Japanese Research in Business History
Online ISSN : 1884-619X
Print ISSN : 1349-807X
ISSN-L : 1349-807X
The Japanese capital market and the Chosen Industrial Bank’s bond issuance during the interwar period
Kei Yajima
ジャーナル フリー HTML

2022 年 39 巻 p. 47-67


In 1920, Japan launched the “Plans for Increasing Rice Production” in Korea (“Chōsen” in Japanese) to boost rice imports through expanded rice production. The impetus for the new policy lay in two key developments: the “rice riots” that swept through Japan in 1918 amid plummeting rice prices, first of all, and the “March 1st Movement” that erupted in Korea in 1919. A vital piece of the Plans for Increasing Rice Production was the Chōsen Shokusan Ginkō (Chosen Industrial Bank; “CIB”), which represents the main focus of this paper. To procure its funding, the CIB issued bonds in enormous sums (“CIB bonds”) that made the bank not only a major channel for Japanese investments in Korea but also a key investment target in the Japanese capital market. This paper shines new light on investments in Korea through the interwar Japanese capital market by examining the issuance conditions for CIB bonds to show how the bonds occupied an increasingly important position in the capital market, delineating the ways in which the composition and underwriting approaches of the underwriting syndicates behind the bonds transformed as securities companies competed and cooperated in the capital market, and explaining financial institutions’ holdings of over 40% of the outstanding balance of CIB bonds.

I. Introduction

During the interwar years, Japan imported food from Korea (“Chōsen” in Japanese) and Taiwan—both Japanese colonies at the time—to satisfy domestic demand. Food shortages had been a constant problem in Japan, a struggle that came to a head with the 1918 “rice riots.” In search of a solution to the dire circumstances, the country turned to Korea as a supply source and launched “Plans for Increasing Rice Production” in 1920 to foster irrigation projects and other initiatives that would make it possible to reap larger quantities of rice imports from the colony. Under the program, Japan’s average yearly total rice imports from Korea ballooned from 2.79 million koku in the years 1919–23 to 5.43 million koku from 1924 to 1928 and 6.65 million koku from 1929 to 1933 (Matsumoto 1983).1

The funding for the Plans for Increasing Rice Production was to come from the Japanese capital market in the form of bonds issued by the Chōsen Shokusan Ginkō (Chosen Industrial Bank; “CIB”) and Tōyō Takushoku (Oriental Development Company; “ODC”), which I refer to as “CIB bonds” and “ODC bonds.” Revisions to the program in 1926 incorporated a supply of low-interest loans from the Ministry of Finance’s Deposit Department, which was responsible for half of the 238.70 million yen in operating expenses for irrigation projects and other efforts, with the CIB and ODC covering the other half. One could thus argue that the rise in rice imports under the program was the product of capital exports via investments through CIB bonds and ODC bonds in the Japanese capital market. The financial inflow that CIB bonds and ODC bonds provided also became one of the main channels of Japanese investment in Korea.

In the Japanese capital market, CIB bonds and ODC bonds circulated in substantial issuance volumes. For example, corporate bonds from ODC and the South Manchuria Railway Company (two national policy concerns) represented 22% of all outstanding corporate bonds (not including foreign bonds) as of June 30, 1927. Adding in the bank bonds from four special banks—the CIB, Nihon Kōgyō Ginkō (the Industrial Bank of Japan; “IBJ”), Nihon Kangyō Ginkō (Nihon Kangyō Bank; “NKB”), and Hokkaido Takushoku Ginkō—the six entities’ total bond volume came to 46% of the balance of all outstanding corporate and bank bonds (not including foreign bonds) (Nihon Kōgyō Ginkō 1928). Evidently, CIB and ODC bonds not only represented a major channel for investment in Korea but also constituted a major investment target for the Japanese capital market.

This paper examines the issuance, underwriting, and holdings of CIB bonds in the Japanese capital market to gain a stronger understanding of the capital exports that fueled an increase in rice imports from Korea. The CIB was formed in 1918 via the merger of six agricultural and industrial banks under the provisions of the Chosen Industrial Bank Act. Responsible for 55% of all bank loans in Korea, the CIB played a central role in the colony’s financial arena. It was also a bond-issuing bank, capable of issuing bonds up to 15 times the amount of its paid-in capital, and drew on the Japanese capital market to finance its lending. The primary avenue for securing that funding was through CIB bonds, which it began issuing on a yearly basis in 1919 (the year after its founding) and continued to issue in sizable amounts.

While the Japanese stock market was floundering in the 1920s, the corporate-bond market was thriving. That development was particularly evident after the 1927 Shōwa Financial Crisis, when bond-issuance conditions eased and corporate-bond issuing volumes swelled. Average yields dropped from 8.776% in 1921 to 6.127% in 1928, but the total value of corporate bonds issued (including bank bonds issued; the same applies hereinafter) leapt from 477.55 million yen to 1.90 billion yen over the same period. After a drop-off during the Shōwa Depression, the value rallied back up to 1.87 billion yen in 1934. As a result, the total balance of outstanding bonds (including foreign bonds) rose from 1.76 billion yen (including 1.07 billion yen in bank bonds) at the end of 1921 to 4.45 billion yen (including 1.83 billion yen in bank bonds) in 1928 and 5.26 billion yen (including 2.05 billion yen in bank bonds) in 1934 (Nomura Shōken 50 Nen-shi Hensan Iinkai 1976). The following sections take a closer look at the conditions governing the issuance of CIB bonds and the circumstances surrounding the flow of investments from Japan to Korea as the Japanese corporate bond market developed in the window between the First and Second World Wars.

Past scholarship on CIB bonds has addressed several lines of inquiry. Bae (1992) analyzed the CIB’s fundraising and operating procedures, examined the terms of CIB-bond issuance and underwriting approaches, and used the CIB’s Jūyō shorui [Important documents] to show that securities companies were responsible for underwriting public bond offerings. A study by Jeong (2004), meanwhile, explored the CIB’s operations in the context of the colonial economy and concluded that the bank constituted a link between the Japanese capital market and Korea. In their financial histories of Korea, Yoon et al. (1996), Bae (2002) and Bae (2021) explained that Korea’s financial structure during the colonial period made it dependent on the Japanese financial market and that the bulk of the CIB bonds and ODC bonds were sold in Japan. However, scholars have yet to explore the issues of how exactly CIB bonds fit into the context of the Japanese capital market or what sorts of changes took place within the underwriting syndicate comprising securities companies. The lack of detailed information on CIB-bond holdings, meanwhile, has made it difficult to identify the sources of the CIB’s funding with proper clarity. To fill these research gaps, this paper first provides an overview of the agricultural financing at the core of CIB’s operations (Part II), explains the contextual position of CIB bonds within the capital market based on the corresponding issuance conditions (Part III), and examines shifts in syndicate makeup and underwriting practices against the backdrop of competition and cooperation among securities companies (Part IV). While there are inherent challenges in laying out the specifics of bond holdings with any degree of precision, the paper also examines the CIB bond holdings at financial institutions to help elucidate the CIB’s funding sources (Part V). All together, the discussion serves to paint a clearer picture of Japanese investments in Korea during the interwar years.

The primary issuance method for CIB bonds was public offering, which hinged on underwriting by securities companies. During the interwar years, zaibatsu-affiliated financial institutions and the IBJ dominated the underwriting market for corporate bonds. When it came to underwriting first-class bonds, securities companies resigned themselves to sub-underwriting the issuances. They did, however, underwrite CIB bonds—which had enormous yearly issuing amounts and thus likely represented a critical business driver for securities companies. In the 1920s and into the 1930s, securities companies’ underwriting operations in the capital market gradually shifted away from cooperation and competition and into an oligopolistic structure. In 1928, Tokyo Genbutsudan (stockbrokers’ association) members Kakumaru Shōkai (“Kakumaru”), Kawashimaya Shōten (“Kawashimaya”), Tamatsuka Shōten, and Yamakanō Shōkai (“Yamakanō”) co-invested to create Kyōdō Shōken (Kyōdō Securities), a securities company specializing exclusively in bond underwriting. The new company, along with Yamaichi Shōken (Yamaichi Securities; “Yamaichi,” including its predecessor, Yamaichi Gōshi), Koike Ginkō (Koike Bank; “Koike,” including its successor, Koike Securities), Nomura Shōken (Nomura Securities; “Nomura,” including its predecessor, Osaka Nomura Ginkō [Osaka Nomura Bank]), Fujimoto Bill Broker Ginkō (Fujimoto Bill Broker Bank; “Fujimoto,” including its successor, Fujimoto Bill Broker Securities), Kawashimaya (which withdrew from Kyōdō Shōken in 1936), Nikkō Shōken (Nikkō Securities), and Kangyō Shōken (Kangyō Securities), formed an eight-company group of core underwriters. The field then shrank from eight to five via consolidation efforts under the wartime economy in 1943 and then proceeded to settle into a structure of four core players—Yamaichi, Nomura, Daiwa (formerly Fujimoto), and Nikkō Securities—after the war (Daiwa Shōken 1963). In this paper, I also discuss the changing approaches to underwriting CIB bonds and shifts in syndicate composition as securities companies competed and cooperated with one another during the interwar period, eventually culminating in this “four-cornerstone” securities structure. Given the limited availability of verifiable data on securities companies’ yearly underwriting activities during the period in question, data on CIB bonds offers revealing glimpses of the interwar shifts in modes of competition and cooperation.

