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STUDIES IN HISTORY
' ECONOMICS AND
PUBLIC LAW
EDITED BY
THE FACULTY OF POLITICAL SCIENCE
OF COLUMBIA UNIVERSITY
VOLUME SIXTEENTH
COLUMBIA UNIVERSITY
1902-1903
^'
, SoCiVI Sciences'"!
CONTENTS
Thk Past and Present of Commkkck in Japan — y^/u;i>
Kifio<:ita, Ph. D. . . . . . . . , i
Thk Employment of Women in ';he CTOimNG Tral-e — yiabcl
Hurd Willett, Ph. D 165
The CE^TRALiZATIO^' of Adiministratton in Ohio — Sainne! P.
Orih, Ph. D. . . 371
lo ^3 'J 's n
zzinx
THE PAST AND PEESEISTT OF JAPANESE
COMMERCE
STUDIES IN HISTORY, ECONOMICS AND PUBLIC LAW
EDITED BY THE FACULTY OF POLITICAL SCIENCE O?
COLUMBIA UNIVERSITY
Volume XVI]
[Number 1
THE
PAST AND PRESENT OF JAPANESE
COMMERCE
i
BY
TETARO KINOSITA PI1.D
THE COLUMBIA UNIVERSITY PRESS
THE MACMILLAN COMPANY, AGENTS
London : P. S. King & Son
1902
•^^
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TABLE OF CONTENTS
PACK
Introduction 9
CHAPTER I
The Finance and Economy of the Primitive Japanese
I. Early Industry . 23
II. Fiscal System 25
CHAPTER II
The Intercourse with Korea and China
I. Economic Effects of Buddhism 31
II. Development of Commerce ........... 35
Commerce in toe Middle Ages
I. Money and Usury Laws in Japan 37
II. Commerce and Foreign Intercourse 43
III. Growth of Cities and Industry 47
CHAPTER III
The Beginning ok European Trade
I. Economic Condition of Europe from the i6th to the
loth Century 51
(a) Mercantilism — its development and theory . . 51
(b) Rival Commercial Empires in the East .... 56
II. The First European Trade 59
(a) The Portuguese and the Spaniards, the Hol-
landers and the English 59
(b) The Commercial Policy of lyeyasu 71
(c) Exclusive and Inclusive Policy 76
(i) The Era of Dutch Commerce 79
(2) Internal Trade 85
5] S
CONTENTS
P
"' CHAPTER IV
The Restoration of 1868
I. The Causes 89
II. Economic Effects 99
(a) Development of Transportation and Communi-
cation ... 99
(b) Fiscal and Monetary Systems 117
(c) Era of" Free Trade "and Industrial Revolution. 134
CHAPTER V
Governmental AcnvnY
I. Protection for Young Industries 141
II. Japan's Commercial Attitude 151
Appendix 160
Bibliography 162
-i
1
.5-
PREFAGE
The Japanese students who come to America to study
economic science are singularly handicapped by the fact
that the appearance of this science in Japan is only of the
most recent date. During the last few decades, numbers of
Japanese students have studied in the universities of Europe
and America, but their favored studies have been medicine,
jurisprudence, metaphysical philosophy, or branches of the
physical sciences. The study of economics has not received
the share of their attention which it deserved. The cause of
this may be, in part, that the word economy suggests to the
Oriental mind only greed and parsimony. Many Japanese
students are sensible of this bias. The politico-ethical teach-
ings of Confucius and of Mencius, and the doctrine of Buddh-
ism which has had so vast an influence in shaping the minds
of the people of the Orient, do not favor, if they are not actu-
ally hostile to, the development of economic science as such.
With these prejudices and misconceptions of economic
science, the ambitious minds of the young Japanese have
tended to seek knowledge in all other branches of western
learning, and have overlooked that most important part of
political science — economics. Japan has given to the world
some writers of authority in recent researches in medical
science, and a remarkable advance has been made in the
branches mentioned. But economics is the youngest of all
the sciences in Japan, and no Japanese economist of note has
yet appeared. It can be said that there is no classical work
of economic literature in the language of Japan, except a
few translations from European languages. Japan is virgin
soil for the study and development of economic science.
# The economic data given :n the old literature of Japan are
few and widely scattered. There is no treatment of Japanese
7] 7
^ I
8 PREFACE [8
history from the economic standpoint. The nearest approach
tp it is the careful and comprehensive compilation of Mr.
Suganuma, The Commercial History of Japan^ but even this
excellent and standard work was written without any regard
to its economic significance. Mr. Suganuma gives copies of
many rare documents and of correspondence which has much
economic value. Mr. Yokoi's History of Japanese Commerce
is a more simple and popular form of Japanese commercial
history. The libraries of this country are almost silent as re-
gards Japanese economics. Among a few dissertations in
German, I have found Mr. Fukuda's Die Gesellschaftliche
und Wirtschaftliche Entivicklung in Japan very suggestive,
although his treatment of the subject is sociological and
philosophical rather than economic. He makes no mention
of the important economic development since the Restora-
tion of 1868. On the other hand, Mr. Ono's Industrial
Transition of Japan, as the title indicates, is limited to the
stage of transition, and does not touch the historical evolu-
tion of economic Japan. So far as I am able to ascertain,
there is no literature in Japanese or in the European lan-
guages which approaches our national history from the
standpoint of economics and with scientific precision. That
this is so must be regretted, for the place and function of
Japan in the industrial awakening of the Far East is admittedly
of importance, and it is highly desirable that the world should
know Japan better and that Japan should have wider knowl-
edge of her economic past and of her possibilities in the
industrial world.
In order to understand Japan's present economic condi-
tions, it is necessary to know the vicissitudes through which
she has gone.
The appended bibliography is as complete as with the
works available it is possible to make it. The books men-
tioned afe all of value for the economic interpretation of
Japanese history.
■:m
3
INTRODUCTION
"Le commerce est la base et Tame d'un empire; Qu'il p^risse, tout meurt:
s'il fleurit, tout respire."
Commerce differs from agriculture and manufacturing in
that it calls into existence no new material product or im-
proved form thereof. The latter industries employ labor in
the production and shaping of nature's products for the
comfort and convenience of man. Commerce takes the raw
material or finished product and transports it from place to
place as occasion may demand. It brings the producer and
the consumer into such relations that the one may find the
most remunerative market for his goods and the other may
supply his various needs at the least cost to himself. In
other words, commerce effects a change of commodities so
as to afford a maximum of satisfaction to both parties to the
transaction. Products are thus distributed according to
supply and demand, regardless of the conditions wherein the
first may be restricted and abnormal, and the second artifi-
cial or anticipatory, and not the natural expression of human
needs. Commerce makes the abundance of one district
available for the scarcity of another, and enables both pro-
ducer and consumer to profit beyond what would be pos-
sible if their trade were confined to a single locality. In
short, being an exchange of values, commerce and the profit
accruing therefrom are of mutual interest and advantage to
both parties to the transaction by reason of the diflference in
time and space of the values exchanged.
Exchange of goods necessarily implies a division of labor,
93 9
lO PAST AND FRESEM' OF JAPANESE COMMERCE [jo
and both of these are fitly called "the organized process of
creating wealth."' Exchange of goods is to bring soils,
climates and natural geographical conditions into an organic
relation, while division of labor is to organize the skill and
industry of individuals.
Such is commerce, and its appearance in human society
attends the development of division of labor and intercourse
between distant lands. If we accept the customary stages
in the development of commercial society, we m.ay say that
in the hunting and fishing stage primitive man finds his
means of satisfaction rather than makes or raises them. He.
partakes of nature's bounty and co-operates with her forces
only in the most meagre and simple fashion. His wants are
simple and the equilibrium of his wants and efforts is found
in a very moderate exertion. Increasing population makes
dependence on hunting and fishing more and more precar-
ious. The pastoral stage begins with the use of pastured
animals for food and clothing. Man is still nomadic with
his flocks and herds, but there comes into being a more
general recognition of the right of private property. There
may be great accumulation of wealth as such, but not that
diversity which alone leads to exchange and commerce. In
the barter of this stage, though there is a surplus of satisfac-
tion on either side sufficient to incite it, there is no exact
equilibrum of supply and demand. With the advent of the
agricultural stage comes a great increase in population, the
nomadic life ceases, society becomes better defined and
centers about definite localities and community life begins.
Private ownership in lands, houses and other property is
established, and with it comes the inevitable result of hitherto
unknown class distinctions ; weak and strong, rich and poor,
shrewd and dull, become more sharply defined. Slavery is
a characteristic feature of this period, and slavery or its
* *J. B. Qark, Distribution of IVealth^ p. xr.
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-i
INTR OD UCTJON
II
successor serfdom becomes the foundation of feudalism.
Finally the industrial stage is reached, wherein man no
longer labors for his immediate individual wants, but for
others. Industrial interdependence means the division of
labor. Intercourse with the most distant lands gradually
ushers in the age of trade and commerce as the necessary
complement of the industrial organization ol society. All
of these changes involve, not so much the fundamental re-
lation between man and material nature, as the relation of
man to man. Local trade or national commerce brings a
single community or nationality into close association.
Foreign trade or international commerce binds mankind into
the close relation of mutual advantage and advancement.'
" In the school of Carl Ritter," says Professor Seeley,
" much has been said of three stages of civilization deter-
mined by geographical conditions : the Potamic which clings
to rivers ; the Thalassic which grows up around inland seas ;
and lastly, the Oceanic." '
The early civilizations were doubtless powerfully influ-
enced by geographical conditions. They were potamic and
thalassic. Ethnography traces the rise of human society in
warm climates and about waterv/ays which afforded easy
communication. Until times comparatively recent, what
was known as the world was but a narrow strip of Asia,
Europe, and northern Africa. A highly developed thalassic
civilization arose along the shores of the Mediterranean Sea
upon which the Carthaginians, the Phoenicians and the
Greeks were the traders. Physical environment determined
largely the predominant occupation of these peoples.
' Palgrave, Dictionary of Political Economy, vol. i, pp. 338 et seq. "Trade
and Commerce may be regarded as synonymous terms, but trade is properly in-
ternal mercantile intercourse, and commerce, coinrjercial dealings between
nations."
Seeley, The Expansion of England, p. X03.
m
12 PAST Ai\D PRESENT OF JAPANESE COMMERCE [12
The intellectual and moral development of the race is ac-
celerated by frequent intercourse between people of different
stages and degrees of civilization. And since the arts of
war are inimical to commercial intercourse, commerce has
often been fitly called the handmaid of civilization. Peace-
ful interchange of commodities must, in the long run, effect
such an interchange of ideas as will elevate and uplift the
race as a whole.
The course of history was affected by, and closely con-
nected with, the routes of commerce between the East and
the West. What the West most needed was produced in
abundance in the East. This was true in particular of one
article of food and one of clothing — spice and silk. The
extent to which spice was used by the ancients can scarcely
be estimated in modern times. Fresh meat for use in the
winter could be had only with the greatest difficulty. The
supply of hay was lacking for the long continued feeding of
herds. The supply of meat was prepared by salting and
spicing, and was thus preserved for the use of those who
could afford the luxury. Modern beverages other than wine
were unknown, and nearly all the common drinks were of
some spiced mixture. Silk for clothing and adornment was
desirable for the same qualities which commend its use
to-day. In order to procure these commodities, two well-
defined commercial routes came to be used, one through
central Asia, by way of the Caspian Sea, the other along
the Persian Gulf, the Euphrates River and through the desert
of Alexandria. It was not until the middle of the first Chris-
tian century that the Monsoon wind was discovered, blowing
regularly in winter from the northeast and in summer from
the southwest, along the Indian Ocean. This discovery
aided greatly in the development of the Levant trade.
From earliest authentic history the Mediterranean sea
seems to have occupied the center of the stage in the drama
I
s
fi uJ,i
-^w.i
-««?*'i*i:.:
JNTRODUCTJCN
13
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r3]
of civilization. The center of activities passed westward,
from Gret-ce to Rome, in the middle of the second century
B. C, and commerce took its course and color from the
policy of the Roman empire. As this was a military organ-
ization prim.arily, its chief interest in commerce was for
direct pecuniary profit. The imports of the empire v/ere
won mainly by conquest, and the immense fortunes of fav-
ored individual Romans have been surpassed only by the
accumulations of the industrial awakening of the nineteenth
century. When Roman peace prevailed the Levant trade
flourished greatly. The trip from China to Syria took eight
months; but this was gladly undertaken, for the rewards
were large.
With the fall of the Roman Empire of the West in 476
A. D. the existing civilization was swallowed up in the Teu-
tonic barbarism. " There were no governments, no frontiers,
no nations ; a general jumble of situations, principles, events,
races, languages ; — such was barbarian Europe." The East
and the West were all but lost to each other. The only
connecting link which succeeded in maintaining an uncer-
tain hold, was composed of the two ports of Constantinople
and Alexandria.
While western Europe was yet in turmoil, the Mohamme-
dan Arabs were establishing the Saracen Empire in western
Asia, northern Africa, and southern Spain. With the spread
of this empire vvent the teaching of its religion, that the
only true and sure way of pleasing God is to develop arts
and industry, in order that the countries may be wealthy
and produce strong soldiers.* Although the Mohammedans
had many things to learn from those they conquered, they
themselves nurtured the arts, the sciences and learning. It
is impossible to say how far the modern world is indebted
to the Arabs for the sciences of astronomy, chemistry and
' Nagata, history of Commerce, p. 26.
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14 PAST AiVD PRESENT OF JAPANESE COMMERCE [[4
mathematics. It is probable that their contribution will be
counted greatest in the indirect way of preserving a knowl-
edge of, and an interest in, the sciences. It is easily possible
to over-estimate their direct contributions. But at any rate,
by the close of the eighth century they had obtained posses-
sion of the highways of the Mediterranean.
