The Fuji Bank, Ltd.

views updated

The Fuji Bank, Ltd.

5-5, Otemachi 1-chome
Tokyo 100
(03) 216-2211

Public Company
Incorporated: 1923
Employees: 15,000
Assets: ¥43.35 trillion (US$346.86 billion)

Stock Index: Tokyo Osaka London Paris

The Fuji Bank was once the core of the Yasuda zaibatsu, or industrial conglomerate. Unlike other conglomerates, which entered almost every industry, Yasuda confined its business to banking, insurance, and lending. It built a strong presence in these areas which, through economic disruption and war, persists to this day. While the Yasuda zaibatsu no longer exists, the former Yasuda companies have assembled a new industrial organization called the Fuyo group, which includes a number of large manufacturers.

The earliest predecessor of the Fuji Bank was established by Zenjiro Yasuda, a young entrepreneur who moved to Tokyo from his native Toy ama in 1856. In 1866 he opened a money exchange in Kobunacho called Yasuda Shoten, which dealt in gold, silver, and copper. During this period Yasuda established ties with the restoration movement, which sought to overthrow the Tokugawa Shogunate. Two years later, when this movement came to power, new laws were enacted to liberalize and modernize the economy.

Yasuda was rewarded for his early support of the new Meiji government in 1874, when he was designated fiscal agent for the Ministry of Justice. The following year he was placed in charge of finances for the Tochigi prefectural government. Yasuda participated in the formation of the Third National Bank in 1876, and in January of 1880 won a charter to form his own bank. Increasingly recognized as a leader in the financial world, Yasuda was appointed as a founding adviser to the Bank of Japan, the countrys first central bank.

The Yasuda Bank became a limited partnership in 1893, in accordance with the Commercial Law and Banking Regulations. The bank grew with the Japanese economy, and gained increasing access to large industrial accounts.

In 1900 it became an unlimited partnership, and in 1912 was reincorporated with ¥10 million in capital, representing a fifty-fold increase in just over 30 years.

In 1921 Yasuda was murdered by an extortionist at his summer home in Oiso in 1921. He was 82 years old.

As banking became more complex, the Yasuda Bank recognized a need to reinforce its management structure and strengthen its recruitment of talented personnel. In 1922 it began regular recruitment of university graduates and started sending middle managers on training missions in Europe and America.

Between 1890 and 1920, the Japanese economy was frequently thrown into disarray by financial crises born of monetary mismanagement and inadequate regulation. Then in 1923 Japan suffered a massive earthquake which left the economy in recession. That year, the entire Yasuda financial organization was restructured to rescue banks whose business was most heavily concentrated in the devastated Kanto prefecture.

The bank established two specialty insurance companies and participated in the formation of a trust bank, all bearing the Yasuda name. The Yasuda Bank, meanwhile, absorbed 10 smaller banks: Third National, Meiji Commerce, Shinano, Kyoto, One-Hundred Thirtieth National, Japan Commerce, Twenty-Second National, Higo, Nemuro, and Kanagawa. As a result of the amalgamation, Yasuda became one of the largest Japanese financial organizations. The bank subsequently absorbed the Hammamatsu Commerce Bank in 1924 and the Mori Bank in 1928.

A financial panic in April, 1927 caused a massive run on deposits and, until a moratorium was declared, brought many banks to the brink of ruin. Yasuda, however, remained relatively healthy, and participated in the formation of the Showa Bank, a rescue bank capitalized at ¥10 million. Showa underwrote the accounts of many troubled banks, but the combined effects of government deflationary policy and world recession in 1929 proved insurmountable. Yasudas business also suffered, forcing the bank to adopt emergency consolidation and austerity measures.

During the early 1930s a group of right-wing officers gained power within the Japanese military. Advocating absolute Japanese suzerainty and economic leadership in Asia, this group put great pressure on moderate forces in industry and government, forcing them to adopt more aggressive policies. In preparation for war, they organized a quasi-wartime economyin effect, a five-year preparation for war.

After a series of incidents which led to the fall of the Hirota governments cabinet, these militarists installed their own puppet cabinet under a government led by Senjuro Hayashi. Included in that cabinet was Nariaki Ikeda of Mitsui, who was named governor of the Bank of Japan, and Toyotaro Yuki of Yasuda, who was made Finance Minister.

