Meiji Economy- Agrarian sector and Industrialization

Types of questions:

1. 2003 Trace the economic development of the Meiji period. How far
did they help the process of modernization?
2. 2004- Discuss the measures taken by the Meiji state to promote
industrialization.
3. 2005- What were the economic reforms of the Meiji State? What was
the role played by Zaibatsu in the economic rise of Japan?
4. 2006-Discuss the nature of industrialization in the 19th century.
5. 2007-Ananlyes the agrarian settlement of the Meijis. In what way
was it linked to industrialization?
6. 2009- What is the significance of the Meiji agrarian settlement, what
are its main features?
7. 2010- To what extent and with what consequences did the Meiji
leaders modernize and strengthen Japan? (all reforms, including
industry especially)

INTRODUCTION:

The Meiji Restoration refers to the restoration of the monarchy whereby on

3rd January 1868 the Emperor Meiji was restored to the Japanese throne
by the insurgent Samurai of the Tozama feudal domains of Satsuma,
Choshu, Tosa and Hizen, overthrew the Tokugawa Shogunate(military
government) which had ruled Japan for 2.5 centuries. Andrew Gordon
states, that within a decade, the new government brought about a
revolutionary turnaround in the economy, society, polity and culture
and set in motion the transformation Japan from a feudal state to a
modern industrialized, capitalist nation.

The Meiji government inherited a country in a deplorable condition.

1. Hugh Borton says Japan was a fragmented feudal county, the

treasury was empty, there was no standard currency, peasantry
 was excessively taxed and government excesses were the rule of the
day; there was no unified army, daimyos maintained their own
troops, and there was no navy to defend it against external threat.
2. From Tokugawa times as early as 1739 Japan faced mounting
pressure from Britain, America, Russia, Netherlands, and France
for greater trading rights.
3. After a period of initial resistance, fearing a fate similar to that of
China during the Opium wars, the bakufu signed trade treaties with
the European nations one by one. These “unequal treaties” signed
under the threat of gun-boat diplomacy as in China, zexposed
Japan’s military weakness and made it economically subservient
to Western powers, which were granted tariff autonomy and
extraterritoriality.

Andrew Gordon says that foreign pressure and the bakufu’s soft
response ultimately weakened the bakufu and strengthened the
emerging national consensus, especially amongst the Tozama lords, who
spearheaded the Meiji Restoration. In such a situation, the new
government’s most pressing task was to strengthening Japan
economically. While examining the agrarian and industrialization
policies of Meiji Japan, most historians often tend to obscure the
contribution of agrarian reforms towards industrialization of Japan.
However the agrarian settlement was integral to the economic
modernization of Japan.

AGRARIAN REFORMS:

ABOLITION OF DOMAINS:

 Prior to the Meiji period, Japan was a feudal economy, with

agriculture at its centre. The Meiji government in 1868 began by
abolishing the domains of the daimyo. Over a period of three
years, leaders of the new provisional government convinced the
daimyo to surrender their lands, laying the foundation for the of
agrarian and political unification of Japan.
 By 1870 this process was complete and all daimyo were
appointed Governors, of their former domains, still retaining
effective control.
  In August 1871, the Emperor formally abolished all the domains,
which were consolidated into 72 prefectures, headed by centrally
appointed governors. The power to collect land tax was
transferred from the daimyo to the governors.
 A financial settlement was made granting the daimyo a yearly
salary, equivalent to about 10% of their former annual tax collection,
according to Andrew Gordon. The government inherited the
daimyo’s liability towards the Samurai, paying them a pension too.
This was a beneficial settlement for the daimyos as the
government underwrote their previous debts and took on their
former liabilities. They also supported the Samurai who were now
paid a pension by the government.
 This policy of paying a pension to the daimyo and the samurai,
proved a financial burden for the new government as in 1871 out
of 42.5 million government expenditure, 15 million went towards
paying Samurai stipends alone. Thus in 1873 government
announced that stipends would be taxed and gave the samurai the
option of commuting their stipends into government bonds at 5-
7% interest, thus providing some relief to the government.
 Yet, the government still had to pay interest on the bonds, thus by
1876 it imposed forced commutation of all feudal pensions to
bonds. This served the purpose of securing funds for industrialisation
and militarisation while simultaneously guaranteeing the support of
the politically disaffected classes for the Meiji regime. However it
proved far more detrimental to the samurai as the daimyo had larger
incomes to begin with and many of them saw a 10-75% drop in
income due in part to fiscal mismanagement.