Although Latin Christendom was broken into political
fragments, it was nevertheless an organized society bound
by the unity of religious belief and ecclesiastical institu-
tions.' This unity and the sensuous mind of the Middle Ages
made possible the tremendous undertakings known as the
Crusades, the war of the Latin Church against the heathen-
dom of the Saracen. Although religious zeal and devotion
were the motive force of the Crusades, the trading interests
reaped the more lasting profit from them. In order to equip
and transport the Crusaders, great business activities sprang
up along the shores of the Mediterranean. The most profit-
able part of this trade fell to the Genoese,' but all the Italian
cities, like Venice, Florence, Pisa, enjoyed a prosperity
hitherto unknown to them. In the fourteenth century the
Venetians had more than three thousand merchant ships of
ten to one hundred tons burden.
At Jerusalem people from the West and from the East ^
mingled ; their mutual knowledge broadened, their desires
were stimulated, their wants multiplied. This collision of
separate civilizations had a most far-reaching effect in the
diflfusion of the knowledge of the Eastern civilization among
the people of the West. Many industries were brought into
Europe as a result, and a more general knowledge of what
might be obtained in the East was disseminated. The man-
ufacture of silk and the cultivation of the mulberry came
from Greece ; from Tyre came the art of making glass ; from
'Cunningham, Western Civilization, vol. ii, p. 108.
'/5;V., p. ^25.
je-j INTRODUCTION 15
Africa came the knowledge of maize and sugar cane.* The
chief commodities of the Levant trade were silk, silk fabrics,
spices, sngar and precious stones. Imperfect and difficult
transportation made these commodities veritable luxuries,
even sugar being counted as such during the Middle Ages.
About the middle of the fifteenth century the Eastern
Empire was brought to an end, being overthrown by the
Turks. These obstructed the Eastern trade by levying out-
rageous taxes and tolls on such part of the trade as they could
not monopolize by concealing its sources. In the fifteenth
century Europe was wholly ignorant of conditions in the
Oriental countries, except as it obtained a limited knowledge
through Marco Polo, who had written in the preceding cen-
tury. Traditions of fabulous wealth to be obtained in the
mysterious East continued to be told, and the desire to find
the shortest route to the Indies led Columbus to the discov-
ery of the New World. Three years later, in 1497, Vasco de
Gama reached Calcutta by way of the Cape of Good Hope.
The Spaniards and the Portuguese accomplished the great
work by which the Atlantic became the highway of com-
merce instead of the Mediterranean. Commerce lost its old
unity and this changed the face of the globe. The geogrpph-
ical discoveries were the signal for the passing of commercial
civilization from the thalassic stage to the oceanic. The
center of commerce moved from the Mediterranean to the
Atlantic, and Cadiz, Lisbon, London and Antwerp rose on
the ruins of Genoa, Venice, Florence and Pisa.
The appearance of the New World transformed the poli-
tics of Europe by altering materially the interests and the
position of five great European states.' The sixteenth cen-
tury was the age pre-eminently of the Spanish and Portu-
guese. During the next century the three other powers
* Pa! grave. Dictionary 0/ PoHiical Economy, vcl. i, p. 470,
•Serrlcy, The Expansion of En^laitd, p. 120.
m
J 6 PAST AND PRESENT OF JAFANESE COMMERCE [i5
bordering the Atlantic were added to the struggle for com-
mercial empire. In the course of the eighteenth century,
Portugal was exhausted in the struggle for a monopoly of
the Oriental trade, and the fate of Spain was scaled by the
defeat of the Armada, the bullion policy and her mistaken
colonial policy. Colbert, with his French tariff war, imd
Cromwell, with his Navigation Act, succeeded in practically
destroying Dutch commerce and industrial pre-eminence.
England and France were left to fight a duel for supremacy
in India and North America. France lost India at the battle
of Plessy and North America on the Heights of Abraham.
These defeats left the Anglo-Saxons undisputed masters of
the seas. England rose on the ruins of Spain and France as
Rome had risen on the ruins of Tyre and Carthage.
But while England was establishing her colonial empire
and supremacy on the sea, there came that series of trans-
formiing and striking inventions, in the second half of the
eighteenth century, which precipitated the industrial revolu-
tion and changed industrial conditions for Europe and the
world. Hand-work and the domestic system gave way to
steam power and the factory system. The age of geograph-
ical discovery had paved the way for the age of invention'
and expansion, and made the success of English commerce
and industry no mere accident. English shipping opened
up new markets which could absorb an almost unlimited
supply of her manufactures. She could produce on a larger
scale than ever before without immediate danger of over-
production. Large sales and small returns per unit of cap-
ital became an axiom of modern trade. England's enormous
profits, industrial and commercial, made her the financial
and economic center of the world.
After the United States became an independent nation, a
tide of emigration flowed across the Atlantic from the Old
* * Cunningham, Wesiern Civilizaiion, vol. ii, pp. 225 et seq.
^■^se£«7,-.
■ '- 1
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1
j.-j IjSTTRODUCTION \y
World to the New. The immigration of intelligent and skil-
ful labor is a conspicuous economic factor in the attainment
of industrial greatness. English industrj^ was fostered and
flourished because of the immigrants from Flanders. Japan-
ese industry profited in the same way because of immigra-
tion from Korea and China. The United States, richly
endowed by nature and peopled by different nationalities
who represented the intelligence and culture of the world,
could not but become the great industrial nation of the world.
The Franco-Prussian War of 1870 resulted in transferring
one thousand million dollars of war indemnity across the
Rhine. The influx of such a mass of wealth was sufficient
to establish Germany in a financial pre-eminence. The in-
dustrial and commercial policy of the German Empire since
that time has been the most vigorous form of government
interference. It may be too soon to judge of the permanent
efitcct of that policy, but it seems to have been a successful
one.
These two great powers are contending for England's
place as the economic center of the world. Should England
be destined to lose her prestige, it would be premature to
point out now the successful rival. A coalition or industrial
alliance of the Teutonic nations would easily dominate the
world. If the question Is to be decided along national lines,
history points strongly westward, and the Spanish-American
W.ir may have been but the surface shock indicating that
the commercial and industrial center had passed to the west-
ern shore of the Atlantic.^
The two problems confronting industrial nation.? in the
twentieth century are the unheard-of accumulations of cap-
ital in the hands of the civilized peoples and the tendency
to special over-production of finished articles.
The French economist, J. B. Say, undertook to prove that
■ I>rool:3 Adams, Amtrica^s Economic Supremacy^ p. 51,
r
^
*1
J 8 PAST AND PRESENT OF JAPANESE COMMERCE [jg
there could be no general over-production, since the in-
creased product of one man or group of men would be ex-
changed for the increased product of the other producing
classes of the community.' M. Say based his argument
upon the premise that the man who produces consumes in
equal ratio with his production. He did not take into ac-
count the modern phenomena of stupendous accumulations.
Saving in order to provide an income is a modern phenom-
enon. In his Essai sur la Repartition des Richesscs, Professor
Leroy-Beaulieu says, " if European laborers and capitalists
continue to amass savings as they have been doing, the
supply of available capital will become so great as materially
to reduce the earning power of capital." Had he been so
minded, he might have added that the decrease in the earn-
ing power of capital would be attended by a corresponding
relative increase in the earning power of labor, and that the
accumulations of capital could be regulated, not by law, but
by the automatic action of demand and supply directing their
force toward capital.
The deposits in European savings banks, as reported by
Conant, have increased as follows : In Prussia, ending with
1898, deposits had increased in five years by about 40 per
cent., or by a sum of more than $350,000,000. In France
private savings banks carried at the end of 1899 deposits of
$657,000,000. In Italy the ordinary and postal savings
institutions had at the same time deposits of $400,000,000.
The savings deposits in Russian banks of different classes
amounted in September, 1899, to $308,500,000. At the
close of the same year, 1899, deposits in the savings banks
of the United States reached the sum of $2,230,366,454.'
To find profitable investment for industrial capital and a /
wider market for consumable goods is the main-spring of
* Sonant, The United Slates in the Orient, pp. 5 et seg.
•Conant, The United States in tlu Orient, p. ijl.
c5
INTR OD UCTIQl^r
10
19]
the international policy of civilized nations to-day. The
territorial "greed" and " imperialism" of Christian nations
is no more than the persistent effort to find and to assure
outlet for surplus capital and goods. The occupation of the
West Indies, the Sandwich Islands, and the Philippines by
the United States, was a measure of " self-defense/' of eco-
nomic necessity. The United States is entering into the
financial and commercial struggle of the twentieth century
as a creditor nation.
Since the discovery of gold in California the industrial
center of the United States has been moving westward, as
the shifting of the center of population partly indicates.
The purchase of Alaska and the acquisition of the Hawaian /
and Philippine Islands makes the Pacific almost an inland
sea of the United States. In the development of the trade
of the Far East the United States is directly concerned and
vitally interested, both politically and economically. As^
the East awakens and develops, the Oriental trade v/ill in-
crease immensely and the Pacific will become a new and
greater highway of the world's commerce; the past few
years have witnessed the beginning of the struggle for its
mastery. England, France, and Germany have each sent
special commissioners to China to investigate and to report
upon the possible openings there for capital and trade. It
is altogether impossible to predict the future and the possi-
bilities it may disclose.
But Japan is profoundly concerned in these world move-
ments. A glance at the map shows that she lies directly at ''
the gateway of the western Pacific, where the channels of
trade converge from east and west, from north and south.
By every geographical condition she is eminently fitted for
prosperity as a commercial and industrial nation. The
character of her soil, climate, racial traits, and the outlying v
iharkets of China and the United States on either hand and
20 PAST AND PRESENT OF JAPANESE COMMERCE [20
Russian Siberia and Australasia to north and south, all go
to show her national possibilities. Nor is Japan unmindful
of her advantages.
Until the present the water-way from Europe to the Far
East has been by way of the Suez Canal or by the Cape of
Good Hope. The Canadian Pacific railway was completed in
1887, uniting Quebec and Vancouver by a line but little
more than 3,000 miles in length. There are several trans-
continental lines in the United States over which an express
train may go from sea-board to sea-board in less than five
days. From Vancouver to Yokohama is 4,374 miles; from
San Francisco to Yokohama is 4,750 miles, and this distance
is covered by fast steamers in two weeks. From England
to Japan by this route requires about 25 days instead of the
34 days required by the route through the Suez Canal.
The Nicaragua Canal — or the Panama Canal — is sure to be
completed before many years. When this is accomplished,
the Pacific will be a more prominent economic factor than
heretofore. The relative advantages of the oceanic canal,
in time and distance, are set forth in the subjoined table.*
DISTANCE IN MILES.
From To Cape Horn. Good Hope. Nic Canal. Saved.
New York City,
San Francisco 14,840 4>76o io,oSo
Hong Kong 18,180 15,^01 11,038 4,163
Yokohama 17,679 16,190 9,363 6,827
Melbourne 13,502 13,290 10,000 3,290
New Zealand 12,550 14,125 8,680 5,870
Hawaii 14,230 6,388 7,840
Liverpool,
San Francisco 14,690 7»So8 7,183
Melbourne 13,352 13,140 12,748 392
New Zealand 12,400 13,975 11,349 1,051 ...
Hong Kong 18,030 15,051 13,7^6 1,265 %
Yokohama . 17,529 16,040 12,111 3,929 P
Hawaii 14,080 9,136 4,944
I
* Johnson, The Nicaragua Canal and the Economic Developmint oj The
United States, p. 46.
I]
II\
/TROD
New Orleans,
San FranciiCQ
15.052
Hamburg,
Mazatlan
I3>93i
Acapulco
»3.37i
Fonseca
11,430
Punta Arenas
11,120
Costa Rica
21
4,047 11,005
6,880
7.05^
6,320
7.-5 »
5.530
5,900
5.515
5,605
The advantages for sailing vessels, of the Central American
canal over the Mediterranean Sea and the Suez Canal, are
ably discussed by McCarlde in his work on The Nicaragua
Canal.
The leading economic influence of this canal, aside from
the considerations of time and of distance, is that it will so
lower transportation charges as to open wider markets for
the raw material of the extractive industries of all the coun-
tries adjacent to the Pacific. This is of immediate interest
to Japan.
On the other hand, vvith the completion of the Siberian
railway at Vladiostock, will be opened a door of large trade
and commerce to the west of Japan. Siberia may or may
not compare with California and Australia, but she has an
abundance of gold and silver, coal, lead and iron. Siberia's
present annual wheat crop is about three million tons.
Within a single generation this may easily be increased to
ten million tons, about one-eighth of the present wheat crop
of the world.
As soon as Japan resumes complete political autonomy
she will have every needed facility for becoming a great
manufacturing nation. She has immense stores of coal, the
chief generative power of the industrial world. The annual
production of coal in Japan is now 6,700,000 tons. The/
veins in the important mines vary from eight to twenty feet,
and with such depth of veins, the area covered gives reason
to believe that, at a conservative estimate, Japan will for
22 FAST AND PRESENT OF JAPANESE COMMERCE [22
many years be an important factor in the production of the
coal supply for the East. With the world's raw materials
being made more readily available to her from every side
she lacks nothing in these respects. Her forty millions of
people have astonished the world by their ingenuity and
adaptability in the arts, industry, and trade. When the
nation is able to protect her people from the keen stress of
foreign competition until they shall, have established indus-
tries of increasing returns, Japan will, doubtless, become as
great industrially as nature has so favorably placed her for
becoming commercially. Extending over 25° of latitude she
has climates suited to every sort of industry, her people are
ingenious, imitative but not lacking in initiative, industrious,
and willing. Adopting and adapting western civilization,
they are best fitted to interpret it to the other races of the
Orient. Spurred on by commercial aims and opportunities,
the Japanese will mingle largely with the peoples of western
civilization and with those of the more ancient and inert
civilizations. The Empire of The Rising Sun is sure to be,
in a great measure, the workshop and the carrier of the Far
East, and in fulfilling this capacity, she will find other oppor-
tunities opening before her. The " Federation of the world "
is far off — very far ; but in moving towards it, whatever may
be the part in the drama of human existence which Nippon
has to play, she will seek to accredit herself to all the peoples
of the earth. For many centuries she has lived apart. Her
exclusiveness is put away forever. Japan is now in friendly
rivalry with the other nations, and the historj' of what she
has been, is, and hopes to be, has now, we hope, become of
general interest.
