Economic Development of Japan - GRIPS new/J06... · 2020. 6. 18. · Russia gained territorial & economic concessions and kept large troops in Manchuria. Japan signed Japan-UK Alliance

Economic Development of Japan

No.5 Meiji MacroeconomyOpening of New

Tokyo Stock Exchange, 1897

Topics for Discussion Explain macroeconomic conditions during Meiji. Did they

support or constrain industrialization? Consider money, banking, inflation, budget, trade structure, tariff rates, exchange rate regime and international reserves.

What was the hottest economic issue in the early sessions of Meiji Parliament (established in 1890)? Identify the issue, supporters & opponents and their reasons.

Explain fiscal activism adopted by central and local governments. What were the major expenditure items?

How did the war with China (1894-95) and with Russia (1904-05) affect the macro balance and industrialization?

Who supplied investment funds, and how? Were foreign borrowing and FDI important during Meiji?

From Monetary Confusion to Fiscal Consolidation, then Fiscal Activism Meiji Japan suffered monetary confusion, inflation and trial-and-error for a

few decades prior to the creation of a new monetary and banking system. Matsukata deflation, adoption of gold standard (fixed exchange rate) and creation of ordinary banks gradually stabilized the macroeconomic situation.

From the late 1880s, private dynamism generated many waves of Company Booms (establishment of large joint stock companies). Investments were directed to textile and railroad construction, then spread to other sectors.

Industrial revolution in light manufacturing (cotton textile) was achieved in the 1890s. Heavy industries were still weak. Meanwhile, business cycles (booms & busts, bank runs) began to emerge in a young capitalist economy.

Government insisted on tax increase and aggressive building of infrastructure and naval fleet, but rural voters (land-tax payers) demanded tighter budget. This was the key economic debate in early parliamentary sessions.

After wars with China and Russia, both of which ended in Japanese victory, central and local governments turned to fiscal activism. This accelerated industrialization but caused serious fiscal and external imbalances.

Rice Price per Koku (Yen/150kg)

0

5000

10000

15000

20000

25000

1873

1876

1879

1882

1885

1888

1891

1894

1897

1900

1903

1906

1909

1912

Matsukata deflation

Source: Management and Coordination Agency, Historical Statistics of Japan, Vol.4, 1988.

Inflation in Meiji Period

Average increase of about 3.5% per year

Matsukata Masayoshi,Councilor of Finance

0

50

100

150

200

2501873

1874

1875

1876

1877

1878

1879

1880

1881

1882

1883

1884

1885

1886

1887

1888

1889

1890

Money i n ci rcul ati on

(mi l l i on yen)

R ice pri ce

(1868=100)

Matsukata

def l ati on

Saigo's Rebel l i on

Money and Inflation in Early Meiji

0

1000

2000

3000

4000

5000

6000

1884

1885

1886

1887

1888

1889

1890

1891

1892

Banking

Transport

Commerce

Industry

Agriculture

0

50

100

150

200

250

300

350

1884

1885

1886

1887

1888

1889

1890

1891

1892

Banking

Transport

Commerce

Industry

Agriculture

First Company Boom

Number of companies

Legal capital (million yen)

Yoshio Ando ed, Databook on Modern Japanese Economic History, 2rd ed, Tokyo Univ. Press, 1979.

Graph1

18841884188418841884

18851885188518851885

18861886188618861886

18871887188718871887

18881888188818881888

18891889188918891889

18901890189018901890

18911891189118911891

18921892189218921892

Agriculture

Industry

Commerce

Transport

Banking

61

379

654

204

1097

78

496

625

80

1103

85

1097

315

158

1106

144

1361

374

159

1100

204

1694

545

150

1061

430

2259

1079

299

1049

465

2284

1201

346

1055

399

2480

1095

332

1066

361

2746

1081

319

1085

SOE2

Expenditure for Ministry of Industry Projects

Yoshio Ando ed, Databook for Modern Japanese Economic History, 2nd ed, Tokyo University Press, 1979

Unit: 1000 yen

SectorProjectInvestmentOperationLossTotal

MiningSado12521520332805

Ikuno16011016562673

Miike7362327213084

Ani16061539673212

Innai675626281329

Kosaka5479141461

Kamaishi22008427163758

Nakakosaka745612142

Okuzu1500150

Aburato492675

ManufacturingAkabane610104231655

Fukagawa332798320

Shinagawa Glass190236105531

Hyogo Shipbuilding7741682422498

Nagasaki Shipbuilding62926933322

RailroadsTokyo-Yokohama298034066386

Otsu-Kobe8110318111291

Tsuruga-Ogaki28982003098

Ogaki-Handa6464

Takasaki-Ueda235235

Tokyo-Maebashi606

Other38745669-4919052

TOTAL292932725460057147

Summary

SectorInvestmentOperationLossTotal

Mining8890886693318689

Manufacturing229659321588386

Railroads142936787021080

Other38745669-4919052

TOTAL293532725460057207

companies

Number of companies by sector


AgricultureIndustryCommerceTransportBanking

1884613796542041097

188578496625801103

18868510973151581106

188714413613741591100

188820416945451501061

1889430225910792991049

1890465228412013461055

1891399248010953321066

1892361274610813191085

Capital of companies by sector

(Unit: 1000 yen)


18841.245.058.996.8987.10

18851.457.7715.8525.5986.61

18861.0514.739.9424.7785.77

18872.9220.0119.2425.6894.35

18885.9639.0321.4151.2792.59

18898.1270.2035.4469.8694.07

18908.2377.5336.09103.6396.63

18916.3270.2928.1294.8696.83

18924.4469.0230.5594.7599.63

companies

Agriculture

Industry

Commerce

Transport

Banking

RGNE

Agriculture

Industry

Commerce

Transport

Banking

tariff

Real GNE estimate

Ohkawa, Takamatsu, Yamamoto (HSoJ vol.3 pp.346-7)

