The Establishment of Oligopoly in the Japanese Cotton-Spinning Industry and the Business Strategies of Latecomers: The Case of Naigaiwata&Co., Ltd.

Tetsuya Kuwahara

doi:10.5029/jrbh1984.3.103

Tetsuya Kuwahara

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JOURNAL FREE ACCESS

1987 Volume 3 Pages 103-134

DOI https://doi.org/10.5029/jrbh1984.3.103

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Published: March 15, 1987 Received: - Available on J-STAGE: June 28, 2010 Accepted: - Advance online publication: - Revised: -
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Date of correction: June 28, 2010 Reason for correction: - Correction: CITATION Details: Right : 1)On Naigaiwata's establishment of manufacturing operations in China,see the following:Naosuke Takamura,Nihon Shihonshugi Shiron(The History of Japanese Capitalism),1982,chap.6,sec.3.Takamura argues that,in order to overcome the slump in the cotton import business,Naigaiwata advanced into China under the leadership of Rihei Kawamura,based on his experience in operating spinning mills in Japan and doing business in China;Mitsuhaya Kajinishi,ed.,Gendai Nihon Sangyo Hattatsushi XI Sen'i(History of the Development of Modern Japanese Industry XI Textiles),vol.1,1964,p.393;Takeo Izumi,“Nihon Boseki Shihon no Chugoku Shijo Shinshutsu ni Kansuru Ichi Kosatsu”(A Study on the Advance of Japanese Cotton-Spinning Enterprises into the China Market),in Senshu Keizaigaku Ronshu(Senshu Univ.Journal of Economics),vol.7,no.1,1972;Mitsuo Fujii et al.,Nihon Takokuseki Kigyo no Shiteki Tenkai(Historical Development of Japanese Multinational Enterprises),vol.1,1975,chap.9,sec.2;Tien-ji Yang,“Chugoku ni okeru Nihon Bosekigyo(‘Zaikabo’)to Minzokubo to no Sokoku”(Conflicts between Japanese Cotton-Spinners in China and Chinese CottonSpinners),in Hiroshi Abe,ed.,Nitchu Kankei to Bunka Masatsu(Sino-Japanese Relations and Cultural Conflicts),1982.
2)The main sources for this section are Naigaiwata Kabushiki Kaisha(Naigaiwata&Co.,Ltd.)ed.,Naigaiwata Kabushiki Kaisha50Nenshi(Fifty Years of Naigaiwata&Co.,Ltd.),1937,chap.1;and Naosuke Takamura,“Naigaiwata Kaisha”(Naigaiwata&Co.),in Kazuo Yamaguchi,ed.,Nihon Sangyo Kin'yushi Kenkyu:Boseki Kin'yu Hen(Studies in the History of Industrial Finance in Japan:Cotton Spinning Finance),1970.
3)Concerning the activities of Mitsui&Co.and Japan Cotton Trading Co.,the following sources were consulted:Nihon Keieishi Kenkyujo(Japan Business History Institute),ed.,Mitsui Bussan Kaisha100 Nenshi(One Hundred Years of Mitsui&Co.,),vol.1,1978,pp.152-153,232-233;Naosuke Takamura,Nihon Bosekigyoshi Josetsu(Introduction to the History of the Japanese Cotton-Spinning Industry),vol.2,1970,pp.163-166;and Nichimen Jitsugyo Kaisha(Japan Cotton and General Trading Co.),Nichimen70Nenshi(Seventy Years of the Japan Cotton and General Trading Co.),1962,pp.22-23,30-31.
4)Gosho Kabushiki Kaisha(Gosho&Co.,Ltd.),Gosho60Nenshi(Sixty Years of Gosho),1967,pp.97,102-103,105,107-108,236-238,247-249.
5)Taichi Kinukawa,Honpo Menshi Bosekishi(History of the Cotton-Spinning Industry in Japan),vol.6,1942,pp.364-365.