SOCIAL CHANGES:

Accompanying this there were changes in the social structure which the
government initiated. Keeping with the abolition of feudalism, in 1869 the
government reduced the numerous samurai ranks to two – upper
samurai (shizoku) and lower samurai. In 1872 majority of lower
samurai were reclassified as commoners or heimin, still receiving their
stipends. In 1876 they were stripped of their traditional privilege to
bear swords. By 1870 non-samurai classes were classified as
commoners. Other changes in the social order constituted, removal of
restrictions on travel, dress and hairstyle.

The peasantry under the Tokugawa regime was subject to a high tax
burden imposed by the lord who was usually indebted to the wealthier
trader and artisanal classes . The peasantry was subject to restrictions on
moving out of their domains and selling or dividing their lands. The new
system abolished restrictions on movement as well as private
ownership/sale of land. These changes were favourable for the rise of
capitalism. The government also ended legal discrimination against
hereditary outcaste groups such as eta and hinin. This fluid social order
benefitted the educated and moneyed classes specially the landowners,
moneylenders, and rural elites. Some educated samurai also fared well but
the landless peasantry however continued to live in dire poverty, later
forming the labour for industrialization.

LAND TAX REFORM (1873)

 The most important measure in the agrarian sector introduced by

the Minister of Finance, Okubo Toshimichi, was the private
ownership of land through the Land tax reform of 1873.
According to Kozaburo Kato the land confiscated by the new
government amounted to 1/3rd of Japan’s total tax assessment.
 The government met its early expenditure, specially payment of
stipends by – (i) issuing paper currency and (ii) by collecting land
taxes under the old tax system. Under the old land tax system, land
was valued in terms of rice production,but with the introduction of
the private ownership of land, land value needed to be calculated
in monetary terms, and tax collected in cash.
 The new government hesitated to introduce a new cadastral
survey to determine land value as it would invite peasant resistance.
 Kohei Kanda, a scholar solved this problem- he recommended the
sale of arable land in perpetuity through the issuance of chiken or
title deeds, by local government officials, which would bear the
location, type, owner and price of land. Land price was fixed by the
government as Okubo devised a formula to set the value of land. It
was determined that the value of the crop was equal to 6% of the
value of the land. Thus the value of land was 16 and 2/3rd times
 the value of the crop. The government could tax the land value
noted in chiken, without a survey of arable land.
 Thus the 1873 Land Tax Reform included the following provisions:
1. Complete abolition of the old taxation system
2. Implementation of land price survey with chiken issued to all
owners,
3. The national tax was fixed at 3% of the land price or half the
value of the crop (keeping in mind the Tokugawa average tax
rate, i.e. 50%) and additional local taxes were not to be more
than 1/3rd of the national tax.
4. Land values were also set for privately owned residential
lands, forests, grasslands and wetlands, only if proof of a
cash purchase could be produced thus many lands lapsed to
the government, when proof couldn’t be produced specially
forests .

The tax reform was completed by 1881 with 120 million chiken issued.
The impact of the land tax reform can be seen in the close match between
the estimated tax and the actual tax collected in contrast to the Shogunate
period. In 1881 Kozaburo Kato says the land tax was estimated at
51.22million yen, and the actual revenue collected was 48.72 million which
almost matched the estimated amount of 3%. There most important
impact of the land tax reform and social change was that private property
rights and a unified tax system were established which was essential for
capitalist development of the economy.