II. Fund management at the CIB

1. Structure

The CIB’s business activities centered on industrial and public financing. Its loan balance on the industrial and public-financing front grew from just under 50 million yen in the second half of 1920 to 250 million yen in the second half of 1931, dipped slightly in the second half of 1932, and then climbed again to eventually top 260 million in the second half of 1935 (Yajima 2014). The ratio of industrial financing to public financing varied between 5.5:4.5 and 6:4 in the 1920s, with the bank prioritizing secured lending for the former and unsecured lending (mostly to irrigation associations and local administrations) for the latter.

A big part of the CIB’s industrial and public financing efforts was agricultural financing for the Plans for Increasing Rice Production. Loans in just three categories—irrigation projects, land improvements, and agriculture—combined to account for over 60% of the total from 1926 onward, ultimately eclipsing the 70% mark in the second half of 1934. Irrigation, a pivotal part of the Plans for Increasing Rice Production, drew 8% of the CIB’s financing in the second half of 1920 before shooting up to over 25% in the second half of 1926 and surpassing 30% in the second half of 1934. These extensive loans for irrigation projects were of the public-financing variety, with the bank providing long-term, unsecured funding to irrigation associations; in 1923, for example, the CIB loaned 2.21 million yen to the Bupyeong Irrigation Association with a deferment period of 3 years and a term to maturity of 25 years. Under the Plans for Increasing Rice Production, the CIB thus provided large loans to irrigation associations on a long-term, unsecured basis. Doing so obviously came with considerable risk for the CIB, as its financial standing consequently depended heavily on the recipient irrigation associations’ operations. However, the high interest rates on the CIB’s loans and an assortment of other factors had already put the irrigation associations’ own financial situations in peril in the 1920s—and amid those trying circumstances came the Shōwa Agricultural Depression.

2. Consolidation of struggling irrigation associations in the 1930s

When bond-issuance conditions eased in the second half of 1925, the CIB began issuing refinancing bonds to lower the interest rates on its loans for irrigation projects. The Deposit Department also started applying low-interest funding toward the refinancing of high-interest loans in 1927 to help the irrigation associations regain their footing. At the end of the 1920s, however, irrigation associations in Korea found themselves in increasingly dire financial straits; several were taking out loans to cover revenue deficits. The ensuing Shōwa Agricultural Depression then threw the irrigation associations’ struggles into even sharper relief. All together, the loans for covering the irrigation associations’ revenue shortfalls sat at a cumulative total of 3.29 million yen in March 1929—a figure that had nearly quadrupled to 12.41 million yen by March 1935. As of September 1931, 40 of the associations in the CIB’s financing portfolio had gone under and amassed a total loan balance of 23.79 million yen, equivalent to 40% of the CIB’s financing for irrigation projects and 10% of its composite industrial and public financing. The Shōwa Agricultural Crisis dealt the segment a crippling blow. In 1932, there were 50 associations requiring consolidation due to difficulties in paying off their debts; in 1934, that number had gone up to 68. Over a third (35%) of all 196 irrigation associations in Korea were thus in danger of consolidation.

The Government-General of Chosen, apprehensive that the irrigation associations’ financial woes could throw the country’s agricultural economy into ruin and thus imperil its rule, got to work in 1931 on a plan to consolidate the struggling associations and eventually implemented the measures in 1935. With a scope covering 68 associations, the plan reduced interest rates for 35 associations experiencing significant management struggles (which were collectively laden with 29.05 million yen of debt), extended their maturity periods by 30 years, and offered subsidies to help offset their existing arrears. The CIB had financed 26 of these irrigation associations, whose outstanding balances together came to a whopping 23.45 million yen.

To implement the consolidation, the CIB received approval to refinance 32.52 million yen of its Deposit Department funding at lower interest rates and with longer-term repayment plans (3.9–4.5% interest; 30-year repayment term) between April and June 1935. This enabled the struggling irrigation associations to pay off their outstanding principal and interest at lower interest rates and extended their maturity periods, while subsidies essentially guaranteed the principal and interest payments. Recovering rice prices also facilitated the process, helping the consolidation plan begin producing results earlier than anticipated. The plan also raised the rent for farms in the target irrigation associations’ operating areas to 60%, shifting a hefty burden onto peasants.

The CIB had shouldered substantial risk by pouring unsecured, long-term funding into irrigation associations, but the new supply of funding from the Deposit Department gave the CIB what it needed to refinance high-interest loans, collect short-term, high-interest market-procurement funding from its funding for irrigation associations, and thereby avoid turning its original funding into enormous amounts of bad loans as a result of the consolidation effort. In addition, the Deposit Department’s funding for the irrigation associations bailed out the CIB by preventing the irrigation associations in the bank’s portfolio from going under—and that bailout also circumvented the potential of plummeting CIB bond prices and defaults, which meant that the CIB no longer had to bear the burden of the sizable investment risk it was under.

III. Bond issuance at the CIB

The CIB issued a grand total of 877.05 million yen in CIB bonds as loan capital between 1919 and 1937. In most cases, the bank issued its bonds via public offering, which accounted for 68 issues and 574.5 million yen in value. The Deposit Department underwrote many CIB bonds—86 issuances totaling 218.22 million yen, to be exact—to provide a long-term, low-interest source of funding that would facilitate the Plans for Increasing Rice Production and the consolidation of failing irrigation associations. Another underwriter was the Government-General of Chosen, which took care of three issuances with a composite value of 12.5 million yen. The other underwriters were chiefly big banks and saving banks: NKB (responsible for 10 issuances totaling 4.83 million yen), South Manchurian Railway (one issuance, 2 million yen), Mitsubishi Ginkō (Mitsubishi Bank; four issuances, 18 million yen; including the 3 million yen across 40 public offerings), Fudō Chokin Ginkō (Fudō Savings Bank; two issuances, 15 million yen), Chōsen Chochiku Ginkō (Korea Savings Bank; one issuance, 3 million yen), Tokyo Chozō Ginkō (Tokyo Savings Bank; two issuances, 13 million yen), Sanwa Ginkō (Sanwa Bank; one issuance, 5 million yen), Sumitomo Ginkō (Sumitomo Bank; one issuance, 5 million yen), Osaka Chochiku Ginkō (Osaka Savings Bank; one issuance, 5 million yen), and the Postal Life Insurance Bureau (one issuance, 4 million yen).

Figure 1 shows the subscriber’s yields on CIB bonds in two categories: bonds underwritten by the Deposit Department and the Government-General of Chosen (the white dots) and other bonds (primarily public offerings; black dots). Drawing on the data in Figure 1, the following section uses the issuance conditions for public offerings to delineate the position that CIB bonds occupied within the capital market.

1. From 1919 to 1929

The first public offering of CIB bonds came in October 1919, amid the post–World War I economic boom. The offering, which was the second issuance of CIB bonds, had a value of 10 million yen, a subscriber’s yield of 7.000%, a deferment period of 2 years, and a term to maturity of 5 years. Although the terms worsened considerably after the postwar depression, with the subscriber’s yield topping 9% and the total repayment period shrinking to 3 years (1 year of deferment and 2 years to maturity), the conditions gradually improved. The 30th issuance, which took place in August 1923 (just prior to the Great Kantō Earthquake), had a lower subscriber’s yield (8.000%) and a longer term to maturity (a deferment period of 2 years and a term to maturity of 3 years). Under the issuance conditions in place for public offerings from the second half of 1920 to the second half of 1923, CIB bonds had more advantageous terms than the average terms for corporate bonds but higher subscriber’s yields and shorter terms to maturity (from 8 years and 8 months to 10 years and 1 month) than bank bonds.