CHAPTER I
The Finance and Economy of the Primitive Japanese
ECONOMIC DEVELOPMENT OF THE COUNTRY FROM 66o B. C. TO 654 A. D.
I. The Early Industry.
Commerce, in its wider sense, begins with the develop-
ment of human society and the growth of civiHzation. In
order to understand the beginning of commerce in a country
it is essential to know something of the earliest steps toward
civilization. Nearly all civilizations began in warm climates
where the necessities of life we're few and were procured with
little exertion. Naturally, the civilization of Japan began
in the southern part of the islands and extended toward the
northeast. The Ainos, the aborigines of Japan, were driven
northward by an opposing race which advanced from the
southwest. The origin of this race is not known, but they
were probably an amalgamation of different races. Infer-
ences drawn from such unwritten history as customs, tradi-
tions, relics, folk-lore, and dialects of the people along the
Indian Ocean and in the Philippines, seem to show that the
Semitic civilization of 2000 B. C, not only reached India
through the Phoenicians, but extended much farther to
the northeast. It is altogether probable that this Semitic
civilization, blended with the Aryan civilization of the
Hamitic races, reached to the Philippines and to Japan.
The Japanese mythology, the phonetic system of the old
dialect, and many customs of the primitive Japanese make
more probable the assumption that there were elements of
23] 23
if
i
24 PAST AND PRESENT OF JAPANESE COMMERCE [24
the Hamitic-Semitic civilization in Japan before the advent
of Chinese civilization/
Very little is known of the economic condition of the
primitive Japanese. There is almost no literature of value
to historians making researches into this period. Of all
social traditions, the economic are primary and are the ear-
liest.' The traditions and old sayings of this period abound
in allusions to fish and the sea. It is likely that in the hunt-
ing stage of the economic life of this people the leading in-
dustry was fishing. They had no cattle or domesticated
animals and could know nothing of flocks or dairy products.
Nor do they seem to have experienced the periods of no-
madic and pastoral life as did the primitive people of the con-
tinent.3 From the hunting and fishing stage the early Jap-
anese passed apparently directly to the agricultural stage.
Rice, even at that early day, was the staple product."* As
Mr. Fukuda states, the cultivation of dry land was by the
system of essartage, or Brennwirtschaft, and was a most
extensive method of cultivation. The origin of rice cultiva-
tion in wet lands is not known, but the Imperial edict of
Emperor Suijin encouraged the irrigation of dry lands and
the cultivation of wet lands. He inaugurated a periodical
census of the people in 86 B. C.
Emperor Suijin was progressive and made special efforts
to develop fishery, agriculture, and commerce. While the
country was sparsely populated the fishing industry was
more profitable than agriculture, and in 81 B. C, the follov/-
ing edict was issued :s
*' Ships are of cardinal importance to the empire. At
'Takekoshi, The History of 2^00 years, pp. 3 et seq.
■•'Giddings, Principles of Sociology, p. 306.
' Biicher, The Evolution of Indtistry, p. S6.
* Fukuda, Die Gesellschaflliche und Wirtschcftlicke Entwicklungin Japan, ■^. 6.
' Transactions of the Japan Society, London, p. 1 61.
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25] FINANCE AND ECONOAfY 2$
present, the people of the coast, not having ships, suffer
grievously by the necessity of land transportation. There-
fore let every province be caused to have ships built."
His purpose was to increase the facility of transporLation
and communication in and for the country. But the develop-
ment of commerce and industry in Japan really dates from
the introduction of Chinese civilization through the Koreans.
II. Fiscal System.
^^ In all classical antiquity there was some sort of govern-
ment fiscal system. But very little record of it was made at
the time, and but little study of it can now be made. Scar-
city of materials for such researches makes the difHculty in-
superable. The fiscal system of a government has to deal
with many practical problems, and is an outgrowth of the
conditions and relations of the people. Revenue is the pre-
dominating factor of it in all governments, ancient as well as
modern. Hence the study of the sources of revenue and the
methods by which it was collected throws much light on
ancient economic life, even though other historic evidence is
obscure and dim. .
The tangible history of Japan begins with the conquest of
Jimmu, who was its first Emperor. But the period prior to
the Taikvva Reform, in 640 A. D., is very indistinct.
The political system of Emperor Jimmu was of most rudi-
mentary fashion, not unlike the Council of the Six Nations
of the Iroquois. Grifhs likens it to that of the Aztecs of
Mexico.^ The Emperor distributed the conquered lands
among his chieftains to be held in return for military service.
It was a tribal organization and a ."species of feudalism.
Aside from the occasional exaction of tribute the chieftains
were practically free from interference, especially in regard
to the details of provincial administration. The conquerors
» GriflSs, The Mikado's Empire, pp. 58, 88.
:
26 PAST AND PRESENT OF JAPANESE COMMERCE [26
seem to have secured to themselves the reverence and
obedience of the people by making the government a
theocracy.
The central government and the Imperial Court were
practically identical, as in the feudalism of Europe. The
fiscal system of the government was the Imperial Court
economy. This important distinction, or more properly
speaking, identity, must be borne in mind in the study of
this period.
In the reign of Emperor Suijin, 97 B. C. — 30 B. C, a
tribute was exacted from each sex, the " tribute of bow-
point" from men, and the "tribute of hand-point" from
women. The former term implies that hide and horns were
the chief requirement in the discharge of this tax, and the
latter that weaving was required.^ This is the first mention
of a tax in Japanese history. During the following reign^
that of Emperor Suinin, 30 B. C. — 70 A. D., the fiscal
system was somewhat organized. Classifying' the public
revenues according to the two general divisions, Quasi-
Private and Public Economic Income, we are able to arrive
at a fair analysis of this early fiscal system, as follows:
(I.) QuAsi-PRrvATE Economic Income.
(a) Mita. (b) Mikata. (c) Mikoshiro. (d) Minashiro.
The Mita and the Mikata refer to the land belonging to
the Imperial Court; the first in the character of public do-
main, the other the property of the Imperial household. The
Mikoshiro and the Minashiro were the serfs of the same
household.
Land tax or " So" was levied at the rate of three per cent,
on the estimated product.
* Hagino, The Financial History 0/ japan, p. 9.
' Seligman, Essays in Taxation^ p. 266.
•^-
2yl F/JVAJVCE AND ECONOMY 2/
(II.) Public Economic Income.
(a) Cho. (b) Yo, (c) Extraordinary taxes.
The Cho was a kind of business tax assessed on the peo-
ple, and it was paid in kind. The rates differed on different
products, For instance, every weaver, brewer, tailor, fisher-
man and other artizan contributed a portion of his specific
product as his share of the Cho. The Cho varied according
to locahty and occupation. There was no standard of rates
according to which it was levied, but it had all the compul-
sory character of a tax.
The " Yo," or man-labor service, was levied at the rate of
one person from, each thirty households. The service was
required during the winter months, when agricultural labors
were suspended.'
The extraordinary taxes consisted of those on markets,
highways, ferries, ships, occasional tribute from the feudal
chieftains, and escheats and fines.
Thus we find the government revenues made up from the
Cho — business tax, the Yo — man-labor service, and the So —
land tax. This latter tax was collected from wet lands only,
all dry land being exempt.' It is evident from this that the
cultivation was especially fitted to wet land, and that its pro-
ductivity was greater than that of the dry-land. The So was
a secondary revenue of the government, inasmuch as the
tribal feudal system prevailed and the Mita and Mikata v/ere
comparatively small portions of the country.
In the strict use of the word, the So was not a tax. The
Cho, or business tax, was the source of greatest revenue,
and on this account chiefly the government encouraged the
establishment of industries. After the conquest of Korea by
the Empress Jingo, the immigrating Koreans gave a new
departure and a new impetus to all industry. Arts and in-
* Hagino, The Finanical History of Japan, p. 29.
28 PAST AND PRESENT OF JAPANESE COMMERCE [28
dustry quickened and multiplied, and the increased Cho
added greatly to the government's revenue.
During the reign of Emperor Yuraku, 456-479 A. D., the
fiscal system of the government was still better organized.
Three departments were established, the " Itsukikura," the
"Uchikura," and the "Okura."' The Itsukikura was a
treasury for the religious affairs of the Imperial Court. As
the government had been a theocracy for many centuries,
its religious relations were of no slight importance. The
Uchikura was the financial department of the Imperial
Court, The Okura was the department of finance of the
central government.
Before there was any conception of such a thing as a
budget, the government had no idea of the probable amount
of its revenues and expenditures. Moreover, the Cho,
which was the principal revenue of the government, con-
sisted of all kinds of commodities, many of which could not
be stored conveniently through the year. This acted in the
nature of a check on the government and caused it to rely
as much as possible on the Yo and the extraordinary taxes,
in cases of emergency.
Since political integration comes first in the stages of
civilization, nation-making and unification require that the
society be military.'' In the reign of Emperor Kotoku, in 640
A. D., the greatest political reformation in the history of Japan
took place. The tribal-feudal system, under which the gov-
ernment had existed for thirteen hundred years, was changed
to a centralized form of government. The country, which
had had no name for itself before this time, was called Nip-
pon. The year was named after the Chinese style, Taikvva.
All Japanese were made the direct subjects of the Emperor ;
' The Department of Finance in Japanese government is called " Okura-Sho,'
»nd the name might have been derived from it.
'Giddings, Principla of Sociolcgy, p. 305.
t i.
^^**l
2q1 finance and economy 29
that is, the Emperor became the head of the nation, and the
imperial power absolute. Japan, for the first time in its
history, became, as a whole, a nation with a distinctly
national history and life. All private ownership of land was
abolished by the nationalization of all the land in the Em-
pire. In connection with this, the " Handen " system of
China was adopted.'
According to this system every citizen when the age of
six was reached, was provided with a piece of land ; two
"tan" of wet land for each male child, and two-thirds of two
"tan " for each female child. When the men became sixty
years old and the women nineteen, the land which had been
distributed to them was to be returned to the government.
Women and old men were to be supported by their children ;
if there were no children to whom they could look for sup-
port, they were dependent on a company or "Kumi" for
their subsistence. The " Kumi " was the band comprised of
five families who selected one of their own number as a
head-man who should look after the order and welfare of
his company.
The old system of land tax was revised. The land was
now divided into the classes of taxable, non-taxable, and
common ownership lands. The taxable land consisted of
all land distributed by the Handen system. The non-tax-
able consisted of all sterile lands and the property of the
Shinto and Buddhist temples. The common ownership
lands comprised all non distributed and confiscated lands
not otherwise classed. These lands v/ere let out to tenants."
Land measures, the " clio," " tan " and " bii," were estab-
lished and taxes were collected according to them. The
So, or land tax, was 3 per cent, on the estimated product,
^Takckoshi, 7'-^<r//i:/<jry<7/"^joo_>rarj, p. 116.
' Hagino, The Financial History of Japan, p. 44.
30 fAST AND PRESENT OF JAPANESE COMMERCE [30
I. e., two "bundles"" of rice from each "tan" of land. In
the reign of Emperor Gensho dry land was first assessed,
the rate of the assessment being placed at three "sho" of
millet for each " tan " of land. This Emperor, in 7 19 A. D.,
divided the people into three classes for the better assess-
ment and collection of the tax.= The basis of this classifica-
tion was 3ge, the division was as follows :
(a) Young — Between the ages of 17 and 20 years.
(b) Regular — Between the ages of 2i and 60 years.
(c) Old — Between the ages of 61 and 65 years.
The Regular class was the standard for the taxation of
the Cho and the Yo. Each member of this class was
assessed twenty-six feet of cloth annually as his share of the
Cho, and other products were commuted to payments of
cloth. The Young and the Old were assessed respectively
one-fourth and one-half of the Regulars' apportionnient.
For the Yo, or man-labor service, each Regular must give
ten days annually to labor on public work. This ten days'
service might be commuted to twenty-six feet of cloth, and
on the other hand, thirty days' labor on public work was
taken in lieu of both Cho and Yo. The Old class were
assessed one-half the Regulars' amount of the Yo; the
Young were altogether exempt.^
The R-oyal families, those who were over sixty-five years
of age or under sixteen years, women and servants, were
exempt from taxation.
It is impossible to estimate with any exactness the
amount of revenue and annual expenditure. In the light of
all the knowledge which is obtainable, Mr. Hagino judges
that the annual revenue from all sources was approximately
176,090 "koku" of rice.-^
* One bundle equals 3 gallons, 7 pints.
' Hagino, The Financial History of Japan, p. 53.
» Jbid., pp. 54-56. * Md., p. 74.
7
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CHAPTER II
The Intercourse with Korea and China
INFLUENCE OF CHINESE CIVILIZAI ION, AND ECONOMIC CONDITION OF
JAPAN, 554 A. D. TO 1541 A. D.
I. Economic Effects of Buddhism,
Intercourse between the Japanese and the Koreans must
have existed from time immemorial. This is rendered the
more probable since the distance between the two countries
is but one day's sail by boat. The first official intercourse
is said to be the arrival of a Korean envoy named Sonaka-
shichi during the reign of the Emperor Suijin, in 33 B. C*
By this step, migration between the countries was brought
about and favored. The incoming Koreans doubtless
brought the knowledge of the civihzation existing in their
own country, and thus through the peninsula, and not directly
from China, did the civilization of the Celestial Empire flow
into Japan. In 201 A. D., the Empress Jingo led an expe-
dition against Korea which reduced it to a dependency and
placed it under the protectorate, of Japan. A yearly tribute
cf eighty ships laden with gold, silver and precious stones
was sent from Korea to the Imperial Court. This relation
increased the frequency of communication between the
countries, and a stream of Korean immigrants poured into
Japan." Korean weavers, brewers, tailors, embroiderers, and
other skilled artisans came in that century. Architects, as-
*Takeko5hi, Tht History of 2^00 years, p. 27.