LINK BETWEEN AGRICULTURE AND INDUSTRIALIZTION:

 The agrarian measures initiated by the Meijis were intrinsically

linked to the process of industrialization, which converted Japan
into a formidable economic and military power by the early 1900s.
 Irving I. Kramer points out that Japan followed a dual approach to
economic stabilization- one of land reform accompanied by
industrial development.
 The Meiji government needed to raise capital to fund the
industrialization and technological modernization of Japan. However,
it did not want to rely on foreign loans nor could it raise capital
from the trade sector as trade tariffs were fixed by foreign powers
 according to the “unequal treaties”. Thus the Meijis were left with no
option but to raise capital internally for industrialization,
majority of which came from the agrarian sector.
 Andrew Gordon points out that the agrarian sector fuelled
industrialization in many ways.
1. It was a critical source of capital as land tax constituted
80% of the government’s income in the 1870s and early
1880s. This figure slowly fell to 60% by the 1890s, as consumer
goods) began to be taxed.
2. Secondly this sector provided labour for industrialization.
The rise in the population of Japan from the 1880s was
accompanied by a shift of the rural population to towns to
work in industry. Gordon points out that in this process
teenage girls of farm families were an important source of
labour. At the end of the Meiji period, out or 8,00,000 factory
workers, 4,75,000 were employed in textile mills and 4/5
were women workers, as they were cheaper to employ than
men.
3. Thirdly as Japan’s population grew from 35million to 45
million between 1880-and early 1900s, it was the agrarian
sector which supported this growth, with a 1-3% increase in
productivity due to addition of new crops, seeds and fertilizer.
This helped conserve valuable foreign exchange till 1920s
as Japan met its domestic food needs.
4. Fourthly Irving I. Kramer says that the conversion of
daimyo and samurai to pensioners was another vital link
between industry and agriculture. The daimyo and samurai
accumulated wealth from pensions the government paid
them and invested that into industry. The government first
developed industry and later sold it to privateers. Initially it
sold non- military industries. Thus the government aided in
this shift from agriculture to industry, thereby, creating
businessmen and financiers.
5. The agrarian sector also earned large amounts of foreign
exchange by exporting tea, cotton and silk products. W.G.
Beasley states that there was growing demand for Japanese
silk, especially in USA as well as in Europe (which was hit by
 silk blight in 1868) in the 1870/80s. Silk accounted for 30% of
exports in 1880 and continued as a main item of export till the
1930s. Andrew Gordon holds that silk accounted for 42% of
Japanese revenue from exports. Cotton exports were
negligible in 1880 by 1910 they accounted for 14% of
exports. Tea accounted for 26% of exports in 1880 but was
down to a mere 3% in 1910. Andrew Gordon points out that
the third highest source of foreign exchange, came from
foreign exchange that emigrant labour sent back home to
their families, from Hawaii, California or Latin America.
 In conclusion it can be said that the agrarian reforms introduced
by the Meijis changed a feudal economy into a modern capitalist
economy, in a very short span. The government played a major
role in aiding this change, as it introduced reforms, established
agricultural colleges e.g. at Saporro (1875), experimental farms,
a national agricultural society (1881), and provided seeds and
fertilizers, to help small farmer families increase production. Though
the area of arable land only increased by13% between 1880 and
1900 the yield per hectare rose by 30% according to W.G.Beasley.
Capital for industrialization was raised without major
consolidation of land holdings as in Europe.
 Thus changes in the agrarian settlement were intrinsically linked to
industrialization, raising the initial capital for this and finally to
achieving the ultimate Meiji aim of building a, “rich country, strong
army” or fukoku kyohei.

INDUSTRIAL GROWTH-

Various historians such as W.G. Beasley and T.C. Smith state that in the
late Tokugawa period certain attributes necessary for economic
growth emerged. These were-a money economy, a good distribution
system covering both rural and urban areas, some expertise in finance ,
knowledge of Western science among the ruling class and small
capital accumulation amongst leading families such as Ono and Mitsui as
well as commoners. W.G.Beasly says that the ‘unequal treaties’, spurred
the Meiji industrialization as they forced Japan into the world
economy, exposed it to new technology and stimulated centralization and
economic growth to defend Japan against the threat of colonialism.
PHASE I:

The Industrialization of Japan has been divided into two broad phases
by W.G. Beasley- (i) Phase I- 1860-1885 and (ii) PhaseII-1885-1930.
The Meiji government started the industrialization process by
concentrating on, what E.H. Norman refers to as, ‘strategic industries’.
Thus the government began by developing three main sectors-
Communication and Transport, Defence and Mining, while instituting
agrarian reforms mentioned afore simultaneously.