During the period from the Great Kantō Earthquake through the first half of 1925, contraction in the financial market made it more difficult for the CIB to procure funding resources and exacerbated misalignments in funding timing. In that context, the Government-General of Chosen underwrote 2.5 million yen for the 42nd issuance (March 1925; with a deferment period of five years, term to maturity of 35 years, and interest rate of 5.5%) and 6 million yen for the 43rd issuance (September 1925; with a deferment period of five years, term to maturity of 34 years and 6 months, and interest rate of 5.5%) to provide long-term, low-interest funding for public financing. The issue prices were low, just 83.7 yen per 100 yen (for the 42nd issuance) and 84.3 yen per 100 yen (for the 47th issuance), which brought the respective subscriber’s yields (7.085% for the 42nd issuance and 7.171% for the 47th issuance) down slightly below the yields on public offerings. Lowering the issue price instead of cutting the interest rate was likely a means of keeping yearly interest payments down, despite the resulting bump in yields. NKB also underwrote 500,000 yen and 300,000 yen in 1924 (the 37th and 38th issuances, both in September) and 500,000 yen and 450,000 yen in 1925 (the 43rd and 46th issuances, in April and August, respectively), which were modest sums both on an individual and collective basis. The interest rates were comparable to public offerings, and the repayment periods were relatively lengthy, with deferments ranging from one to 5 years and a term to maturity of 15 years.

The issuance conditions for public offerings of CIB bonds gradually began to grow more favorable from the first half of 1925 onward, as total value per issuance rose (up to 10 million yen), subscriber’s yields dropped (7.000%), and terms to maturity grew longer (a 2-year deferment period and 8-year term to maturity). Relative to the averages for bank bonds, CIB bonds saw some improvements: while bank bonds may have offered consistently better terms to maturity from 1925 on, CIB bonds had lower subscriber’s yields than their bank-bond counterparts from 1925 to 1927. Fudō Chokin Ginkō also underwrote 5 million yen in April 1925 (the 44th issuance) at conditions similar to public offerings at the time.

The year 1928, coming on the heels of the Shōwa Financial Crisis, witnessed an easing of issuance conditions that sent issuance values through the roof and ushered in what observers have called the “golden age of corporate bonds.” While the issue market ultimately began to decline in the second half of the year, CIB bonds were hitting the market at better terms than ever. The 74th issuance, for example, had a total value of 15 million yen (issued in September), a subscriber’s yield of 5.623%—low enough to rival the bonds that the Deposit Department was underwriting—and a lengthy term to maturity of 15 years. The subscriber’s yields put CIB bonds shoulder to shoulder with first-class IBJ bonds (6.154% and 6.218% for the 117th and 118th issuances, respectively) and NKB bonds (large bonds; 5.623% and 5.519% for the 105th and 106th issuances, respectively) (Nihon Kōgyō Ginkō 1933).

While the Deposit Department underwrote just one issuance in the years 1924 and 1925, its underwriting began to pick up considerably—in terms of both quantity and value—in 1926 as funding for the Plans for Increasing Rice Production entered the picture and the Deposit Department’s volume of funding resources skyrocketed after the 1927 Shōwa Financial Crisis. From 1926 to 1929, the Deposit Department underwrote a total of 20 issuances at a combined value of 61.78 million yen to fund the Plans for Increasing Rice Production and refinance high-interest loans to irrigation associations.

2. From 1930 to 1937

The Shōwa Depression dealt a massive blow to CIB bonds. Not only did the number of issuances plummet, but the issuance conditions also worsened as subscriber’s yields climbed and terms to maturity shrank. In the years 1930 to 1932, the value of all CIB bonds issued came to 108.72 million yen—and the Deposit Department underwrote 55.72 million yen, over half of the total, as a result of supplying low-interest funding to refinance the high-interest loans to irrigation associations and cover budgetary shortfalls amid the Shōwa Agricultural Depression (discussed above). The Government-General of Chosen also underwrote a portion of the bonds from this time frame (4 million yen for the 99th issuance, issued in November 1930), likewise a means of combating the Crisis via a supply of long-term, low-interest funding (with a 5-year deferment period, a 25-year term to maturity, and an interest rate of 5.5%). However, the bonds came at a low issue price of 91.1 yen per 100 yen and a subscriber’s yield of 6.033%, exceeding the rate for public offerings. There were just 5 public offerings of CIB bonds over the span of the period, totaling a mere 45 million yen. The subscriber’s yields sat between 5.874% and 6.000%, close to the rates prior to the Crisis, but the terms to maturity for the bonds were markedly shorter than before, ranging from a 2-year deferment period and 3-year term to maturity to a 3-year deferment period and an 8-year term to maturity. Still, CIB bonds compared favorably to other types of bonds over the same period. Corporate bonds had average subscriber’s yields between 6.238% and 7.000%, along with terms to maturity from 4 years and 3 months to 5 years and 10 months. Bank bonds, meanwhile, averaged subscriber’s yields between 6.082% and 6.418% and terms to maturity from 7 years and 11 months to 11 years and 8 months. Both types had slightly longer repayment periods than CIB bonds, but they also posted higher subscriber’s yields. During the Shōwa Depression, therefore, CIB bonds had a comparative advantage over other bond types in terms of issuance conditions.

In 1933, the issue market saw a massive increase in the issuance of public and corporate bonds (not including government bonds): the total came to 2.54 billion yen, up 942.91 million yen year on year. There was also a sizable jump in the value of CIB bonds issued, which came in at 55 million in 1933 (five issuances) and 40 million yen in 1934 (four issuances) before coming back up to 55 million yen in 1935 (six issuances). The maximum value per issuance rose as well, going from 15 million yen (the maximum for the 130th issuance, October 1933, and the 146th issuance, February 1935) to 20 million yen (the maximum for the 171st issuance, July 1936, and the 173rd issuance, August 1936). Subscriber’s yields fell dramatically, reaching and maintaining a sub-4.00% level from 1935 forward. Longer terms to maturity were another distinct feature of the time, as the periods trended between 10 and 15 years for the most part—and almost all issuances from 1934 onward came with a term of maturity of 15 years. CIB bonds posted values that were roughly in line with those for bank bonds (averaging subscriber’s yields from 4.010% to 5.446% and terms to maturity of 13 years to 15 years and eight months), and their issuance conditions approached those of NKB bonds (as the 121st issuance, August 1933, had a value of 10 million yen, a subscriber’s yield of 4.500%, a 2-year deferment period, and a 13-year term to maturity) and even outstripped those of IBJ bonds (as the 172nd issue, February 1934, had a value of 10 million yen, a subscriber’s yield of 4.500%, a 2-year deferment period, and a 10-year term to maturity). As the data shows, CIB bonds had solidified their status as first-class bonds in the post–Shōwa Depression issue market.

Big banks and saving banks also underwrote a total of 35 million yen in CIB bonds across six issuances. Mitsubishi Ginkō (two issuances) and Tokyo Chozō Ginkō (one issuance) both accounted for 10 million yen, while Sanwa Ginkō (one issuance), Sumitomo Ginkō (one issuance), and Osaka Chochiku Ginkō (one issuance) were responsible for 5 million yen each. The issuance conditions were on par with those for contemporary public offerings.