' See Mayo-Smith, Emigration and Immigration, p. 35, for " colonist) and
iojmigraats," and their diSering intiuence,
30 3^
k-
32 PAST AND PRESENT OF JAPANESE COMMERCE [32
tronomers, mathematicians and learned men came from Korea
and took up their residence at the Japanese Court in 552
A. D/ China's civilization which had been accumulating
through many centuries was thus transplanted to the virgin
soil of Japan. The yearly tribute from Korea decidedly in-
creased the revenue of the government, and the constant ad-
ditions of productive labor force through immigration greatly
accelerated the growth of the arts and industry. These in-
fluences, united with that of a growing commerce, and the
new blood pouring into the country, tended to destroy the
last vestiges of the old tribal bonds. This and, the creation
of a heterogeneous organization of society tended strongly
to the formation of a military, centralized government.
The influx of Chinese civilization was followed in 554 A. D,
by the introduction of Buddhism. The Buddhist mission-
aries were scholars, teachers, and skilled artisans, who
brought with them arts, science, letters and written liter-
ature. The Imperial Court, and high officials generally,
already the radical adopters of Chinese civilization, were
soon made zealous converts to Buddha.
The conversion went on from the upper class of society to
the lower, which is a characteristic feature of the Buddhist
religion, and its progress was rapid and remarkable. Many
temples were built for the propagation of the faith. Idols
and priests were brought from the continent, and the spread
of Buddhism was coincident with the spread of civilization
in the country.
Although the first official intercourse with China was in
462 A. D.,' it was not until after the introduction of Buddh-
ism — that is, in 628 A. D. — that diplomatic representatives
were exchanged between the countries and direct intercourse
and communication established. With the embassies went
1 Grjffis, The Mikado's Empire, p. 83.
' Yokoi,'^ The History of Japanese Commerce, vol. i, p. 37.
ti
^,-1 INTERCOURSE WITH KOREA AND CHINA 33
students and priests to learn the religion and civilization of
the Celestial Empire,
The introduction of Buddhism may be regarded, as Mr.
Giifhs says, as the first of the three great waves of foreign
civilization in Japan.' The effects of Buddhism as a civiliz-
ing force, powerful and far-reaching in the early organization
of society in Japan, can scarcely be overstated. The unifying
influence of the religion was a mighty force in bringing
about the centralized military-religious government of the
Taikwa epoch.
The effect of Buddhism on the economic life of the coun-
try was not less than on the political and social orders.
With the rapid spread of the new religion, the enormous
amount of wealth which had accumulated in the country was
wasted in establishing idols and temples throughout the
land. Em.peror Shomu, 723-748 A. D., constructed an idol
which weighed 739,560 "kin" of fine copper, and at the
sacrifice of a vast amount of labor. The government was
itself transformed into an instrument of religious propagand-
ism, and its example was emulated by the people. Many
landed properties were donated to the temples for the sup-
port of priests and nuns. The people were taught that to
give up all earthly v/ealth was an essential antecedent condi-
tion of asking the blessings of heaven. To donate all one's
possessions to the temple was regarded as an act of piety.
In this way, like the religious institutions of Mediaeval Europe,
the temples became the holders of great landed properties,
and were the centres of v/ealth and power. Priests and
temple property were exempt from all taxes, as were the
English monasteries before Henry VIII. Decreased rev-
enue, regular deficits and increased expenditure necessarily
brought heavier taxation to the people.
* Griftis, The Mikado's Empire, p. 84. The second was from western Europe
in the fifteenth century, and the third from America and the world subsequent to
the visit of Commodore Perr\-.
34 PAST AND PRESENT OF JAPANESE COMMERCE [34
The Chinese system of officialism gradually created a class
of nobility and land owners. The nationalization of land
v/as lost sight of. Those who held land tried to escape tax-
ation by making their property nominally temple lands.
Large numbers became priests and nuns, and among these
were many educated and industrious people. These were,
of course, withdrawn from the productive classes.
The essential teaching of Buddhism is that desires are the
cause of all human sufTering, and that deliverance from suf-
fering can come only by the extinction of the desires. The
motive forces of economic life are the desires of men. Dif-
ferent phases of industry and trade and the outward activi-
ties of men are incited and determined by the intensity of
their desires. Indeed, human wants are the dynamics of
wealth.
The spread of Buddhism led the people to shun the pur-
suit of worldly affairs, since the production of wealth v;ould
stimulate the desires. Such a belief put at the heart of
human life could not but have a profound effect on the
growth of industry, commerce, trade, and all the business
relations of life. Government revenues continued to de-
crease and weaken in direct proportion to the prestige and
force of the Imperial power. The ascendency of such a
religious order and the decadence of the political order
could have but one direct economic effect, effectually to
check even the thought of material enterprise. The priests
played one role, however, which should not be overlooked.
Diplomatic relations were frequently suspended or sundered
between Japan on one side and China and Korea on the
other. During these periods the religious unity bound the
Japanese priests and those of the continent together, and
thus preserved a constant channel of communication with
Chinese civilization.
While the economic literature of this period is entirely
35]
^t;l INTERCOURSE WITH KOREA A!^D CHINA 35
lacking, these two facts stand out conspicuously. The
Buddhist priests were educated representatives of the
Chinese civilization which they taught to the people among
whom they lived. The religion they disseminated was hos-
tile to all economic life and progress, of which it dried up
the very fountains. A high order of economic life and
material welfare must be developed in spite of it and never
because of it,
11. The Development of Commerce.
In early times when the country was sparsely settled, and
the people were organized in tribes, their bartering was
carried on quite naturally in places where the people were
accustomed to assemble for any purpose. The origin of a
common mart in Japan is similar in many ways to that
which is traced in European history. It appears that the
most frequent occasion of these assemblies was some re-
ligious festivity. At the "Utagaki"'' where the people
gathered for singing, all courtship, or rather bargaining for
wives, was conducted. This became a great festive occasion.
At such gatherings there was a general exchange of com-
modities. The first market mentioned in the history of
Japan was that of Karu, during the reign of Emperor Ojin,
201-310 B. C.
With the increase of the population and the growth of
industry the custom of having markets extended to several
provinces.' Under the tribal-feudal system there was no
government interference or regulation of any sort. Some
of the feudal lords in the southwest had been trading with
Korea from an early period, and Hakata in western Kiushu
was the port of entry and departure. With the introduction
* Fukuda, Die Geselhchaftliche und Wirtschaftliche Eniwickhmg in Japan,
p. 9. Also Takekoshi, The History 0/2300 Years, p. 69.
' Yokoi, Tke History of Japanese Commerce, vol. i, p. 3.
?--'™7'^'? V** '
■;-.?**itjlr*-} i»1-
36 PAST AND PRESENT OF JAPANESE COMMERCE [36
of Buddhism came the Korean and Chinese traders, and
Hakata and Osaka became the chief centers of foreign
commerce.
The inland sea Seto is the Mediterranean Sea of Japan.
Many rivers empty into it. On its shores the early Japanese
civilization naturally sprang up. Kinai, comprising four
provinces along the northeastern shore of the Seto, was
densely populated, and Osaka was the center of distribution.
In 749 A. D., Emperor Kammu selected Kioto, thirty
miles from Osaka, for the permanent seat of the central gov-
ernment. While foreign commerce is undeveloped, internal
trade tends to follow the activity of political and social life.
Thus Kioto became the political and economic center of the
country. The centralized, monarchical government mani-
fested its activity by general interference in trade and in-
dustry. Activities which had been left free to private inter-
ests and the enterprise of individuals were now controlled
and regulated in detail by the government. Foreign com-
merce was considered a government monopoly, if not in fact
a government function. Officials were set over the markets,
and all weights, measures, and m.arket prices were fixed by
the government. Hotels were built by the government in
Kioto, Osaka, and Hakata, for the especial purpose of
entertaining foreign officials and merchants. Individuals
were not permitted to trade directly with foreign merchants,
and foreign commerce assumed the character of official busi-
ness. Inasmuch as there were no free transactions between
foreigners and the people, all imports were brought in by
the foreigners. The imports were mainly silk textiles, bro-
cades, embroidered goods, and coin. In regard to exports,
Japanese history is silent ; but, judging from the nature of
presents which were sent to China in this era, the following
were the principal articles exported : sea-weed, quicksilver,
military, arms, such as swords, bows and arrow.s, lacquer
ware, fans, screens, and gold and silver.
27 commerce in the middle ages [37
Commerce in the Middle Ages.
I. Money ajtd Usury Laivs in Japan.
Money economy comes later than barter, and, regardless
of the substance ot which the money is composed, that
function of serving as a common medium, of exchange and
measure of values persists. Money itself is a matter of con-
vention, tradition, and custom. Any material substance
which a society by conventional agreement recognizes as the
common medium of exchange and measure of value may
legally become, and may be called, money. Different cus-
toms and modes of living are characteristic of varying de-
grees of civilization, and many different articles have been
used as money in various times, places, and degrees of social
progress. Among hunters, especially the American Indians,
pelts were used for money ; cattle among the ancient Greeks ;
tobacco among the early Virginian settlers. The history of
money is in a large measure the history of social advance-
ment. As agriculture was the principal industry of the early
Japanese, grain, and especially rice was the m.edium of ex-
change. Prices vi/ere originally fixed at so many bundles of
rice. Later, when a standard of measurement was estab-
lished, the " koku " of rice v;as the standard.
Taxes were commuted for a time, as v/e have already seen,
in cloth, but rice was always the popular medium of ex-
change.
Empress Jingo's expedition in the third century brought
to Japan some gold and silver, but this metal was used in
the arts, chiefly in idol making. The first historical notice
of silver coin was in the reign of Emperor Kenso, 486 A. D.,
but this was without doubt some coin imported from Korea
or China,' since there was at that time no production of silv^er
' There was in China a currency of shells in the remotest ancient times in which
history is meagre. The words denoting buying, selling, riches, property, prices
38 PAST AND PRESENT OF JAPANESE COMMERCE [38
in Japan. It is said that the first silver produced in the
country was presented to Emperor Temmu in 675 A. D.,
and the first gold was presented to Emperor Shomu in 848
A. D.* But it is doubtful if these precious metals were not
rather some of those which were originally imported from
China. After the Korean conquect in the third century a
great quantity of the precious metals entered Japan, and it
would be difficult to deny successfully that some of these
were the ones presented to the Emperors.
In the history of mining, the production of gold precedes
that of silver. The first mint is said to have been estab-
lished in the reign of Emperor Temmu, 675 A. D., but
nothing is recorded about coinage in that period. It is
highly probable that silver and copper were coined under
Emperor Genmyo in 708 A. D. for the first time in the
history of Japan.^ The coinage of silver was soon aban-
doned, and copper alone was coined. This indicates that
the production of silver was yet too small to permit its use
for money, and that copper was more abundant.
The government recognized the convenience of the use of
coined money and encouraged its use in every way. The
foreign money in circulation was the iron money from Korea
and the copper coinage from China. The people, however,
did not understand so well the advantages of the metals as a
medium of exchange, and rice continued to be the money in
popular favor. In order that the people might be more
readily inclined to receive coined money, Emperor Genmyo
--
<4
and many others referring to money and wealth, are composed of the ideo-
graphical sign which denotes the word shell. As early as 2852 B. C. money is
supposed to have been extant in China. In the period of 2255-1766 B. C.
money consisted of yellow^, white, and red metals. For the detailed statement,
see Vissering, On Chinese Currency^ Chapter I.
* Yokoi, The History of jfapantse Commerce, vol. i, p. 8.
* Ibid., p. ID.
29] COMMERCE IN THE MIDDLE AGJ^S. 39
issued an edict in 708 A. D.' granting titles to those who
stored more than ten Kwamme of inonej.'. He seemed to
think that if the people once had it in their possession there
would be no further question of its circulation. At least the
decree was intended to teach the circulation and use of
mowQy. Taxes were commuted in money. For travelers
who had always been compelled to carry with them a pro-
vision of rice, way-side inns and markets were established
where they might buy rice with money. In 714 the pur-
chase and sale of land were restricted to transactions where
money was the consideration. The nationalization of land
was thus made less strict in order to foster the use of a
coined money. But the pertinacity of custom set aside the
ruler's good intentions, and clung to rice as the common
medium of exchange. The Emperor was unable to impart
to coined metal the essential money function of being
universally acceptable throughout the country. It was
hoarded as a kind oi curious commodity.
During two and a half centuries from 708 A. D., fifteen
different kinds of coin were issued at twelve different times.
Of these coins twelve were copper, two were silver and one
was gold. As will be seen from the following table, with
each recoinage the money underwent an enormous debase-
ment. Although the new coins were of reduced weight,
their value, as fixed by law, was ten times that of the coins
replaced. The effect was directly opposite to that intended.
The people refused to circulate it at all, preferring to use
rice for their medium of exchange. The table, as given by
Suganuma, is as follows : ""
^ Suganuma, 7'he Commercial History o/yapan, pp. 180 tt teq.
^Ibid., p. 184.
1
40 PAST AND PRESENT
Year. Kind of Coin. Weight.
Momuic. Fun,
708 Silver 2 i
708 Copper I
761 Gold 3 I
761 Silver — —
761 Copper I 2
767 Copper I o
797 Copper — 9
821 Copper I
832 Copper 7 o
845 Copper — 5
856 Copper o 6
867 Copper — 7
886 Copper — 7
903 Copper I o
956 Copper 7 o
OF JAPANESE COMMERCE
Legal Value,
[40
Rin.
f One silver coin equals twenty-five
*■ coppers.
(-One gold coin equais 10 silver
J coins. One siver coin equals 10
copper coins. One copper coin
equals 10 of previous coinage.
Same legal value.
/ One coin equals 10 of previous
(. coinage.
f One equals 10 of previous coin-
1 age.
f One equals 10 of previous coin-
1 age.
j- One equals 10 of previous coin-
1 age.
f One equals 10 of previous coin-
l age.
For more than six centuries from 956 A. D., or down to
the time of Hideyoshi, history makes but one mention of
coinage. This occurred at the time of the temporary Mika-
doate, 1333 to 1336, when Emperor Gotaigo attempted to
reform the coinage. He is said to have issued the first
paper currency and some copper coins, but his endeavor
was buried in the tumult of the war of the Crysanthemums.