Yasuda supported the militarists, believing that economic domination of Asia would greatly enrich the company and Japan. During the war with China, Yasuda, like other Japanese banks, provided funding for the effort and helped to establish profitable ventures in an effort to reduce Japans increasingly cumbersome external trade deficit.

The economic situation deteriorated rapidly after the United States and Britain entered the war against Japan in 1941. The government was compelled to amalgamate hundreds of industries in an effort to raise productivity. In 1943 Yasuda absorbed the Kyoto Ouchi Bank, the Japan Day & Night Bank, and the Japan Trust Bank. The following year it took over the operations of the Showa Bank. When the war ended in 1945, Yasuda was Japans largest bank, with 202 branches and ¥13.9 million in deposits.

Under American occupation, all bank accounts were frozen, new bank notes were introduced, and emergency economic measures were enforced to control shortages. War criminals were purged from Yasuda and other companies, and new industrual laws were passed which outlawed the powerful zaibatsu groups. The Yasuda Bank was substantially reduced in size and refitted to operate as a common city bank. Its holdings in other Yasuda companies were eliminated and all the Yasuda companies were forced to change their names.

The Yasuda Bank emerged from two years of transformation in 1948 under the name Fuji Bank, a name chosen by its employees. While in 1945 the Yasuda family and holding company had controlled 39% of the banks shares, by 1949 even the largest shareholder accounted for no more than 1%.

Operating under restrictive new laws, the bank was forced to rebuild its operations almost from scratch. It abandoned leadership by a few men in favor of a presidential form of management under Seiji Sako, and adopted a new logo: the banks three pillarsshareholders, customers, and employeesenclosed by a circle, the symbol of money.

The Reconstruction Finance Bank (which helped to rebuild Japans economy, but which also contributed to inflation) was dissolved in 1948, leaving new markets open to the city banks. In addition, industrial laws were relaxed in 1949 and again in 1952. Many companies, including former Yasuda companies, reverted to their prewar names. The Fuji Bank kept its new name, but took advantage of the liberalized environment by re-establishing ties with its former affiliates. The bank restored business contacts and cross-ownership of stock with former zaibatsu affiliates, including Yasuda Mutual Life and Yasuda Fire & Marine Insurance.

Having regained some of the advantages it enjoyed before the war, Fuji was better placed than many of its rivals to rebuild its banking empire. By taking advantage of the high savings rate in Japan, Fuji recycled capital from individuals into promising export-oriented industries. As Japanese industry matured, Fuji developed a stronger presence in industrial finance, and in some instances wielded enough influence to win seats on the boards of high-growth client companies.

During Japans first period of industrial growth (1955-1965), Fuji succeeded in winning back much of its prewar influence. It was not Japans largest or most important bank, but it did gain a reputation as a keiretsu, or banking conglomerate, similar to the old zaibatsu combines.

Fuji began an aggressive international expansion during the 1950s, mostly by following clients into important export markets. Under the leadership of Toshi Kaneko, who succeeded Sako as president in 1957, Fuji began to assemble a zaibatsu-like organization. The Fuyo group, as it later became known, consisted of several companies involved in basic industries including shipping, trading, electronics, and steel and chemical production. The Fuyo group was created largely in order to protect the markets of non-zaibatsu companies against former zaibatsu that had begun to reassemble as diversified conglomerates. Major threats were Mitsubishi, Mitsui, Sumitomo, and C. Itoh, all of which operated diverse interests through an efficient worldwide trading network.

The Fuyo group developed much of its identity during the 1960s, when Yoshizane Iwasa, who succeeded Kaneko in 1963, was president of Fuji Bank. Some of the groups major members were Hitachi, Nissan, Canon, and Showa Denko, in addition to the new Yasuda companies. All were associated with Marubeni, a general trading company once associated with Yasudas rival, the Sumitomo zaibatsu .

