The Meiji period and Japan’s journey to modernization began when the 16-year-old ruler Mutsuhito chose the era name Meiji for his reign. The period started with the downfall of the Tokugawa Shogunate and resulted in Japan’s transformation from a feudal nation into a contemporary industrial state. Japan came out of the Meiji period with a parliamentary form of government and as a world power through military extension overseas. The Meiji rule initially started as a coalition between Satsuma and Choshu. The two dominions were in charge of conquering the Tokugawa Shogunate with the help of Tosa and Hizen domains. Satsuma and Choshu experienced the overwhelming role of inflicting and maintaining national unity. To change the economy from an agricultural one to a developed industrial state, Japanese researchers traveled overseas to learn Western science and language, whereas foreign experts educated the Japanese. The government invested highly in public works, for example, railtransport and communication systems. It alsosponsored the thriving industries, particularly the strong business that belonged to families, known as zaibatsu. The huge spending on industrialization resulted in a financialcalamity in the mid-1880’s that led to modification of the currency and banking system. The Meiji rule came to an end with the death of the emperor in 1912, which also marked the end of the era of the genro. This period in Japanese history was a historicalage that enabled Japan to transform from feudal into a present industrialized state with a parliamentary form of government and its growth as a world power through military exploits overseas. The Meiji era resulted in radicalpolitical, economic, and social transformations in Japan, whichturned out to be the structure and basis of the modern Japan(Grabowiecki, 2012).
During the Meiji restoration, the government was mainly in charge of establishing the foundations essential for economic growth. It also linked the private and public sectors, which marked the beginning of industrialization. The state-private business relation was enhanced in a national structure during the early Meiji period, and this consistency contributed to the economic growth of Japan. During the first fifteen years of the Meiji restoration, the government focused on creating social and industrial infrastructure. It invested highly in public works like railroads, shipment, communication, harbors, and lighthouses among others. The Meiji officials spent a big percentage ofnationalincome on the importation of Western technology and expertise in establishing modern factories. There were no private entrepreneurs with capital or the sureness to join the numerous areas of telegraph and railways. The mainstay of Japan’s modernization would not have grown as quickly as it did without the government investing directly(Allen, 1968).
Japan grew in a way that entailed the features of the dual economy, with differences between the traditional and modern sectors. The traditional segment denotes agriculture, and it dominated the economy for the first two decades of Meiji restoration. It hired many workers and generated revenue for the country in the form of land tax. Between 1870 and 1900, there was a 2% growth rate of the economy yearly because of the adoption of the Land Reform Act of 1873, the launch of new strains of rice, and the development of an educational center of farming. Payment of land levy in cash was replacedwith forced labor and payment in the products of the land. Transformation of Japan’s economy during the Meiji restoration was made possible through subsidization of the agriculture industry and manipulation of the peasants. It was the only possible source of government income since the government taxation of powerful industries and the zaibatsu at that phase of development would have been counter-productive for the entire economy(Allen, 1968).
Although Japan had limited natural resources, it managed to make good use of the increased demand for silk in Europe. Until the end of the 19th century, raw silk represented 40% of Japan’s aggregate export revenues. Japan also exported huge quantities of tea. The global demand for silk and tea, thus, stimulated agricultural diversification and development, which resulted in higher revenues that the government used to finance industrial growth. The income generated from exports in Japan helped in buying foreign machinery. Additionally, when the Meiji period ended, Japan was leading all manufactured silk exporting nations. The by-product effects from the silk business were witnessed in the cotton industry. The reason behind the introduction and diffusion of Western technology in the cotton industry was to stop it from relying on imports of Western textile commodities. The goal of public and private sectors was to reach a point where foreign income would be utilized in funding import of capital goods instead of consumer goods. At the end of the first decade of the Meiji, cotton spindles in Japan were below 10,000; however, by the second decade, the figure was 100,000. Therefore, towards the end of the Meiji Period, Japan was globally leading the textile industry. Additionally, the country managed to import foreigntechnology and made adjustments and improvements to enable its industry to become competitive in the world(Saito, 2011).
The development of international commerce led to the establishment of many banks. At first, the Meiji government conducted tests with several devices, and in 1873, it created a national banking system that resembled mainly that of the United States. Japan alsourgently needed a strong financial system due to the unequalpacts with the West; Japan was being exhausted of its currency. The banks, as well as the national treasury, were in a risky condition. In 1881, the government founded a central bank, which was later called the Bank of Japan. Additionally, to help in trade and foreign exchange, a secondary institution named the Yokohama Specis Bank was founded. Postal savings bank was also established during this period. In the Meiji Era, the banking system eventually took the form whose key features formed the basis of the current Japanese banking system. In 1894, agricultural and industrial banks were developed to fund farmers and producers.
