Saihei Hirose: Part 2

Author: Teruaki Sueoka

Overcoming financial difficulties

Sumitomo’s first project of the Meiji era was to modernize the cash-starved and debt-burdened Besshi Copper Mines. Former daimyo owed Sumitomo 180,000 ryo (1 ryo = 1 yen) and Sumitomo owed the government 88,500 ryo for rice supplied for the miners’ sustenance. While striving to collect loans and repay debts, in 1869 Saihei Hirosei issued private banknotes, known as yamaginsatsu, valid only within the Besshiyama area, in a move designed to improve liquidity.

In 1870, in order to secure funds for modernization of the Besshi Copper Mines, Hirose invested in Osaka Kawasekaisya, Japan’s first bank, and secured a loan. However, this company, whose investors included both the government and wealthy Osaka merchants, collapsed in 1873 under a mountain of bad debts. At the request of the investors, Hirose took charge of the liquidation, managing to collect a considerable amount of loans by 1877 for distribution to the investors.

Saihei Hirose and his wife Ko.
These photos were taken during their visit to Europe and North America in 1889.

Modernizing the Besshi Copper Mines

Hirose’s policy at Sumitomo was to steadily promote business development by using internally sourced funds. Unlike Mitsui, Mitsubishi, Furukawa, or Fujita, Sumitomo did not borrow heavily to acquire mines but instead plowed all its surplus financial resources into modernization of the Besshi Copper Mines. Meticulous planning and thorough implementation were Hirose’s watchwords throughout the modernization.

Yamaginsatsu, private banknotes valid only in the Besshiyama area, issued in 1869 to improve liquidity.

On February 24, 1876, based on French mining engineer Louis Larroque’s Besshi Copper Mines Masterplan encompassing mining, transportation, and smelting, Hirose presented his plan for modernizing the Besshi Copper Mines. The plan’s key elements included development of the Toen Inclined Shaft and construction of a pathway for ox-drawn wagons. As regards smelting, although Larroque’s plan looked good on paper, putting it into practice would be anything but straightforward. At the urging of Monnosuke Shiono, the translator of the masterplan, Hirose dispatched Shiono and Yoshizo Masuda, a clerk, to study mining engineering for five years.

The centerpiece of modernization in terms of mining was development of the Toen Inclined Shaft. In 1854, toward the end of the Tokugawa Shogunate, Misuma, a zone notable for the quality of its ore, became waterlogged as a result of a major earthquake. Relying on the traditional labyrinth of narrow winding shafts, it would have been impossible to efficiently exploit this mineral wealth. A tunnel for removing water and a modern shaft were indispensable.

In 1868, overriding objections, Hirose started excavation of the Koashidani Water Channel and, in 1876, excavation of the Toen Inclined Shaft got underway. The plan called for a steep 49-degree inclined shaft running from Toen at an altitude of 1,150 meters to the rich ore zone of Misumi at an altitude of 750 meters, which was at the level of the eighth gallery. With a width of 6 meters and a height of 2.7 meters, the inclined shaft would be connected with eight horizontal branch galleries. Excavation of the 526-meter-long Toen Inclined Shaft was a challenging 19-year project completed in 1895.

Cross-sectional drawing of the Besshi Copper Mines in 1895 indicating Koashidani Water Channel, Toen Inclined Shaft, Adit No. 1, etc.

For the Besshi Copper Mines, located more than 1,300 meters above sea level, efficient transportation was essential yet fraught with difficulty. From the Edo period, the Besshi Copper Mines had been reliant on porters. Recognizing that dependence on manpower was a bottleneck, Hirose decided to construct a 39-kilometer pathway for ox-drawn wagons, connecting the mines to Niihama via the pass. Work started in 1876 and the new pathway opened in 1880.

In 1882, Hirose began the excavation of Adit No. 1 in order to dispense with the need for transportation over steep terrain. Larroque was against Hirose’s project, arguing that it was beyond the capabilities of the Japanese without foreign expertise. Hirose introduced dynamite and Adit No. 1 with a length of 1,021 meters was completed in four years.

Commerce with Korea and establishment of a trading company

In commerce in the early years of the Meiji era (Late 19th century), Japan was in a weak position vis-à-vis the leading European maritime nations and the U.S., having been forced to swallow the bitter pill of the unequal treaties concluded in the Ansei era (1858). Through the copper business conducted by Sumitomo’s Kobe branch, Hirose was well aware that foreign firms with a presence in Kobe dominated commercial rights. Indeed, Hirose bridled at their high-handed manner. In January 1875, Hirose unilaterally decided to reduce the commission on copper sales payable to foreign firms from 5% to 2% and notified them of the fact via the Kobe branch. Prior to that, in 1873, in a bid to expand the scope of trading beyond copper, Hirose attempted to export rice to Britain and Australia, taking his cue from the rice export business of Senshusha, a predecessor of Mitsui & Co.

In 1877, Hirose began trading with Korea as part of efforts to recover commercial rights. Although he wanted to open branches in Europe and the U.S., he knew that Sumitomo still did not have sufficient capabilities to do so and therefore decided to start with Korea, a near neighbor. When Hirose visited the Busan and Wonsan branches in Korea in September 1880, he stressed the importance of dealing respectfully with the Korean people—mindful that the historical record included many instances of amicable and fruitful relations between the inhabitants of the Japanese archipelago and their neighbors on the Korean peninsular, while, with a view to expanding Japan’s commercial rights in Korea, ceasing to be subservient to European and American contenders in East Asia. However, in the aftermath of a violent uprising in Korea, the Imo Incident, which occurred in 1882, China gained control of commercial rights in Korea and Sumitomo withdrew from trading in Korea in 1883.

