Guessing what was on the mind of a Mitsui & Co chief executive used to be easy enough. As the most resource-focused of Japan’s titanic sogo shosha general trading houses, copper prices, iron ore supply and the geopolitics of energy were corporate life and death.
As he approaches his fourth year in charge, Tatsuo Yasunaga’s preoccupations include mayonnaise deployment at McDonald’s, Earth-mapping micro-satellites, Indonesia’s appetite for yoghurt and whether a convoy of trucks can cross the US without drivers.
He is not running a grand old mansion of salarymen, he insists from an office overlooking the grounds of the Imperial Palace in central Tokyo, but a hothouse of entrepreneurs: “We are finding new markets . . . industry-wise, business-wise, penetrating new frontiers.”
The bewildering splay of Mitsui’s trading and investment interests — animal feed to air cargo; prosciutto to passenger trains; telecoms to tailoring — is not new. Its 2017 negotiations over a port investment in Colombo that could transform Japanese trade routes, for example, are certainly not hindered by Mitsui subsidiaries having built Sri Lanka’s parliament building in 1982. Even the activities Mitsui considers core — chemicals, machinery, infrastructure, healthcare and retail — are diverse.
For many years, Japan’s trading companies, led by Mitsui and Mitsubishi, have been steadily turning into something between private equity houses and venture capitalists. There have been “significant failures” along the way, admits Mr Yasunaga, and shareholders have demanded investment discipline.
But Mr Yasunaga’s mission now is to accelerate the shift away from resources. He is pushing the venture capital and private equity themes, and hoping that Mitsui’s “DNA-rooted” entrepreneurialism will create new business lines to take its investments deeper into consumer markets and absorb new technologies. The trading house model, he says, is well placed to make it happen. And unlike pure private equity groups such as Bain and KKR, he adds, Mitsui is used to taking a very long view.
He talks with unusual bluntness for a Japanese CEO of streamlining Mitsui’s headquarters and of introducing artificial intelligence and internet-of-things technology. He has taken, he says with pride, to confronting Mitsui staff — especially those in the core competency of risk management — with the question: “When can your job be replaced by AI?”
The funding side of this endeavour involves earmarking $200m from Mitsui’s published investment plans of $5bn-$6bn to 2020, for a special account to spend on new ventures. These may fall outside Mitsui’s comfort zone and will, Mr Yasunaga says, involve the company “sharpening pencils”.
There is a personal flavour to this enthusiasm. In 2016, a year after taking over as chief executive, Mr Yasunaga became the first Mitsui president since the second world war to announce an annual loss, as his predecessors’ bets on metal and energy soured during a global commodities rout. It was humiliating stuff. For all the breadth of its portfolio, he had inherited a company whose profits (it disclosed at the time) fell ¥2.8bn ($23.7m) for every $1 per barrel drop in the price of crude and had been, just three years earlier, 90 per cent derived from resources and energy.
He vowed to “exhaust all possible means to return to profitability”, and the current strategy, in which 50 per cent of profits will come from the consumer side of the business, is the result. On that note, his current preoccupation is Russian male life expectancy.
Russia has a population of more than 144m. “They need access to quality products,” says Mr Yasunaga, describing Mitsui’s recent investment in R-Pharm, the Russian drugs group. “This is a platform to penetrate the pharmaceuticals business in Russia, and we are bringing in Japanese products and devices.” He points out that the average healthy life expectancy for men was 66.5 in 2016, “so there is big headroom”.
Mitsui’s core interests in Russia will continue to be its large and expanding resource-related investments, particularly in liquefied natural gas. But the R-Pharm move is about leveraging a history of engagement with the country (and more than 60 others to which Mitsui’s resource-trading background has given it access and expertise) into markets where the margins may be greater.
“Thanks to our successful experience,” he says, “and efforts to keep good contacts through our governmental affairs activities, we can control to some extent our investment . . . so we would like to increase our exposure to Russia.”
Mr Yasunaga faces two challenges; both point to the difficulties of bringing cultural change to a company whose history dates back to 1876. Firstly, the Japanese corporate recruitment model — whereby a company takes a large bloc of entrants once a year — is inflexible. Mr Yasunaga has already increased to about 60 a year the number of people it hires from outside.
The second is the accusation that corporate Japan — and the country in general — erects barriers to entrepreneurship. The innovation of which he is most proud is a support system that encourages staff to create business start-ups within the company. Twenty proposals have been received in the first year.
“It encourages our young guys to . . . run the business themselves, utilising Mitsui’s business platform for legal, accounting, taxation and even marketing,” he says. Mitsui will offer co-investment but let the founders keep the stock option. “I’d like to encourage them to enjoy business,” he says.
Additional reporting by Peter Wells
Second opinion: the partner
Mitsui acquired a 20 per cent stake in US truck leasing company Penske in 2015. Roger Penske, chairman and chief executive, says he greatly admires Mr Yasunaga as a leader and partner.
“His ideas and beliefs are vested deeply in integrity and the strength of human capital as the most important asset in the Mitsui organisation,” he says. “His experience, vision and guidance have helped our companies forge a long-term relationship to create value on a worldwide basis.”
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