During these intervals Chinese coins circulated freely and
prices were quoted on a money basis, but they were not de-
termined by the simple and pure consideration of money.
"Natural economy" predominated, on the whole, through-
out the country. The slow^development of " monej'- econ-
omy" unquestionably retarded [the »^growth of trade and
commerce. The income of feudal lords and the payment of
rents were estimated in rice as late as the time of the present
..,,
.^8
41 ] COMMERCE IN THE MIDDLE AGES ^i
Emperor, whose reign is known as the Meiji period. The
actual "money economy" of Japan may be reckoned ac-
curately from the Restoration of f868.
The reformation of the Taikwa period was based on the
Confucian principle that " the ruler is the parent of the
people." Paternalism of the most pronounced type was
consequently the ideal. Among the many regulations and
interferences of the government, those which had direct
economic consequences were the regulation of prices by the
government and the usury laws. The interference was in-
tended in the beginning to fix the standard of prices in
transactions between the government and individuals, but it
was carried further in the course of time so far as to fix and
regulate the prices of all commodities. These regulations
differed from the Mediaeval "just price," which was an ab-
stract conception of the worth of a commodity by com.mon
estimation, based on the Christian principle of right and
wrong.' The successive debasements of the coinage had
caused a general rise in prices, and the government under-
took to keep down the level of prices by its authority.
Buying and selling were prohibited except in markets where
prices were fixed and regulated by the government without
any regard to the elasticity of supply and demand.
After the system of nationalization of land was broken
down, the alienation of land was permitted only under the
most careful and minute supervision of the government.
Each buyer and each seller was required to secure a permit,
witnesses to the transaction were demanded, and the deeds
were recorded in the same manner as to-day.
All other commodities were freely bought and sold at the
prices fixed by the government. Priests and nuns were
allovved to purchase only such articles as were required by
their personal necessity.
"* * Cunningham, Growth of English Commerce and Industry, vol. i, p. 252.
42 PA^T AND PRESENT OF JAPANESE COMMERCE [42
These various regulations and interferences continued
until the thirteenth century, and the government always
sought their enforcement, but they were frequently evaded
with more or less cleverness. With the decline of the power
of the central government the trade restrictions and regula-
tions became mere " dead letters."
There were two kinds of loans, from an early date, but
their origin is unknown. One was very similar to the
Mediaeval " mututim" ^ and was a gratuitous loan. The other
resembled the Mediaeval ^* damnum emergens" and '^lucrum
cessans," interest being paid on the principal. The usury
laws which were enacted against the latter were explicitly
for the protection of debtors. It was entirely apart from re-
ligious motives. The government loaned both money and
rice to individuals for the payment of interest. In the reign
of Emperor Mombu, 705 A. D., the maximum rate of inter-
est for government and private loans was so fixed that the
amount of interest could not exceed one-eighth of the prin-
cipal in sixty days, and the total interest could not exceed
100 per cent, in 480 days.^ Compound interest was not
allowed. During the reign of Emperor Saga, 809 to 823
A. D., it was decreed that the amount of interest should not
exceed 50 per cent, of the principal in one year, and that
thereafter no interest should be chargcd.3 Monks and nuns
were not allowed to lend except gratuitously, and govern-
ment officials might not borrow within their own jurisdic-
tion. In case the debtor should become a bankrupt, he was
compelled to repay the loan by his labor-service. For this
reason all suits involving debts were brought before the
criminal courts. Under the Hojo rule, loans for interest were
prohibited, but interest was paid at the rate of 5 per cent,
to 8 per cent, per month.'*
^ Cunningham, Growth of English Industry and Commerce, vol. i, pp. 256, 257,
' Yokoi, The History of fapanese Commerce, vol. 1, p. 22.
» Ibid,, p. 58. * Ibid,, p. 84.
•/*:
43] COMMERCE IN THE MIDDLE AGES 43
II. Commerce and Foreign Jntercoiirse.
By the Taikwa Reforms an absolute monarchical govern-
ment was created and the Emperor became a real ruler direct-
ing all affairs of peace and war. The period from 645 A. D. to
930 A. D. is known as the golden age of the Mikado's power.
The decline of the Imperial power was due largely to the
rapid advance of Buddhism. As has been pointed out, the
effect of Buddhism on the formation of Japanese character
has been very great. Because of it, it now became the cus-
tom for the Emperors to abdicate after short reigns, renounc-
ing all worldly affairs, and becoming monks.* From Emperor
Kimmei, 571 A. D., to Emperor Gotoba, 1198 A. D., there
were fifty- three Emperors, and the average length of their
reigns was less than twelve years. Meanwhile, the crafty
and powerful nobility formed a " ring" about the Emperors
and usurped the administration of government. At the same
time, the increase of the property held by the Buddhist tem-
ples and the creation of " shoyen," ' or non-taxable land, so
depleted the government revenues that the Emperors were
dependent on the nobility for financial support. The Fuji-
wara family gave their daughters in marriage to the Emper-
ors, and were the first ones to usurp the virtual sovereign
power. Two powerful military clans, the Taira and the
Minamoto families, followed the Fujivvara family, and the
strife between them lasted for a century and a half, down to
the thirteenth century. The Minamoto family were the final
victors. In 11 86, their chief warrior, Yoritomo, established
himself as Shogun, or generalissimo, at Kamakura, in the
province of Sagami. It was a military government and its
establishment marked a triumph of the militant democracy
of the Northerners — the Teutons of Japan — ever the literary
^ Griffis, The Mikado' i Empire,^. 114.
' Fukuda, Die Gesellschaftliche und IVirtschaftliche Entivicklung in yapan^
P- 79-
44 PAST AND PRESENT OF JAPANESE COMMERCE [44
aristocracy of the Southerners. The center of rule was
moved from Kioto to Kamakura, and the Kamakura Shoguns
became the dc facto rulers of Japan, the de jttre rulers being
mere figure-heads of administration.
Under the Shogunate thus begun, the dual system of
government was founded. The feudalism which developed
under the Fiijiwara was now to assume national proportions.
Kamakura, hemmed in as it is by the mountainous region
of the eastern provinces, was wholly unsuited for a center of
commerce and industry. Very little attention was paid to
arts and industry by Yoritomo's rule. The military principle
of the Shogunate and the plain and simple customs of the
warriors were no stimulus to industrial activity. Their prow-
ess lay in their military skill, and they thought the arts and
culture generally fit occupations for the aristocratic nobles
at Kioto. But the necessities of transportation and com-
munication between Kamakura and Kioto extended the
sphere of commerce toward the eastern provinces.
From 1205 to 1333 was the period of the Hojo rule. The
later representatives of this family were oppressive and
tyrannical, but they were able rulers and maintained the
peace and order of the country by a simplified administration.
During this period the resources of the country were devel-
oped, and commerce and industry were so encouraged by
the Shogunate that Kamakura rivaled Kioto as the business
center of the country.
In the year 1248, the merchant gild known as the "za"
was organized. The name signified a seat where merchan-
dize was sold. There were seven of these " za," representing
the industries and trades having to do with silk, rice, char-
coal, fish, carpentering, dry-goods and horse trading.
Each "za" obtained from the Shogunate the privilege of
monopoly by the payment of a sum of money. Outsiders
could not engage in the business, the monopoly of which
m
45] COMMERCE IN THE MIDDLE AGES 45
was so purchased. Interlopers were punished by the same
penalties as thieves. Although each " za " was an exclusive
body, its membership was open to all who might pay the
required fees, which were practically annual dues. The
leading advantages derived from the "za" system were, on
the one side, increased revenues to the Shogunate, and on
the other, the privilege of monopoly and the power of a col-
lective advocacy in any dispute with other traders and with
those of the same trade in other towns. In the Ashikaga
period the number of the "za" was greatly increased, in
order to make them, a more prolific source of revenue. Sub-
sequently the crafts-gild, or artizans' " za," was organized in
different towns. The " za " system of the organization of
industry is in some ways like that of the gild system, of
Mediaeval Europe, but it differs in that it has played no relig-
ious or political role nor has it ever governed a city. Mr.
Fukuda has developed this contrast very ably.^
It was at this time, 1281 A. D., that the great Mongolian
invasion of Japan by Kublai Khan occurred. The success-
ful repulse of the Mongols in what is known as the cam-
paign of the Koan period had an effect on the Japanese people
similar to that which the defeat of the Armada had on the
English. An awakening of the adventurous and sea-faring
spirit followed, and merchants and adventurers scattered to
all parts of the eastern coast of Asia. While some of the
adventurers became renowned in Siam and the Philippines,
others gave themselves up to piracy. The coasts of China,
Korea, Japan, and other archipelagoes were the prey of
these buccaneers. This piratical movement extended widely
the routes of navigation, and this period saw great progress
in the arts of ship-building and navigation.
The civil war of the Crysanthemums devastated Kioto, but
in the early days of the Ashikaga period the Kamakura
^Die Gesellschaftlichi und Wirtschaftlicke F.nhvicklun^ in Japan, pp. 109, no.
^6 P^^T AND PRESENT OF JAPANESE COMMERCE [46
Shogunate removed to it, and Kioto again became the center
of rule as well as the economic center of Japan. Internal
trade was largely developed, all kinds of products from the
provinces were sent into Kioto and Osaka. The system of
bills of exchange was introduced at this time, doubtless
from China/
The sequel of the development of commerce and industry
is the unequal distribution of wealth and the creation of
social classes. In order to prevent the increasing difference
between the poor and the rich, an extreme form of govern-
ment interference was often resorted to, under the guise of
" benevolent administration." ' By this existing debts
among private individuals were canceled. The origin of this
** benevolent administration " is said to have been the exemp-
tion from taxes made by the government in order to lighten
the burdens of the poor. In the later days of the Ashikaga
rule, not only were the taxes heavily increased, but the
government floated a public loan and repudiated it by
" benevolent administration."
Corruption, effeminacy and luxury were the characteristics
of the Ashikaga period, but it was, nevertheless, the most
prosperous age of arts and letters, and some of the arts were
brought to such a state of perfection that they have been
surpassed at no time since then.
Yoshimitsu was a free trader, without perhaps compre-
hending the significance of his policy. He believed that
free exchange of com.modities is a source of national wealth.
The need of large revenues to maintain his extravagant life
caused him to make foreign trade the prerogative of the
government. Diplomatic intercourse and trading were not
separated, and embassies and priests sent abroad on govern-
\
^ Yokoi, The History of Japanese Commerce, vol. i, p. 79.
'Takekoshii The History of 2^00 }Va/-j, p. 471.
^y-j COMMENCE IN THE MIDDLE AGES 47
ment vessels were allowed to engage in commerce. His
strong desire to develop the Chinese trade caused Yoshimitsu
to call himself a dependent of the Emperor of China. South-
ern China was frequented by Japanese vessels, Ningpo being
the center of trade at that time. The principal exports were
copper, sulphur, fans, screens and swords. Chinese coin
was the chief import. In 1448, a commercial treaty^ was
negotiated with Korea by the terms of which Japan might
send fifty ships annually and export 20,000 koku of rice and
beans from Korea. It was in this Ashikaga period that
Japan first became known to western Europe through Marco
Polo, and that the first European arrived on the shores of
Japan.
III. Growth of Cities and Industry.
From 1478 to 1600, is known as the Dark Ages, or War
Period, in Japanese history. It was the most individualistic
and progressive age in the history of the country. Hereto-
fore compulsory military service was required of each clan
or military class whose unifying bond was blood-relationship
or the more artificial relations of mutual recognition. The
members of these clans were the land owners and constituted
the army of provincial nobles. In theory the classes of sol-
diers and farmers were separate, but they were both produc-
ive classes, since soldiery was not yet a profession and the un-
productive luxury of a standing army had not yet appeared.
The bond of service, however, was so changed that individ-
ual discipline and duty, and not clan affiliation, was the basis
of military service. The farmer laid down his " kuwa" and
took up arms when called. He was free to pledge his fealty
to whatever cause or provincial noble gave promise of suc-
cess, in such a way as most to benefit him and to better his
■^ ' Yokoi, The Hiitory of Japanese Ccmmerce, vol. i, p. 123.
48 PAST AND PRESENT OF JAPANESE COMMERCE [48
condition. Any one capable of bearing arms was welcomed
by. the provincial nobles, and each man was advanced to
positions of trust and power according to his merit. Com-
petition, in the widest sense of the term, miodified the social
structure, which had been built upon kinship, ranks and
caste. The two most famous warriors of the age, Hideyoshi
and lyeyasu, started from humble origin and attained the
rank of Shogun by sheer force of merit and ability. It was
a period of almost incessant fighting and devastation, but, as
in western Europe, cities and industry grew up during the
war period. The provincial nobles — veritable feudal lords
— had need to protect themselves against unexpected attacks
by rival chiefs, and they erected strong castles where their
soldiers might always be assembled in case of emergency.
Thus the soldiers became professional fighters and formed
the standing army of the nobles. xA-bout the castles farmers,
artisans and merchants settled, both to supply the needs of
the soldiers and to enjoy protection for their own lives and
property. In this way the cities sprang up. Unlike the
cities of feudal Europe, they had no walls but such as the
flesh and blood of the citizens might constitute. The castles
were built in what were considered strategic points from a
military view, and mountainous and partly inaccessible
places were often chosen. This peculiarity is noticeable in
the old Japanese cities even to this time.
Each province considered the contiguous ones as ene-
mies, and strangers were apt to meet with marked suspicion
rather than with hospitality. Tolls and all kinds of restric-
tions were enforced in order to discourage migration from
province to province. Each province had its own standards
of money, weights, and measures. This self-sufficing policy
was an inevitable concomitant of the war spirit. In order
to provide for the great expenditures which were made
necessary 'by their large standing armies, the nobles en-
49] COMMERCE IN THE MIDDLE AGES '49
couraged agriculture and all kinds of industries in their ■
provinces, and the productive labor forces were easily led -j j
to establish themselves in the cities about the castles. 1!