1934-36 price, millions of yen

RGNE

19006267Growth

1901650519013.8%

190264191902-1.3%Smoothed

1903648519031.0%19032.0%

19047140190410.1%19041.0%

190568681905-3.8%19052.3%

190668141906-0.8%19062.5%

1907716619075.2%19071.2%

1908730119081.9%19083.0%

1909754719093.4%19093.7%

1910796119105.5%19102.0%

1911817119112.6%19112.2%

191279081912-3.2%19121.7%

1913811119132.6%19131.9%

1914820619141.2%19142.9%

1915873519156.4%19155.1%

1916938119167.4%19166.1%

19171010619177.7%19176.9%

19181090719187.9%19185.7%

19191147019195.2%19194.7%

19201149919200.3%19203.5%

19211179219212.5%19211.1%

19221195919221.4%19220.7%

1923115041923-3.8%19231.8%

19241184019242.9%19241.4%

19251252119255.8%19252.2%

19261261619260.8%19263.9%

19271329819275.4%19273.3%

19281391819284.7%19282.5%

1929139031929-0.1%19292.4%

19301413719301.7%19302.0%

19311419419310.4%19312.8%

19321468219323.4%19324.6%

19331597119338.8%19335.4%

19341734919348.6%19345.9%

19351838219356.0%19356.0%

19361887519362.7%1936

19371961019373.9%1937

tariff

Late Meiji

Taisho

Early Showa

Smoothed

m & inf

Average Tariff Rates

All commoditiesAverage of non-zero tariff commodities

18703.63.7

18753.84

188055

18854.95.1

18903.85

189534.6

19005.18

19057.512

19107.515

1915517

19202.58

1925414

1930722

1935619

19405.312.5

194525

19501.83

1955314

1960517

19657.820

1970715

19752.66

19802.53

19852.73

19902.64

m & inf

1899 Restoration of tariff rights

%

All commodities

Average of non-zero tariff commodities

cent bonds

Money & Inflation

新詳説日本史図説P178 シンショウセツニホンシズセツ

Money in circulation (million yen)Rice price (1868=100)

18739580

1874153124

1875155125

187617083

187717890

1878225105

1879220128

1880210177

1881197180

1882192148

1883186101

188418083

1885183104

188620095

188720181

188821080

1889220100

1890229139

cent bonds

Money in circulation (million yen)

Rice price (1868=100)

Matsukata deflation

Saigo's Rebellion



local bonds

Bond issues by Meiji Government

Simon J. Bytheway, Japanese Economy and Foreign Capital, pp.106-107 (Japanese)

YearLocationInterest rateMaturity (years)Amount (mil yen)Purpose

11870London9.0%134.88Railroad construction

21873London7.0%2511.71Redemption of samurai salaries

31897London5.0%5543.00War

41899London4.0%5597.63RR, steel mill, telecom, war


61904LN & NY6.0%797.63War

71904LN & NY6.0%7117.16War

81905LN & NY4.5%20292.89War

91905LN, NY, Berlin4.5%20292.89War, refinancing of domestic bonds

101905LN, NY, Berlin, Paris4.0%25244.08Redemption of fiscal bonds

111907LN, Paris5.0%40224.55Redemption of 6 & 7

121910Paris4.0%60174.15Redemption of domestic bonds

131910London4.0%60107.39Redemption of domestic bonds

colony trade

Bond issues by local governments (Meiji)


YearIssuing cityInterest rateMaturity (years)Amount (mil yen)Purpose

11899Kobe6.0%360.25Water works

21902Yokohama6.0%230.90Water works

31903Osaka6.0%783.09Port facility

41906Tokyo5.0%3014.58Port facility and roads

51907Yokohama6.0%283.11Port facility

61909Yokohama6.0%80.65Gas factory

71909Osaka5.0%2930.22Street trams, water works

81909Nagoya5.0%337.82Water works

91909Kyoto5.0%2917.55Power supply, water works



121912Tokyo5.0%4089.56Street trams

FDI meiji

Yamamoto Yuzo, Oku Kazuyoshi (Nihon Keizaishi vol.5), pp.118-119

Exports (%)

189219021912

Zone 1 (US, Europe)715546

Zone 2 (Developing areas)202017

Zone 3 (Korea, Taiwan, occupied China)92537

Imports (%)

189219021912




FDI meiji

Zone 1 (US, Europe)

Zone 2 (Developing areas)

Zone 3 (Korea, Taiwan, occupied China)

FDI taisho

Zone 1 (US, Europe)



Major FDI Firms


YearJapanese nameForeign partnerForeign ownshpRemark

11893Standard OilStandard Oil (US)100%Later sold to Nippon Oil

21899Nippon Electric (NEC)Western Electric (US)54%Later under Sumitomo

31900Murai BrothersAmerican Tobacco (US)50%State-owned in 1904

41900Rising SunS. Samuel & Co. (UK)100%Oil business

51901Singer MishinSinger Sewing Machine (US)100%

61902Osaka GasMr A.N. Brady (US)50%Brady capital exits 1925

71903Tokyo Electrical TrainMr Malcolm (UK)--

81905Tokyo ElectricGeneral Electric (US)38%Later Toshiba, 1939

91906Osaka Glass ManufacturingPrivate syndicate (UK, Bel, Fr)56%

101907Nippon SteelArmstrong & Vickers (UK)50%Weapon manufacturing

111907Imperial SpinningJ&P Coats (UK)60%

121909Dunlop RubberFar East Dunlop (UK)100%Later, 100% Japanese

131910Shibaura ManufacturingGeneral Electric (US)24%Later Toshiba, 1939

141910Nippon Okijenu & AsechiresuL'air Liquide (FR)100%

151910Lever Brothers AmagasakiLever & Brothers (UK)100%

161910Nippon Chikuonki TradingMr. F.W. Hohn (US)--Phonograph

Major FDI Firms (Taisho and Prewar Showa)



171917Yokohama Rubber Manuf.F.B. Goodrich (US)50%Goodrich sale from 1912

181918Japan-US Sheet GlassLibby Owens Sheet Glass (US)35%1922, under Sumitomo

191920Sumitomo Electric CableWestern Electric (US)25%

201922Asahi Silk WeavingVereinigete Glanzstoff Fabriken (Germany)20%1929, under Nicchitsu

211923Fuji Electric ManufacturingSiemens (Germany)30%J side: Furukawa

221923Mitsubishi ElectricWestinghouse Electric (US)10%

231925Japan FordFord Motor (US)100%Previously, sales through agents

241927Japan General MotorsGeneral Motors (US)100%

251927Japan VictorVictor Talking Machine (US)100%1937, under Nissan

261927Daido MatchSweden Match (Swe)50%1932, under Nissan

271928Japan Columbia PhonographColumbia (UK)59%1935, under Nissan

281928Toyo BabcockBabcock & Wilcox (UK)71%Boilers, steam turbines

291929Japan Benberg Silk FiberJ.P. Benberg (Germany)20%1933, merged with no.20

301931Mitsubishi OilAssociated Tidewater Oil (US)50%J: Mitsubishi Corp.

