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Walsh Brothers

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Papering Japan

Thomas Walsh

Thomas Walsh
(1827-1901)

Thomas and John Walsh were scions of an upper-class American family. John, the younger of the two, traveled to Nagasaki in 1862. Thomas, who had engaged in trading ventures in China in the 1850s, soon joined him there.

Japan only recently had opened its doors to the world after two-and-a-half centuries of isolation. The nation was racing to catch up with the West in technology and industry. It presented commercial opportunities aplenty for entrepreneurial foreigners. Nagasaki, on the southern island of Kyushu, was the site of Japan's first foreign enclave. It was where Thomas Glover began his illustrious career in Japan.

The Walsh brothers set up a trading company with a fellow American in Nagasaki in 1862 and soon opened branches in Yokohama and Kobe. They were leaders in the foreign business community, and John Walsh became the first American consul in Nagasaki. Contemporary accounts record that the brothers worked unselfishly to assist Japanese who traveled to the United States on study missions. They even mobilized their younger brother, who lived in the United States, to escort Japanese visitors.

When local entrepreneurs established Japan's first modern paper company, the Walshes arranged for importing the production equipment from the United Kingdom. Japanese had been making and using paper, of course, for hundreds of years. But they lacked technology for mass-producing paper to use in modern printing equipment.

The brothers became influential spokesmen for Japan's fledgling paper industry. Thomas led the formation of an industry cartel. And the brothers promoted an import tariff to protect local manufacturers. They also helped persuade the government to stop selling paper through its printing bureau. The Walshes argued convincingly that direct government involvement in the marketplace hindered the sound development of private-sector industry.

Meanwhile, the brothers entered the market themselves. Scrap cotton fabric was the chief raw material for paper in the industrialized nations in the late 19th century. Used fabric was available almost for the asking in Japan, where blue-dyed cotton garments were standard apparel for most people. The Walshes and other investors set up Japan Paper Making Co., Ltd., in Kobe in 1875 to convert scrap cotton fabric into pulp for export.

Work began on the factory. Costs ran far beyond the initial budget, however, and a dispute arose among the participants in the project. Fate intervened when the American brothers reluctantly put the company up for sale.

A Favor Returned
John Walsh

John Walsh
(1829-1897)

Yataro Iwasaki, the founder of Mitsubishi, learned of the company's travails. He had done business with the Walshes in Nagasaki and trusted them immensely. They had provided Yataro with crucial seed funding for early Mitsubishi ventures. This was his chance to repay the favor. He extended the brothers an interest-free loan to refinance their company.

The company thus gained new life in 1877 as Kobe Paper Mill, and it began producing pulp in 1878. But a high import duty in the United States and a sharp increase in the cost of fuel coal made exports unviable. Instead, the Walshes used their pulp to make paper locally. They were immediately successful, and their company became a leading Japanese producer of paper.

Yanosuke Iwasaki, Yataro's brother and the second president of Mitsubishi, took an equity interest in Kobe Paper Mill in 1888. Joint ownership of companies by Japanese and non-Japanese investors was becoming common as the government eased its rules on investment. Yanosuke also had secured an equity stake in the company that is today's Kirin Brewery.

Profitability in Japan's paper industry deteriorated in the early 1890s. Competition had escalated as the number of local producers grew. Profit margins also suffered from surging imports in Japan's increasingly open market. Kobe Paper Mill endured the hard times, however, and returned to profitability when paper prices recovered in mid-decade.

Smooth sailing lay ahead for the American brothers who had achieved unlikely success in an unlikely venue. Then, tragedy struck. John died of sudden illness in his home in Kobe in August 1897. Thomas was traveling with his wife and children in Switzerland. He rushed back to Japan alone. After dealing with the sad chores of settling his brother's estate, the elder Walsh took stock of his situation. He decided after much soul-searching to withdraw from the venture he had built with his brother. He ceded the company in 1898 to Hisaya Iwasaki, the son of Yataro, who renamed it Mitsubishi Paper Mills in 1904.