Japan and the industrial boom of 1917

What do Japanese companies such as camera maker Nikon, auto manufacturers Mitsubishi Motors and Subaru, sports equipment maker Mikasa and dairy product firm Morinaga Milk have in common? They are among the 1,118 companies that were founded in 1917, according to market research firm Tokyo Shoko Research, and are now a hundred years old.

But these firms have often changed dramatically since their founding. For instance, Subaru began operations in May 1917 as Nihon Hikoki and Nakajima Aircraft, and the firm initially manufactured aircraft. The first Subaru car was manufactured after World War II.

Nikon was founded in July 1917 as Nippon Kogaku Kogyo and initially made binoculars, microscopes and lenses. The firm's production of cameras also started only after the war.

Yokohama Rubber started in October 1917 as a wire maker. The first tire factory was set up three years later. Also, the sports equipment producer Mikasa was founded in May 1917, originally for rubber production.

The war and boom

This boom in the setting up of new businesses was a consequence of World War I. Many new firms at the time received hefty orders not only from the Japanese military but also from others across the world, as the war had severely disrupted the hitherto prevailing global supply chains. Russia, for example, lost access to the markets in Germany and Austria-Hungary, forcing Moscow to buy guns, howitzers and ammunition from Japan starting from the spring of 1915. France ordered 12 destroyers from Japan in 1917 as the European country could not build them by itself due to the war. This foreign demand for military goods boosted Japanese exports.

The war came at a favorable time for Japan's economy, driving the second stage of its industrialization. The first phase that began in the middle of the 1880s mainly focused on developing light industry, banks, transport and craftsmanship. This was followed by the heavy industry, including shipbuilding and tire manufacturing as well as the production of machines and engines. In October 1917, Japan's first automaker Mitsubishi Motors was launched.

"The war accelerated industrialization, as imports had suddenly declined and the goods had to be manufactured by Japanese themselves," said Franz Waldenberger, director of the German Institute for Japanese Studies, a research institute based in Tokyo.

By that time, Japan had already built up a sufficient industrial base, including capital stock, skilled workers and technologies, and was ready to take advantage of the new opportunities presented by the world market.

Boosting industry

The big companies now needed their own organization and founded the "Japan Industrial Club" in March 1917, in which Mitsui and Mitsubishi played the dominant role.

With the slogan "development of the economy," they were able to influence Japan's government, military and political parties, reckons the Japanese historian Kiyoshi Inoue. In 1917, the RIKEN institute, a large comprehensive research institution, was also founded.

The acceleration of economic activity caused by the war even affected Japanese agriculture, which, according to historians, tripled its value of production between 1914 and 1919.

The system of self supply collapsed, large-scale owners enlarged their farm areas and food was now industrially produced. In September and December 1917, the forerunners of Morinaga Milk and Meiji Dairies emerged. Their first product was condensed milk. There was also demand from the Japanese military for this. 

Today, Morinaga is Japan's leading chocolate producer and Meiji Holdings is one of the largest confectionary makers in the world.

In December 1917, eight family-owned companies for soy sauce merged to form Kikkoman's predecessor, in a bid to continue their business on an industrial scale.

A long life

However, this boom soon came to an end. In 1923, a powerful earthquake destroyed the capital Tokyo, and in the early 1930s Japan, along with the West, faced a severe economic crisis.

But the fact that many Japanese companies set up in 1917 have managed to survive to this day, has to do with the country's stable employment practices, says Japanese expert Waldenberger. "Because of the system of lifelong employment, workers in Japan are not fired during crises, but rather companies try to develop new business areas," explained the German economist.

Such restructurings were made possible until the 1990s by a house bank system, which had stood by the companies even in times of crisis. The strategy proved to be a success, as shown by a study conducted by the Bank of Korea, which concluded that of the over 3,100 companies worldwide that are older than 200 years, 56 percent are based in Japan.