IV. Underwriters of CIB bonds

Securities companies underwrote the public offerings of CIB bonds. As the stock market contracted and the issue market expanded in the 1920s, securities companies began to make forays into the corporate bond market. Competition and cooperation gradually gave way to a more selective arena where eight companies eventually cemented their positions within an oligopolistic structure. Underwriting contracts from the CIB and Jūyō shorui shed valuable light on how the syndicate arrangement for public offerings of CIB bonds took shape and the companies went about their underwriting activities. Table 1 and Table 2 consolidate the relevant data from these and other sources. Drawing on the information in Table 1 and Table 2, the following sections examine the changes that occurred in underwriting approaches and syndicate composition in the process of competition and cooperation among the securities companies of the time.2

1. From 1919 to 1923

Public offerings of CIB bonds from 1919 to 1923 were underwritten by a syndicate comprising Fujimoto, Nomura, and Koike (which operated exclusively in public and corporate bonds) in Osaka and securities companies centered on the Tokyo Genbutsudan in Tokyo. From the first public offering (10 million yen for the second issuance, issued in October 1919) forward, the Tokyo Genbutsudan, the Osaka Genbutsudan, Osaka Shintakudan, and Tokyo Kabushiki Genbutsudan were involved in issuances as public-offering providers.3 In 1920, the 6th issuance (1 million yen, issued in July) was underwritten exclusively by Fujimoto, and the seventh issuance (7.5 million yen, issued in September) was issued with Fujimoto, Koike, and Nomura co-underwriting and the Tokyo Genbutsudan serving as the public-offering service provider (Yamaichi Shōken 1958). For the ninth issuance (5 million yen, issued in March 1921), Kawashimaya, Yamakanō, Yamaichi, Kakumaru, and Iwai Shōten (“Iwai”) from the Tokyo Genbutsudan joined Koike, Fujimoto, and Nomura as joint underwriters. The next two issuances were each underwritten by a single company: Yamaichi was the underwriter for the 10th issuance (2 million yen, issued in April 1921), and Kawashimaya handled the 11th issuance (2 million yen, issued in June 1921), the latter of which was held entirely by Mitsubishi Ginkō. While companies specializing in public and corporate bonds, such as Osaka’s Fujimoto and Nomura, initially covered most of the underwriting for public offerings, the Tokyo Genbutsudan began to join the mix in the first half of 1921. The underwriters for the 19th issuance (5 million yen, issued in October 1922) were what the records term “stockbrokers’ associations in Tokyo and Osaka,” an arrangement in which Yamaichi, Kakumaru, Iwai, Kawashimaya, and Yamakanō agreed to joint-underwrite 2.5 million yen and Koike, Fujimoto, and Nomura agreed to handle the other half. Through 1923, it was these eight companies that composed the syndicate.

However, the groups in Tokyo and Osaka employed different co-underwriting approaches. One difference was that the allotment of underwriting amounts among the members varied from issuance to issuance. For example, the companies signed an agreement for the 30th issuance (August 1923, 8 million yen) that allotted 2.5 million yen of the total to Fujimoto, 1.4 million yen to Nomura, 600,000 yen to Koike, 240,000 yen to Yamakanō, 200,000 yen to Iwai, 200,000 yen to Kawashimaya, 200,000 yen to Kakumaru, and 360,000 yen to Yamaichi, with Kawashimaya, Yamakanō, Yamaichi, Kakumaru, and Iwai agreeing to joint-underwrite 2.3 million yen. Whereas the Osaka side tended to have single companies take on substantial underwriting amounts, the Tokyo counterpart generally underwrote sizable amounts via joint arrangements. The three organizations in the Osaka contingent—Koike, Nomura, Fujimoto—did occasionally engage in joint underwriting, but most of the cases involved unequal allocations that assigned proportionally larger amounts to Fujimoto. The Tokyo Genbutsudan favored the opposite approach: while it did allocate varying underwriting amounts on occasion, joint underwriting was the primary arrangement—most likely because the Tokyo companies were taking part in the Tokyo Genbutsudan as members of a syndicate. When the Tokyo Genbutsudan allocated underwriting amounts among its members, Yamaichi often took on more than its fellow members. Fujimoto (Osaka) and Yamaichi (Tokyo), which tended to take on the lion’s share of allocations, were clearly the dominant players in their respective organizations. Not only did they underwrite offerings by themselves, but they were also the central figures in the co-underwriting arrangements that the Osaka and Tokyo groups implemented. As I explain below, they were also the only two securities companies to engage in underwriting on their own in the ensuing years.

While the contemporary issue market saw an increase in the issuance of corporate bonds, fueling growth and competition among securities companies that gradually formed a bloc dealing in corporate bonds, the Tokyo Genbutsudan settled for sub-underwriting for banks and providing public-offering services (Yamaichi Shōken 1958). Yamaichi saw the emergence of new issuers with no ties to big banks in the issue market as an opportunity to engage in principal underwriting for corporate bonds, but the varying levels of financial resources among the members of the Tokyo Genbutsudan made it hard to venture full-scale into the public- and corporate-bond arena. Aiming to make its way into principal underwriting on its own, Yamaichi thus withdrew from the Tokyo Genbutsudan in November 1923. The breakdown of the 30th issuance underscores the motivations behind Yamaichi’s decision: Fujimoto underwrote 2.5 million yen of the 8-million-yen total, with the Tokyo Genbutsudan handling 2.3 million yen and Yamaichi responsible for just 360,000 yen in a joint-underwriting arrangement. For Yamaichi, the imbalance in the underwriting amounts surely must have made its participation in the Tokyo Genbutsudan syndicate seem restrictive.

Table 1: CIB bonds issued by public offering (1,000 yen)
Year Number of bond issuances Total bonds issued Number of bonds issued by public offering Total amount of bonds issued by public offering Amount per issue by public offering
Min. Max
1919 3 14,500 1 1,000 10,000 10,000
1920 5 16,000 4 15,500 1,000 7,500
1921 5 17,000 4 14,000 2,000 5,000
1922 11 37,300 6 27,000 2,000 7,000
1923 7 28,800 4 24,000 3,000 8,000
1924 6 25,800 4 25,000 3,000 10,000
1925 9 41,450 3 23,000 3,000 10,000
1926 6 29,293 2 20,000 10,000 10,000
1927 10 51,192 4 40,000 10,000 10,000
1928 11 68,810 4 45,000 10,000 15,000
1929 14 91,464 6 55,000 5,000 10,000
1930 15 51,278 2 15,000 5,000 10,000
1931 7 37,731 2 20,000 10,000 10,000
1932 7 19,715 1 10,000 10,000 10,000
1933 14 80,390 5 55,000 10,000 15,000
1934 13 62,315 4 40,000 10,000 10,000
1935 22 95,870 6 55,000 5,000 15,000
1936 11 97,864 5 80,000 10,000 20,000
1937 4 24,280 1 15,000 15,000 15,000
Table 2: Underwriters of CIB bonds issued by public offering
Year Number of times underwritten by various securities companies
1919 Unknown (1)
1920 Fujimoto, Koike & Nomura (1), Fujimoto (1), Unknown (2)
1921 Fujimoto, Koike, Nomura, Yamaichi, Iwai, Yamakanō & Kakumaru (2), Yamaichi (1), Kawashimaya (1)
1922 Fujimoto, Koike, Nomura, Yamaichi, Iwai, Yamakanō, Kawashimaya & Kakumaru (5), Yamaichi (1)
1923 Fujimoto, Koike, Nomura, Yamaichi, Iwai, Yamakanō, Kawashimaya & Kakumaru (3), Fujimoto (1)
1924 Fujimoto, Yamaichi & Koike (1), Fujimoto & Yamaichi (2), Fujimoto (1)
1925 Fujimoto, Yamaichi & Koike (2), Mitsubishi (1)
1926 Fujimoto, Yamaichi & Koike (2)
1927 Fujimoto, Yamaichi & Koike (2), Yamaichi (2)
1928 Fujimoto, Yamaichi, Koike & Nomura (3), Yamaichi & Koike (1)
1929 Fujimoto, Yamaichi, Koike , Nomura & Hayakawa (4), Yamaichi (2)
1930 Fujimoto, Yamaichi, Koike , Nomura & Hayakawa (2)
1931 Fujimoto, Yamaichi, Koike & Nomura (2)
1932 Fujimoto, Yamaichi, Koike & Nomura (1)
1933 Fujimoto, Yamaichi, Koike & Nomura (5)
1934 Fujimoto, Yamaichi, Koike & Nomura (4)
1935 Fujimoto, Yamaichi, Koike & Nomura (4), Yamaichi (1), Fujimoto (1)
1936 Fujimoto, Yamaichi, Koike & Nomura (5)
1937 Fujimoto, Yamaichi, Koike & Nomura (1)

2. From 1924 to 1927

Fujimoto was the sole underwriter for the 31st issuance (3 million yen, issued in December 1923), coming in the aftermath of the Great Kantō Earthquake, and the 35th issuance (7 million yen, issued in January 1924). Osaka-based Fujimoto most likely handled the underwriting alone because of the disaster’s impact on Tokyo and businesses based there, including Yamaichi and Koike. The issuance conditions included extremely short 1-year terms of maturity, with bonds callable for 2 years, and served to cover deficits in funding for industrial public lending and the redemption of existing bonds.

