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Business Abroad: Following Henry Ford

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In the sunny living room of his home near Osaka, 26-year-old Seiji Hayakawa last week contemplated his existence and found it good. Mornings, Seiji and his young wife Kumiko wake to the bubbling of their automatic rice cooker, turned on minutes before by an electric timing device. Evenings they watch Laramie or the samurai dramas on their television set and right off the winter chill by toasting their feet on an electric footwarmer. So well paid are their jobs at the nearby Matsushita Electric Co. radio plant—as a foreman, Seiji makes $61.12 a month, plus a bonus of 6½ months’ pay last year—that they also own a refrigerator, transistor radio, vacuum cleaner, electric iron and washer. If the expectant Kumiko presents him with a son next month, Seiji even talks confidently of sending the boy to a university. “What more could I want?” Seiji ruminates contentedly—and answers himself: “I can’t think of anything.” The contentment of Seiji Hayakawa is a consequence of the biggest and most hopeful economic news out of Asia since the end of World War II: the emergence of Japan as a consumer-oriented society and the first Asian nation to approach a Western standard of living. Less than a century after its awakening from feudalism and only 16 years after the soul-crushing devastation of World War II, Japan ranks among the world’s great industrial powers. Stimulated originally by liberal transfusions of U.S. aid* and propelled by the boundless energy of its people, Japan last year boosted its national output to $45 billion—four times the highest prewar level. Exporting at the rate of $4 billion a year (triple the 1951 rate), Japan today is the U.S.’s single biggest trading partner after Canada; last year Japan’s exports to the U.S. hit $1.1 billion, its imports from the U.S. $2.2 billion.

What makes Japan unique among Asian nations, however, is that its growing wealth, instead of being concentrated in the hands of a small elite, is benefiting the entire nation. Of the hundreds of words the Japanese language has borrowed from English, the most overworked today is “boom” (pronounced “boomu”). Japan’s boom has edged off some in recent months, but the results continue to be spectacular. There is the golfing boom, as new courses, opening at the rate of 60 a year, are jammed with wild-swinging enthusiasts. There is the bed boom, as people leave their straw mats for Western-style mattresses. There are skiing booms, boating booms, bowling booms, appliance booms. Cities throb with the pound of pile drivers pushing new office buildings and apartments skyward. Tokyo’s streets —most of them no more than lanes—resound with the honking of 700,000 cars, trucks and motorcycles, v. 59,000 before the war; traffic jams are hideous, and the death rate from traffic accidents the highest in the world. So many people pack stores, subways and amusement centers that one entrepreneur sells a “slippery coat” of tough synthetic fiber to make it easier to slither through crowds.

In many places, the ancient poverty of Japan persists, but today it is no longer accepted as necessary and permanent.

Even the once miserable Japanese farmer, who traditionally sold his daughters into prostitution to tide the family over bad times, now equips his wife with gleaming appliances and works his tiny fields with a motor plow. In the big cities, housemaids, who 20 years ago lived in something approaching involuntary servitude, are now apt to carry a transistor radio tucked away in their handbags, may even be putting a few dollars a month into mutual funds.

King of Taxpayers. Japan’s energetic businessmen, freed from the military domination of prewar days, have shown themselves to be among the world’s most aggressive and imaginative free enterprisers. And of all the men who have helped to build Japan’s prodigious industrial machine, none has worked so consistently and successfully to distribute its products among Japan’s ordinary people as Seiji Hayakawa’s boss — gentle, sad-eyed Konosuke Matsushita (pronounced Mat-soosh-ta), founder of giant Matsushita Electric Industrial Co.

At 67, wispy (5 ft. 4 in., 129 Ibs.) Konosuke Matsushita has the self-effacing look of an elderly, underpaid schoolteacher. In fact, he is a daring manufacturing and merchandising genius who, starting out at nine as an errand boy, has built Japan’s biggest appliance business from nothing. Matsushita’s success has made him Japan’s biggest yen billionaire; last year his personal income hit $916,000, and for five out of six years he has been Japan’s ”King of Taxpayers.” But Japan’s prosperity does not delight Matsushita merely because it fills his coffers. His hero is Henry Ford — the man who brought the automobile to the masses — and he believes that if the world can be filled with material abundance, men will at last be free to pursue universal peace and happiness. In making himself the Henry Ford of Japan’s appliance industry, he has also made himself the most widely admired businessman in Japan.

