Japanese Economy A 2012 Fall Seinan Gakuin University

1. Japanese Economy A2012 FallSeinanGakuinUniversity Noriaki EZOE Professor Ph.D. Economics Department Seinan Gakuin UniversityJapan Mail address: ezoe@seinan-gu.ac.jp Homepage address: https://w3.seinan-gu.ac.jp/~ezoe/

2. Chapter 2Economic History, Part1:Edo Period and Meiji Era What you will learn in this Chapter 1History in Japanese development :Overview. 2 Edo period : Shogun system and seclusion. 3 Meiji Era : What Meiji revolution had achieved?

3. 1History in Japanese development : Overview. Japanese histo­ry can be divided into four major periods: (following chart). 1.1 the period 1: The rise and fall of the emperor - 300 BC Jomon: The early Japanese were gatherers, hunters and fishers. Continental Asian influence was a very important. Modern Japanese may well be the descendants of continental Asian tribes. These tribes came to Japan in waves, one after the other. 300 BC - 300 AD Yayoi: The rice agriculture begins. The development of a social hierarchy and small countries started to unify into larger countries. 300 – 710 Yamato : Japan is for the first time united. Large tombs (kofun) were built. 6th century Buddhism first came . The emperor family took the power (AD 645) 710 - 794 Nara : Nara becomes the first permanent capital. 752 The great Buddha created. 794 - 1185 Heian :The capital moves to Heian (Kyoto). "Japanization" of foreign culture. The Tale of Genji (11th century).

4. PP.16-17 II. Samurai’s Rule III. Modern-ization I. Emperor’s Rule IV. Postwar 1603 X WAR 1867 Rapid recovery and growth NARA Centralization MEIJI Westernization,industrialization,militarilization EDO Tokugawa Shogunate KAMAKURAMUROMACHISENGOKU Jinshin War × 671 HEIAN Nobles,Decentralization Taika Reform × 645 Internal wars, dynamic & fluid society Peace, isolation, conservative class society Clan fights Hunting & gathering xxxx xxxx xxx WEST!!! Chinese culture &political system WEST: guns &Christianity US occupation1945-52 Rice Buddhism

5. 1.2 the period 2:The age of Samurai (Feudal era ) • Power centralization declined. • Local landlord and temples became independent. To protect their land, warrior class (samurai) emerged. • 1185, samurai leaders formed the government. • Kamakura Shogunate repelled Mongol invasion(1274, 1281). After this, the shogunate fall, internal fights among daimyo(samurai leaders ) ensued. • Sengoku era : century-long civil war. • 16th century, the European influences prevailed. • Finally, Tokugawa won the battle, established military government of Edo.(1603 - 1867) • 18- 19th century , government power declined.

6. 1.3 the period 3:Meiji modernization • After the resignation of the shogun, a centralized state established under the Emperor . • Adopted Western political, judicial and military institutions. • The Meiji Restoration transformed the Empire of Japan into an industrialized world power that pursued military conflict to expand its sphere of influence. • "Taishōdemocracy“: early 20th century the political power shifted from the Meiji oligarchic clique to the parliament and the democratic parties. • 1930s, world economy collapsed. The rise of fascism and militarism. • Long war(１９３７－1945）

7. 1.4 the period 4:Post war growth • Japan was defeated in 1945. • US occupation(1945－1952). • Japan achieved rapid growth to become the second-largest economy in the world. This ended in the mid-1990s when Japan suffered a major recession. • In the beginning of the 21st century, positive growth has signaled a gradual economic recovery. • On March 11, 2011, Japan suffered the strongest earthquake; this triggered the Fukushima I nuclear accidents, one of the worst disasters.

8. 2 Economic History: Edo Period2.1Transition from Sengoku to Edo • Tokugawa Ieyasu(1542 - 1616) • Daimyo’s direct rule of land and farmers was established (removal of middle powers such as influential temples, manors, landlords). • Rigid separation of samurai and farmers • --Kenchi検地(land survey and registration)  creation of family farms. • --Katanagari刀狩(confiscation of all arms from non-samurai classes)--All samurai required to live in castle town, receive rice salary--All farmers required to live in villages, till allotted land, and pay rice tax • The sengoku period, 12c to 16cInternal fights for dominance continued. • Religion for self-discipline, pragmatism and coping with life-or-death situation emerged (Zen Buddhism). • Society was dynamic and fluid. Power, not family name, mattered.