311931Sumitomo Alminum SmeltingAluminum Co. of Canada (Can)50%

321932Toyo Otis ElevatorsOtis Elevators (US)60%J: Mitsui Corporation

331932Japan Submarine CableInt'l Standard Electric (US)12%Under Sumitomo

341933National Cash RegisterNational Cash Register (US)100%

351937Japan WatsonWatson Computing Tabulating Recording Machine (US)100%

361939Shibaura Kyodo IndustriesUnited Engineering (US)--J: Shibaura

Graph2

18841884188418841884

18851885188518851885

18861886188618861886

18871887188718871887

18881888188818881888

18891889188918891889

18901890189018901890

18911891189118911891

18921892189218921892

Agriculture

Industry

Commerce

Transport

Banking

1.235

5.048

8.988

6.892

87.1

1.45

7.771

15.854

25.585

86.613

1.053

14.725

9.935

24.773

85.766

2.924

20.011

19.239

25.682

94.352

5.962

39.032

21.409

51.266

92.593

8.119

70.199

35.438

69.859

94.074

8.23

77.53

36.086

103.631

96.634

6.315

70.293

28.119

94.863

96.825

4.438

69.016

30.547

94.745

99.626

SOE2



Unit: 1000 yen



Ikuno16011016562673

Miike7362327213084

Ani16061539673212

Innai675626281329

Kosaka5479141461

Kamaishi22008427163758

Nakakosaka745612142

Okuzu1500150

Aburato492675


Fukagawa332798320





Otsu-Kobe8110318111291


Ogaki-Handa6464

Takasaki-Ueda235235

Tokyo-Maebashi606

Other38745669-4919052

TOTAL292932725460057147

Summary


Mining8890886693318689


Railroads142936787021080

Other38745669-4919052

TOTAL293532725460057207

companies




1884613796542041097

188578496625801103

18868510973151581106

188714413613741591100

188820416945451501061

1889430225910792991049

1890465228412013461055

1891399248010953321066

1892361274610813191085


(Unit: 1000 yen)


18841.245.058.996.8987.10

18851.457.7715.8525.5986.61

18861.0514.739.9424.7785.77

18872.9220.0119.2425.6894.35

18885.9639.0321.4151.2792.59

18898.1270.2035.4469.8694.07

18908.2377.5336.09103.6396.63

18916.3270.2928.1294.8696.83

18924.4469.0230.5594.7599.63

companies

Agriculture

Industry

Commerce

Transport

Banking

RGNE

Agriculture

Industry

Commerce

Transport

Banking

tariff

Real GNE estimate



RGNE

19006267Growth

1901650519013.8%

190264191902-1.3%Smoothed

1903648519031.0%19032.0%

19047140190410.1%19041.0%

190568681905-3.8%19052.3%

190668141906-0.8%19062.5%

1907716619075.2%19071.2%

1908730119081.9%19083.0%

1909754719093.4%19093.7%

1910796119105.5%19102.0%

1911817119112.6%19112.2%

191279081912-3.2%19121.7%

1913811119132.6%19131.9%

1914820619141.2%19142.9%

1915873519156.4%19155.1%

1916938119167.4%19166.1%

19171010619177.7%19176.9%

19181090719187.9%19185.7%

19191147019195.2%19194.7%

19201149919200.3%19203.5%

19211179219212.5%19211.1%

19221195919221.4%19220.7%

1923115041923-3.8%19231.8%

19241184019242.9%19241.4%

19251252119255.8%19252.2%

19261261619260.8%19263.9%

19271329819275.4%19273.3%

19281391819284.7%19282.5%

1929139031929-0.1%19292.4%

19301413719301.7%19302.0%

19311419419310.4%19312.8%

19321468219323.4%19324.6%

19331597119338.8%19335.4%

19341734919348.6%19345.9%

19351838219356.0%19356.0%

19361887519362.7%1936

19371961019373.9%1937

tariff

Late Meiji

Taisho

Early Showa

Smoothed

m & inf



18703.63.7

18753.84

188055

18854.95.1

18903.85

189534.6

19005.18

19057.512

19107.515

1915517

19202.58

1925414

1930722

1935619

19405.312.5

194525

19501.83

1955314

1960517

19657.820

1970715

19752.66

19802.53

19852.73

19902.64

m & inf


%

All commodities


cent bonds

Money & Inflation



18739580

1874153124

1875155125

187617083

187717890

1878225105

1879220128

1880210177

1881197180

1882192148

1883186101

188418083

1885183104

188620095

188720181

188821080

1889220100

1890229139

cent bonds



Matsukata deflation

Saigo's Rebellion



local bonds






31897London5.0%5543.00War



61904LN & NY6.0%797.63War

71904LN & NY6.0%7117.16War

81905LN & NY4.5%20292.89War






colony trade
















FDI meiji


Exports (%)

189219021912




Imports (%)

189219021912




FDI meiji

Zone 1 (US, Europe)



FDI taisho

Zone 1 (US, Europe)



Major FDI Firms










































Meiji Banking HistoryNational Bank Act, 1872

Gold backing required to issue private paper money – only four banks established

Revision of NBA, 1876Gold reserve no longer required – up to 153 banks established

Bank of Japan, 1882A central bank was created

Ordinary Bank Act, 1893National banks were replaced by ordinary banks leading to bank establishment boom; besides these, “savings banks” accepting small deposits were hardly regulated

Bank runs & bankruptciesFrom around 1900, many banks faced difficulties and exited

NBA 1872

BOJ 1882

Revised 1876

OBA 1893

Source: Japan Statistical Association, Historical Statistics of Japan, vol.3, p.166.

Government was relatively small

Composition of Domestic Demand

0%10%20%30%40%50%60%70%80%90%

100%

1888

1900

1910

1920

1930

1938

1954

1960

1970

1980

1988

Gov invt

Priv invt

Gov cons

Priv cons

Meiji

Source: Ryoshin Minami, The Economic Development of Japan, 1986.