The development of commerce and financial institutions improved the means of transportation. Additionally, there was increased utilization of steamships and construction in Japan. The Meiji government encouraged and supported ship construction firms that paved the way for the remarkable development of domestic and foreign shipping in Japan. Besides shipping, the state also initiated railway construction. Despite strong opposition from the conservatives in the government, a railway was constructed between Tokyo and a port in Yokohama in 1872. The state consistently promoted railways, and the initial ones were built either by the state or by government supported organizations. Telegraph lines were constructed by the state, and in 1886, the telegraph and postal services were unifiedunder a combined state bureau.
The government, with the reformers’ support, contributed to the restructuring of banking, trade, transport, industry, and agronomy. This was because the state was the only institution, which had the structure, resources, and the tribute to conduct an operation on large scale essential to contend with the West. When Perry arrived, large commercial industries were few. Secondly, focus on the state had been enhanced by the previous government, hence it was normal for the ministers of Meiji to stick to the standard of the past ages(Saito, 2011).
Other light industries were also established, such as cement, glass, paper, chemical fertilizers, and sugar refining. Heavy industries that needed a lot of capital and expertise developed later. The government supported heavy industries by creating model factories, though on a small scale. Regarding the iron and steel industry, the Yahata Steel Mill founded in 1897 remained a government firm until the 1930s. Additionally, only large firms managed to join heavy industries due tohuge amounts of capital required. The growth of heavy industries, such asengineering requiredthe presence of large firmsbut waited until sufficient capital was gatheredbybig business corporations.
TheBest and Worst Period in the Economic Performance of Japan in the Meiji Restoration and Analysis of the Effectiveness of the Government Policies for the Economic Growth
The best period in the economic performance of Japan in Meiji restoration was the early Meiji period (1868 to 1870s) where the country witnessed rapid modernization and remarkable transformation of political, social, and economic institutions in order to meet the challenge of the West throughadopting its model.The economic endeavors of the early Meiji government were extensive. The government acknowledged the entire executive, monetary, and fiscal systems, initiated general and technical systems of education that resembled the Western nations, and developed the majority of the services and institutions regarded to be vital to a civilized country during that time. The government startedbuilding a modern system of communications, which included the first railway line, a steamship service and postal and telegraphic services. Additionally, it actively enhanced the growth of modern types of banks. The government also developed new manufacturing industries and took over several enterprises, such as cotton mills, shipyards, and shipping services from the feudal government, which it reorganized and expanded. During the 1870s, the government established factories with modern equipment in a broad range of industries and bought ocean-going ships. Furthermore, the government offered financial aid to private organizations and sold machinery to them on easy terms, which it had imported for thatpurpose. It also involved foreigntechnicians, teachers, managers, and skilled workersin offering the skills required for running the new sectors of the economy(Saito, 2015).
The Japanese real growth rate was not steady for a while, particularly inearly 1900. Additionally, few government enterprises were financially successful during that time. The government did not hesitate to sell its industrial assets to private firms when it was in a financial crisis. Such trend lasted for a while even to the further expansion of the railway system. During this period, the state withdrew from directly owning and controlling the manufacturing industry and otter kinds of enterprise. Additionally, various government assets, such as factories, mines, and shipping lines were obtained by few fast developing business houses. The two periods where Japan experienced rapid price increases were the civil war inflation of 1877-1880 and the post-war inflation of 1896–1897 when the Gross National Product (GNP) deflator skipped by 20%. The Matuskata deflation took place after the civil war inflation. In times of disaster, governments ensure that economic control replacesdeteriorated private sector activities. During the period of war, necessities were consistentlyregulated, and the government supervised production as well as input procurement. Prices were regulated, subsidies were given,and the economy continued to befirmlycontrolled. Nevertheless, regulationsturned out to be less effective due to the development of several black markets. There were many shortages and lower living standards in 1946, one year after the war ended. During this period, there was scarcity of food production and several people worried about deaths that could occur because of starvation(Saito, 2015).
As warriors and citizens came back home from war fronts and former colonies, the lack of employment opportunities became a major problem. Unemployment was anticipated to reach 10 million. Nonetheless, both hunger andhuge unemployment did not occur because many people received the opportunity of working in the informal and agricultural sectors.Hence, there was no idling. Several individuals who lived in urban areas worked in the informal sector, which enabled them to survive. Such sectors offeredshort-term jobs and ensured that the available food could be shared among a large population. Moreover, people who lived in towns and cities also had to go back to rural villages in verycongested trains to exchange their remaining assets like cloth, for food. The regulated food was served in small portions, and many individuals were not satisfied. Therefore, several people had to break the law by going to the black market to search for food. However, some people like Judge Yoshitada Yamaguchi of Tokyo District Court were so sincere that they decided notto break the Food Control Law. The judge ate only rationed food and never took advantage of forbidden food. In October 1947, Judge Yoshitada Yamaguchi died of hunger. In order to manage thelow production andjoblessness, the Japanese government had to print money to fundgrants while inflicting price controls. Evidently, such techniquecould not last for a long time. Monetizing fiscal deficitled to triple-digit inflation from 1946 to 1949(Yamamura, 1968).