From 1924 to 1927, public offerings of CIB bonds came to a total value of 180 million yen across 13 issuances—and the offerings showed evidence of shifts in underwriting approaches. The syndicate composition underwent a significant change, first of all. The Tokyo Genbutsudan stopped underwriting CIB bonds after Yamaichi left the group in November 1923, and Osaka-based Nomura also apparently pulled out. Through around 1927 and 1928, the syndicate comprised three dealers: Fujimoto, Yamaichi (the chief players in Osaka and Tokyo, respectively), and Koike. Yamaichi and Fujimoto co-underwrote the 35th and 36th issuances (5 million yen and 3 million yen, respectively, both in September 1924), and Koike became the third co-underwriter starting with the 39th issuance (10 million yen, issued in December 1924). That trio would then co-underwrite every public offering in the period spanning from the 35th issuance to the 56th issuance (10 million yen, issued in April 1927), save for the 40th issuance (3 million yen, brokered by Yamaichi and underwritten by Mitsubishi Ginkō, issued in January 1925), for a total of 78 million yen across 9 offerings.

Yamaichi handled the underwriting of the 63rd and 64th issuances (10 million yen each, issued in October and November 1927, respectively) on its own and then co-underwrote the 66th issuance (10 million yen, issued in February 1928) with Koike; Fujimoto was absent from the underwriting arrangement in all three cases. Fujimoto had its own struggles to contend with at the time, as it had to write off 3.13 million yen in non-performing debts as the Shōwa Financial Crisis made its loans to Suzuki Shōten and Kawasaki Shipyard unrecoverable. Despite the bustling public- and corporate-bond market in the wake of the Shōwa Financial Crisis, the financial burden of writing off bad debts forced Fujimoto to slash its funding for offerings of public and corporate bonds from 76.69 million yen in the first half of to just 26.77 million yen in the second half of the year (Daiwa Shōken 1963)—and also opt not to take part in underwriting CIB bonds at the time.

3. From 1928 to 1932

However, Fujimoto resumed its underwriting of CIB bonds with the 68th issuance (10 million yen, issued in May 1928). Nomura was also on board for the issuance, bringing the number of co-underwriters to four. While a larger number of underwriters would normally bring the per-company allocation down, Fujimoto’s dwindling financial means, stemming from the bad debts it accrued during the Shōwa Financial Crisis, was likely what brought Nomura back into the co-underwriting of CIB bonds. The co-underwriting structure then saw the arrival of its fifth player, Hayakawa Bill Broker Bank, which took on a portion of the 76th issuance (10 million yen, issued in February 1929) and thereby thinned the allocation pool yet again.4 One factor behind Hayakawa’s entry into co-underwriting CIB bonds was the financial quagmire affecting Yamaichi, which saw the number of securities in its portfolio balloon and its corresponding cumulative borrowings increase as the public- and corporate-bond market sank into a dry spell in the second half of 1928 (Kasuya et al. 2011). In 1929, Yamaichi began exercising more caution in new underwriting offerings and cut back considerably on its underwriting amounts for public and corporate bonds (going from 439.77 million yen in 1928 to 142.9 million yen in 1929) (Yamaichi Shōken 1958). Nomura, too, reduced the resources it put into underwriting public and corporate bonds (which dropped from 179.54 million yen in 1928 to 120.64 million yen in 1929) (Nomura Shōken 50 Nen-shi Hensan Iinkai 1976). Hayakawa would not remain in the mix for long, however: the 96th issuance (10 million yen, issued in August 1930) marked its last co-underwriting venture. The exit likely stemmed from changes on the company’s corporate side, as it shut down its banking operations in response to revisions to the Banking Act and changed its name to “Hayakawa Bill Broker” in December 1930 (Tanshi Kyōkai 1966). From there, the syndicate of dealers handling public offerings of CIB bonds solidified into a four-member structure: Fujimoto, Yamaichi, Koike, and Nomura.

4. From 1933 to 1937

In 1933, the issuance of CIB bonds began to gain substantial momentum. With that growth came the emergence of new names on the underwriting scene, including big, zaibatsu-affiliated banks like Mitsubishi Ginkō and Sumitomo Ginkō along with savings banks like Fudō Chokin Ginkō and Osaka Chochiku Ginkō. For these institutions, the objective behind the underwriting was to secure holdings of CIB bonds. Mitsubishi Ginkō’s underwriting of 5 million yen for the 128th issuance (issued in August 1933) and Sumitomo Ginkō’s underwriting of 5 million yen for the 147th issuance (issued in March 1935) both went into their respective holdings, for example (Mitsubishi Ginkō 1933; Sumitomo Ginkō 1935). There were also some cases where bonds were sold on a priority basis in allocations that securities companies had set in advance. The 160th issuance (underwritten by Yamaichi, issued in May 1935) had a value of 10 million yen, with 5 million yen going to Dai-ichi Ginkō (Dai-ichi Bank), 3 million yen to Osaka Chochiku Ginkō, 1 million yen to Kōnoike Shintaku (Kōnoike Trust), and 1 million yen to Kansai Shintaku (Kansai Trust Company). The 5 million yen in the 161st issuance (underwritten by Fujimoto, issued the following day) went to Osaka Chochiku Ginkō (3 million yen) and Nihon Seimei (Nihon Life; 2 million yen). Big banks and savings banks were underwriting and selling allocations of CIB bonds in sizable sums for fund-management purposes, so it is doubtful that they engaged in underwriting to compete with securities companies.

5. Fujimoto, Yamaichi, and Nomura

As the above sections have explained, the compositions of the CIB-bond syndicate gradually changed and eventually solidified around four core dealers—Fujimoto, Yamaichi, Koike, and Nomura—in the process of competition and cooperation among securities companies from the 1920s to the 1930s. The next section explores the business operations at Koike, Fujimoto, Yamaichi, and Nomura in light of how they went about underwriting CIB bonds.

The first figures to examine are Koike’s underwriting amounts for CIB bonds. From the 49th issuance (10 million yen, issued in March 1926) to the 74th issuance (15 million yen, issued in September 1928), there were 9 public offerings totaling 80 million yen. According to the data on Koike, available for every issuance except the 39th issuance (10 million yen, issued in December 1924), the company underwrote a total of 11.2 million yen.5 If one takes Koike’s total out of the total issuance values for public offerings of CIB bonds between 1924 and 1928 (16 offerings totaling 143 million yen, not including the 40th issuance) and distributes the remainders evenly, the underwriting amounts for the three other companies come to 49.7 million yen for Fujimoto, 10.25 million yen for Nomura, and 68.85 million yen, the highest value, for Yamaichi.

Fujimoto, as I noted above, was the sole underwriter for the 31st and 33rd issuances (totaling 10 million yen) of CIB bonds after the Great Kantō Earthquake. Records indicate that Fujimoto’s public- and corporate-bond offerings in the first half of 1924 amounted to 58.94 million yen, which means that the 7 million yen that it underwrote for the 33rd issuance of CIB bonds alone accounted for 11.8% of the total. This represented a massive underwriting commitment for Fujimoto and thus a sizable risk, considering the circumstances in the wake of the disaster. Fujimoto also played a significant part in the CIB’s public offerings. As noted above, however, Fujimoto needed to dispose of bad debts after the Shōwa Financial Crisis. The circumstances led the company to not only slash its total trading and offering volumes for public and corporate bonds but also eschew its underwriting of CIB bonds. The company’s offerings of public and corporate bonds finally crept back up to 53.65 million yen in the first half of 1928, and it resumed its underwriting of CIB bonds that year with the 68th issuance (10 million yen, issued in May 1928). In the second half of 1928, it was part of a four-company group (with Yamaichi, Koike, and newcomer Nomura) that underwrote the 73rd and 74th issuances (10 million yen and 15 million yen, respectively) (Daiwa Shōken 1963). If one combines the totals for the 73rd and 74th issuances (25 million yen), factors out the portion that Koike underwrote (2.75 million yen), and divides the remainders evenly across the three remaining companies, the per-company total for the three comes to 7.42 million yen. For Fujimoto, whose offering volume for public and corporate bonds amounted to 53.22 million yen in the second half of 1928, am underwriting total of 7.42 million yen for CIB bonds would have represented roughly 14% of its composite total. It would appear, then, that CIB bonds occupied a significant position within Fujimoto’s underwriting business.