0%

20%

40%

60%

80%

100%1875

1880

1885

1890

1895

1900

1905

1910

1915

1920

1925

Indirecttaxes

Directtaxes

Income tax

Land tax

Corp. tax

Other

Liquor taxCustoms

duties

Sugar tax

Other

Source: Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.268-269.

Tax Revenue StructureMeiji

Graph2

18751875187518751875187518751875

18761876187618761876187618761876

18771877187718771877187718771877

18781878187818781878187818781878

18791879187918791879187918791879

18801880188018801880188018801880

18811881188118811881188118811881

18821882188218821882188218821882

18831883188318831883188318831883

18841884188418841884188418841884

18851885188518851885188518851885

18861886188618861886188618861886

18871887188718871887188718871887

18881888188818881888188818881888

18891889188918891889188918891889

18901890189018901890189018901890

18911891189118911891189118911891

18921892189218921892189218921892

18931893189318931893189318931893

18941894189418941894189418941894

18951895189518951895189518951895

18961896189618961896189618961896

18971897189718971897189718971897

18981898189818981898189818981898

18991899189918991899189918991899

19001900190019001900190019001900

19011901190119011901190119011901

19021902190219021902190219021902

19031903190319031903190319031903

19041904190419041904190419041904

19051905190519051905190519051905

19061906190619061906190619061906

19071907190719071907190719071907

19081908190819081908190819081908

19091909190919091909190919091909

19101910191019101910191019101910

19111911191119111911191119111911

19121912191219121912191219121912

19131913191319131913191319131913

19141914191419141914191419141914

19151915191519151915191519151915

19161916191619161916191619161916

19171917191719171917191719171917

19181918191819181918191819181918

19191919191919191919191919191919

19201920192019201920192019201920

19211921192119211921192119211921

19221922192219221922192219221922

19231923192319231923192319231923

19241924192419241924192419241924

19251925192519251925192519251925

19261926192619261926192619261926

Indirect taxes

Direct taxes

Income tax

Land tax

Corp. tax

Other

Liquor tax

Customs duties

Sugar tax

Other

Land tax

Income tax

Corporate tax

Other

Liquor tax

Customs duties

Sugar tax

Other

50345

8

2556

1719

4566

43023

9

1912

1989

4797

39451

10

3050

2359

3053

40455

22

5100

2352

3557

42113

14

6464

2691

4297

42346

14

5511

2624

4767

43274

27

10646

2570

5159

43342

23

16330

2613

5430

43538

16

13491

2681

7934

43426

21

14068

2681

7008

43034

19

1053

2750

5726

43282

22

11744

2085

7260

42152

528

34

13070

2990

7511

34651

1067

52

17064

4136

7804

42161

1053

96

16440

4615

6929

40084

1092

3

13912

4728

8188

37457

1111

0

14687

4393

8843

37925

1132

135

15813

4540

9765

38809

1239

178

16637

4992

10614

39291

1354

248

16130

5125

11619

38693

1497

656

17749

6786

11948

37640

1810

0

1262

19476

6728

14848

37965

2095

4416

1002

31105

8021

16572

38441

2351

5478

1824

32960

9093

18792

44861

4837

5507

1454

48918

15937

24023

46718

6368

6052

2028

50294

17010

24989

46666

6837

6481

2429

58017

13631

612

28043

46505

7461

6777

1888

63738

15501

4146

31285

46873

8247

7049

1628

52822

17378

6943

34291

60940

14370

12602

3249

58286

23160

8362

58082

80473

23278

18785

7006

59099

36757

11348

78399

84637

26349

19770

7498

71100

41854

16157

82937

84974

27292

20384

10099

78406

50027

16178

89387

85418

32144

23574

9073

83591

40068

19684

113356

85694

32800

25112

8546

91480

36424

13270

119276

76292

31722

25757

9524

86701

39949

17906

118743

74936

34756

24599

11606

86033

48519

17256

123777

75365

38933

26022

12284

93862

68497

13517

127440

74636

35591

27393

12748

93224

73722

21050

131244

74926

37157

28594

12252

95782

44229

23385

110748

73602

37567

21455

12367

84649

32166

22676

129144

73274

51284

22834

14697

89837

35919

27442

139212

73479

94649

26395

17187

106738

45187

29813

167513

73527

122817

34375

104667

120635

68938

36354

194397

73754

193148

44075

194971

137627

81136

46168

237140

73945

190344

62092

68073

163896

69372

40395

269941

74131

200939

68454

30680

176086

100941

54966

295359

74326

229132

77132

18670

222585

108045

72906

311048

73134

163846

55838

17119

221497

89310

64755

318384

71970

209993

61943

19609

221577

119638

80201

343386

74614

234972

65791

22686

212639

111161

76726

340865

68728

209578

62153

35955

216583

150612

82440

310702

SOE2



Unit: 1000 yen



Ikuno16011016562673

Miike7362327213084

Ani16061539673212

Innai675626281329

Kosaka5479141461

Kamaishi22008427163758

Nakakosaka745612142

Okuzu1500150

Aburato492675


Fukagawa332798320





Otsu-Kobe8110318111291


Ogaki-Handa6464

Takasaki-Ueda235235

Tokyo-Maebashi606

Other38745669-4919052

TOTAL292932725460057147

Summary


Mining8890886693318689


Railroads142936787021080

Other38745669-4919052

TOTAL293532725460057207

tax

Tax revenue structure

Statistical Bureau of the Management and Coordination Agency,

Historical Statistics of Japan, Vol.3, Japan Statistical Association, 1988

pp.268-269

Unit: thousand yen

TOTALDirect taxesIndirect taxes

TotalLand taxIncome taxCorporate taxOtherTotalLiquor taxCustoms dutiesSugar taxOther