Many of the nobles, who were actually governing independ- 'I
ent princedoms, and especially those in the southwest, en- ■;
gaged in the Chinese-Korean trade, and the importation of ii
foreign money provided for their war expenditures. A new
development of ship-building and navigation may be traced
to this period. The ships built at this time were much
larger than the ships of Columbus and their sailing qualities
were about equal to those of the Dutch and Portuguese
galleons.^ Meanwhile mining was developed in the north-
ern provinces, and the mines of Sado, Kaga, and Koshiu
came to be well-known. Judging from the quantity of
precious metals exported from Japan by the Europeans in
subsequent years,'' the production of gold and silver during
this era must have been much more than is commonly
estimated.
Hideyoshi brought about once again the unification of the
country. It was his policy to break down provincialism
and to create a universal social organization. The taxation
of land, the monetary system, measures and weights, were
made to conform to the same standards throughout the
land. The abundance of precious metals and the prosper-
ous condition of the country in the later days of Hideyoshi,
prompted him to send out an expedition against Korea and
China. This expedition set out in 1592. In some respects
it may be compared to the Crusades of the Middle Ages.3
A vast army of Japanese marched through the home of an
' Griffis, The Mikadoes Empire^ p. 246,
' The Portuguese are said to have exported 59^2 millions sterhng of preciouit
metals, chiefly gold, from 1550 to 1639. (See next chapter.)
' Fukuda, Die Geselhchaftlicht ttttd Wirtksehaftliche Entv.ickelung in ya^au,
p. 114.
\'\
^O' PAST AND PRESEiXT OF JAPANESE COMMERCE [50
ancient civilization and came in direct contact with the
Koreans and Chinese. No permanent foothold on the con-
tinent was obtained, and the only material result was the
enormous loss of money and of men. But what the Japanese
soldiers had seen on the continent and the influence makinj^
for refinement and culture which they brought back with
them, were no small factors in producing the industrial
growth of the country in the Tokugawa regime. With the
death of Hideyoshi in 1598 and the battle of Sekigahara in
1600, lyeyasu brought the whole country under his rule and
domination. At this point begins the Tokugawa period.
CHAPTER III
The Beginning of European Trade
COMMERCIAL RELATIONS WITH THE WESTERN WORLD, 1541 TO 1 868 A. D.
I. Economic Condition of Europe from the i6th to the i8th
Century
(a) Mercantilism — Its Developtnent and Theory.
During the sixteenth century, the growth of commerce
and the development of the money economy in the western
part of Europe were the principal economic factors in the
dissolution of the manorial system, which had become part
and parcel of the customs and traditions of centuries. The
local self-sufTiciency gave way before the activities of com-
merce, which relieved a community of its surplus and supplied
its needs from the abundance of others. The displacement
of the old feudal economy founded on exchanges in kind by
the new money economy led to the introduction of the wage
system, industrial capital, and the relation of contract be-
tween employer and employed. Social growth implies
changes. The sweeping away of Mediaeval ism was the
change from independent, local institutions to the central-
ized, national ones. The rise of states in the sixteenth
century was the opportunity of absolutism, and each king
sought to concentrate his military and monetary forces. It
was an age of materialism and struggle for money. In all
ages national power and national w^ealth are intimately re-
lated. In order to promote national power, the endeavor to
increase wealth becam.e a sort of national passion. As the
state became more concentrated politically, its added strength
50 51
^2 FAST AND PRESENT OF JAPANESE COMMERCE [c2
and prestige were used more directly for commercial ends.
The creation of commercial and industrial strength was
aimed at and rought by such exercise of sovereign authority
as v/as deemed expedient. National jealousies and rivalries,
as well a:> internal conditions, were the occasion of innumer-
able encouragements, restrictions, and restraints.
The discovery of the New World and the opening of the
eastern trade brought much new treasure, especially silver,
into Europe, and the scope of the m.one}' economy was cor-
respondingly broadened. Money became the one object of
desire and was counted the one essential item of wealth. As
a corollary of this conception, the idea became general that
the more money there was in a state the more prosperous
must that state be. Possessed with this idea, the nations
vied with each other and with their own greed in the ac-
cumulation of treasure. Foreign commerce was the ideal
means of accomplishing this desire, and national industries
were encouraged in order that the products might be ex-
ported and the precious metals brought in.
It was also generally held that one nation's gain neces-
sarily implied a corresponding loss on the part of another.
That a free interchange of commodities could be of mutual
profit and advantage seemed to have no place in their
economic conceptions. There was no code of international
law of anything like common acceptation. In the absence
of this, commercial rivalries led to strained relations between
the nations. The political schemes and intrigues of the
time were almost always based on some real or imagined
advantage in commercial relations which one nation pos-
sessed over another. When the nations were exhausted by
excess of actual war, and peace was declared, embargoes,
tariffs, restrictions and reprisals of every sort were resorted
to as scarcely less effectual means than war of crippling the
enemy. It was the age of "qui terre a, guerre a'* And
r
*d
cj] THE BEGINNING OF EUROPEAN TRADE 53
the same sort of legislation was enacted for the strengthen-
ing of national resources and strength. Colbert's tariffs and
Cromwell's Navigation Acts were of this character. Thus it
came about that the whole period was characterized by the
growth and unification of national sentiment, the centraliza-
tion of political sovereignty and economic prestige, and the
national manipulation of industry and commerce to the end
of large and ever larger importations of money. Gustav
Schmoller, in his comprehensive review of the Mercantile
System, has stated this situation in detail.
In such an age of politico-economic struggle the life of
each nation depended, both for defense and for timely
offense, on its organized efificiency. The economic suprem-
acy of the United Netherlands was possible only because the
Republic pursued a vigorous commercial policy under cen-
tral guidance and control. As localism and provincialism
became more conspicuous, after 1700, the decline of the
Republic was hastened by so much as these principles were
of predominant influence.
The combined efiect of the Thirty Years' War and the
Reformation movement was the division of Germany into
small princedoms and independent states. The unification
of the empire was greatly retarded, and Germany, " the
mouths of whose great streams passed into foreign hands,"
was put nearly two centuries behind France and England in
the economic competition because she was not concentrated
as were they.
The movement toward a pronounced nationaUsm was the
social product of the times which has come to be known as
'* mercantilism." In England it started long before the con-
troversy on the Balance of Trade and the Bullion Policy of
the East India Company, even in the time of Richard IL
Schmoller gives this summary of the system : ' " The
■" * The Mercantile System^ p. 51.
54 PAST AND PRESENT OF JAPANESE COMMERCE [54
essence of the system lies not in some doctrine of money, or
of the balance of trade; not in tariff* barriers, protection
duties, or in navigation laws; but in something far greater,
namely, in the total transformation of society and its organi-
zation, as well as of the state and of its institutions, in the
replacing of a local and territorial economic policy by that
of the national state,"
Ingram points out that this movement was not the con-
scious product of scientific thought or of deliberate purpose
and plan on the part of states and statesmen, but was wrought
out by the force of circumstances and conditions,' Thus it
happens that in different nations mercantilism assumed dif-
ferent forms and was known by different names, but the
essential and vital principle was the same. In France it was
known as the Restrictive System, or " Colbertism," while in
other countries it was called the Industrial System and the
Balance of Trade. But nowhere was economics distinguished
from, politics. It Vvas considered rather a sub-division of the
science of statesmanship.
From the standpoint of economics, the mercantilists held
four erroneous ideas concerning money. No distinction
was made between private and public wealth ; money was
thought to be, if not the sole, at least the most important
form of wealth ; money, by its very presence, indicated
prosperity, and hence, the more money the more prosper-
ity ; and its hoarding as treasure for use in offense and de-
fense was held to be a necessity. There can be no question
that they held exalted ideas of money, but they are wrong
who condem the mercantilists on the ground that they iden-
tified money and wealth. They recognized the conventional
character of money; they considered it an index of prosper-
ity ; but they did not fail to recognize that commerce and
industry, not the making of currency, was the sure means of
* History 0/ Economics, p. -^g. |
. i
55] THE BEGJNMNG OF EUROPEAN TRADE 55
increasing the wealth and power of the nation. They aimed
at national self-sufficiency — that is, that the nation should
produce, so far as possible, everything needed for its own
consumiDlion and the surplus exported. By this means the
money of a nation would be all kept at home and the nation
be correspondingly prosperous. Consequently the export
of bullion, staple goods and raw material was prohibited
along with the importation of manufactured articles. On
the other hand, the importation of raw material was free and
the exportation of manufactured goods was encouraged by
bounties. It must be borne in m.ind that restrictive duties
were not in themselves an essential condition of mercantilism,
but depended rather on the relation of industiy and trade
to the economic condition of the country.
To encourage manufactures, shipping and foreign com-
merce by state interference resembles the program of social-
ism in some respects, but it differs wholly in ultimate ends.
The one aims to secure national self-sufficiency, the other
seeks to improve the condition of wage-earners.
Judged by the standard of m.odern economic theory and
practice, mercantilism, is seriously defective, but in its day
it was an advance from past conditions and was productive
of important results. List calls it the " industrial system,"
and discusses its merits in comparison with later systems.
He says of it : ' " It assumes the importance of manufactures
and their influence on the agriculture, commerce, and navi-
gation of a country, and frankly acknowledges their import-
ance. It aims, in general, at the best mode of establishing
industry in a nation properly situated for that purpose. It
takes the idea of a nation as its starting-point, and, treating
nations as units, keeps the attention fixed constantly upon
national interests."
* List, National Economy, p. 414.
56 PAST AND PRESENT OF JAPANESE COMMERCE [0
(b) Rival Commercial Empires in the East.
The extension of the money economy and the disruption
of the gild system led to the appearance of the capitalist
class. At the same time, and largel}' for the same reasons,
came the rise of competition and competitive prices in place (
of former monopoly and fixed prices. Capital had long been I
in existence as a product of accumulation, but it had not
until now been used on a large scale as an instrument for
exploiting commerce and industry in the production of
wealth. According to Karl Marx, industrial capital origi-
nated in the sixteenth century. Lassalle ascribes the over-
throw of Medisevahsm to the growth of capital through trade,
and attributes the enormous increase of capital to the dis-
covery of the New World and the opening of the trade routes
to the East.
The struggles for economic supremacy were by no means
confined to Europe, but were carried on in distant lands
under the system of chartered joint stock companies. The
, States stood behind the companies, and the principle of mer-
cantiUsm was extended to the commercial rivalry in the Far
East.
The famous voyage of Vasco de Gama was soon followed
by that of Pedro Alvarez Cabral, who established trading
posts at Cochin and at Caunamore on the Indian Ocean in
1 501. Ten years later, Malacca,' the seat of all the com-
merce of the Spice Islands, was captured by the Portuguese.
China was reached in 1517.'' The Portuguese thus began to
monopolize the trade bordering the Indian Ocean. They
established commercial and military stations along both the
Atlantic and the Indian coasts. They had undisputed com-
mercial supremacy. The decline of this commercial empire
dates from 1580, when the crowns of the Iberian peninsula
were united In the person of Philip II. The trading posts
^ Morris, History of Colonization, p. 2 1 1. ' Ibid.
.;*
57] THE BEG!N:\ING OF EUROPEAN TRADE cj
of the East and the vessels of the Portuguese were exposed
to the attacks of the hostile powers and enemies of Spain.
Political corruption contributed to the exhaustion of national
energy. In order to keep the monopolv of the Oriental
trade in the markets of Europe, the Portuguese undertook
to maintain political authority over the entire area from Gib-
raltar to the Far East. Such an enterprise was too great for
a nation whose population is estimated at 3,000,000.^
In 1640 Portugal became once more independent, and its
colonial aspirations were directed this time to the west
instead of to the east.
The colonial policy of Spain differed materially from that
of the Portuguese. While Portugal was extending her com-
mercial interests to the East and among people of old
civilizations and established customs, Spain was establishing
her sovereignty by means of colonies among the barbarians
of South and Central America.' The Spaniards met less
resistance generally from the semi-civilized people than
Portuguese did in the Ear East. But the Spaniards were
neither a commercial people nor good colonizers. Their
object was to exploit the mineral deposits of the colonies by
native laborers. For this reason Spain's colonial policy
exhibited the most extreme form of the restrictive system-.
Her ceaseless political embroilments made her the prey of
hostile powers, and she granted private rights of trade to
none, but reserved to herself the monopoly of all trade
privileges, conducted the enterprises for the profit of the
Crown, and made her colonial policies a creature of state
monopoly.'
Vast amounts of the precious metals, principally silver
from Mexico and Peru, were brought into Spain. The
abundance of treasure led the Spaniards to look upon
» Cunniugbam, Western Civilization, vn!. ii, p. 189. * Hid., p. 190.
'. ' Morris, History of Colonization^ vol. i, p. 261 .
58 PAST AND PRESENT OF JAPANESE COMMERCE [ 58
industry as low and base, an occupation tending only to
debasement. But the costly wars of Charles V. and tlie
luxurious extravagance of Philip 11. made it impossible to
keep these deposits of treasure at home despite the bullion
policy of the government. F"e\v industries had been estab-
lished, and the metal treasures of Spain gradually found their
way to Genoa, Amsterdam, and other commercial and indus-
trial centers.