Modernization of marine transportation and establishment of O.S.K. Lines

Western-style smelter in Sobiraki that began operation in 1888 (top). The wooden-hulled Hakusuimaru, the first steamship Hirose purchased (bottom).

In November 1872, Hirose purchased Kobemaru (54 tons), a second-hand wooden steamship, from its British owner, renaming the vessel Hakusuimaru in a reference to Sumitomo’s trade name, Izumiya: the Chinese character for izumi (spring) comprises haku (white) and sui (water). Sumitomo went on to found a shipping business, acquiring several vessels, either newly built or second-hand, in the 14 years from 1874: Kaitenmaru (76 tons), Tomimaru (tonnage unknown), Anneimaru (340 tons), Koanmaru (125 tons), and Tsukumomaru (79 tons). These ships carried cargo between Shikoku, Sanyo, Kyushu, and Korea. Foreign steamship companies were soon facing stiff competition from homegrown Japanese lines: the two major contenders, Mitsubishi Steamship and Kyodo Unyu Kaisha, merged to form Nippon Yusen Kaisha (NYK) in 1885, while several smaller steamship companies were soon plying East Asian waters too. Furthermore, in 1880, Sumitomo suffered a misfortune when an exploding boiler sank the venerable workhorse Hakusuimaru off Shodoshima Island.

Hirose realized that consolidation of minor shipowners was the key to competing effectively against foreign shipping lines and Mitsubishi Steamship. On May 1, 1884, Osaka Shosen Kaisha (O.S.K. Lines), the predecessor of the present-day Mitsui O.S.K. Lines, was established by 55 small players based in western Japan with paid-in capital of 1.2 million yen and 93 vessels as in-kind contributions. Sumitomo contributed Anneimaru and Koanmaru and Hirose assumed office as the first president of O.S.K. Lines. In his speech at the inauguration ceremony, he emphasized the vital role of the shipping industry in Japan’s industrial development: “The new company’s task is to expand transportation, thus facilitating industrial and commercial development to the benefit of civilization in Japan.”

Touring Europe and North America, genesis of the Besshi mine railway

Besshi upper railway, Japan’s first mountain railway serving a mine. Hirose was inspired by a mine railway he saw in Colorado.

In May 1889, Saihei Hirose set sail for Europe and North America on a trip marking his attainment of the age of 60, a milestone of particular significance in the cultures of East Asia. In June 1989, Hirose inspected a mountain railway that followed a dramatic route hacked into sheer cliffs at the Colorado Central Mine in the Rocky Mountains. This experience boosted his confidence concerning prospects for constructing a railway to serve the Besshi Copper Mines. In 1894, two lines opened: the lower railway traversing the Niihama lowlands (approx. 10 km between Sobiraki and Hadeba) and the upper railway running along a mountainside 1,000 meters above sea level (approx. 5.5 km between Ishigasanjo and Kadoishihara). Such was Hirose’s delight at the inauguration of Japan’s first mountain railway serving a mine that he composed a poem in Chinese characters to mark the auspicious occasion: “An enterprise like no other. Desiring to extract inexhaustible pure copper for the nation’s economy. A railway, cleaving the heavens in twain, is the essential link.” This poem expresses Hirose’s enthusiasm for mining and its role in Japan’s economic development.

Shibusawa in the East, Hirose in the West

Besshiyama mountain covered with verdant forest, attesting to the success of afforestation promoted since the Meiji era.
Photo by Hitoshi Fugo

Hirose was active in the business world, devoting his energy and talent to cultivation of Japan’s budding private sector.

In a letter dated April 9, 1881 addressed to leading government minister Shigenobu Okuma, Tomoatsu Godai, a former feudal retainer of the Satsuma Domain who became a powerful figure in Osaka business circles, referred glowingly to Hirose: “He is the Director-General of Sumitomo…He is not just my right-hand man but also my left-hand man.” In fact, as a partner of Godai, Hirose was involved in establishing numerous companies, becoming vice president of Osaka Chamber of Commerce in 1878, deputy president of Osaka Securities Exchange and president of Osaka Ryusan Seizo Kaisha (Osaka Sulfuric Acid Manufacturing Company) in 1879, vice president of Kansai Boeki Sha (Kansai Trading Company) and president of Osaka Seido Kaisha (Osaka Copper Production Company) in 1882, and president of O.S.K. Lines in 1884.

On July 19, 1892, Saihei Hirose together with Eiichi Shibusawa (president of the Dai-ichi Bank), Ichibee Furukawa (promoter of the Ashio Copper Mine), and Kunishige Date (developer of Hokkaido) were the first cohort of private-sector leaders to be awarded the Order of the Sacred Treasure, Fourth Class in the Meiji Emperor era for their contributions to Japan’s industrialization. Although previously only government officials who made outstanding contributions to the nation received such honors, the Ordinance on Medals of Honor was revised in 1892 to make leaders from the private sector eligible. Hirose was the only person from Kansai to be thus honored. At the celebration held on October 19, 1892, Hirose addressed the gathering of some 200 wealthy merchants and other luminaries: “Society has opened up to such an extent that those people engaged in business may aspire to honors. It is my earnest desire that you will devote yourselves to business so as to benefit the national interest, proving yourselves worthy to receive the Order of the Sacred Treasure, First Class, not just Second Class or Third Class.” His speech was inspiring since it conceived of business as potentially a noble endeavor engaging an individual’s foremost qualities and desire to serve the nation.