The Lucky Man. In Japanese. Konosuke Matsushita’s name means “lucky man beneath the pines,” but his success owes more to pluck than luck. While he was still a child, his parents and five of his seven brothers and sisters died in rapid succession, leaving him, a frail orphan, to scratch for a living. With no family to discipline him in the rigid Japanese rules of life, which dictated that a boy must stick with his first employer for life. Matsushita at 1 6 deserted his job as apprentice bicycle repairman to join the Osaka Electric Light Co. because he saw more future in the infant electric industry. In eight years he had married and had a good position as a wiring inspector. But again he quit, scraping together $97.50 to start a tiny business making an electric socket he had designed. It failed miserably (“It was a grim year. I had to pawn my wife’s kimono”), but he struggled along with subcontract work until he developed an electrical attachment plug that could be sold for 30% less than his competitors’ plugs. By the time he was 27, he was a success.

Matsushita’s business career began in a Japan that was still shaking off the effects of two centuries of political, economic and international hibernation under the autocratic Tokugawa shoguns. To preserve their nation’s independence, the new rulers of Japan—an uneasy coalition of military leaders descended from the old samurai and the great financial clans known as zaibatsu—concentrated on building Japan’s industrial and military power at forced draft. The policy was in part highly successful—until World War II, Japan was the only Asian nation that had never been colonized or dominated by a Western power—but it cost a grim price. Like Communist China today, prewar Japan built its strength on the sweat of its people, had no surplus to spare for decent living conditions.

Neglected Cranny. Matsushita managed to exist alongside the grasping zaibatsu by slipping into a cranny of industry they cared nothing about: consumer goods. The Osaka zaibatsu even lent him money, with no attempt to dominate him. But his success came from introducing the Japanese to a brand of imaginative. Western-style salesmanship they had never seen. When retailers refused to believe that his battery-powered bicycle lamp would run 30 hours—ten times longer than any other then on the market—he left one turned on in each store. Before long, orders came streaming in, and Matsushita Electric was on its way to becoming big business.

By 1931, Matsushita had 600 employees, was producing appliances from electric foot warmers to radio receivers. But it was not until one day in 1932 that he realized what his mission as an industrialist was. “It was a very hot summer day,” he recalls. “I watched a vagrant drinking tap water outside somebody’s house and noticed that no one complained about it. Even though the water was processed and distributed, it was so cheap that it didn’t matter. I began to think about abundance, and I decided that the mission of the industrialist is to fill the world with products and eliminate wants.” From then on he added a missionary’s zeal to his driving ambition; by the time World War II broke out, he was in command of an empire of 10,000 employees.

Ships & Planes. No sooner had war begun than Matsushita and his factories were drafted for military production, churned out everything from radios to 200-ton wooden transport ships. Toward the end of the war, Matsushita was even called on to build wooden training planes.

Says he: “When they came to me to manufacture airplanes, I knew things were hopeless.” V-J day found the Japanese economy prostrate. U.S. fire bombings—so numerous that they were more devastating to the wood-and-paper cities than atomic bombs—left 80% of Japan’s industry a charred rubble; the shell-shocked populace foraged for weeds to keep from starving. When General MacArthur demanded 50 cars to move his staff to Tokyo, the Japanese government could not find that many functioning autos in the entire Tokyo-Yokohama area. But in the long run, defeat and devastation proved the best thing that could have happened to Japanese industry. Forced to rebuild with modern plants, Japan’s businessmen vastly increased their ability to compete abroad. And the downfall of the militarists meant that the Japanese economy was no longer made to play armorer. With the outbreak of the Korean war and the consequent U.S. decision that Japanese industry should be treated as a valuable free world asset instead of a threat to world peace, the way was clear for Japanese businessmen to build a new Japan.

Economic Explosion. In the past decade, Japan’s steel industry has poured $1.3 billion into construction of some of the world’s most automated plants, has increased its output 480%. Last year, without benefit of military spending —Japan still produces no missiles or heavy military equipment — Japanese steel production hit 27.8 million tons, enough to oust Britain as the world’s fourth largest steel producer. In shipbuilding, by adopting the most modern techniques and guaranteeing quick delivery, Japan nosed Britain out of the No. 1 spot six years ago. The Japanese chemical industry, riding the crest of a demand for chemical fertilizers that has helped make Japan self-sufficient in rice, has more than doubled its sales (to $3.2 billion) in the past six years, is now going heavily into petro chemicals. Under the protection of stiff tariffs, even the long-struggling Japanese auto industry has increased its sales —virtually all domestic — from $93 million to $1.3 billion since 1951.