Dutch commerce commended itself from the first by the
excellence of the wares of native manufacture. Their
woolen industry was especially prosperous. The Dutch
imported corn from Poland, Russia, and Prussia for their
own consumption and for the trade which they supplied
along the Mediterranean Sea. Their trading extended to
America, to the East Indies and to the Far East. The com-
mercial policy of the Dutch government was peculiar at
that time. They attempted the subjugation of no part of
the Far East, but they succeeded in breaking up the mono-
poly enjoyed by the Portuguese and Spanish traders, and
drove them out from one place after another. The Dutch
East India Company, which played so great a role in the
eastern trade, was formally organized and chartered on the
twenty-ninth of March in 1602. Its capital stock was fivd
million dollars, divided into 2153 shares.^
The prosperity of the Dutch traders was due to the fact
that they directed their efforts solely to securing profitable
trade. They were indifferent to the acquisition of territory
and to the political and religious affairs of the natives of the
countries with which they traded. They were welcomed by
the natives and met with no difificulty in establishing trading-
posts in the East. By this purely economic policy thc
Dutch gained one point, but lost another. They enjoyed,
unexcelled prosperity in the Oriental trade, but gradually
* Morris, History of Colonization, vol. i, p. 334.
rp] THE BEGINXING OF EUROPEAN TRADE 59
fell before the energetic and centralized rivalry of France
I and of England. The Dutch traders were not free from the
economic fallacies of the time. They began their com-
mercial enterprises with the most liberal economic policy
and doctrine of the age, but gradually assumed the heritage
of monopoly which they had wrested from the Portuguese
and Spaniards. They undertook to limit the suppl}' of Ori-
ental goods by destroying the surplus and thus assuring to
themselves control of the European markets. The rise of
jealous rivals tempted them to increase their restrictive
measures, which tended only to hasten the decline of their
commercial power and pre-eminence.
II. The First European Trade
(a) The Portuguese and the Spaniards : The Holla-nders
and the English.
Japan was first known to the Europeans through the
Venetian traveler, Marco Polo, who wrote in the thirteenth
century of his travels in the East. He called the country
" Zepang," the land of gold and of silver. It was nearly
three centuries later that direct and regular commercial
intercourse between v;estern Europe and the leading coun-
tries of the East was established by the persistent enterprise
of the Portuguese seamen and traders. The discoveries of
Vasco de Gama were followed up by extensive explorations
by the Portuguese, As early as 15 10 they obtained a foot-
hold at Goa, some three hundred miles north of Calcutta.
The following year they established a trade-station at
Malacca, where the trade of the Spice Islands and of all the
East was concentrated. In 15 17 they pushed on into Siam
and southern China and made trade settlements at Macao
and at Ningpo. In 1541, while plying on a Chinese junk
between Dodra, Siam, and a Chinese port, certain Portuguese
traders were driven by a storm and reached the shore of Ka-
6o PA^T A^D PRESENT OF JAPANESE COMMERCE [6o
goshima, Japan. The names of these traders were Antony de
Moto, Francis Zimoro, and Antonio Perota.' Two years later,
September 23, 1543, another Portuguese adventurer, Fernao
Mendez Pinto, and his Chinese comrades, while sailing along
the China Sea vvere driven by a Monsoon storm to Tanega-
shima, Japan. It was this Pinto who introduced tire-arms
and the manufacture of gunpowder into Japan. It is narrated
that one thousand Rio of silver was given for a fire-arm and
that Pinto's comrades cleared more than twelve hundred per
cent, on their cargo. Although Pinto is generally known as
the first European who reached Japan, the honor or prestige
unquestionably belongs to the three above-named. Moto,
Zimoro, and Perota returned to Siam, and Pinto and his
comrades returned to Ningpo whence they came. These
Portuguese doubtless told their fellow-countrymen what
they had seen in Japan, with possibly some exaggeration.
At any rate much interest was aroused and the attention of
the Portuguese settlers in Siam and Ningpo directed to
Japan. As an immediate result, nine vessels were at once
fitted out for the Japanese trade. This fleet was followed
by others and the new trade proved lucrative and increased
accordingly. The Portuguese had but few products and
manufactured articles of their own, but they brought from
China and India brocades, silk textiles, drugs, and sugar.
They also introduced into the country sheep, goats,' pota-
toes and tobacco.^ The chief items of Japanese export
were gold and silver.
This was at the time of the war period of Japanese history,
and the provincial nobles needed the fire-arms v/hich were
' Nachod, Die Betiekungen der NisderlandiicheK Ostindischen Kompagnie
zu Japan, p. 30.
' Hildbrerb, Japan and th: Japanese, p. 67.
*Satow's account of the introduction of the weed in Transactions of the Asiatic
Society of Japan, vol. vi, p. 68.
' ^f*^'^> ?■ V:?**. •;
5i] THE BEGINNING OF EUROPEAN TRADE 6 1
being imported. These rivals, jealous of each other's pros-
perity, were most willing to open their ports to foreign trade
and to welcome, the Portuguese traders. There has never
been freer trade and foreign commerce in Japan than at this
time. Foreigners were permitted to travel at will through
the country and to enter any port along the coast of Japan.
The missionary followed the trader.
Portuguese merchants in those days were accompanied
wherever they went by friars and Jesuits. The zeal and
devotion of the Jesuit missionaries in the propagation of
their faith were met in this instance by a remarkable, if
ephemeral, success. Francis Xavier reached Japan in 1549.
He and his successors " reaped within twenty years a harvest
of three hundred thousand souls in the highest and the low-
est walks of life." ^ Among the converts were several princes
and a number of feudal chiefs.
On February 20, 1582, ambassadors were sent to bear
their submission to the Holy See and to kiss the feet of the
Pope. They were sent by the provincial nobles of Bungo,
Arima and Omura, on board a Portuguese ship.''
In the propagation of the new faith the Jesuit missionaries
employed the spirit and methods of the Inquisition. They
violently attacked the Buddhists, insulting their gods, and in-
citing them to destroy the idols and temples. They did not
confine their activity and influence to matters of religion, but
seemed to be animated with political purposes. Commercial
motives and religious principles were combined and the
traders and Jesuits, working together for their mutual advan-
tage, played the one against the other so as to compel the
reception of the faith as a condition of the benefits of trade.
The priests persuaded the merchants to establish their head-
* Nitobe, Intercourse between the United States and yaf>an, p. 10.
'Suganuma, The Comtnercial History of Japun, p, 322. A copy of the
crigiual letter from the feudal chief of Bungo to the Pope.
62 JP^^'iT AND PRESEA'T OF JAPANESE COMMERCE [62
quarters where the provincial nobles were converted and
where Roman Catholic domination might be obtained. The
provincial noble of Kagoshima was indifferent to the new
faith and not at all disposed to yield to the dictation of the
Roman Catholic representatives. As a result, the trade
station was at once removed from Kagoshima to Hirato.
The latter port was opened in 1550 and became the center
of Portuguese trade. When the Jesuit missionaries ascer-
tained that the provincial noble of Hirato was not a ready or
willing convert to the faith, they entered into a negotiation
with the noble of Omura, and three other ports, Yokose,
Fukuda and Nagasaki, were opened in order to ruin the
prosperity of Hirato. The three ports were not over forty
miles from Hirato. The demands made on the noble of
Omura by the Jesuit missionaries was as follows :
" (i) Protection for the Roman Catholic Church and mis-
sionaries. Four miles square of the settlement to be opened
and all taxes to be exempted therein, and those who are not
Christians not to be allowed to live in the settlement without
the permission of the Catholic priest."
" (2) The Portuguese residing in the settlement to be
exempt from all kinds of taxation, and those who trade with
the Portuguese to be exempted from duties for ten years." *
The Roman Catholic influence soon controlled the port of
Nagasaki and it appeared to be a part of the papal dominion.
The Jesuits conducted themselves arrogantly, and when their
ambitious designs became known, the native converts showed
their impetuous character. And added to this aggravation,
were the political claims of the Pope. "The novel doctrine
that there was a King of kings to whom, all allegiance was
primarily due, and that the vicar of this King did actually
reign in Rome, would have been enough to rouse the jealous
susceptibilities of any ruler." '
^Suganuiia, The Cammercial History 0/ yaj>an, ^. y>^.
^Nitohc, Intercourse betzveen the U. S. and yapan, p. 11.
^3] "^i^E. BEGTNXnyG Of EUROPEAN TRADE 63
Hidt;yoshi, having restored the unity and order of the
country, saw the threatening character of the new religion.
Although not anti-Christian himself, he determined to drive
the Jesuits out of the land. The following letter from Hide-
yoshi to Dom Edward de Menessez, the Portuguese Viceroy
of Goa, distinctly affirms his policy, namely, to separate
commerce from religion ; to encourage the former, to reject
the latter. The letter was dated July 25, 1592, and is of
historic importance both to Japan and to the western world.
It is as follows : ^
" As to what regards religion, Japan is the realm of the
Kami, that is, of Shin, the beginning of all things ; and the
good order of the government depends upon the exact
observance of the laws of which the Kami are the authors.
They cannot be departed from without overturning the sub-
ordination which ought to exist of subjects to their sover-
eign, of wives to their husbands, of children to their parents,
vassals to their lords, servants to their masters. These laws
are necessary to maintain good order within and tranquillity
without." " The fathers, called the Company, have come to
these islands to teach another religion ; but as that of the
Kami is too deeply rooted to be eradicated, the new law
can only serve to introduce into Japan a diversity of worship
very prejudicial to the state. It is on that account that, by
an Imperial edict, I have forbidden these strange doctors to
continue to preach their doctrine. I have even ordered
them to leave Japan, and I am determined not to allow any-
body to come thither to retail new opinions. But I still
desire that commerce, as between you and m.e, may continue
on its old footing. I shall keep the way open to you both
by sea and land, by freeing the one from pirates and the
* Suganuma, The Commercial History of yapan, pp. 329-330. The original
letter is copied here. A translation is found in Hildbreth, Japan and the
Japanese, p. no.
64 FAST AND PRESENT OF JAPANESE COMMERCE [64
Other from robbers. The Portuguese may trade with my
subjects in all sincerity, and I shall take care that nobody
harms them."
What Hideyoshi did was for the safety of the national exist-
ence. He was not so blind as to confuse religious prejudices
with commercial interests. He desired to make a commer-
cial Japan, but he could not tolerate political interference
under the guise of religious propagandism. The sad work
of religious persecution, for the first time in Japanese history,
began in 1587, just 45 years after the arrival of the Portu-
guese in Japan.
Notwithstanding the fact that the crowns of Spain and
Portugal had been united in Philip W. a fierce jealousy and
hatred continued to exist between the two nations. This
feeling was exaggerated in the trading posts of the East,
The Spanish traders at Manila looked with envy at the
Portuguese monopoly of the Japanese trade, and seized
every opportunity of opening up trade with Japan. In 1548,
twenty years after their discovery of the Philippine Islands^
the first Spanish vessel came to Yatsuya in the province of
Bungo. In 1564, for the second time, a Spanish ship came
to Japan, landing at Goshima in the province of Hizen. In
1567 another Spanish ship came, this time to Amakusa, in
the province of Higo, and after an interval of thirteen years
another came to the port of Hirato. These ships were
plying between Acapulco, New Spain (Mexico), and
Manila, P. I., and touched en route at the southern ports of
Japan. Through the means thus opened, the Friars,
Dominicans and Franciscans, poured into Japan from
Manila. As the different orders of the Catholic mission-
aries increased they began to encroach on each other's
territories, or parishes. This gave the start for quarrels,
incidental squabbles and mutual vituperation and vilifica-
tion. ' A brief of Pope Gregory XITL, in 1585, forbade under
-%■
(3r-j THE BEGINNING OF EUROPEAN TRADE gr
pain of the greater excommunication, any but Jesuits to
proceed to Japan with the view of exercising any ecclesiasti-
cal function there/ But as there was no authority to enforce
it, this Bull only served to arose and excite the Dominicans
and Franciscans, and they at once began to denounce the
Portuguese Jesuits to the Shoguns. Thus the commercial
and ecclesiastical quarrels between the Portuguese and
Spaniards and the immediate disturbances were the chief
causes of the utter destruction of the intercourse of Japan
with Europe. The religious phases of the matter are of no
concern here. The European trade of Japan was open to
Portugal and Spain, but the latter enjoyed only a small part
of it. The relations between Spain and Japan were rather
religious than commercial. The foreign commerce of Japan
continued to be practically a monopoly of the Portuguese
until the arrival of the Dutch traders.
The five Dutch vessels'' which formed the East India fleet
sailing by way of the Straits of Magellan were wrecked in
1599 on the coasts of Chile. One of the fleet, the Chanty,
steered for Japan, and on April 12, 1600, arrived at one of
the ports in the province of Bungo. This was the first
arrival of the Hollanders in Japan, and the first step in
breaking the monopoly which the Portuguese had had of the
Japanese trade. The pilot of the Dutch vessel was an Eng-
lishman named William Adams.
At that time lyeyasu was centralizing the government and
bringing it under his sway. It was his fixed policy to foster
commerce and trade in every way. In an interview with
lyeyasu, Adams narr.ited how the Dutch were a commercial
people, desiring friendship in the way of trade, and that they
had in their country all kinds of commodities which might
' Hildbreth, Japan and the yapanese, p. 117.
* Nachod, Die Beziehungen der Niederlandichen Usiindischtn Kompagnit »m
y apart, p. 94.
66 P^^r AND PRESENT OF JAPANESE COMMERCE ^^(^
be exchanged with the Japanese to their mutual advantage.
Adams was treated with the greatest kindness, and was pre-
vailed upon to remain in the country by lyeyasu, who
undertook to make him contented by giving him " a living
like un.to a lordship in England, with eighty or ninety hus-
bandmen as his servants and slaves." '
The news conveyed to Amsterdam by the crew of the
Charity aroused much interest there among the Dutch mer-
chants. In 1607 the East India Company fitted out a fleet
of thirteen ships known as the Verhaeven fleet, and these left
Amsterdam on Dec. 12. But two of the ships made the
entire voyage, and they, the Red Lion and the Griffon,
reached Hirato in July, 1609. Through the good offices of
William Adams they obtained the most favorable terms for
trading, and they established a trade centre at Hirato.
Shortly after, lyeyasu sent the following letter to the King
of Holland :
"And further, whereas the Hollanders, your Majesty's
subjects, desire to trade with their shipping in my country
and to traffic with my subjects, and desire to have their
abiding near unto my court, whereby in person I might help
and assist them, which cannot be as now because of the in-
convenience of the country ; yet, notwithstanding, I will not
neglect to be careful of them, as I already have been, and to
give in charge to all my governors and subjects, that in
what places and havens, in what ports soever they shall
arrive, they shall show them all favor and friendship to their
persons, ships and merchandise ; wherein your Majesty or
your subjects need not to doubt or fear aught to the con-
trary. For they may come as freely as if they came into
your Majesty's own havens or countries, and so may remain
in my country to trade. And the friendship begun between
* Hildbretb, Japan and thi Jafanese, p. 139.