Yamaichi, after leaving the Tokyo Genbutsudan in 1923 and making a concerted entry into underwriting, began co-underwriting corporate bonds with Fujimoto and making corporate bonds a central cog in its underwriting operations. Amid the surge in the issue market following the Shōwa Financial Crisis, Yamaichi poured resources into its underwriting activities; the year 1928, in particular, saw the company’s underwriting business grow by leaps and bounds (Yamaichi Shōken 1958). Yamaichi’s aggressive underwriting push was evident in the immediate aftermath of the Shōwa Financial Crisis, as well: not only was it the sole underwriter for 20 million yen in CIB bonds (see above), but it also accounted for the bulk of a co-underwriting arrangement with Koike (the 66th issuance, 10 million yen) by covering 8.75 million yen of the total (with Koike responsible for the remaining 1.25 million yen). In 1928, Yamaichi underwrote an impressive 439.77 million yen in public and corporate bonds (229.99 million yen in corporate bonds, 158.48 million yen in bank bonds, and 51.3 million yen in municipal bonds). A closer look at the breakdown reveals an interesting dynamic. According to the data for the year’s corporate bonds, which offers figures for principal underwriting amounts, Yamaichi was a sub-underwriter for 167.95 million yen and the principal underwriter for 62.04 million yen—which makes the relative weight of the at least 14.63 million yen in CIB bonds that Yamaichi underwrote in 1928, going off the estimates I explained above, even more significant. Corporate bonds were a critical piece of Yamaichi’s underwriting business, and the sizable volume of the CIB bonds that Yamaichi underwrote on a consistent basis from year to year shows how important that segment of the corporate-bond landscape was for the company.

In its underwriting of corporate bonds, Yamaichi also underwrote bonds through its relationship with the CIB (Yajima 2021; Yajima 2012). One example came in 1927, when the CIB recommended that Yamaichi underwrite corporate bonds for Fuji Kōgyō. Yamaichi obliged, serving as the sole underwriter for 2 million yen in the company’s 2nd and 3rd issuances, with the CIB guaranteeing the principal and interest. In 1928, Yamaichi underwrote 1 million yen in Fuji Kōgyō’s 4th issuance and was also the sole underwriter for the 2nd and 3rd issuances for the CIB-funded Kumgangsan Electric Railway (5 million yen and 1.75 million yen, respectively). In addition, Yamaichi underwrote unpaid stock for Fuji Kōgyō and the issuance of new stock for Kumgangsan Electric Railway—thereby handling securities business for both companies—in 1927. Other activities included joint arrangements with Nomura and Koike, which together underwrote 7.5 million yen and 10 million yen in Chosen Railway’s 4th and 5th issuances of corporate bonds, respectively (issued in 1927). Based on these initiatives, it appears that Yamaichi was pushing its corporate-bond underwriting as part of its efforts to forge an investment base in Korea-based companies with connections to the CIB.6

Nomura left the underwriting syndicate along with the Tokyo Genbutsudan with the 30th issuance (issued in August 1923). As I noted above, however, the company later joined Fujimoto in co-underwriting with the 68th issuance (10 million yen) in May 1928. Nomura also dramatically increased the scale of its underwriting activities in the public- and corporate-bond segment when the bond market took off after the Shōwa Financial Crisis (Nomura Shōken 50 Nen-shi Hensan Iinkai 1976). Nomura’s total underwriting amounts for bank bonds and corporate bonds rose from 60 million yen (4.58 million yen in bank bonds and 55.51 million yen in corporate bonds) in 1926 to 83.19 million yen (15.8 million yen and 67.39 million yen, respectively) in 1927 and 150.72 million yen (39.7 million yen and 111.02 million yen, respectively) in 1928. Meanwhile, Nomura’s estimated underwriting amount for CIB bonds in 1928 came to 10.25 million yen (see above). Considering that Nomura’s total principal underwriting for bank bonds and corporate bonds (98 million yen: 39.7 million yen in bank bonds and 58.3 million yen in corporate bonds) in 1928, a time when the corresponding markets were humming, the projected value of its CIB-bond underwriting is commensurate to over 10% of the composite total and more than a quarter of its bank-bond principal underwriting. For Nomura, then, CIB bonds had a definite, meaningful presence in the company’s underwriting business, and taking part in co-underwriting arrangements was likely a key initiative.

V. Holdings of CIB bonds

This section looks at financial institutions’ holdings of CIB bonds to shed light on how Japan invested in Korea through the capital market. Business reports from some commercial banks and savings banks provide information on their respective institutions’ securities holdings, while information on holdings at Mitsubishi Ginkō and other big banks is available in historical materials in the Diplomatic Archives of the Ministry of Foreign Affairs. These resources provide information on both the presence and value of CIB bonds in the banks’ portfolios. Yajima (2014) has also identified some of the sales recipients of CIB bonds. Table 3 compiles the data from these various sources into a single, consolidated view. First, one can see that financial institutions held 63.435 million yen (at face value; the same applies hereafter) in CIB bonds in the second half of 1929, which equates to 46.8% of the 135.6 million yen in outstanding CIB bonds at the time.7 Shimura, ed. (1980), examining holdings of public and corporate bonds, found that financial institutions held 60.8% of the outstanding corporate bonds—46.6% if one excludes the Deposit Department’s underwriting amounts—as of the end of 1929. Much of the remaining volume was likely in the holdings of individual investors. Yajima (2014) also determined that Yamaichi sold its CIB bonds to individuals and businesses in addition to financial institutions. Considering the above, it would be safe to assume that the values of financial institutions’ holdings of CIB bonds in Table 3 represented a sizable portion of all institutions’ holdings.

Table 3, which provides data on the holdings of CIB bonds by financial institutions in the second half of 1929 and classifies the financial institutions according to Yajima (2012),8 shows that Mitsubishi Ginkō held 13.75 million yen (10.1% of all outstanding holdings in the market), 34 regional banks and savings banks held a total of 34.15million yen (25.2%), 7 “city” banks (large commercial banks) held a total of 5.7million yen (4.2%), 8 trust companies held a total of 1.27 million yen (0.9%), seven life-insurance companies held a total of 6.03 million yen (4.4%), NKB held 2.53 million yen (1.9%), and individuals and other entities combined for 1.82 million yen (1.3%). In these figures, Japan’s investments in Korea through the capital market come into clearer focus.

Mitsubishi Ginkō had the highest CIB-bond holding value per bank and, as I noted earlier, also engaged in underwriting activities; the institution thus appears to have been active and aggressive in developing its holdings. In the 1920s, Mitsubishi Ginkō’s holdings of CIB bonds occupied a sizable share of its total corporate-bond holdings (a high “CIB-bond ratio”)—one that grew to as much as 15.6% in the first half of 1928 while the bank was amassing CIB bonds as a means of managing surplus funds after the Shōwa Financial Crisis. However, Mitsubishi Ginkō eventually began reducing the value of its CIB-bond holdings when the irrigation associations in Korea began to struggle amid the Shōwa Agricultural Depression. The totals started their decline in the second half of 1931, with the bank’s CIB-bond ratio eventually dropping as low as 6.4% in the first half of 1934. The ratio rebounded in the second half of the year, however, when the plan to consolidate the struggling irrigation associations took shape and rice prices started to recover. By the first half of 1935, the CIB-bond ratio had climbed back up to 11.1%. While CIB bonds were clearly an important fund-management destination for Mitsubishi Ginkō, the institution did not simply pour money into the bonds; it evidently adjusted its holding values according to how CIB’s business operations were faring. For CIB, too, Mitsubishi Ginkō became an increasingly important funding source after the Shōwa Financial Crisis; in the first half of 1928, for example, Mitsubishi Ginkō held 15.6% of the CIB’s funding. Given that Mitsubishi Ginkō also underwrote several issuances of CIB bonds for holding purposes, it was also a major customer. Sumitomo Ginkō was another institution that underwrote CIB bonds, but it had no CIB bonds in its holdings portfolio until it underwrote 5 million yen in the bonds in March 1935 (the 147th issuance) (Sumitomo Ginkō 1934).9