In this mighty surge, Japanese industry produced a managerial class that can hold its own against any in the world. Among its leaders: > Shigeo Nagano, 61, stocky, hardheaded president of Fuji Iron & Steel Co., who expanded his company at such a pace — in eight years he increased Fuji’s steel production 300% — that he gave growth fever to all of Japanese industry.

> Toyota Motor’s Chairman Taizo Ishida. 73, patriarch of Japan’s auto industry, who in a single year turned Toyota away from near bankruptcy toward prosperity as Japan’s biggest automaker.

> Ex-Insurance Man Taizo Ishizaka, 75, who has led Tokyo Shibaura Electric Co. (Toshiba) to a sizzling 35% a year growth rate, is Matsushita’s biggest competitor in appliances and Japan’s largest producer of heavy electrical equipment.

> Shigeki Tashiro, 71, a zaibatsu executive “purged” by the U.S. Occupation, who came back to make Toyo Rayon Japan’s largest synthetic fiber maker and a major earner of foreign exchange.

> Kaneo Niwa, 66, chairman of Mitsubishi Shipbuilding Co., who aggressively rebuilt his company’s shipyards at atom-bombed Nagasaki into the world’s largest.

> Canon Camera’s Takeshi Mitarai, 60, who, by stressing quality and workmanship, emerged as one of the world’s leading camera manufacturers and exporters.

> Soichiro Honda, 55 (TIME, Aug. 25), a former auto mechanic whose precision-built Honda motorcycle has won world fame as the hottest thing on two wheels.

The Bottom. Of all Japan’s industrial titans, none has brought his company so far and so fast since the war as Matsushita. Matsushita came out of the war with worn-out machinery—miraculously, the B-29s had failed to hit any of his plants—and exhausted, frightened workers. He was so badly in debt that for a time the future King of Taxpayers was billed as the King of Tax Delinquents.

American occupation authorities lumped him with the zaibatsu, who were scheduled to be obliterated from the industrial scene.

“It was the bottom, the low point, the toughest period of my career,” he says.

Salvation came from an unexpected quarter: the labor union whose formation U.S. officials encouraged as a measure to introduce democracy to Japan’s industry. Time after time, delegations of Matsushita workers trooped to Tokyo to tell the occupation authorities that their boss was a non-zaibatsti poor boy, a benevolent employer, whose aim was a better life for the masses. After three years of appeals, Matsushita’s name was finally taken off the purge list and his company spared the enforced “deconcentration” that hit other giant firms. Still, the hard times forced him to lop off 30 subsidiaries and reduce his staff to 3,800. Says he: “I never felt so sad about anything in my life.” The New Freedom. Once he could operate freely in a civilian economy, however, Matsushita was in his element. He pioneered easy-payment plans, became Japan’s biggest advertiser (his ad budget last year: $18 million), flooded his dealers with sales aids. His domain swelled to 89 plants, employing 49,000 workers. From $17 million in 1951, Matsushita’s sales made an astounding leap to $486 million last year, and in five more years he expects them to pass the billion dollar mark.

Unlike most U.S. electrical-equipment makers, he does a scant 1% of his business with the military.

To his prewar product line, Matsushita has added a staggering array of new products including television sets, tape recorders, hearing aids, mechanical massagers, electric pencil sharpeners and electrically heated trousers; now he is developing a home freezer and a line of computers.

Sold under the brand name “National” (except in the U.S., where, because of a trademark conflict, they carry the name “Panasonic”), Matsushita’s products have done much to change Japanese life. His rice cooker, which automatically turns out a perfect batch of rice every time, has freed Japanese women from the need to get up an hour earlier than their husbands — and from the terrible mother-in-law’s verdict, “She can’t even cook rice,” which once was enough to send a Japanese bride back to her parents in disgrace. Matsushita’s vacuum-cleaner ad that promises women “freedom from one phase of household drudgery,” introduces a notion that, though old hat in the West, marks a revolution in the status of Japanese women.