6)Naigaiwata&Co.,Ltd.,Eigyo Hokokusho(Business Report),first half of1905.
7)Interview with Kiyoshi Inoue,July25,1974,at Mengyo Kaikan,Osaka(tape recording in author's possession).Inoue said he heard this from Ueda,the manager of the Nishinomiya mill,in July1909.Naigaiwata borrowed\400,000from the130th Bank and used\150,000in company funds to purchase the Nishinomiya mill.Subsequently,by1906the firm had appropriated\140,000for depreciation costs at the mill and had paid back the\400,000 loan(Naigaiwata&Co.,Ltd.,Business Report,first half of1905to first half of1906).If the funds used to repay this loan came out of the profits of the Nishinomiya mill,then this would support Inoue's statement.
8)Naigaiwata&Co.,Ltd.,Business Report,first half of1908.
9)Ibid.,second half of1908.
10)On the development of the latecomers,see by Kazuo Sugiyama:“Meiji Ki Kohatsu Dai Boseki Kigyo no Shikin Chotatsu:Fuji Boseki,Osaka Godo Boseki no Bunseki”(Capital Procurement in the Latecomers among Large Spinning Enterprises in the Meiji Era:Analysis of Fuji and Osaka Union Cotton Spinning Companies),in Kin'yu Keizai(Journal of Financial Economics),nos.123-124,135,July and October1970,August1972;and“Senzen,Boseki Kigyo no Zaimu Katsudo”(The Financial Activity of Prewar Cotton-Spinning Enterprises),in Keiei Shigaku(Business History Review),vol.5,no.1,1970.In these articles,Sugiyama takes Fukushima,Kishiwada,Fuji,and Osaka Union spinning companies to be latecomers and analyzes their growth in terms of capital raising.
11)The figure\64million was arrived at by multiplying current prices by numbers of bales.Current prices were taken from“Table of High and Low Current Prices of Spun Yarn for December1907”in Df bales.Current prices were taken from“Table of High and Low Current Prices of Spun Yarn for December1907”in Dainihon Boseki Rengokai(Japan Cotton-Spinners'Association),ed.,Dainihon Boseki Rengokai Geppo(Monthly Report of the Japan Cotton-Spinners'Association),January1908,and numbers of bales from Menshi Boseki Jijo Sankosho(Reference Book for Cotton-Spinning),second half of1907.
12)The markets for Japanese-made cotton yarn in the latter half of1907were as follows:
13)Takamura regards the period from the panic of1900-1901to the eve of World War I as a formative period in the development of spinning monopolies,an era in which the eight companies which would later become the six major spinners established monopolies in specific product markets.The latter,which formed the basis for the extraction of monopolistic profits,consisted of the export market for coarse yarn and the domestic markets for medium-count doubling yarn,gassed yarn,and double-width cotton goods.Takamura,Introduction to the History of the Japanese CottonSpinning Industry,vol.2,1971,chap.6,sec.2,subsecs.1-2.While relying on the findings of Takamura and others,the present article seeks to locate the significance of the oligopolistic system in the share of the domestic market held by large-scale spinning enterprises and to explain the process by which the oligopoly was formed in terms of the opportunities afforded spinners to enter major domestic product markets.
14)Kinukawa,History of the Cotton-Spinning Industry in Japan,vol.7,1944,p.230.