In the sphere of Communication and Transport, the government

established a postal service with 3000 offices within three years. It
established telegraph lines in 1869, laying the first line between Tokyo
and Osaka hiring English technicians. The telegraph was purely
government owned for security reasons, which benefitted them in war
time. The Railways sector was initially entirely government owned,
though by the end of the century 2/3rds of it was privatized. The first line
connected Tokyo and Yokohama by 1872. Railways were a strategic
industry as it connected Tokyo, Osaka and Kyoto and deep water ports
of Kobe(1877)and Yokohama, which was important for defence and trade.
Andrew Gordon says railways impacted society as it radically altered
their notion of time, distance and social behaviour.

Shipping services were also developed the government controlling,

internal and overseas trade. In 1873 Iwasaki Yataro founded a leading
shipping firm-Mitsubishi, with a few ships acquired from the dissolution of
his domain Tosa, he later added government subsidised military transports
to his fleet operating this as far as Vladivostok. In 1885 the government
forced him to merge his firm with a shipping rival the NYK (Nippon
Yusen Kaisha), and granted them 8% dividends for 15 years. Mitsubishi
was to be one of the most influential industrial houses of Japan`,
initially aided by government contracts and subsidies, it would later be
part of the ‘Zaibatsu’.

In the defence sector Hugh Borton points out that the government
confiscated former Tokugawa military industries and nationalized
them. In 1868 it took over the Nagasaki shipyard and foundry which it
sold to Mitsubishi in phase II. The Yosuka shipyard and foundry, was
retained till 1945. The government also inherited arsenals, one at Osaka,
where it employed foreigners, and built up weapons.

In the mining sector, important for growth of heavy industries and

railways, the government took over the Takashima coal mine, which was
developed earlier by B. Glover and Co. In this sector it allowed greater
privatization and employed many European miners, geologists and
engineers . Other mines that were important were Ikuno silver mine
(1868), Sado gold mine (1869) and the Kozaka silver mine (1869). Hugh
Borton points out that the government set up the Ministry of Industry in
1870, under which industrial school were set up and subsidies and finance
arranged.

The government also developed cotton textile, silk and the tea
industries. These industries were very important as these commodities
earned good foreign exchange later coal was also added to this list. W.G.
Beasley says that tariff regulation by foreign powers, left Japan with no
choice but to mechanize and improve the quality of its silk and tea.
Thus regulations regarding silk reeling were introduced (1873) the
government financed silk filatures at Marbashi and Tamioka to
introduce Japanese entrepreneurs to western manufacturing methods.
Students were sent abroad to study sericulture in Europe. The benefits of
this paid off as raw silk production increased by 60% and exports by
100% between 1868 and 1883. Beasley also points out that the
government set up machine manufacture to reduce its dependence on
foreign import of machinery. Thus a machine factory was established in
1871, steam powered factories to produce cement in 1875, glass in1876
and white brick factory in 1878.

Important banking reforms were introduced, since a financial crisis hit

Japan in 1881, due to high government expenditure incurred in order to
suppress the Satsuma rebellion (1877). Bonds had to be issued in lieu of
samurai pensions (1876) all of which resulted in high inflation . Thus
Finance minister Matsukata Masayoshi initiated the Matsukata Reforms
to deal with this situation. He cut back government expenditure,
introduced new taxes on cigarettes and sake, thus achieving a budget
surplus which he used to stabilize the currency. He also set up
centralized fiscal control, as the Bank Of Japan(1877) was meant to
regulate banking and national currency. He reorganized the Yokohama
Specie Bank to control foreign exchange and introduced post office saving
schemes. These reforms resulted in a major deflation, causing
bankruptcies and a large amount of rural distress, however they left
Japan with a strong industrial base for future industrial growth.