9. 2.2 Tokugawa Period (1603~1868):The baku-han system (1) Features of the Bakufu-Han System Bakuhu(Government)controls Hans(Daimyo). • The daimyo were divided into distinct groups. The shinpan, The fudai,Tozama daimyo---- The daimyo were not required to remit taxes to the bakufu but were occasionally called upon to assist in the building of public works and were also expected to supply guard contingents to imperial and bakufu facilities. (2) Class society:Thecaste system (shi-no-ko-sho)All people were classified as four groups: samurai(士), farmer(農), artisan(工), and merchant（商）- Assignment to a particular caste was according to birth. - The percentage of the population that comprised the samurai class was probably only about 7 percent. The great majority of people, 80 percent, were farmers, followed by 13 percent artisans and merchants. Japanese Economy

10. Ohno PP.23-25 Bakuhan Taisei(Bakufu-Han System)幕藩体制 --“Feudalism”--Class societySeparation of rulers and ruled 士 How to keep daimyos obedient:--Seppuku & termination of family--Limits on military capability (e.g. one castle)--Relocation & downsizing of hans at will--Sankinkotai(bi-annual residence in Edo)--Assignment of charges and public works 農 工 商

11. (3)Alternate attendance (sankinkotai) the daimyo spend half their time in Edo and that their families reside there year round. • The economic effects - Edo became a major consumption center - Osaka had become the city of merchants - development of roads and coastal waterways (4)The seclusion policy (sakoku) -OnlyDutch and Chinese were allowed to trade through the southern port at Nagasaki. • Reasons : • to prevent military alliances between the European countries and the daimyo. • Suppression of Christianity. • to reserve for the Tokugawa a quasi-monopoly of imports

12. Ohno P.23 2.3 Pre-conditions for Industrial Take-off • Political unity and stability • Agricultural development and commercialization • Development of transportation and nationally unified markets • Rise of commerce, finance and wealthy merchant class • Rise of pre-modern manufacturing • Industrial promotion by local governments • High level of education Samurai police and merchants City girls Daimyo in his castle

13. Ohno PP.25-28 Agriculture: Positive vs Negative Aspects • Village autonomy and family farming • Acreage rose then stabilized, productivity rose continuously • Technology and knowledge improved over time • As commercial crops increased, rich farmers emerged • Farmers were tied to land and had to pay heavy (?) tax • Famine, discontent with policy/officials led to ikki (farmers’ rebellion) Source: Hayami & Miyamoto, 1988.

14. Rich Merchants in Edo Period (Gosho)Ohno Mitsui Family -17c From Matsuzaka -Kimono trade & money exchange in Edo, Kyoto, Osaka – huge success <Transition to Meiji> Manager: Minomura Rizaemon -Cope with bakufu policy to protect Mitsui business -Support and work with new government -Internal reform: from gosho to zaibatsu -1876 Establish Mitsui Bank & Mitsui Trading Company Sumitomo Family -16c Adopt Western copper refining, copper trade (Kyoto)-17c Move to Osaka -Besshi Copper Mine (under Bakufu’s commission) <Transition to Meiji> Manager: Hirose Saihei -Avoiding gov’t confiscation-Introducing Western mining technology to renovate Besshi -Business diversification Konoike -Sake making, trading, loans to daimyo -No serious internal reform in Meiji -Failed to form zaibatsu (Sanwa Bank) Onogumi? Tennojiya? Hiranoya? Shimadagumi? Kashimaya?

15. High level of education Ohno PP.33-34 Official Teaching BakufuSchools and Han Schools The core curriculum was ancient Chinese philosophy, especially Confucianism (6-5c BC). -Confucianism emphasized social order, respect for superiors and elders, the role and duties of the ruler, and rituals and ceremonies (legitimacy for class society). -Study consisted of reading old Chinese literature in Japanese way, memorizing, and interpret the meaning. Private teaching ShokasonJukuby Yoshida Shoin (1830-59)Produced many political leaders • Ito Hirobumi (Prime Minister) Yamagata Aritomo (Prime Minister)KusakaGenzui (anti-bakufufighter) Kangi-en by Hirose Tanso (1782-1856) -Largest private school in Edo period, attracting over 4,000 students -Main courses: ancient Chinese literature and philosophy

16. Ohno P.35 Terakoya (Private Primary Schools) • Private teaching (3Rs:read, write, abacus) at teacher’s house, all over Japan (20,000+)—contributing greatly to literacy • Any intelligent person can be a teacher, any child can study (ages about 7-13) • Individual teaching, with flexible time and flexible fee <Typical curriculum>8-12am Writing (brush & ink)12-1pm Lunch at home1-2pm Arithmetic, moral2pm Go home <Exams and exhibitions>Monthly examsYear-end final examWriting exhibitions, Apr & Aug <Holidays>3 days/month, plus others

