Turbulent Period1917 – 1949Transformation of Nagase Shoten — Hardships and determination amid great wars

Establishment of Nagase Shoten Company

As business expanded, Nagase outgrew its organizational structure and made changes. On April 27, 1917, Nagase switched from a branch-based to a division-based management structure. Adding to the existing Export Division and Import Division, new divisions were established for dyestuffs, chemicals, machinery and sundries, and a new head office-centered organizational structure was instituted. Nagase steadily increased its capitalization, from ¥42,500 in 1904 (earlier data is unavailable) to ¥100,000 in 1906 and ¥1 million in 1916.

Aiming to build upon the substantial growth in profits from the economic boom brought about by World War I and to solidify its business foundation, Nagase Shoten, a sole proprietorship, was dissolved and incorporated as Nagase Shoten Company on December 31, 1917. This ended some 85 years as a sole proprietorship and ushered in a new company structure with modern management.

Nagase Shoten Company started out with capital of ¥3 million, and its locations comprised the head office, Tokyo branch office, Kyoto branch office, Kobe branch office, London branch office, New York office, Tianjin office, Hankou office, and the Kyoto Cotton Yarn Division established in January 1918.

Relationship with Eastman Kodak

At the time, Managing Director Tokutaro Nagase, who was in charge of sales, was interested in raw film stock for movies, and wanted to import it from U.S. company Eastman Kodak.

In March 1926, a new department for motion picture materials, which later became the Motion Picture Products Division, was launched at the head office. At first this business made no money, but in time Nagase became the leader in film sales in Japan and established a close relationship with Eastman Kodak. Later, Dainippon Celluloid Company (now Daicel Chemical Industries, Ltd.) was the first Japanese company to successfully manufacture movie film, and in January 1934 it established Fuji Photo Film Co., Ltd. (now Fujifilm Corporation) and began producing movie film. The same year, Nagase signed a sales agreement to sell that company's products. Due to Nagase's expanding share of sales to the movie industry, a division was also established at the Tokyo branch office in May 1933. This division was renamed the Motion Picture Products Division in 1941.

During this period, Nagase moved to establish processing facilities at the request of Eastman Kodak. Nagase began film development at the Far East Film Research Laboratory in July 1932, and later transferred its facilities and operations to Far East Laboratory, Ltd., which was established on February 18, 1935, and today is known as Imagica Robot Holdings.*

*Imagica Robot Holdings: Imagica changed its name to Imagica Holdings in April 2006, and to Imagica Robot Holdings in July.

Expansion of Paint Business and Distribution Agreement with UCC

Nagase signed a sole distributorship agreement for the import and sale of DUCO, a revolutionary paint from U.S. company E.I. DuPont de Nemours & Co., Ltd., and established the Paint Division at the head office in September 1927. The following January, Nagase opened a paint research laboratory and paint warehouse, and began issuing Nagase Paint Monthly to publicize and expand the market for imported paints. In May 1928, a paint division was also established at the Tokyo branch office, and Nagase widened its market to areas north of Kanto.

In July 1929, then-prime minister of Japan, Osachi Hamaguchi, formed his cabinet and laid out a bold 10-point policy program, calling for fiscal austerity and the lifting of Japan's gold. However, the Wall Street Crash of 1929 shortly after on October 24 severely destabilized stock prices and subsequently precipitated the worldwide Great Depression.

Japan's economy languished under severe recession brought on by ripple effects of the Great Depression and the lifting of the gold embargo. Flagging exports, diminishing purchasing power, and falling prices induced a slew of bankruptcies. Many companies in the dyeing and finishing industry collapsed. Nagase came through the recession relatively unscathed, however, as a result of agonizing and determined efforts to maintain sales.

Under these circumstances, Nagase moved to shore up its business foundation by deepening its ties with Union Carbide Corporation (UCC), a major U.S. chemical manufacturer (now The Dow Chemical Company). Nagase had imported paraldehyde from UCC on a trial basis in 1923, and began full-scale business with UCC around 1929 as it worked to expand its market by importing Cellosolve, triethanolamine, butanol and other chemicals. Because Nagase had used the establishment of the Paint Division when it began handling DUCO to gain a solid foothold in the paint industry, UCC also had a favorable impression of Nagase. This paid off in November 1930 when Nagase reached an exclusive distribution agreement with UCC to market that company's products in Japan, winning out over such major trading houses as Mitsui, Mitsubishi, Iwai and Ataka.

This was an important first step in Nagase's development into a trading company specializing in chemicals. The relationships with UCC and Ciba were the springboards for the evolution and expansion of the chemicals business, which is still the largest pillar of Nagase's business today.

Centennial

Nagase marked its centennial on June 18, 1932. At the anniversary celebration, President Denzaburo Nagase said that the 100 years since Nagase's founding had been “truly an eventful period fraught with difficulties. Nagase has been carried along with the times and witnessed tremendous changes, but fortunately has made it to today. Looking back on this, I am deeply moved.” His address was a heartfelt reminiscence of the various events and difficulties Nagase had overcome in its development, from the end of the Edo period to the Meiji Restoration, and through the wars with China and Russia and World War I.

But Japan was about to enter an even more tumultuous period. After the Manchurian Incident in September 1931, Japan expanded its battle lines in mainland China, and by May 1938 the Japanese economy was on a total war footing.

In this time of emergency, imports of products such as dyestuffs, chemicals, machinery, raw film stock, paints, and automobile parts became scarce, but Nagase was able to maintain its operating results by selling more domestic products.

However, in August 1935 dyestuffs came under government control. Nagase was unable to purchase products freely, and prices were set by the government. Unions and associations were formed one after another to control imports, exports and primary distribution, and dyes were also rationed under a coupon system.

Opening of Nagoya Branch Office

Nagase's involvement in markets in the Nagoya area date back to its time as a sole proprietorship, but as dealings increased, the need for an office in the area grew more apparent. Nagase began by opening a Nagoya office in a rented room in November 1933. In September 1938, Nagase purchased a building and land in Nagoya City's Azuma ward, to which the office was moved and a warehouse added. The office became a full-fledged branch office in April 1940.

Wartime Change of Company Name

December 8, 1941, marked the beginning of the four-year-long Pacific War. On June 1, 1943, the company changed its name from Nagase Shoten Company to Nagase & Co., Ltd. The change was made to reflect that Nagase was no longer just a sales and trading company but also encompassed affiliated manufacturing companies, had established directly operated factories, and was anticipating expansion into manufacturing businesses.

On August 15, 1945, the war finally came to an end with Japan's unconditional surrender to the Allied forces. Nagase lost all of its interests in Manchuria, China and Korea, and more than a few Nagase employees had been killed in action or perished in bombings.

Near the end of the war, Nagase's business shrank and sales plummeted. Even after the war ended, the economy was still controlled, and Nagase's management faced a number of difficulties. Severe inflation and fiscal restraints prevailed, and companies were being reorganized due to the dissolution of the zaibatsu, enactment of laws to eliminate excessive concentration of economic power, and other measures. Labor conditions in Japan also changed drastically during this time. After enactment of the Labor Standards Law in September 1947, an employee union was formed at the head office of Nagase on October 1. This was the predecessor of the labor union of today.

President Tokutaro Nagase led all important negotiations himself, and put all his effort into restoring business relationships with Ciba, UCC, AB Separator (now Alfa Laval AB), Eastman Kodak and other companies with which Nagase had close ties before the war. Nagase once again imported dyestuffs, industrial chemicals, machinery, raw film stock and other products in large quantities.