Table 3: List of financial institutions list and holdings of CIB bonds in the second half of 1929 (1,000 yen)
Mitsubishi Ginkō 13,750 Rokujuhachi Ginkō (Nara) 350
Fudō Chokin Ginkō (Tokyo) 10,000 Juni Ginkō (Toyama) 300
Chosen Chochiku Ginkō 8,000 Daiichi Gōdō Ginkō (Okayama) 300
Osaka Chochiku Ginkō (Osaka) 3,200 Yamaguchi Ginkō 300
Nihon kangyō Ginkō 2,530 Yamanashi Chochiku Ginkō (Yamanashi) 300
Daiichi Seimei 1,700 Yokkaichi Ginkō (Mie) 300
Teikoku Seimei 1,500 Kokkō Seimei 270
Nagoya Ginkō 1,500 Daishi Ginkō (Niigata) 210
Okayama Gōdō Chochiku Ginkō (Okayama) 1,430 Nihon Sōgo Chochiku Ginkō (Osaka) 210
Geibi Ginkō (Hiroshima) 1,350 Yushin Ginkō (Yamanashi) 200
Nihon Chochiku Ginkō (Aichi) 1,160 Enshū Ginkō (Shizuoka) 200
Aichi Ginkō 1,000 Nakatsugawa Ginkō (Gifu) 180
Hyakuju Ginkō 1,000 Niigata Kōgyō Chochiku Ginkō (Niigata) 150
Kyōdō Shintaku 1,000 Ryou Ginkō (Yamagata) 130
Kawasaki Dai-hyaku Ginkō 1,000 Hyōgo Daidō Shintaku 100
Nihon Seimei 1,000 Kaizuka Ginkō (Osaka) 95
Settsu Chochiku Ginkō (Osaka) 965 Murakami Ginkō (Niigata) 95
Takamatsu Hyakujūyon Ginkō (Kagawa) 850 Yokohama Seimei 80
Tōyō Seimei 780 Yasuda Shintaku 55
Daijū Ginkō (Yamanashi) 700 Imari Ginkō (Saga) 50
Taiyō Seimei 700 Kawasaki Shintaku 41
Hachiman Ginkō (Shiga) 600 Sumitomo Shintaku 29
Sanjūgo Ginkō (Shizuoka) 550 Saraike Ginkō (Osaka) 20
Sanjuhachi Ginkō (Hyogo) 500 Hannō Ginkō (Saitama) 20
Sanjuyon Ginkō 500 Hyakujūsan Ginkō (Shiga) 20
Rokujusan Ginkō (Nagano) 500 Gifu Shintaku 19
Dai-ichi Sogo Chochiku Ginkō (Tokyo) 450 Mitsui Shintaku 17
Kōnoike Ginkō 400 Kansai Shintaku 10
Daiyonjuhachi Ginkō (Akita) 400 Kōnoike Shintaku 4
Shiga Gōdō Chochiku Ginkō (Shiga) 365 Individuals and companies 1,818
Amount of bonds held by financial institutions (A) 63.435
Amount of outstanding CIB bonds (B) 199,685
Amount of outstanding CIB bonds underwritten by the Deposit Department (C) 55,585
Amount of outstanding CIB bonds underwritten by the Governor-General of Korea (D) 8,500
Amount of outstanding CIB bonds other than C and D (E=B-{C+D}) 135,600
A/E 46.8%

In the second half of 1929, 34 of the 42 regional banks and savings banks that listed security holdings in their “business reports” held CIB bonds. One bank with a particularly sizable holding value was Fudō Chokin Ginkō, whose total came to 10 million yen. The CIB-bond ratio at Fudō Chokin Ginkō, which trended high from 1925 onward, reached 83.7% in the second half of 1929. This lofty figure stems from the effects of the Savings Bank Act, which limited savings banks’ ownership of corporate bonds and stock to those with official authorization from the Minister of Finance and prompted banks to deposit CIB bonds with the government as collateral for the repayment and provision of savings and deposits. Given that most issuances of CIB bonds were public offerings and that Fudō Chokin Ginkō could have been a potential underwriter, it would appear that the bank opted to use CIB bonds as a fund-management destination because it had the means to make large-scale purchases.10 From the second half of 1929 to the second half of 1930, five of the 34 regional banks and savings banks—namely Fudō Chokin Ginkō and four other banks, mostly of the savings variety—held at least 1 million yen. The total of all CIB-bond holdings at regional banks and savings banks in the second half of 1929 came to 25.2% of the bonds’ outstanding balance, making this segment of the banking sphere another important funding source for CIB. The data also indicates that six of the regional banks and savings banks had CIB-bond ratios of over 30% in the period spanning the second half of 1929 to the second half of 1930 (Fudō Chokin Ginkō: 83.7%, 10 million yen; Rokujūsan Ginkō: 77.0%, 490,000 yen; Yokkaichi Ginkō: 42.9%, 380,000 yen, Yūshin Ginkō: 37.5%, 190,000 yen, Dai-hachijūgo Ginkō: 33.6%, 1.72 million yen; and Nakatsugawa Ginkō: 32.4%, 1.8 million yen), while 20 of the banks had ratios of at least 10%. The fact that at least 80% of the regional banks and savings banks with known securities holdings owned CIB bonds suggests that the bonds were important in the fund-management framework for these types of banks too.

On the other hand, life-insurance companies had relatively small holdings of CIB bonds during the 1920s and the Shōwa Depression. Life-insurance companies were not of much importance to CIB in terms of funding, nor were CIB bonds an important fund-management channel for life-insurance companies. That changed after 1932, however, when life-insurance companies began massively expanding their holdings of CIB bonds. In 1935, Dai-ichi Seimei (Dai-ichi Life, which then held 7.3 million yen in CIB bonds), Teikoku Seimei (Teikoku Life, 4.46 million yen), and Nihon Seimei (4.09 million yen) combined for holdings of 15.85 million yen—equivalent to 9% of the outstanding balance at the time (Dai-ichi Seimei 1935; Teikoku Seimei 1935; Nihon Seimei 1935).11

VI. Conclusion

In examining the issuance, underwriting, and holdings of CIB bonds, this paper highlighted three key points.

First, the issuance conditions for CIB bonds were less favorable than the average terms for bank bonds in the first half of the 1920s but then improved in the late 1920s—eventually rivaling those of first-class IBJ and NKB bonds. Around 1933, CIB bonds were available at conditions that were even more advantageous than IBJ bonds. These changes imply that CIB bonds were gaining stronger credibility as an investment.

Second, a look at changes in the syndicate structure and format for underwriting public offerings of CIB bonds showed that the underwriting framework solidified around Fujimoto, Yamaichi, Koike, and Nomura, with Fujimoto and Yamaichi playing the central roles. As Shimura (1969) explained, the departure of numerous stockbrokers’ associations from the contemporary issue market left a relatively small group of dealers to carry on with the surviving underwriting engagements—and among that remaining cadre were Fujimoto, Yamaichi, Nomura, and Koike, the four organizations that made up the syndicate for underwriting CIB bonds. The process through which securities companies competed and cooperated with one another in the issue market was apparent in how the underwriting syndicate for CIB bonds evolved. In that process, taking part in the underwriting of continuous, high-volume issuances of CIB bonds gave securities companies a foundation for growth in the issue market.

Third, the paper examined the ownership of CIB bonds to identify several key holders: Mitsubishi Ginkō, which held the largest sums; Fudō Chokin Ginkō and other savings banks, which also had considerable holdings; regional banks, which had relatively small holdings individually but were collectively a large group; city banks; and life-insurance companies. Individual investors also likely accounted for a healthy portion of the ownership picture. Together, these findings shed valuable light on the dynamics of Japanese investment in Korea via the capital market.

This paper analyzed how financial institutions went about exporting capital for boosting rice-import levels. The increase in Japan’s rice imports from Korea pushed rice prices down, which played into the crash in rice prices during the Shōwa Depression. The connections between capital exports and rice imports between Japan and Korea could provide an interesting standpoint for future research on the Shōwa Depression.


This work was supported by JSPS KAKENHI 19K13757.


1 1 koku, a unit mainly used for quantities of rice, equates to a volume of roughly 180.39 liters, which experts believe to be a good approximation of a given person’s average yearly rice consumption at the time.

2 Unless otherwise noted, all the figures in the following section are from the CIB’s Jūyō shorui [Important documents]. Figures in parentheses in Table 1 represent the numbers of times the corresponding firms underwrote issuances in the corresponding years.

3 Yamaichi Shōken (1958) argues that in the contemporary bank-bond market, securities companies (even public-offering service providers) would often buy and keep leftover bonds—essentially the same as underwriting them. In addition, the Tokyo Genbutsudan handled the public-offering services for the issuance of stock in conjunction with CIB’s founding in July 1918, likely the start of its involvement in public-offering services.