17. 2.3Fall of Bakuhu Decline of the feudal system (1) Rice-based system----chronic fiscal crisis • Economy shifted from rice to cash crop, agro-processing and commerce, but revenue continued to be based on rice tax • Bakufu and han governments launched reforms and industrial promotion to cope with budget crisis (only some succeeded) • Inflation accelerated in late Edo period due to (i) debasement of gold, (iii) foreign trade, and (iii) famine (entire period) • Higher taxes and inflation led to farmer`s riots Output & Tax on Bakufu Land

18. (2) The social hierarchy began to break down as the merchant class grew increasingly powerful while some samurai became financially dependent of them. (3)External pressure Commodore Perry in 1853 and 1854: --military threat to open up Japan. • Trade with West began under unequal treaties (1858: no tariff right, no court right), which brought social and economic changes • Fights over pro- and anti-foreigner forces, and pro- and anti-Bakufu forces began, eventually toppling Bakufu (1867)

19. Ohno P.43 3 Economic History: Meiji Era(1868-1912) 3.1 Meiji Government: Radical Reformist Initially, avoid colonization by the West Rapid modernization and Westernization Become “first-class” nation on a par with West • Political goal - abolish feudalism and class society; introduce Western style constitution and parliament • Economic goal - industrialization based on rapid adoption of Western technology • External goals - (1) revise unequal treaties as soon as possible; (2) modernize army & navy, establish “sphere of influence” around Japan Fukoku Kyohei (富国強兵) - Enrich the country, strengthen the militaryShokusan Kogyo（殖産興業） - Increase production, encourage industry

20. 3.2 Early steps of the new government • Capital move to Tokyo. • Han abolished, replaced Prefecture • Land tax reform • Dispossession of the samurai • Iwakuma mission (Dec.1871-Sep.1873) Half the cabinet - Iwakura (leader), Okubo, Ito, Kido, Yamaguchi, and other high officials (46); attendants (12), students (49); total 107 members Purpose 1: Start renegotiating unequal treaties (failed) Purpose 2: Inspect Western systems and technology Official report with illustrations by KunitakeKume (scholar) <Results> (1) Valuable inputs for policy making (2) Conflicts with “home-keeping” gov’t (leaders who stayed home) ---- Civil war (1878): Seinan War

21. Ohno PP.41-42 3.3 Resumed International Trade Fake color photos of early Yokohama • Open ports: Yokohama, Nagasaki, Hakodate, Hyogo, Niigata • Unequal treaties with West vs. no travel rights for foreigners • Rise of Yokohama merchants • Rapid westernization and technology import begin • Inflation, relative price changes, rise and fall of industries Trade 1876-80 To US From UK

22. Case Study; Early Meiji trades After a opening the economy, Japanese tariff rate had been very low. ----Reason: 1865: by the unequal treaty with Western Powers Japan was forced to take a low tariff rate (5%). --Those figures show that the early Japanese economy faced with a free trade. Review (Economics) Gains from Trades: 1Comparative advantage theory : trade between two countries makes both countries better off than they would be in autarky—that is, there are gains from trade.2 The main sources of comparative advantage are: International differences in climate Differences in technology Factor endowments Japanese Economy

23. 3 International trade increases the demand for factors that are abundant in the country compared with other countries, and to decrease the demand for factors that are scarce in the country compared with other countries. 4International trade leads to expansion in exporting industries and contraction in import-competing industries. 5Compensation principle Trades may result some groups worse off. Lump-sum transfers from gainers to losers would necessary. Japanese Economy

24. (1) The Effects of Exports (Raw silk, tea )The world price is higher than the autarky price trade leads to exports and a rise in the domestic price compared to the world price.There are overall gains from trade because producer gains exceed the consumer losses Figure Japanese Economy

25. Japanese Economy

26. (2) The Effects of Imports • When a market is opened to trade, competition among importers or exporters drives the domestic price to equality with the world price. • If the world price is lower than the autarky price, trade leads to imports and a fall in the domestic price compared to the world price. • There are overall gains from trade because consumer gains exceed the producer losses. Japanese Economy AChapter 2

27. The Effects of Imports (iron and nail ) • Figure

28. References Dadid Flath [2005],TheJapaneseEconomy, OxfordUniversity Press. TakatoshiIto[1992], The Japanese Economy, MIT Press. Morishima, M [1982], Why Has Japan Succeeded? CambridgeUniversity Press. Kenichi Ohno[2006], The Economic Development of Japan, GRIPS Development Forum. Reischauer, E.[1988], The Japanese today, Harverd University Press.