187559194503535034588841255617194566

187651730430324302398698191219894797

1877479233946139451108462305023593053

18785148640477404552211009510023523557

18795557942127421131413452646426914297

18805526242360423461412902551126244767

188161676433014327427183751064625705159

188267738433654334223243731633026135430

188367660435544353816241061349126817934

188467204434474342621237571406826817008

1885525824305343034199529105327505726

188664393433044328222210891174420857260

188766285427144215252834235711307029907511

1888647743577034651106752290041706441367804

1889712944331042161105396279841644046156929

189068007411794008410923268281391247288188

189166491385683745711110279231468743938843

18926931039192379251132135301181581345409765

189372469402263880912391783224316637499210614

189473767408933929113542483287416130512511619

189577329408463869314976563648317749678611948

18968176440712376401810012624105219476672814848

189710117645478379652095441610025569831105802116572

189810893948094384412351547818246084532960909318792

1899145537566594486148375507145488878489181593724023

1900153459611664671863686052202892293502941701024989

19011627166241346666683764812429100303580171363161228043

190217730162631465057461677718881146706373815501414631285

190317523163797468738247704916281114345282217378694334291

19042390519116160940143701260232491478905828623160836258082

1905315145129542804732327818785700618560359099367571134878399

1906350302138254846372634919770749821204871100418541615782937

19073767471427498497427292203841009923399878406500271617889387

19084069081502098541832144235749073256699835914006819684113356

19094126021521528569432800251128546260450914803642413270119276

19104065941432957629231722257579524263299867013994917906118743

191142148214589774936347562459911606275585860334851917256123777

191245592015260475365389332602212284303316938626849713517127440

191346960815036874636355912739312748319240932247372221050131244

191442707315292974926371572859412252274144957824422923385110748

191541362614499173602375672145512367268635846493216622676129144

191645449916208973274512842283414697292410898373591927442139212

1917560961211710734799464926395171873492511067384518729813167513

191875571033538673527122817343751046674203241206356893836354194397

1919100801950594873754193148440751949715020711376278113646168237140

19209380583944547394519034462092680735436041638966937240395269941

1921100155637420474131200939684543068062735217608610094154966295359

1922111384439926074326229132771321867071458422258510804572906311048

192310038833099377313416384655838171196939462214978931064755318384

1924112831736351571970209993619431960976480222157711963880201343386

1925113945439806374614234972657912268674139121263911116176726340865

1926113675137641468728209578621533595576033721658315061282440310702

Direct taxesIndirect taxes

Land taxIncome taxCorporate taxOtherLiquor taxCustoms dutiesSugar taxOther

1875503458255617194566

1876430239191219894797

18773945110305023593053

18784045522510023523557

18794211314646426914297

18804234614551126244767

188143274271064625705159

188243342231633026135430

188343538161349126817934

188443426211406826817008

18854303419105327505726

188643282221174420857260

188742152528341307029907511

1888346511067521706441367804

1889421611053961644046156929

189040084109231391247288188

189137457111101468743938843

18923792511321351581345409765

189338809123917816637499210614

189439291135424816130512511619

189538693149765617749678611948

18963764018100126219476672814848

18973796520954416100231105802116572

18983844123515478182432960909318792

189944861483755071454489181593724023

190046718636860522028502941701024989

190146666683764812429580171363161228043

1902465057461677718886373815501414631285

1903468738247704916285282217378694334291

190460940143701260232495828623160836258082

1905804732327818785700659099367571134878399

1906846372634919770749871100418541615782937

19078497427292203841009978406500271617889387

19088541832144235749073835914006819684113356

19098569432800251128546914803642413270119276

19107629231722257579524867013994917906118743

191174936347562459911606860334851917256123777

191275365389332602212284938626849713517127440

191374636355912739312748932247372221050131244

191474926371572859412252957824422923385110748

191573602375672145512367846493216622676129144

191673274512842283414697898373591927442139212

1917734799464926395171871067384518729813167513

191873527122817343751046671206356893836354194397

191973754193148440751949711376278113646168237140

19207394519034462092680731638966937240395269941

192174131200939684543068017608610094154966295359

192274326229132771321867022258510804572906311048

19237313416384655838171192214978931064755318384

192471970209993619431960922157711963880201343386

192574614234972657912268621263911116176726340865

192668728209578621533595521658315061282440310702

tax

Indirect taxes

Direct taxes

Inc. tax

Land tax

Corp. tax

Other

Liquor tax

Customs duties

Sugar tax

Other

Land tax

Income tax

Corporate tax

Other

Liquor tax

Customs duties

Sugar tax

Other

companies




1884613796542041097

188578496625801103

18868510973151581106

188714413613741591100

188820416945451501061

1889430225910792991049

1890465228412013461055

1891399248010953321066

1892361274610813191085


(Unit: 1000 yen)


18841.245.058.996.8987.10

18851.457.7715.8525.5986.61

18861.0514.739.9424.7785.77

18872.9220.0119.2425.6894.35

18885.9639.0321.4151.2792.59

18898.1270.2035.4469.8694.07

18908.2377.5336.09103.6396.63

18916.3270.2928.1294.8696.83

18924.4469.0230.5594.7599.63

companies

Agriculture

Industry

Commerce

Transport

Banking

RGNE

Agriculture

Industry

Commerce

Transport

Banking

tariff

Real GNE estimate



RGNE

19006267Growth

1901650519013.8%

190264191902-1.3%Smoothed

1903648519031.0%19032.0%

19047140190410.1%19041.0%

190568681905-3.8%19052.3%

190668141906-0.8%19062.5%

1907716619075.2%19071.2%

1908730119081.9%19083.0%

1909754719093.4%19093.7%

1910796119105.5%19102.0%

1911817119112.6%19112.2%

191279081912-3.2%19121.7%

1913811119132.6%19131.9%

1914820619141.2%19142.9%

1915873519156.4%19155.1%

1916938119167.4%19166.1%

19171010619177.7%19176.9%

19181090719187.9%19185.7%

19191147019195.2%19194.7%

19201149919200.3%19203.5%

19211179219212.5%19211.1%

19221195919221.4%19220.7%

1923115041923-3.8%19231.8%

19241184019242.9%19241.4%

19251252119255.8%19252.2%

19261261619260.8%19263.9%

19271329819275.4%19273.3%

19281391819284.7%19282.5%

1929139031929-0.1%19292.4%

19301413719301.7%19302.0%

19311419419310.4%19312.8%

19321468219323.4%19324.6%

19331597119338.8%19335.4%

19341734919348.6%19345.9%

19351838219356.0%19356.0%

19361887519362.7%1936

19371961019373.9%1937

tariff

Late Meiji

Taisho

Early Showa

Smoothed

m & inf



18703.63.7

18753.84

188055

18854.95.1

18903.85

189534.6

19005.18

19057.512

19107.515

1915517

19202.58

1925414

1930722

1935619

19405.312.5

194525

19501.83

1955314

1960517

19657.820

1970715

19752.66

19802.53

19852.73

19902.64

m & inf


%

All commodities


cent bonds

Money & Inflation



18739580

1874153124

1875155125

187617083

187717890

1878225105

1879220128

1880210177

1881197180

1882192148

1883186101

188418083

1885183104

188620095

188720181

188821080

1889220100

1890229139

cent bonds



Matsukata deflation

Saigo's Rebellion



local bonds






31897London5.0%5543.00War



61904LN & NY6.0%797.63War

71904LN & NY6.0%7117.16War

81905LN & NY4.5%20292.89War






colony trade
















FDI meiji


Exports (%)

