By YASUTAKA TAMURA
Global Business Journalism reporter
OSAKA, JAPAN – In the early months of the coronavirus pandemic, one of the vexing problems facing nations around the world was a shortage of Chinese-manufactured medical equipment, particularly face masks. The winter COVID-19 outbreak in Wuhan damaged China’s manufacturing capacity, and then the exponential growth in global demand caused by the rapid spread of the new virus taxed the limited supply. Hospitals from Tokyo to Milan were begging for help.
Enter two 24-year-old Japanese men who had met during a year of language study at Fudan University in Shanghai. Ryu Miyamoto and Akihiro Matsumoto, who studied Chinese at Fudan and dreamed of careers as business managers, saw an opportunity amid the deadly outbreak. Their goal was to bring their nation and its historical enemy across the East China Sea closer together while protecting lives and building person-to-person ties between Japanese and Chinese people.
“Ryu is a man of action and he came up with the idea of ‘Mask Diplomacy,’” said Matsumoto.
Unlike most start-ups, their venture was not designed to turn a profit. It was designed to show how Chinese and Japanese can work together to solve difficult global problems.
“The idea is to sell face masks approximately at cost and build a relationship,” said Miyamoto. “In the long term, a good relationship worth more than [a profit of] 200,000 or 300,000 Japanese Yen.”
The idea for “Mask Diplomacy” was born when Japan was struggling with a severe shortage of made-in-China medical equipment during the early weeks of the global spread of COVID-19. Prices for face masks had more than tripled as speculators cornered the global market and demanded exorbitant prices for the suddenly precious masks. Miyamoto happened to know a factory that produces face masks in China. So he came up with the idea of shipping them to Japan.
That’s where Akihiro Matsumoto comes into the picture. His father’s company in Japan, Koshin Company (Koshin), had experienced sales declines of 90% amid the pandemic. But with Miyamoto’s source of supply and Matsumoto’s father’s distribution skills, the two young professionals thought they might be able to pull off their audacious plan.
The partners met in Shanghai in 2018. Miyamoto has a Japanese father and a Chinese mother, and his parents’ business operates both in Japan and China. When he enrolled in Fudan, Miyamoto had a clear vision for his career. It was in his mother’s native country.
“I had made my mind to go back to China [to work] when I decided to study Chinese at Fudan University,” he said. “My Chinese level was not high enough [to work in China], so I decided to study [Chinese].”
Matsumoto, whose parents are Japanese, came to the university a half-year later than Miyamoto. His father’s business, Koshin, sells jewelry products. Chinese customers account for 80 to 90 percent of its non-Japanese sales. Akihiro Matsumoto decided to study Chinese at Fudan because “the business with the Chinese will be necessary and fun” for his family business, he said.
Even though the two Japanese students had not yet met, mutual friends told Matsumoto that both of them would get along very well. Both were born to families that operate their own businesses. And both had the same dream of becoming a manager.
“I got along well with him [Miyamoto], like, in a second,” Matsumoto said. “He was a wonderful person, as I had imagined … And [we] can talk about the future passionately.”
The friendship became a business partnership in early March, when a legal counsel for Miyamoto’s father’s company introduced Ryu Miyamoto to a factory where he could purchase face masks. With China facing a shortage of face masks early in the outbreak, Shanghai Xinzheng Trading Company, Miyamoto’s father’s company in China received 3,000 face masks from its cooperating company in Japan. In return, Miyamoto wanted to do something for the Japanese company when its country faced equipment shortages.
“I thought of sending face masks [back to Japan] to show our gratitude,” said Miyamoto.
As Japan suffered from a face mask shortage in February and March, resale of masks at inflated prices compounded the shortage. Japanese government officials were angered but could not solve the problem.
“It has been reported that masks are being traded at high prices on the Internet,” Prime Minister Shinzo Abe said on March 5.
Miyamoto said the price of a box of face masks in Japan reached JPY$3,500, about triple the normal cost. In China he managed to purchase a box for about JPY$1,200. He told Matsumoto he could sell them in Japan for JPY$1,400 to 1,500, including tax and other costs. That would cover their costs.
Miyamoto took the initiative to start ship 120,000 masks back to Japan without making a profit. This was also the beginning of “Mask Diplomacy.”
Miyamoto learned that Matsumoto’s home prefecture of Yamanashi also lacked face masks.
“So I came up with an idea for Aki,” said Miyamoto. “I said, ‘Although we are still not skilled and experienced enough [to start a large business] yet, it will be a great experience for us.’”
The idea sounded great to Matsumoto because his family’s company’s sales had plummeted by 80 percent to 90 percent in March, April and May.
“People don’t need luxury goods amid the coronavirus pandemic,” Matsumoto noted.
Matsumoto negotiated with his father, the owner of Koshin, to buy face masks from Miyamoto and sell them in Yamanashi. Matsumoto presented the idea of “Mask Diplomacy” to his father.
“For me, the idea was also to contribute to my hometown where I was born and raised,” Matsumoto said. “And this could be a good experience for me as I want to be a manager in the future.”
All seemed good until a quality problem with the Chinese masks emerged.
Since the factory changed a material to produce a face mask, the ear straps could easily be removed. So when people wore it, the straps came off with a little contact.
Miyamoto learned of the problem as he received feedback from a logistics company that he had sent masks to before. Miyamoto thought “this is bad.” He realized he had to come up with a solution: “I cannot make our customers suffer a loss.”
When Miyamoto noticed the problem on May 10, 400,000 face masks – 50,000 of them sent to Matsumoto – had already arrived in Japan. He had to ship all of them back to Shanghai and resend another 400,000.
But there was very little time left before the promised delivery date of May 15. For both of the young entrepreneurs, missing the deadline would cause big trouble with their relationship-building venture. For Matsumoto, his father’s credibility also was at stake. His father, the president of Yamanashi Jewelry Association, had sought orders under his name, and all the orders Matsumoto received were from companies in the association.
“What we did for people would backfire if we missed the deadline,” Matsumoto said.
Matsumoto was also worried about his friendship with Miyamoto.
“If Ryu missed the deadline, it might affect our friendship,” said Matsumoto.
To show the sincerity, Miyamoto tried to meet the deadline by any means.
Miyamoto told the supplier factory that the face masks he purchased were defective. The manager of the factory agreed it was their fault and offered to provide another 40,000 face masks for free. Taking responsibility, the factory manager paid to transport the face masks by air. These concessions meant it might be possible to meet the deadline for delivery.
Miyamoto also managed to find a factory in Japan that would fix the defective face masks free of charge. The defective ones were transformed into new, usable masks in the factory. That saved Miyamoto the cost of sending the defective masks back to China. And it doubled the number of masks that could be distributed in Japan.
The new order of 40,000 face masks arrived in Japan from Shanghai on May 13, two days before the deadline.
Going through difficulties together, Miyamoto and Matsumoto both agreed that it was a good experience.
“We talked about it and said ‘It was really fun,’” said Matsumoto.
For Miyamoto, it was also an opportunity to recognize the challenges his father goes through operating an international company.
“Doing business means nothing goes well [as expected],” said Miyamoto. “So it’s very important how you can respond to it,” he added.
The bottom line for “Mask Diplomacy” cost Matsumoto JPY$5 million, an amount he says is small on a global scale. It is a small price, he said, for everything he learned.
“You need the courage to do something new,” Matsumoto said.