Oil Crisis and Criticism of Trading Companies
As the international competitiveness of Japanese industry strengthened, exports increased and the trade surplus grew while at the same time the United State's trade deficit increased, so in response, in August 1971 the United States ceased the conversion of dollars to gold and established import surcharges. This was called the "Nixon Shock," and this was used as an opportunity to switch the major world currencies from a fixed exchange rate system to a variable exchange rate system.
This caused the yen to strengthen, so the Japanese government, with was worried about a strong yen recession, implement aggressive fiscal support, easier financing, and a low-interest-rate policy. This resulted in pouring too much money into market, which in turn caused prices to rise. In addition, poor weather overseas caused grain prices to rise, and then in October 1973 the 4th Middle East War broke out, causing the price of crude oil from Persian Gulf oil-producing countries to rise greatly. These factors caused the February 1974 wholesale price index in Japan to rise 37% over the same month the previous year to create a state of runaway inflation. At this time the mass media blamed trading company activities for the price increases saying the trading companies were probably cornering the market or hording.
Until that time the general trading companies had been well thought of as Japan's economic pioneers for developing overseas markets, investing in new businesses, and other activities, but as sales grew to several trillion yen, the sheer size of the trading companies was criticized. In addition, as the Japanese economy became massive, the accustomed double-digit growth changed to single-digit growth and industry changed from heavy industries, such as steel and heavy equipment, to light industries, such as electronics.
During this time of economic transition, the Company's sales exceeded 5 trillion yen in fiscal 1974 to reach ¥5.5484 trillion yen. Then in May 1975 President Hiyama became the chairman and Vice President Taiichiro Matsuo became the president.
The Iranian Revolution that occurred in 1979 caused a temporary stoppage in crude oil production, sending up the price of crude oil again, moving it from $10 a barrel to $30 a barrel in 1980. During this time the Company's energy and chemicals division sales increased greatly and came to account for nearly the same 23% share as that of machinery and metals. During fiscal 1980 total sales also exceeded ¥10 trillion, reaching ¥10.1846. In addition, several capital increases raised the capital to ¥39.8 billion at the end of March 1981, and the shareholders' equity exceeded ¥100 billion, reaching ¥112.5 billion.