189219021912




Imports (%)

189219021912




FDI meiji

Zone 1 (US, Europe)



FDI taisho

Zone 1 (US, Europe)



Major FDI Firms










































Macroeconomy of Late Meiji (1890s-1900s)Trade, Budget & Finance, Saving Mobilization

Aggressive public spending continued for militarization and industrialization, causing budget deficit and gold reserve loss.

Cotton industry succeeded in import substitution. Trade exhibited dual structure—exporting light industry goods to Asia and importing machinery from the West.

Yen initially floated down, but was fixed at $1=2 yen after joining the gold standard in 1897.

Banks and stock exchanges were set up, but main source of saving remained self-finance and joint stock companies within the private business sector.

Japan relied relatively little on FDI. But foreign bonds were issued by central and local governments to execute the Japan-Russia War, local public investments and budget re-financing.

Imports by Commodity (%)

0

20

40

60

80

100

1870

s

1880

s

1890

s

1900

s

1910

s

1920

s

1930

s

1940

s

1950

s

1960

s

1970

s

1980

s

Other

Manufactured

Light industry

Primary com.

NA

Exports by Commodity (%)

0

20

40

60

80

100

1870

s

1880

s

1890

s

1900

s

1910

s

1920

s

1930

s

1940

s

1950

s

1960

s

1970

s

1980

s

Other

Manufactured

Textile (incl. silk)

Food

Primary com.

Source: Ryoshin Minami, The EconomicDevelopment of Japan, 1986.

Meiji

Shifts inTrade Structure

Trade Structure in Meiji (incl. colonies) Exports to West—silk to US (60-70%) dominated Imports from West—machinery, steel, US raw cotton Exports to other areas—cotton products, light industry goods

(matches, umbrellas, clocks, glass products, lamps, knitted goods) Imports from other areas—foodstuff, Indian raw cottonTrade content with developing areas & with colonies were similar

0%

20%

40%

60%

80%

100%

1892 1902 1912

0%

20%

40%

60%

80%

100%

1892 1902 1912

Taiwan, Korea, occupied China

Developing areas

Europe, US

Export Import

Source: Y.Yamamoto & K.Oku, “Trade,” JEH vol.5, 1990.

Early Meiji Late Meiji

Japan Japan

Europe, US Europe, US

Rest of Asia

Tea, silk Tea, silk

Raw cotton (India), food

Textile & light manufacturing

Machinery, textile products

Machinery, raw cotton (US)

Japan’s Trade Pattern

Meiji

Average Tariff RateCalculated as (tariff revenue)/(import value)

Source: Ministry of Finance Policy Research Institute, Ministry of Finance Statistics Monthly, vols. 178 (Aug.1966), 293 (Apr.1976), 413 (Sep.1986), 437 (Sep.1988), 630 (Oct.2004) and 772 (Aug.2016). If data do not exactly match between volumes, data in later volume are used.

Meiji

ProductTariff rate (%)

1911 1926 1932 1951 1961 2014Raw materials

Coal 0 0 0 0 0 0Wool 0 0-5 0-21 0 0 0Cotton 0 0 0 0 0 0

Light manufacturesWoolen products 25 15-20 8-16 20 20 5.3-7.9Cotton products 20 5 7-27 10 10-15 2.9-5.6Artificial fiber products 40 100 100 15,25 15,25 4-10Leather footwear 40 100 100 30 27-30 17.3-30Soap 50 100 100 30 27-30 0

Industrial inputsArtificial fiber 30 27 75 15,25 15,25 4-6.6Pig iron 5 4 20 10 10 0Steel 7.5 15 15 12.5 12.5 0-3.9

MachineryTextile machine 15 15 16 15 15 0Metal & wood working machine 15 15-20 21 15 15-25 0Generator 20 15-20 8-29 15 15 0Telegraphic instrument 20 20 20 15 15 0Phonograph 50 100 100 40 25-30 0Passenger car 50 50 50 40 35-40 0Camera 50 100 100 40 30 0Musical instruments 40 40 40 20 20 0

Transition of Tariff Rates of Selected Products

Source: Same as the previous page.

The Ratio of Nonzero Tariff Imports to Total Imports(有税品比率＝有税品輸入額／輸入総額）


Exchange Rate (Dollar/Yen)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1875

1880

1885

1890

1895

1900

1905

1910

1915

1920

1925

1930

1935

1940

Exchange Rate RegimeSilver standard (float): until 1897 -- Depreciation against Western currencies; East Asia (Shanghai forex market) used silver

Gold standard (fix): 1897-1917 and 1930-31 -- Adopting global standard with reparation gold from China (at the initiative of Finance Minister Matsukata)

Merits of gold standard

- Pride of joining the first-class country club- No exchange risk- Ease in issuing foreign bonds

Demerit?

- No more depreciation

Meiji

Gold Reserves(In millions of yen)

0

500

1000

1500

2000

2500

1903

1905

1907

1909

1911

1913

1915

1917

1919

1921

1923

1925

1927

1929

1931

1933

1935

1937

1939

1941

Held abroad

At home

Reserves in Import Months

0123456789

10

1903

1905

1907

1909

1911

1913

1915

1917

1919

1921

1923

1925

1927

1929

1931

1933

1935

1937

1939

1941

- Gold reserves began to be held abroad in the early 20th century. It gradually fell toward the end of Meiji (1912).

- Active foreign bond issues by central and local governments can be regarded as a way to avoid fiscal belt-tightening.

- Gold reserves shot up during and after WW1, but declined subsequently.