15)Kiyoshi Inoue, who entered the Kanegafuchi Cotton-Spinning Company in1910,Isaburo Suko,who joined Kanegafuchi in 1896,and Ichitaro Ichihashi,managing director of Yagi Shoten(Yagi&Co.)in1949,reminisce on the competition for markets among spinning enterprises from late Meiji to Taisho in Asaichi Omori,ed.,Men Boeki Hanseiki no Kuto(A Half Century of Struggle in the Overseas Cotton Trade),1949,p.15.Inoue states therein as follows:“When I entered Kanegafuchi in1910,I remember we had hundreds of beautiful lacquerware shingles on which the company trademark and the words‘Kanebo Special Agent‘or’Selling Agent'were painted in gold,and when customers would request it we would send these to them”;“after I moved to a new post in Kyushu in1915,when I would make a round of courtesy calls on customers,they would have cushions and clocks bearing the Kanegafuchi trademark,and even abacuses engraved with our company name.It had also become customary to hand out towels dyed with the company trademark during the summer bon festival and at year's end.I think this was because in places like Kyushu Japanese-style reeled yarn used exclusively for hand-made cotton cloth was still in great demand,and many customers came to buy one reelful at a time.It was said that in the provinces during the bon festival and at the end of the year people would compare the price of one catty of sugar and one reelful of cotton yarn and use the cheaper of the two[for gift-giving]”;also,“the forty-twocount doubling yarn produced by the Amagasaki Cotton-Spinning Company was selling well,as it was used in making the dyed cotton yarn of Kurume, but Kanegafuchi muscled into the market and,proclaiming Kyushu to be its base,carried out a sale with bonus gifts.Thereupon,Mr.Kodera[of Amagasaki],as I recall,complained that this kind of competition was causing trouble.”
16)In Tables6and7,the yarn Naigaiwata used in making cotton fab rics is taken to be entirely the company's own product.
17)The numerical values in this paragraph and the next are based on Japan Cotton-Spinners'Association,ed.,Monthly Report of the Japan Cotton-Spinners'Association,February-July1906,appended tables,and Reference Book for Cotton-Spinning,first half of1906.
18)Goro Saitaya,“Chosen ni okeru Men-orimono no Jukyu Kankei”(Supply and Demand of Cotton Textiles in Korea),in Chosen Menshifusho Rengokai(Association of Cotton Yarn and Textile Traders of Korea),ed.,Chosen Mengyoshi(History of the Cotton Industry in Korea),1929,pp.92-94,149-150.
19)Saitaya,pp.44-46.
20)Japan exported a total of270,000bales of cotton yarn in1906,230,000bales in1907,and170,000bales in1908.Yudo Koda,Honpo Mengyo no Tokeiteki Kenkyu(A Statistical Study of the Japanese Cotton-Spinning Industry),1931,p.34.
21)Otokichi Shoji,Boseki Sogyo Tanshukushi(History of Operational Curtailments in the Japanese Cotton-Spinning Industry),1930,pp.145-153.
22)Naigaiwata&Co.,Ltd.,Business Report,second half of1907to first half of1908.
23)Ibid.,first half of1907to first half of1908.
24)Naigaiwata&Co.,Ltd.,Business Report,second half of1908.Up to that time,Naigaiwata had sold its left twenty-count yarn at a price equal to or somewhat higher than the average price of yarn,but beginning in April1908it began to sell the yarn at a price lower than the national average.For example,in October1908the average price nationwide was between\114.57and\117.35,while the price of Naigaiwata's left twenty count ranged from\112.5to\115.Japan Cotton-Spinners'Association,ed.,Monthly Report of the Japan Cotton-Spinners'Association,July 1907-June1909.
25)Kiyoshi Inoue,“Nihon Bosekigyo Keiei no Ippan”(An Outline concerning the Management of Japanese Cotton-Spinning Enterprises),graduation thesis,Tokyo College of Commerce,1910,chaps.3-4.The cost of shipping one bale of cotton yarn from Kobe to Shanghai in1908could not be determined,but according to the Chugai Shogyo Shinpo(Chugai Commercial News)for March20,1915,the cost of shipping one bale of cotton yarn from Japan to Shanghai at that time was\1.5.Also,according to Yamaguchi Noshomu gishi(Engineer of the Bureau of Agriculture and Commerce),Manshu Sangyo Chosa Shiryo(Menpu oyobi Menshi)(Survey Data on Manchurian Industry[Cotton Textiles and Cotton Yarn]),July1906,the comparable rate from Kobe to Ying-k'ou in1906was\1.75.