PHASE II-

Phase II- The second phase of industrial growth began in 1885 and was
associated with privatization of some industries,the establishment of
new ones and the rise of the ‘Zaibatsu’. W.G. Beasley points out that
this phase saw investment of private capital in the domestic textile
industry. This far the textile industry had required a small initial
investment; it could be carried out in small workshops and used
Japanese farm labour and simple technology. Increasing demand for silk
exports, especially in U.S.A., led entrepreneurs to mechanize. He says in
1893 there were only 3200 reeling factories which usually employed 10
people, yet by 1929 mechanization led to increased production by few
filatures. Beasley says the cotton industry was also privatized now as
the Osaka Cotton Spinning Company was established in 1882 by
Shibusawa Ei’ichi, who introduced Western technology. As he was able to
pay 18% dividend others followed his path and between 1886 and 1890
the yarn output in cotton increased seven fold. Beasley says this led to
a temporary over production crisis but soon things stabilised as 1895
victory of Japan over China in the Sino-Japanese war led to china and Korea
opening up as new markets.

The period post 1900 saw the development of the heavy industries
sector. Beasley says between 1910-14 volume of output of the following
industries increased- metal and machinery , chemical and ceramic and
electricity and gas . In this period the Yawata Iron and Steel Works were
set up in 1901. By 1914 the output of iron and steel could meet half and
one third of the requirement of local industry respectively.

There was also an increase in coal and metal mining, with mineral
output increasing by 700% between 1876 and 1896. The coal fields of
Kyushu and Hokkaido were important in this period as they provided
fuel to heavy industry. Mitsui emerged with major mining interest and
mines raised output from 1million ton in 1885 to 21 million in 1914 and
34 million by 1929. Increase in industrial production led Japan to import
coal. The railways now largely privatized, continued to grow, and
covered 1000miles by the 1880s, lowering transport costs of raw material.
The ‘Big Five’ or five major companies Nippon, Sanyo, Kyushu, Kansai
and Hokkaido now controlled rail expansion.

This period also witnessed the emergence of the Zaibatsu or an

industrial cliques. The ‘zaibatsu’ comprised large family enterprises
that monopolized industrial sectors, with government help.These were
merchant families such as Mitsubishi and Sumitomo ,from the pre-Meiji
period who extended credit to the Tokugawas and later shifted allegience
to the Meiji. All these companies had diverse interests in banking,
shipbuilding etc. These companies exploited the role of the government
in the industrial sector, and got large concessions from the government
when it sold off enterprises in 1882. For example Ito Hirobumi allowed
Mitsui to mine from state owned Miike mine at a cost price and sell coal
for a profit. Mitsui profited from this as it sold coal to foreign steamer and
thus established links with foreigners as far as London. Mitsui also founded
a cotton firm, paper pulp factory and engineering concern, thus
diversifying.

The zaibatsu survived industrialization well as they brought in

professional management, just controlling finances themselves. Alexander
Gerschenkron says that the relative lateness of Japanese
industrialization and the pressure to catch up with the west led to the
rise of the Zaibatsu. Andrew Gordon says they rose due to many factors
such as government’s support of these firms, inexpensive labour in the 19 th
century, and due to the entrepreneurial atmosphere.

The industrialization of Japan had a profound impact on society not

only did it lead to the emergence of industrial magnates, but also the
emergence of a working class. Andrew Gordon points out that women
workers comprised 4/5th of workers in the textile industry, faced
great hardship, being young and from rural backgrounds, they were paid
half the wages of male workers, exposed to poor work conditions and
sexual harassment. Male workers worked in the heavy industries. By the
1890s they formed unions to protest their poor working conditions and
were often job hopping. The State amongst all this tried to create worker
pride, for building kukoku kyohei –or a “strong army rich country”. Thus
in conclusion the industrialization of Japan was initially sparked off by
the government and was dependenton the agrarian sector, but by 1900s
private industry injected much dynamism, and helped create a secure
industrialized nation a match for the great Western world power by
the World Wars.