Much of the old, austere simplicity —wooden blocks for pillows and floor cushions instead of chairs — still persists in Japan, but it is unlikely to survive another generation. “The old Japanese style,” says Matsushita, echoing the sentiments of young Japan, “is just too uncomfortable.”

“Finest Performance.” Unlike many Japanese industrialists, Matsushita exports only 10% of his production. In fact, he disputesthe national contention that Japan, with its few natural resources and scant arable land, must either trade or die.”The government should consider ways of bringing about prosperity without depending on foreign trade only.” says he. “Our ancestors did it.”

But although he exports less than such competitors as Toshiba, the high quality of the goods Matsushita sends abroad is helping to erase the old image of Japan as a producer of cheap junk. In dramatic evidence of the changing international reputation of Japanese goods, New York’s Macy’s last week took full page newspaper ads to tout Matsushita’s “worldwide reputation for finest quality, finest performance,” and to boast that it had the U.S.’s first stock of his new Panasonic portable television sets. Like other Japanese industrialists. Matsushita finds the U.S. and Canada his best customers. Latin American countries are becoming increasingly important, but Europe still maintains stiff trade barriers, and Asian nations have not progressed enough to want the new, sophisticated products Japan turns out.

“Harmony and Sincerity.” The Japanese are naturally hard workers and love fine workmanship, but Matsushita ceaselessly exhorts his employees anyway. From the ceilings of his gleaming white, air-conditioned plants hang signs declaring: “Quality Is Everybody’s Job,” “Always Think of the Consumer.” And each day before work begins, Matsushita executives and their uniformed workers gather to sing with the fervor of a college homecoming crowd:

For the building of a new Japan, Let’s put our strength and mind together,

Doing our best to promote production, Sending our goods to the people of

the world,

Endlessly and continuously, Like water gushing from a fountain.

Grow, industry, grow, grow, growl Harmony and sincerity!

Matsushita Electric!

So infectious is the plant spirit that even skeptical new white collar employees fresh from the universities soon join in the singing. Jobs with Matsushita are considered such plums that thousands of young men and women take examinations for them each year.

Trust the Help. Unlike most autocratic Japanese industrialists, Matsushita calls freely on his subordinates for advice, rarely interferes after delegating responsibilities to them. Says one of his executives: “His intuition is amazing. He sees markets before they are there.” Once he listened to a group of his managers present a convincing argument, buttressed with statistics, that first-year production of a new foot warmer should be 50,000. Matsushita glanced over the figures, quietly said: “A hundred thousand.” The company made a hundred thousand and sold them easily.

In the past year Matsushita has stepped up to the chairmanship of Matsushita Electric and, though he still watches overall policy, is making a manful effort to turn day-by-day operation over to his son-in-law—and adopted son—Masaharu Matsushita, 49. (Matsushita’s own son died when he was two years old.) The younger Matsushita, who lacks the contagious zeal of his self-made father-in-law, is intensifying the company’s research efforts and stressing computers.

Tea & Flower Petals. As he gradually cuts himself free from his business duties.

Matsushita nonetheless adheres to a rigid schedule that brings him home only on weekends to his wife Mumeno. But in their 45 years of marriage, she has played a vital part in his business life, accompanying him on factory visits and often doing the final tests on home appliances that Matsushita is about to market. Currently, they live in a company-owned, 27-room Japanese-style home on a country estate between Osaka and Kobe, but will soon move to a six-room house on the same grounds, which is being westernized for comfort.

Most weeks, Matsushita goes to his Osaka office only for Monday business conferences. From there he is driven in his long black Cadillac (his only bit of ostentation) to a modest Kyoto town house where he occupies himself until Friday with his “old man’s toy”: the PHP, or Peace and Happiness through Prosperity Institute, which he set up in the desperate days after the war. In the monastic atmosphere of the institute’s serene gardens, he sips tea, eats flower-petal cakes, and holds seminars with his three young research fellows, discussing how best to use abundance to bring prosperity and happiness to all. “First,” explains Matsushita, “we must really know what a human being is. If one wants to raise sheep, one must learn the nature of sheep. So with humble heart, I want to study human nature.” A Special Necessity. To more mundane American businessmen, Matsushita’s philosophic quest may sound naive. But it has a special necessity in a Japan whose society has undergone such radical change in so short a time. Along with the once stabilizing ties of the Japanese family, the paternalistic relationship between master and man in Japanese industry is breaking down.