Black market inflation was even escalated, particularly in the early period. It was the highest inflation that Japan ever witnessed. Foreign trade was sternlyregulated and any business deal had to receive approval from the Supreme Commander of the Allied Powers (SCAP). Private foreign trade was forbidden during that time. Additionally, for every commodity, SCAP dictated the dollar price and the yen price distinctly. Therefore,there was an implicit exchange rate existed for every commodity. As a result, Japan has numerous exchange rate systems between 1945 and 1949. Additionally, exchange rates for exports (150-600 yen per dollar) were largely more denigratedcompared to exchange rates for imports (125-250 yen per dollar). International trade was also restricted. Besides controlled trade, the United Statesoffereda lot of humanitarian and economicassistanceto Japan, totaling to $1.95 billion during 1946-1950. The supportassisted in improving the shortages of food and consumer goods. Studies show thatthe Japanese economy managed to survive with two man-made aids:grants and US aid. Such supports had to be terminated as soon as possible(Nation Building, 2002).
Forecast of the Economic Growth of Japan during the Next 20 Years with the Understanding of Past Economic Growth of the Country, Which is the Meiji Restoration
Japan will go intothe 2020s in a comparatively strong position. Separating the agrarian and other lobbies in the late 2010s will accelerate the process. The transformation methods initiated under Benomics will slowly come into force after 2020 but will not be able to generateprolonged annual GDP growth over 1-2 percent. Transformation strategies, however, will help in guaranteeing stable GDP, increased efficiency, productivity andconsistent quality of life. This will develop a practical basis for the government’s determination to restore the country’s regional and global image and widen its political, economic, and military reach. Between 2020 and 2030, Japan’s working –age population (20-64 years) will decrease by around 4.8 million to 5.6 million. Such decline will be well below the decline of 7.7 million-8.3 million people from 2010 to 2020; however, it will beconsiderable. To maintain a constantGDP, Japan will be needed to ensure that the average yearly productivity growth of at least 2%. Achieving this will require securing labor reforms. It will as well depend on the government’s ability to increase higher-value-added services, such as financial services and computer technologies industries at home (Saito, 2015).
Tokyo will advanceall through the 2020s in strengthening reforms and fostering the types of industries required to enhance the overalloutput of Japan’s economy. Japan’s domestic changes are not anticipated to producesufficient taxable income to reverse Tokyo’s dependence deficitexpenditure. Japan will possibly not evade its debt because of the increased rates of local ownership, but the total debt will increase, as debt servicing costs. Until 2025, other neighboring Japan’s will still consider it as the top counterbalance to China.
Therefore, in the mid-2020s, Japan will struggle between recovering China and the United States more to aid in the revival. Suchtactical bind, together with Japan’s expanding demographic failure, could lead to another era of comparativeintrospection in the 2030s.
The degrees of workforce reduction and population aging will continue to be moderate in the 2030s prior torising again in the 2040s. The determination to increase fertility levels in the late 2010s and 2020s will assist incountering the impact of working-age population decrease after 2040. However,largely, they will not have animpact on Japan’s labor force in the 2030s. Increased fertility in 2040 will make Japan’s workforce to strain financially even more as compared to the earlier decade. By 2060, the nation’s workforce will have reduced by 50 percent since 2015, whereasits total population could reduce by as much as 25%. As a result, the years after 2040 will probably be highly dominated by domestic economic and social issues associated with management(Nation Building, 2002).
The significantaspect of the Meiji era was Japan’s effort for acknowledgment of its success and equality with Western countries. Japan succeeded in establishingadeveloped, capitalist state based on Western standards. The nation experienced vast challenges in creating the current, prosperous, and technologically progressed economy that it is today. It set a pace by purposely setting out to reform itself in important ways in order to modernize the economy and society along Western lines. The risk-taking innovation of that attemptimproved every aspect of the nation. Additionally, the development shapedcurrenttransformations in systems, technologies, and relations. Furthermore, the transformation has been an essentialelement of Japanese economic history.
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Grabowiecki, J. (2012). Zaibatsu conglomerates as organizational innovations at the time of the modernisation of Japan’s economy. Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu, (256), 132-143.
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Saito, O. (2011). The stem family and labor markets: Reflections on households and firms in Japan’s economic development. The History of the Family, 16(4), 466-480.
Saito, O. (2015). Growth and inequality in the great and little divergence debate: a Japanese perspective. The Economic History Review, 68(2), 399-419.
Yamamura, K. (1968). A Re‐examination of Entrepreneurship in Meiji Japan (1868–1912). The Economic History Review, 21(1), 144-158.