4 The applications that the CIB submitted to the Government-General of Chosen for approval to issue bonds for the 82nd and 85th issuances (issued in July and August 1929, respectively) list “Genbutsudan” as the underwriter.

5 Yamaichi Shōken. “Boshū kōshasai shirabe (haraikomi)” [Account books of public and corporate bonds (payment)], in Yamaichi shōken shiryō [Documents of Yamaichi securities], no. 1-071.

6 According to Yamaichi Shōken (1958), the company was the sole underwriter for one issuance in 1927 (Okayama Electric Tramway Co., Ltd.). Yamaichi does not list any underwriting for Fuji Kōgyō.

7 Holdings of CIB bonds in the 1930s are difficult to determine, as most local banks stopped listing the names of securities holdings in their business reports around that time.

8 Table 3 lists the respective locations of local banks and savings banks in parentheses.

9 The records for Mitsui Ginkō, another zaibatsu-affiliated bank, show no holdings of CIB bonds (Mitsui Ginko, 1934).

10 Asai (1981) showed that after the Shōwa Financial Crisis, Fudō Chokin Ginkō sank into financial turmoil as it encountered dwindling deposit balances, dealt with bad loans, and booked valuation losses resulting from falling government-bond prices. In the second half of 1931, the bank let go of all its corporate bonds and ceased to hold any CIB bonds.

11 According to Itaya (1935), Itaya Seimei (Itaya Life Insurance) also held 30,000 yen in CIB bonds.

  • Asai, Yoshio. “Fudō Chokin Ginkō no hatten kōzō” [On the development of the Fudo Savings Bank]. Ikkyo ronsō 85, no. 1 (January 1981), 40–62.
  • Bae, Yeong-Mog. “Joseon sigsan eunhaeng gwa nong-eob” [The Chosen Industrial Bank and agriculture]. Treatises on Korean History, no. 36 (1992), 173–215.
  • Bae, Yeong-Mog. Hangug geum yungsa [History of financial systems in Korea]. Chungcheongbuk: Chungbuk National University Press, 2002.
  • Bae, Yong-Mog. Hangug tonghwa geum yungsa 1 [History of money and financial systems in Korea]. Seoul: Haenamin, 2021.
  • Chōsen Shokusan Ginkō [Chosen Industrial Bank]. "Chosen Shokusan Ginkō 20 nen-shi” [A 20-history of Chosen Industrial Bank], Keijō: Chōsen Shokusan Ginkō,1938.
  • Chosen Shokusan Ginkō. Eigyō hōkokusho [Business reports].
  • Chosen Shokusan Ginkō. Jūyō shorui [Important documents], National Library of Korea.
  • Dai-ichi Seimei. Hōkoku [Report], no. 33 (September 1, 1934–August 31, 1935). 
  • Daiwa Shōken. Daiwa Shōken 60 nen-shi [A 60-year history of Daiwa Shōken]. Tokyo: Daiwa Shōken, 1963.
  • Itaya Seimei. Jigyō hōkoku [Business report], no. 29 (January 1, 1935–December 31, 1935).
  • Jeong, Byung-Wook. Hangug geundae geum-yung: Joseon sigsan eunhaeng gwa yeongu sigminji gyeongje [A study of Korean modern finance: The Chosen Industrial Bank and the colonial economy]. Seoul: Yuksabipyongsa, 2004.
  • Kasuya, Makoto, Osamu Itō, and Jurō Hashimoto. Yamaichi Shōken 100 nen-shi [A 100-year history of Yamaichi Shōken]. Tokyo: Japan Business History Institute, 2011.
  • Matsumoto, Toshirō. “Shokuminchi” [Colony]. In 1920 nendai no Nihon shihonshugi [Japanese capitalism in the 1920s], edited by 1920 Nendai-shi Kenkyūkai, 299–327. Tokyo: University of Tokyo Press, 1983. 
  • Mitsubishi Ginkō. Hōkokusho [Report]. Archives Division of the Mitsubishi Economic Research Institute and JACAR (Japan Center for Asian Historical Records) Ref.B08061414700, Miscellanea about Japanese banks/Mitsubishi Bank/Appendix Vol. 1 (E-2-3-2-4_4_1_001) (Diplomatic Archives of the Ministry of Foreign Affairs).
  • Mitsui Ginkō. Gyōmu hōkokusho [Business report], no. 51 (Second half of 1934), JACAR (Japan Center for Asian Historical Records) Ref.B08061412700, Miscellanea about Japanese banks/Mitsui Bank/Appendix Vol. 6 (E-2-3-2-4_3_1_006) (Diplomatic Archives of the Ministry of Foreign Affairs).
  • Nihon Kōgyō Ginkō. Zenkoku kōsaishasai meisaihyō [Detailed lists of bonds in the public and corporate sectors]. Tokyo: Nihon Kōgyō Ginkō, no. 34 (1928) and no. 40 (1) (1933), no.51(1952).
  • Nihon Seimei. Hōkokusho [Report], no. 47 (January 1, 1935–December 31, 1935). 
  • Nikami, Kiyoshi. Nihon no shōken kaisha keiei [A study of the management of securities companies in Japan]. Tokyo: Toyo Keizai Shinpōsha, 1990.
  • Nomura Shōken. Kōshasai nenkan [Yearbook of public and corporate bonds]. Osaka: Nomura Shōken, 1935.
  • Nomura Shōken 50 Nen-shi Hensan Iinkai. Nomura Shōken Kabushiki Kaisha 50 nen-shi [A 50-year history of Nomura Shōken Kabushiki Kaisha]. Tokyo: Nomura Securities, 1976.
  • Shimura, Kaichi. Nihon shihon shijō bunseki [An analysis of Japanese capital market]. Tokyo: University of Tokyo Press, 1969.
  • Shimura, Kaichi, ed. Nihon kōshasai shijō-shi [History of the market of public and corporate bonds in Japan]. Tokyo: University of Tokyo Press, 1980.
  • Sumitomo Ginkō. Gyōmu hōkokusho [Business report], no. 47 (First half of 1935), “Partition 1” Japan Center for Asian Historical Records (JACAR) Ref.B08061422100, Miscellanea about Japanese banks / Sumitomo Bank Vol. 3 (E-2-3-2-4_5_003) (Diplomatic Archives of the Ministry of Foreign Affairs).
  • Tanshi Kyōkai. Tanshi shijō 70 nen-shi [A 70-year history of the money market]. Tokyo: Jitsugyō no Nihon Sha, 1966.
  • Teikoku Seimei. Hōkokusho [Report], no. 50 (January 1, 1935–December 31, 1935). 
  • Yajima, Kei. “Senkanki Chōsen ni okeru testudō kin’yū no tenkai: Chōsen Testudō Kaisha no shasai hakkō o chūshin ni” [Railway finance during the interwar period in colonial Korea: Focusing on the issuance of bonds by the Chōsen Railway]. Shakaikeizaishigaku 78, no. 1 (July 2012), 25–47.
  • Yajima, Kei. “Senkanki ni okeru “sanmai zōshoku keikaku” to Chōsen Shokusan Ginkō” [Plans for increasing rice production in colonial Korea: Financing of the Chosen Industrial Bank]. Shakaikeizaishigaku 80, no. 3 (November 2014), 373–394.
  • Yajima, Kei. “Chōsen Shokusan Ginkō ni yoru sangyō kin’yū no tenkai to Yamaichi Shōken” [The Chosen Industrial Bank and Yamaichi Securities’ long-term financing during the interwar period in colonial Korea]. Shakaikeizaishigaku 86, no. 4 (February 2021), 307–329.
  • Yamaichi Shōken. Yamaichi Shōken-shi [A history of Yamaichi Securities]. Tokyo: Yamaichi Shōken, 1958.
  • Yamaichi Shōken. “Bōshū kōshasai shirabe (haraikomi)” [Account books of public and corporate bonds (payment)], In Yamaichi Shōken shiryō [Documents of Yamaichi securities], no. 1-071.
  • Yamaichi Shōken. "Boshū saiken mōshikomi kin'yūchō dai-3 gō" [Account books of subscribers to bonds]. Yamaichi shōken shiryō [Documents of Yamaichi securities], nos. 1-048.
  • Yoon, Seok-Beom, Sung-Chan Hong, and Dae-Hyeong Woo. Hangug geundae geum-yungsa yeongu [A study of history of Korean modern finance]. Seoul: Sekyungsa, 1996.
© 2022 Business History Society of Japan