Overview 1935 to 1939

(1) Three Majors: Shôchiku, Nikkatsu and Toho

In 1937, P.C.L was developed into Toho Eiga, which already had a stable distribution network. Toho grew steadily as seen from the Top_10_Movies list in this period.

In contrast, Nikkatsu struggled with financial difficulties. Nikkatsu decided to cooperate with Toho or Shôchiku. The management leaders of Nikkatsu were divided into two parties, one in favor of Toho and the other in favor of Shôchiku. Toho was once ahead of Shôchiku. However, the situation reversed after the main person of the pro-Toho party was arrested on suspicion of violating the commercial code. Finally, Shôchiku and Toho agreed to govern Nikkatsu together. Thus, Nikktasu was no longer one of the three majors.

Shôchiku was then the most powerful movie company in Japan.

In parallel with the reorganization of the major companies, many independent productions found in the Top_10_list wound up mostly in 1936 or 1937, and many of their members were absorbed into Shinkô or Nikkatsu (under the control of Shôchiku):
   Ichikawa Utaemon Production (in 1936);
   Arashi Kanjurô Production (in 1937);
   Bando Tsumasaburo Production (in 1936);
   Irie Production (in 1937); and
   Chiezo Production (in 1937).

Daiichi Eiga, which is found in the Top_10_Movies list only in 1936, was established by collecting people who had withdrawn from Nikkatsu, seeking for better work conditions. Daiichi Eiga was short-lived (approx. 2 years). Most of the members were moved to Shôchiku, as you guess. 

(2) Shadows of War

The military confrontation between Japan and China from 1931 became an all-out war in 1937. Thus, many directors, technical staffs and actors were enlisted. For example, Yasujiro Ozu had military service in China from 1937 for nearly two years; and Sadao Yamanaka was enlisted in 1937 and died from disease in a field hospitalin 1938.

Government increased its interference, which met little resistance from the Japanese film companies.Thus, freedom of production was deprived by the government (or abandoned by the movie industry), which would affect the quality of Japanese movies.