For the first time in its history. Japan is facing a labor shortage. Last November, available jobs outnumbered junior high school graduates seeking work by better than 3 to 1. Job scouts from cabarets, electronic plants and weaving mills virtually shanghai girl caddies off the golf courses. In the future, the labor pool can be expected to dry up still more, since Japan, alone among Asian nations, appears to have beaten the population explosion. Japan’s present birth rate (17.1 per 1,000) is lower than that of most European nations, and with the continuing spread of contraception and legalized abortion, it should fall even lower.

For a while to come, the steady migration of young Japanese from the farm to the city will help keep factories staffed.

But ultimately, the declining population curve foretells the end of one of the traditional mainstays of the Japanese economy—the tiny, back-alley “cottage industry” with two or three employees, depending for its survival on cheap labor and sweatshop conditions. To continue to compete internationally, Japanese business from now on will have to put its main emphasis on modernization and increased productivity.

Double the Income. Prime Minister Hayato Ikeda’s government has proposed a ten-year plan to provide many of the needed changes. But to divert the voters’ attention from Japan’s current political upheavals, Ikeda publicly laid greatest stress on the plan’s goal of nearly doubling Japan’s per capita income by 1970.

This encouraged an orgy of business expansion in anticipation of an even more glorious domestic boomu. As a result, imports of machinery became so heavy that by mid-1961, ships were literally queued up in Japan’s harbors, sometimes had to wait as long as 30 days to be docked for unloading. This, plus the U.S. recession, which slowed exports, caused Japan’s trade deficit to jump to a record $1.5 billion last year.

News of the trade deficit chilled the stock market, and by December prices on the Tokyo Exchange had plummeted 30%. For months the market had been rising so joyously that investors forgot it could ever decline, and common people had become such avid speculators that brokerage houses opened offices in department stores for the convenience of housewives. Reluctantly, Ikeda raised interest rates to discourage further borrowing for expansion and put curbs on imports. As a result, the trade deficit has gradually begun to improve and stock prices have started recovering.

Nevertheless, the scare has started many Japanese businessmen off on a new boom—the “gloom boom.” They fearfully suggest that their businesses will collapse because their annual growth rate may fall from 30% to a mere 15%. And though Japan’s foreign trade balance in December was the most favorable in a year, many Japanese darkly suspect that they are being frozen out of international trade. In Europe’s Common Market, they see only a wall designed to keep Japanese goods out of Europe. The 19-nation Geneva agreement on textiles published last week will, in fact, open new markets in Europe for Japanese cotton goods, but this does not pacify the Japanese, who have focussed instead on the attempts of the U.S. to reduce its imports of Japanese textiles. In Washington last week, a delegation of Japanese businessmen testified that if the U.S. adopts President Kennedy’s proposal to put an 8½¢per pound surcharge on imported cotton textiles, Japan will reduce its heavy purchases of U.S. raw cotton.

Buyer’s Market. Tough-minded Konosuke Matsushita will have none of the gloom boom. Any stumble in the Japanese economy, he declares confidently, will only help Matsushita Electric. Says he: “In a declining situation, you get a buyer’s market. The customer becomes more selective and looks for better quality. That’s when the good companies make themselves felt.” More important, Matsushita remains confident that, given a modicum of good management, the continued growth of Japan’s economy is assured. He has long criticized Premier Ikeda’s heady “double the income” talk as a stimulus to ill-conceived and excessively rapid expansion. “There is such a thing as the most economical speed of operation whether for an engine or a national economy,” says he. “What the Japanese economy has to do now is slow down its growth to the most economical speed.” As far as the Common Market is concerned, says Matsushita, “it is shortsighted to think that a progressive development in one part of the world will hurt us. After all, the more America developed, the more Japan benefited. So long as there is a relationship between the Common Market and the rest of the free world, then Japan’s economy in ten years will be incredibly good.”

And while he readily admits that “prosperity does not automatically bring a happier, more enriching life,” Konosuke Matsushita remains convinced that abundance for the many provides a far better base for peace and happiness than do poverty and deprivation.

* Largely cut off in 1952, though U.S. procurement for the Korean war brought another cornucopia of dollars into Japan.

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