Miyazaki Teru takes the presidency and makes the “healthy loss-making division” the axis of diversification (1961)

The light and the shade of tolerating losses by design

The heart of this decision was not writing off the prospects of the founding fibre business, but deliberately taking on the risk of new ventures on the back of the earning power of the existing one. Refusing to treat losses as the enemy, and going so far as to call the red ink of a new business “healthy” so long as it did not break the company’s finances, was an unusual idea in the management of a large Japanese company at the time. That Miyazaki already felt a sense of crisis in an era of generous dividends and a firm share price is what supported the scale and the speed of the investment that followed.

The method carried a side effect all the same: it blurred the criteria for withdrawal. Positioning the losses of a new business as “healthy” made it hard to draw the line on how long they would be tolerated, and this fed into the low profitability and the delayed disposals that Asahi Kasei Kogyo carried in later years. Given how quickly the shift to selection and concentration proceeded once Miyazaki had died, the decision of 1961 was at once the starting point of Asahi Kasei Kogyo as a diversified company and the judgment that sowed the problem it would spend decades facing.