The Fuyo members were major clients of the Fuji Bank. As such, they were also the banks primary vehicles of investment; their successes (and failures) were often reflected in the banks financial statements. True to the spirit of Zenjiro Yasuda, the Fuji Bank oversaw costly rescues of troubled firmsa phenomenon virtually unknown outside Japan. The rescues were intended to demonstrate to other clients the banks dedication to their businesses. But virtually all of the Fuji Banks customers were highly successful, which helped the bank emerge in the 1970s as one of Japans most influential financial organizations.

With establishment of the London-based Japan International Bank in 1970, Fuji became directly involved in European money markets. The bank set up subsidiaries in Australia in 1971 and in Switzerland, Hong Kong, and Singapore in 1972.

One area of particular interest for Fuji was investment banking. Japanese financial regulations, however, prevented city banks from performing non-bank activities. In the less-regulated overseas markets, Fuji was free to pursue whatever businesses local laws would allow. Fuji therefore formed Fuji Kleinwort Benson, a joint venture with the British investment bank Kleinwort Bensons Chicago-based securities brokerage, Kleinwort Benson Government Securities, in 1973. In 1977 Fuji increased its interest in this company to 70% and changed its name to Fuji International Finance. Fuji also established Fuji Bank & Trust in New York in 1974 as a way of entering the trust business.

Kunihiko Sasaki, who led the company from 1971 to 1975, is credited with steering the bank through the difficult years of the energy crisis. Because Japan is totally dependent on foreign oil, the countrys basic industries, including those within the Fuyo group, were severely affected. But the crisis created similar adversities in export markets, and demand for Japanese products remained high. Production slowed temporarily while markets adjusted to a new economic order. The latter half of the decade was marked by a strong recovery and expansion in the automobile sector, where Nissan was a major manufacturer.

Fuji forecasted a gradual decline in the rate of growth in the domestic economy many years before it occurred. It continued to take advantage of promising opportunities in the international market, thereby protecting itself against overconcentration in one market.

Under Takuji Matsuzawa, promoted from president to chairman in 1981, and Yoshiro Araki, who replaced him as president, Fuji purchased the financial subsidiaries of the Chicago-based Walter E. Heller International Corporation for $425 million in 1983. The acquisition gave Fuji an established client list and demonstrated the banks growing commitment to American financial markets. It also promised to win Fuji greater participation in syndicated loans, an activity that was virtually monopolized by larger American banks. In 1986 Fuji made an additional $300 million investment in Heller to strengthen the companys business structure.

Araki, an outspoken advocate of financial deregulation in Japan, was promoted to chairman in 1987. He was replaced as president by Tanzo Hashida. Under these two men, Fuji made its first direct challenge to American securities laws when it attempted to take over its joint venture partner Kleinwort Benson Government Securities.

The U.S. Government opposed the takeover because Kleinwort Benson was a primary dealer of treasury securities, and control of such institutions was legally denied to foreign companies. In a compromise, Fuji was allowed to purchase a 24.9% share of Kleinwort Benson for $39.5 million. While it gave Fuji a far smaller stake than it had originally planned, it also discouraged hostile takeovers of Kleinwort Benson until American securities laws were altered and Fuji could complete the acquisition.

Fujis international division performed outstandingly during the 1980s, and reported consistently increasing rates of growth. Domestic business, while representing a smaller share of total business, remains stable and strong. As a kind of coordinating body for the Fuyo group, Fuji enters the 1990s as a major international bank and leading member of one of Japans most powerful industrial organizations.

Principal Subsidiaries:

The Fuji Bank & Trust Co. (U.S.A.); Fuji Bank International, Inc. (U.S.A.); Heller International Corp. (U.S.A.); Heller Financial, Inc. (U.S.A.); Heller Overseas Corp. (U.S.A.); Fuji Bank Canada (Canada); Fuji Bank (Schweiz) AG (Switzerland); Fuji International Finance Ltd. (U.K.); Fuji Bank (Luxembourg) S.A.; Fuji Leasing (Deutschland) GmbH (Germany); Kwong On Bank, Ltd. (Hong Kong); Fuji International Finance (HK) Ltd. (Hong Kong); The Fuji Futures (Singapore) Pte. Ltd.; Fuji International Finance (Australia) Ltd.

Further Reading:

The Fuji Bank, A 100th Anniversary Commemorative, Tokyo, The Fuji Bank, 1980.