In fiscal 1994, JustSystems Corporation’s “Ichitaro” held a commanding 50% share of Japan’s domestic word processing software market and had established an unassailable position. Yet within just a few years, that fortress crumbled audibly. Behind the collapse was Microsoft’s aggressive “tying” sales strategy, wielded through its Windows operating system. Why did the champion of Japanese domestic software lose? Testimony from the management team, sales personnel of that era, and antitrust authorities reveals the inside story.
The “Ichitaro Room” That Showed Microsoft’s Obsession
In 1995, at Microsoft’s U.S. headquarters ahead of the Windows 95 launch, Ichitaro founders Kazunori Ukigawa and his wife Hatsuko paid a courtesy visit to Chairman Bill Gates. During the visit, employees escorted the couple to a room in one corner of the headquarters. Inside, Japanese PCs with Ichitaro installed were lined up in rows, and shelves displayed successive generations of Ichitaro packaging. A whiteboard was covered with notes on Ichitaro’s features.
“This is the ‘Ichitaro Room,’ where we study Ichitaro.”
The employee said this and proceeded to demonstrate Ichitaro in front of the couple. Kazunori reflected on that moment: “Word was overwhelmingly dominant globally, but in Japan it simply couldn’t beat Ichitaro. They were probably studying it in this ‘Ichitaro Room’ to find a way to compete.”
Word had secured its position as the standard software in Western markets, but the “language barrier” of Japanese text conversion had prevented it from conquering the Japanese and South Korean markets. Gates publicly declared that “the only rival in the Japanese market is JustSystems’ Ichitaro.” Microsoft, which lagged far behind Ichitaro in Japanese input conversion performance, chose a different strategy rather than competing head-on in product quality.
“Tying” Leveraged on Excel’s Popularity
While Ichitaro held an overwhelming advantage in retail store sales, Microsoft set its sights on a different approach: securing pre-installation agreements with PC manufacturers. In fact, JustSystems had pioneered pre-installation deals first, and this had been a driving force behind Ichitaro’s market share expansion. Microsoft effectively stole that playbook and began pressuring Japanese PC manufacturers to pre-install Word.
According to Japan Fair Trade Commission documents, in 1995 Microsoft requested that Fujitsu install both the spreadsheet software “Excel” and Word on its PCs. Fujitsu indicated it wanted to install Ichitaro for word processing, but Microsoft refused. Fujitsu was forced to accept Word pre-installation. Subsequently, more than 10 PC manufacturers including NEC began installing Excel and Word on their machines.
At the time, Excel boasted the top share in the spreadsheet software market. Microsoft used Excel’s popularity as leverage to “tie” Word to PC manufacturers, rapidly capturing market share.
Akira Kato, a sales representative at JustSystems at the time, expressed his frustration: “When they use their power over OS supply to sell word processing software, there’s nothing we can do. There’s no way we could win.”
Every manufacturer’s PCs came with Windows, which had become the global standard. If a manufacturer refused to install Word, would they be cut off from Windows supply? It was extremely difficult for manufacturers to defy the wishes of Microsoft, which controlled the foundational software. Hatsuko recalled: “Without an OS, a PC cannot function, so Microsoft could impose any conditions on manufacturers. That’s what it means to own the OS.”
Even if one thought “Microsoft’s methods are unreasonable,” there was no recourse. Kazunori said he felt a profound sense of crisis: “This could become an existential threat to the company.”
The JFTC’s Cease-and-Desist Order Came “After the Battle Was Over”
Kazunori’s fears became reality. Through tying, Word rapidly expanded its share, surpassing 50% in fiscal 1997 and seizing the top spot from Ichitaro. With its flagship product’s share declining, JustSystems’ revenue plummeted. Hatsuko said: “The decline in the numbers was extraordinary. The drops exceeded our forecasts year after year.” The company fell into the red in its fiscal year ending March 1998.
Kato, who fought Microsoft on the front lines of sales, said he felt that “Microsoft devours everything—both the OS and applications. They are truly a ‘hunter-gatherer tribe.'”
Meanwhile, the Japan Fair Trade Commission had identified problems with Microsoft’s conduct and was taking action. In January 1998, it conducted an on-site inspection of Microsoft’s Japanese subsidiary on suspicion of antitrust violations. In November of the same year, it issued a cease-and-desist order for illegally tying Excel and Word together in violation of the Antimonopoly Act.
However, the market share Ichitaro had lost never returned. “The JFTC’s conclusion came after the battle was already decided. It was too late.” Kazunori remains dissatisfied with the regulator’s sluggish response to this day. A current senior JFTC official also acknowledged: “Once Word became widespread, it was difficult for Ichitaro to overturn the situation. We should have responded much sooner.”
Lessons Left for Japan’s Software Industry
Ichitaro’s decline was not merely the defeat of a single company. It exposed the immense power of those who control the OS platform, the plight of those who do not, and the slow-moving antitrust authorities. The fall of one of Japan’s most prominent homegrown software products continues to pose numerous lessons for a Japan that suffered a “digital defeat.”
The dynamic in which those who control the platform control the market became even more pronounced with the subsequent rise of the tech giants known as GAFA. The Ichitaro case can be said to have foreshadowed the harsh reality of the digital economy: even with superior technology, if you are outmatched in distribution and platform dominance, you can be driven from the market.