- Japan eventually solved the balance-of-payments crisis not by tight budget but through WW1 export boom.

WW1

Gold Reserves in Yen and Months-of-Import

Meiji Taisho Showa

Japan-China War (1894-95) & Reparation Japan fought and won a war against Qing

Dynasty of China over the control of Korea (1894-95). After the war, Japan received from China:

• Taiwan and Penghu Islands• Liaodong Peninsula (immediately forced to return to China

under the pressure of Russia, Germany, France)• Reparation of 365 million yen (4 times the annual budget)

China borrowed from other countries and paid reparation in sterling-denominated checks in London

Japan held this amount in London as gold reserves This balance was used to issue convertible paper money in

Japan (establishment of gold exchange standard, 1897).

Special Account for Japan-China War Reparation(Balance at end 1902)

Million yen PercentRevenue Reparation from China 311.07 85.3% Compensation for return of LP 44.91 12.3% Interest etc. 8.53 2.3%

TOTAL 364.51 100.0%Expenditure Japan-China War expenditure (past) 78.96 21.7% Army buildup 56.80 15.6% Navy buildup 139.26 38.2% Yahata Steel Mill 0.58 0.2% Budget finance for 1897 (infra.) 3.21 0.9% Additional money for navy 30.00 8.2% Budget finance for 1898 (Taiwan) 12.00 3.3% Imperial family expense 20.00 5.5% Education 10.00 2.7% Natural disaster fund 10.00 2.7% Remaining balance 3.70 1.0%

TOTAL 364.51 100.0%

83.7%

For military

Note: total budget for Yahata Steel Mill was 6.5 million yen, of which reparation covered 9%.

(see note)

Japan-Russia War (1904-1905) Cause: influence over Korea and Manchuria (Northeast China).

Russia gained territorial & economic concessions and kept large troops in Manchuria. Japan signed Japan-UK Alliance to deter Russia.

When the war started, few thought Japan would win. To cover the war cost, Japan issued government bonds in London and

New York. At first there were no takers, but finally the deal was done. Battles were fought on land and at

sea. The fall of Russia’s LushunFortress and the defeat of Russia’sBaltic Fleet were decisive.

Many were surprised that a non-Western latecomer beat Whites.

Russia paid no war reparation. TheJapanese government accepted thisbecause it needed to end the warasap to avoid fiscal crisis.

Jap. army & navy

Major battlesMain citiesMain railroads

Source: Ryoshin Minami, The EconomicDevelopment of Japan, 1986.

Dependence on Foreign saving=(Imports-Exports)/Gross Investment

-10%

-5%

0%

5%

10%

15%

20%

1880s-

90s

1900s

1910s

1920s

1930s

1940s

1950s

1960s

1970s

1980s

Saving Ratios

0%

5%

10%

15%

20%

25%

30%

35%

40%1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1987

Gross saving (%of GNP)

Net saving (% ofGNP)

Personal saving(% of disp inc)

Dependence on Foreign Saving=(Imports-Exports)/Gross Investment

Estimated Saving Ratios

Meiji

How Was Meiji Industrialization Financed?

1899-1902 1903-1907 1908-1912 1913-1917 1918-1922 1923-1927 1928-1932 1933-1937

Private farms 1 13 4 43 207 23 -12 222 Savings 121 159 175 240 657 523 402 580 Investment 120 146 171 197 450 500 414 358Non-farm private sector 62 123 -87 175 81 -290 631 931 Savings 180 310 212 752 1724 858 1498 2637 Investment 118 187 299 577 1643 1148 867 1706Government -59 -233 15 120 -146 -112 -626 -1162 Savings 24 -142 205 317 441 801 251 -298 Investment 83 91 190 197 587 913 877 864External sector 5 -97 -68 338 143 -380 -6 -10

Memorandum item:Agricultural taxes 104 115 154 166 290 291 188 145 (% of non-farm gross invt) 42.0% 38.4% 28.0% 24.2% 19.4% 13.8% 9.0% 11.3%

Note: Prof. Juro Teranishi's estimates. Farms' S-I balance shows transfer of surpluses to the non-farm sector through the financial system while agricultural taxes are transfer of surpluses through government budget.

Savings and Investment Balance by Sector (In millions of yen)

Agriculture Industry

Gov’t

Banks Not very active

Infrastructure Public spending

Foreign saving(bond issues)

Tax

Intra-sectoral financing--Self finance--Joint stock companies--Mobilizing rich merchants & producers

Prof. Teranishi

0%

5%

10%

15%

20%

25%

30%

1899-1902 1903-1907 1908-1912 1913-1917 1918-1922 1923-1927 1928-1932 1933-1937

Government

Non-farm private

Private farms

-5%

0%

5%

10%

15%

20%

25%

30%

1899-1902 1903-1907 1908-1912 1913-1917 1918-1922 1923-1927 1928-1932 1933-1937

Government

Non-farm private

Private farms

Gross Savings (% of estimated GDP)

Gross Investment (% of estimated GDP)

Note: GDP estimate by Prof. Yamada, from Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.344-345.

Prof. Teranishi’s savings & investment estimates expressed in percent of GDP

Japanese Economy and Foreign Capital, 1858-1939Simon Bytheway, 2005 (in Japanese, PhD dissertation at Tohoku Gakuin Univ.)

After 1858, foreign trading firms came, but their activities were confined to foreign settlement areas.

Japan prohibited FDI until 1899 (revision of commercial law). Even after that, policy and popular opinion remained hostile to FDI.