26)The difference in customs duties was2.22ryo,which was converted to yen using the average exchange rate for1908of84.23ryoper100yen.For more on this,see by the author:“Zaika Bosekigyo no Seisei:Dainippon Boseki Kaisha no Jirei”(The Formation of the Japanese Spinning Industry in China:The Case of Dainippon Cotton-Spinning Company),Keizai Keiei Ronso:(Journal of Economics and Business Administration),1981,p.79.
27)The assertion that wages in China were lower than those in Japan is based on statements by the following:(1)Narazo Takatsuji,in mid-1905,cited in Naosuke Takamura,Kindai Nihon Mengyo to Chugoku(The Modern Japanese Cotton Industry and China),1982,p.80;(2)a British commercial investigator in China,Jame-son,cited in Monthly Report of the Japan Cotton-Spinners'Association,no.153,May,1905,p.26;(3)Naigaiwata stockholder Fujio Hioki,based on his investigation of the Shanghai mill in April 1913,in Naigaiwata&Co.,Ltd.,Kabunushi Sokai Gijiroku(Minutes of the Stockholders'General Meetings),July25,1913;and(4)Hirota Akiyama,executive director of Osaka Union Cotton-Spinning Company,cited in Osaka Jiji Shinpo(Osaka Cur-rent-Events News),February10,1913.In addition,the statement that unit manufacturing costs were higher in China is based on the following:Kisaku Hashimoto,Shinkoku no Mengyo(The Cotton Industry in China),1905,chap.2,secs.3-4;and Takamura,Kin-dai Nihon Mengyo to Chugoku,p.80.
28)Hashimoto,pp.56-57.See also Takamura,p.80.
29)Stockholders who visited the No.4Mill in April1913stated as follows:“This company has many employees who are familiar with conditions in China,having served in the branch offices or agencies set up in various parts of China in years past.Since such employees are now engaged at this Shanghai mill,it enjoys a great advantage and will no doubt have excellent results.Even if other firms perceive this advantage,it is not something that can be attained in a short period of time.”Naigaiwata&Co.,Ltd.,Minutes of the Stockholders'General Meetings,July 1913.The same opinion was also expressed by a director of Fuji Gas CottonSpinning Company.“Shina no Boseki Jigyo Keiei”(Management of Spinning Enterprises in China),in Yamato Shinbun(Yamato Newspaper),July28,1912.
30)Besides Kontaibo and Muto,cited below,the following also criticized Naigaiwata's establishment of manufacturing facilities in Shanghai:special Shanghai correspondent,“Shina Boseki Ron”(Cotton-Spinning in China),in Osaka Mainichi Shinbun(Osaka Daily News),May16,18-19,1912;Shanghai correspon-dent,“Shina no Bosekigyo”(The Spinning Industry in China),in Tokyo Jiji Shinpo(Tokyo Current-Events News),May16-18,1912; Japan Cotton Trading's Executive Director,Matazo Kita,“Menshi oyobi Boseki no Zento”(The Outlook for Cotton Yarn and Spinning),in Osaka Shinpo(Osaka News),May20,1912;a director of Fuji Gas Cotton-Spinning Company,“Shina no Bosekigyo”(Management of Spinning Enterprises in China),in Yamato Shinbun,July 28,1912.However,by the beginning of 1913,with the success of Naigaiwata's Shanghai mill and the possibility of an increase in Chinese customs duties,many had come to the opinion that it was advantageous for Japanese spinners to set up operations in China.See,for example:“Boseki Kai no Shin Keiko”(New Trends in the Cotton-Spinning Industry),in Osaka Shinpo,December18,1912;“Shina ni okeru Boseki Kigyo”(Spinning Enterprises in China),in Osaka Jiji Shinpo,February1,1913;interview with Hirota Akiyama,executive director of Osaka Union Cotton-Spinning Company,“Bosekigyo no Shorai”(The Future of the Cotton-Spinning Industry),in Osaka Jiji Shinpo,February10,1913.In articles such as these,it was reported that Settsu,Mie,Fukushima,Amagasaki,and other spinning companies were planning to set up operations in Shanghai.On this point,see especially the aforementioned article in the Osaka Shinpo.
