Strengthening of Consolidated Management
In June 1987, President Haruna became chairman and Vice President Tomio Tatsuno became president. In September 1985, the Plaza Accord reached at the Group of Five (Ministers of Finance and Central Bank Governors of five advanced nations) meeting resulted in the yen/dollar exchange rate, which at the time was $1 = ¥240, moving to the ¥190 level in January 1986 and then the ¥120 level in December 1987. This rapid strengthening of the yen hurt the performance of export industries, such as electric equipment and steel, which became known as the "strong yen recession." In response, the Bank of Japan executed a series of official discount rate reductions in accordance with the policy to grease the financial system using a very low interest rate.
The extra money made available by the low interest rate was put into stocks and land. In September 1985 the Nikkei Average for the first section of the Tokyo Stock Exchange stood at ¥12,000, but by the end of December 1989 it had climbed to an historic high of ¥38,915. Many companies used this increase in stock prices to procure funds by increasing capital by issuing at the market price or by issuing convertible bonds and then used the proceeds to invest in stocks. Marubeni also had a policy to actively increase capitalization which increased the Company's capital four fold from ¥46.7 billion at the end of March 1986 to ¥192.9 billion at the end of March 1991 and increased shareholders' equity 3.5 times from ¥130.2 billion at the end of March 1986 to ¥457.5 billion at the end of March 1991.
From the beginning of the 1980s, Marubeni reorganized poorly performing subsidiaries and affiliates, which required large write offs, and to make Marubeni a profitable company, it was necessary to strengthen the entire Marubeni Group, so fiscal 1989 was made the "first consolidated year."
The low interest rate activated the construction of homes and office buildings and personal consumption, such as automobile sales, was also good, so the economy recovered despite the strong yen. As a result, the Company's financial results for fiscal 1990 posted sales of ¥19.156 trillion and ordinary income of ¥54.8 billion, both records.
To suppress the rapid increases in land prices, however, the Bank of Japan tightened money policy, which caused a rapid drop in the price of stocks and land. This was the so-called "burst of the bubble."
During this time President Tatsuno fell ill, and in August he became vice chairman and Vice President Iwao Toriumi became president. To create a "Marubeni with a fresh face," President Toriumi streamlined the administrative departments, reorganized and integrated subsidiaries and affiliates, and liquidated the Wrap Account and Fund Trust. As a result, the Company unavoidably suffered a large write off, and the drop in price of bank and other stocks caused the Company to post an appraisal loss on its stock portfolio, so for fiscal 1997 the Company posted a net loss of ¥30.8 billion, which was the Company's first loss since fiscal 1951.
Despite this difficult business environment, Marubeni actively developed businesses, such as developing and importing LNG from Qatar, purchasing a pulp plant in Canada, entering the electric power generation business, entering information & telecom businesses, such as fiber optic submarine cables to Europe and the United States and the Internet, and establishing many business corporations in China and Southeast Asia.