During Meiji period, foreign debt issue (borrowing) was much larger than FDIShare in foreign saving mobilization--gov’t bonds 82.5%, municipal bonds 7.8%, corporate bonds 9.0%, FDI 0.7%

However, FDI played important roles in some industries (see below), esp. technology transfer through patents.Ex. light bulbs: bamboo filament tungsten filament

Foreign Bond Issue of Meiji GovernmentYear Location

Interestrate

Maturity(years)

Amount(mil yen)

Purpose

1 1870 London 9.0% 13 4.88 Railroad construction2 1873 London 7.0% 25 11.71 Redemption of samurai salaries3 1897 London 5.0% 55 43.00 War4 1899 London 4.0% 55 97.63 RR, steel mill, telecom, war5 1902 London 5.0% 55 50.00 RR, steel mill, telecom, war6 1904 LN & NY 6.0% 7 97.63 War7 1904 LN & NY 6.0% 7 117.16 War8 1905 LN & NY 4.5% 20 292.89 War

9 1905LN, NY,Berlin

4.5% 20 292.89 War, refinancing of domestic bonds

10 1905LN, NY,

Berlin, Paris4.0% 25 244.08 Redemption of fiscal bonds

11 1907 LN, Paris 5.0% 40 224.55 Redemption of 6 & 712 1910 Paris 4.0% 60 174.15 Redemption of domestic bonds13 1910 London 4.0% 60 107.39 Redemption of domestic bonds

Source: S.J.Bytheway (2005), pp.106-107

- Foreign bond issue was made easier by adoption of the gold standard. Other reasons were economic and legal maturity of Japan, and victories over China and Russia.- Borrowing in later period was mainly for war and deficit refinancing.

Central Government Bonds Outstanding

Source: Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.278-279.

0

1

2

3

4

5

6

7

1870

1875

1880

1885

1890

1895

1900

1905

1910

1915

1920

1925

1930

Foreign

Domestic

Billion yen

Meiji

War with China

War with Russia

WW1

Taisho

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%1870

1875

1880

1885

1890

1895

1900

1905

1910

1915

1920

1925

1930

1935

1940

1945

Central Government Bonds Outstanding(Including Domestic & Foreign Bonds)

（％ of Estimated GDP)

Note: GDP estimate by Prof. Yamada, from Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.344-345.

Foreign Bond Issues of MunicipalitiesSix cities borrowed abroad for building local infrastructure

Year Issuing cityInterest

rateMaturity(years)

Amount(mil yen)

Purpose

1 1899 Kobe 6.0% 36 0.25 Water works2 1902 Yokohama 6.0% 23 0.90 Water works3 1903 Osaka 6.0% 78 3.09 Port facility4 1906 Tokyo 5.0% 30 14.58 Port facility and roads5 1907 Yokohama 6.0% 28 3.11 Port facility6 1909 Yokohama 6.0% 8 0.65 Gas factory7 1909 Osaka 5.0% 29 30.22 Street trams, water works8 1909 Nagoya 5.0% 33 7.82 Water works9 1909 Kyoto 5.0% 29 17.55 Power supply, water works10 1909 Yokohama 5.0% 44 7.00 Water works11 1912 Kyoto 5.0% 20 1.95 Power supply, water works12 1912 Tokyo 5.0% 40 89.56 Street trams

In addition, many public/utility companies issued corporate bonds: RR companies, banks, textile companies, power companies, etc.


Major FDI Firms in Meiji Period

FDI was relatively small (cf. China, India). However, it played leading roles in tobacco, oil refining, electrical and general machinery, weapons, automobiles, glass, (aluminum). Later, zaibatsu mostly took over FDI technology and production.


Year Japanese name Foreign partnerForeignownshp

Remark

1 1893 Standard Oil Standard Oil (US) 100% Later sold to Nippon Oil

2 1899 Nippon Electric (NEC) Western Electric (US) 54% Later under Sumitomo

3 1900 Murai Brothers American Tobacco (US) 50% State-owned in 1904

4 1900 Rising Sun S. Samuel & Co. (UK) 100% Oil business

5 1901 Singer Mishin Singer Sewing Machine (US) 100%

6 1902 Osaka Gas Mr A.N. Brady (US) 50% Brady capital exits 1925

7 1903 Tokyo Electrical Train Mr Malcolm (UK) --

8 1905 Tokyo Electric General Electric (US) 38% Later Toshiba, 1939

9 1906 Osaka Glass Manufacturing Private syndicate (UK, Bel, Fr) 56%

10 1907 Nippon Steel Armstrong & Vickers (UK) 50% Weapon manufacturing

11 1907 Imperial Spinning J&P Coats (UK) 60%

12 1909 Dunlop Rubber Far East Dunlop (UK) 100% Later, 100% Japanese

13 1910 Shibaura Manufacturing General Electric (US) 24% Later Toshiba, 1939

14 1910 Nippon Okijenu & Asechiresu L'air Liquide (FR) 100%

15 1910 Lever Brothers Amagasaki Lever & Brothers (UK) 100%

16 1910 Nippon Chikuonki Trading Mr. F.W. Hohn (US) -- Phonograph

Key Ideas for This LectureMeiji Japan eventually stabilized macroeconomy and

established a new monetary and financial order. When inflation ended, strong private investments began to mechanize factories and introduce new technology.

Japanese industrial revolution (in textile, the key industrial product at that time) progressed rapidly and manufactured export rose. Japan began to export light industry goods to Asia while continuing to import machinery from the West.

Debate between fiscal activism and the call for small budget was finally won by the former, but this naturally led to fiscal and balance-of-payments problems.

Central government issued foreign bonds for wars while municipalities for infrastructure building. FDI was modest but it was one of the ways to facilitate technology transfer.

Economic Development of JapanTopics for DiscussionFrom Monetary Confusion to Fiscal Consolidation, then Fiscal Activismスライド番号 4スライド番号 5スライド番号 6スライド番号 7Government was relatively smallスライド番号 9Macroeconomy of Late Meiji (1890s-1900s)�Trade, Budget & Finance, Saving Mobilizationスライド番号 11Trade Structure in Meiji (incl. colonies)スライド番号 13スライド番号 14Transition of Tariff Rates of Selected Productsスライド番号 16スライド番号 17スライド番号 18スライド番号 19Japan-China War (1894-95) & Reparationスライド番号 21Japan-Russia War (1904-1905)スライド番号 23スライド番号 24スライド番号 25Japanese Economy and Foreign Capital, 1858-1939�Simon Bytheway, 2005 (in Japanese, PhD dissertation at Tohoku Gakuin Univ.)Foreign Bond Issue of Meiji GovernmentCentral Government Bonds Outstanding Central Government Bonds Outstanding�(Including Domestic & Foreign Bonds)Foreign Bond Issues of Municipalities�Six cities borrowed abroad for building local infrastructureMajor FDI Firms in Meiji PeriodKey Ideas for This Lecture

Documents

Economic Development of Japan - GRIPS new/J06... · 2020. 6. 18. · Russia gained territorial & economic concessions and kept large troops in Manchuria. Japan signed Japan-UK Alliance