31)Keizai Hyoron(Review of Economic Issues),vol.11,no.5,April1911.on.7-11.
32)In fact,Naigaiwata reportedly took the problem of temperature into serious consideration and adopted excessive countermeasures.“Shina ni okeru Boseki Kigyo”(Spinning Enterprises in China),in Osaka Mainichi Shinbun,February 1,1913.
33)“Shina no Kanzei Kaisei:Tai-Shi Boekigyosha no Iken”(Revision of the Chinese Customs:The Opinion of One Engaged in Trade with China),in Jiji Shinpo(Current-Events News),October19,1913.
34)The information on Kawamura's career comes from Noboru Otani,Kawamura Rihei O Shoden(Short Biography of the Venerable Rihei Kawamura),1926.
35)Naigaiwata&Co.,Ltd.,Minutes of the Stockholders'General Meetings,January 25,1909.
36)Ibid.,Business Report,second half of1909.
37)The description of the founding of the Shanghai mill is based on the following sources:Naigaiwata&Co.,Ltd.,Business Report,second half of 1909 to second half of1911;ibid.,Fifty Years of Naigaiwata&Co.,Ltd.,chap.2;and“New Shanghai Cotton Mill,”North China Herald,October21,1911.
38)Taichi Kinukawa,Heiwa to Shina Mengyo(The Armistice and the Chinese Cotton Industry),1919,p.202.
39)The source for these data is Naigaiwata&Co.,Ltd.,Business Reports for the respective semesters.
40)Naigaiwata&Co.,Ltd.,Fifty Years of Naigaiwata&Co.,Ltd.,p.37;Kiyoshi Inoue,“Meiji Jidai no Omoide”(Reminiscences of the Meiji Period),in Nihon Mengyo Kurabu(Japan Cotton Industry Club),ed.,Geppo(Monthly Report),January1977,p.5.
41)Naigaiwata&Co.,Ltd.,Minutes of the Stockholders'General Meetings,July1913.
42)The period is somewhat later,but in April1916Naigaiwata's Shanghai mill produced568g of sixteen-count yarn per spindle per day,while other Shanghai mills had a comparable output of only about454g of fourteen-count yarn.Toa Dobun Kai,ed.,Shina no Kogyo(Manufacturing Industry in China),1916,p.142.In Japan,moreover,in December1913the Settsu Cotton Spinning Company had a daily yield per spindle of645g for its average yarn count of sixteen,and Naigaiwata's No.2 Spinning Mill had a comparable output of535g for its average yarn count of17.7.“Zenkoku Boseki Kaisha Eigyo Jikkyo Ichiranhyo”(Table of Actual Business Conditions of Spinning Companies Nationwide),in Monthly Report of the Japan Cotton-Spinners'Association,December1913.Further,an article in the June15,1912edition of the Osaka Mainichi Shinbun entitled“Hojin no Shanghai Bosekigyo”(“Japanese Spinning Enterprise in Shanghai”)stated as follows:“The No.3Mill of Naigaiwata&Co.,which is operated by Japanese,is equipped with the latest machinery and facilities and is known as the best in Shanghai for the excellent quality of its yarn and the enormity of its output....”
43)Gaining confidence through its management of the No.3Mill,Naigaiwata began construction of the No.4Mill(30,000spindles)in early1912and had it in full operation in October1913.Further,in November1914the company started operation of the No.5Mill(50,000spindles).By the end of World War I the firm's spindleage had grown to170,000,making it the largest spinning enter-prise in China.

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