% .
57] THE BEGINNING OF EUROPEAN TRADE 67
me and my subjects with you shall never be impaired on my
behalf, but augmented and increased."
"Whereof this shall serve for a testimony; that they in
all countries, places and islands under mine obedience, may
trade and traffic and build houses serviceable and needful for
their trade and merchandises, where they may trade without
any hindrance at their pleasure, as well in time to come as
at the present, so that no man shall do them any wrong.
And I will maintain and defend them as my own subjects." ^
This letter was sent in July, 1610.
Immediately upon the return of the Red Lion to Holland,
the Dutch East India Company fitted out another fleet for
the Japanese trade. The first to arrive at Hirato was a small
vessel, the Broch, in July of 161 1. Through the good in-
fluence of William Adams the Dutch commissioner, Jacob
Spex, obtained from lyeyasu the letters-patent which reads
as follows :'
" All Dutch ships that come into my Empire of Japan,
whatever place or port they put into, we do hereby expressly
command all and every one of our subjects not to molest
them in any way, nor in any w.iy to be hindrance to them ;
but on the contrary, to show them all manner of help,
favor, and assistance. Every one shall beware to maintain
the friendship in assurance of which we have been pleased
to give our Imperial word to these people ; and every one
shall take care that our commands and promises be in-
violably kept."
On September 28, 161 1, a Dutch ship, the Broch, sailed
for Ho- land, and by it William Adams sent a letter to an
Englishman residing in Java. In his letter Adams gave an
' Suganuma, The Commercial History of Japan, p. 502. English translation
by Hildbreth, Japan and the Japanese, p. 143.
'Suganuma, The Commercial History of Japan, p. 509. Translation by
Kdmpfer, The History of Japan, b. iv., p. 382.
68 PAST AND PRESENT OF JAPANESE COMMERCE [68
-:
exaggerated account of the wealth and profit of the Japanese --
trade. "You shall understand," wrote Adams,"' "that the
Hollanders have here an Indies of money, so that tl:ey need
not to bring silver out of Holland to the East Indies, for in I
Japan there is much gold and silver to serve their turn in --I
other places where need requireth." He enumerated as . ::|
vendible in Japan for ready money, raw silk, damask, black :%
tafitetas, black and red cloth of the best kinds, lead, etc. \
This letter, under date of October 22, 161 1, appears to have ' ^f.
reached England finally. But independently of Adams' j|
letter, the London merchants obtained the nev.s from the if
crew of the Dutch ship, the Red Lion, and they had already "jf
despatched the Glove, on January 5, 161 1, for Japan, and »|
had followed this in April with three more ships, the Clove, ||
the Thomas, and the Hector. The fleet was under the com- H
mand of Capt. John Saris, an old adventurer in the East,
and arrived at Hirato on June 10, 161 3. Capt. Saris pre-
sented a letter and presents from King James I. to lyeyasu, r
and, through the efforts of William Adams, succeeded in
establishing commercial relations between England and
Japan. The letters-patent given to Capt. Saris by lyeyasu, t
which may be regarded as the first commercial treaty be-
tween the two countries, were as follows : -
»"(l) Imprimis. We give free license to the subjects of
the King of Great Britain, namely, Sir Thomas Smith, gov-
ernor, and the company of East India merchants and adven-
turers, forever, safely to come into any of the ports of our
Empire of Japan, with their ships and merchandizes, without
any hindrance to them or their goods, and to abide, buy,
sell, and barter, according to their own manner, with all
^Hildbreth, Japan and the Japanese, p. 160
'Suganuma, The Commercial I/istary 0/ Japan, p. 518. For English transla-
tion see Hildbreth, Japan and ike Japanese, p. 169.
M
6Q-J THE BEGINNING OF EUROPEAN TRADE 69
nations ; to tarry here as long as they think good, and to
depart at their pleasure."
"(2) Item, We grant unto them freedom of custom for
all such merchandizes as they now have brought hither or
hereafter they shall bring unto our kingdom, or from hence
shall transport to any foreign port ; and do authorise those
ships that hereafter shall arrive and come from England, to
proceed to present sale of their commodities, without further
coming or sending up to our court."
"(3) Item. If any of their ships shall happen to be in
danger of shipwreck, wc will our subjects not only to assist
them, but that such part of ship and goods as shall be saved
be returned to their captain or Cspe-merchant, or their
assigns; and that they shall or may build one house or
more for themselv^es in any part of our Empire where they
shall think fittest, and at their departure to make sale
thereof at their pleasure."
"(4) Item. If any of the English merchants or other,
shall depart this life within our dominions, the goods of the
deceased shall remain at the disposal of the Cape-merchant,
and all offences committed by them shall be punished by
the said Cape-merchant according to his discretion : our
laws to take no hold of their person or goods."
" (5) Item. We will ye, our subjects, trading with them
for any of their commodities, pay them for the same accord-
ing to agreement, without delay, or return of their wares
again unto them "
" (6) Item. For such commodities as they have now
brought, or shall hereafter bring, fitting for our service and
proper use, we will that no arrest be made thereof, but that
the price be made with the Cape-merchant, according as
they may sell to others, and present payment upon the de-
livery of the goods."
" (7) Item. If, in discovery of other countries for trade,
70 ^^57" AND PRESENT OF JAPANESE COMMERCE [70
and return of their ships, they should need men or victuals,
we will that ye, our subjects, furnish them for their money
as their need shall require."
" (8) Item. And that without further passport they shall
and may set out upon the discovery of Yezo or any other
port in and about our Empire." '
Capt. Saris, having replaced with fifteen Japanese sailors
those of his crew who had died or deserted, left Hirato,
December 5, 161 3, and arrived at Plymouth, September 27,
16 1 4. These Japanese sailors must have been the first
Japanese who landed in England. j|
The English had an auspicious beginning and seemed to »l
have every opportunity before them. While the Portuguese jj
tried to keep away the incoming heretics, the Dutch and the \\
English, there was a keen rivalry between the Dutch and Eng- \
lish themselves. In 1616, two English vessels came to Hirato %
and found great difficulty in trading because of the competi- ^1
tion of the Dutch. Inasmuch as King James I. was a Roman it
Catholic, the Dutch made use of that fact as a plausible
basis to libel the English and to class them with the Portu-
guese and Spaniards. In this way the Japanese began to
look upon the English with much suspicion. Meanwhile,
after the death of lyeyasu, in 161 6, the religious intolerance I
and persecution became more violent than before. The
Spaniards were suspected of smuggling missionaries into the
country and were forbidden, consequently, to come to Japan.
By the edict of 1624, all the ports of Japan were closed to
foreign commerce with the exception of Hirato and Nagasaki,
the former being open to the Dutch and English, and the
latter to the Portuguese. All the attempts made by the
English to increase the Japanese trade were unsuccessful.
After expending ;^40,000 in the effort to maintain it, the
English East India Company decided, at the Council of
* Cape-merchant may mean a general commercial manager.
-j-j THE BEGINNING OF EUROPEAN TRADE 71
Batavia, to abandon altogether the trade with Japan/ This
was in 1623.
The Portuguese, accused of having encouraged the Shima-
bara Revolt, in 163 5-1 637, were excluded from the country
by the edict of 1638. This left the Dutch the sole agents of
European trade in Japan.
( b ) The Commercial Policy of lyeyasu.
lyeyasu, having succeeded in attaining the Shogunate
after the country was exhausted by a long period of foreign
and civil wars, made it his fixed policy to encourage trade
and commercial intercourse with foreign countries. He be-
lieved that the best means of establishing peace and of in-
creasing the wealth of the country, was to develop foreign
commerce. He conceived that the free exchange of pro-
ducts and service was a leading source of national wealth,
and that the wider and more extensive the commercial inter-
course, the more prosperous and wealthy would the country
be. As noted in the preceding pages, lyeyasu's letter to
the King of Holland, his letters-patent granted to Jacob
Spex and the crude form of commercial treaty with Eng-
land all bear witness to his breadth of view, his keen
commercial acumen and his intuitive grasp of the funda-
mental truths of free international exchange. History dis-
closes no more conspicuous example of trade perfectly
unrestricted for the stated purpose of the mutual advantage
of the nations concerned. All the doors of Japan were open
to foreign commerce and foreigners were given every privi-
lege enjoyed by the Japanese themselves ; no customs were
exacted and no restrictions contemplated ; the coasting
trade by foreign vessels was granted without question ; the
rights and property of foreigners were protected and so
guaranteed as to allow the privilege of extra-territoriality.
*Nitobe, Intercourse hftzveen the U. S. and yapan, p. 19.
72 PAST AND PRESENT OF JAPANESE COMMERCE [72
While contemporary Europe was flooded with the ideas of
mercantilism, and national policies were giving rise to all
sorts of jealousies, hostilities and restrictions, the avowed
national policy of Japan was based on the principles of
humanity, friendship, freedom and peace. The contrast in
this age between the Occident and the Orient is striking and
suggestive.
At the opening of the larger commercial history of Japan,
it is found that lyeyasu's active policy and persistent efforts
were to maintain intercourse with foreign nations en the (
basis of cosmopolitan interests. The first attempt was to
induce the Spanish vessels plying between Acapulco and
Manila to touch at one of the ports in the neighborhood of
Yedo. By this means it was intended to open a direct com-
mercial route between Japan and Mexico. To this effect,
he sent a letter ' to the Spanish governor of the Philippines,
in October, 1601, referring to the mutual advantages of
trade, and saying that if the Spanish seamen would guide the
Japanese merchant ships to the Mexican trade, he would, in
return, open the ports of Japan to the Spanish vessels ply-
ing between Mexico and the Philippines. The Spanish gov-
ernor replied that the Spanish vessels might touch at such \
ports in Japan as lyeyasu should open, but he left unnoticed
the matter of the Mexican trade. In 1608, lycyasu opened
the port of Uraga, in the province of Sagami, to the Spanish
trade.' The privilege of coast trading was also granted to
the Spanish ships. But efforts were not relaxed to open up
communications with Mexico. In 1610, under the direction
of William Adams, two ships of European model, one of 80
tons and the other of 120 tons, were fitted out. The vessels
were finished in 161 1. About this time, a Spanish ship hap-
pened to be wrecked on the coasts of Japan, and lyeyasu
' Suganuma, The Commercial History vf Japan, p. 374.
' Ibid.^ pp. 38C-3S3. Letters-patent to Spanish vessels.
.i ■
y^l THE BEGIA'jVING OF EUROPEAN TRADE 73
took the opportunity of sending the rescued Spaniards back
to Mexico on board his new vessels, and thus succeeded in
establishing the route between Mexico and Japan, but it is
not known how long the trade so begun continued.
In 16 1 6, a Japanese vessel, having on board a nriission to
the Pope from a feudal chief of Sendai, Japan, sailed across
the Pacific to Mexico. At this time Japanese vessels fre-
quented Java, Manila, Anam, Siam, Malacca, southern China,
Korea, and even India. The activity of the trade between
Japan and Siam is witnessed by the number of Japanese set-
tlers in that country. In Aynthia, the capital of Siam at
that time, and in Potami, the commercial center of the gulf
of Siam, there were Japanese colonies whose population
reached eight thousand. The trade between Japan and the
Philippines lasted for more than fifty years from 1580, and
there were at one time more than three thousand settlers
(Japanese) in the island of Luzon.
Commerce and piracy were closely related in those days,
and especially so on the Japan and China seas. Piracy was
so prevalent that lyeyasu tried in every v/ay to discourage
it while he was trying to establish commercial relations with
foreign nations. Pie adopted the system which Plideyoshi,
iiis predecessor, had instituted, of granting a license which
was called the "Letter with Red Seal" to the merchant
marine engaged in legitimate trade. One hundred and
ninety-eight vessels received this " Letter with Red Seal "
between 1604 and 161 6. The licenses were granted to all
Japanese vessels and to a few foreign ships. ^
lyeyasu negotiated a treaty of peace with Korea through
the feudal chief of Tsushima, and concluded a commercial
treaty in 1609.' He also sent a letter to the viceroy of Fou-
kien, China, in order to open up the southern China trade
' Suganuma, The Conmercial History of Japan, pp. 417 <■/ seq.
• Ibid,, p. 394.
74 PAST AND PRESENT OF JAPANESE COMMERCE [74
to the Japanese. Although this proposal for peace ad-
dressed to the viceroy may seem a very elementary affair
now, it exhibits faithfully the broad features of the policy of
lyeyasu. The proposal for a treaty was as follows:'
"(i) Japanese merchant vessels may come to Chinese
ports to trade.
"(2) The two countries, Japan and China, shall send their
merchant vessels to the Lew Chew Islands, and trade there
on equal terms for mutual advantage. \
"(3) Japan shall send her commercial agent to China each
year in order to look after the commercial interests of both
countries."
lyeyasu planned to bring Chinese traders to the Lew \
Chevy islands, v/hich fell barely within Japanese possession, \
and to develop the wealth of the islands. \
So mindful was lyeyasu of the peace and welfare of the \
country, as well as of establishing commercial relations with |
foreign countries, that he declared every foreigner who obeyed ;
the laws and traded honestly to be very welcome. " Yea, |
even if devils come from hell, they shall be treated like |
angels from heaven " so long as they heartily submitted to t
the laws he established.' I
It will be seen that the policy of lyeyasu was that of the }
" open door " in the literal and widest sense of that term, \
On the other hand, his policy was weak in two points
especially. :
Desiring to avoid all political relations and responsibilities,
he undertook to confine his attention and relations to trade
alone. He did not see that commercial and political rela-
tions are inseparable. As commerce expanded and trade
relations multiplied, political relations would become more
'Suganuma, The Commercial History ofyapan, p. 411.
*Rein, Industries of Japan, p. 522.
^r] THE BEGINNING OF EUROPEAN TRADE 75
intimate and complicated as a necessary consequence.
Economic motives alone controlled lyeyasu in the determina-
tion of his policy, and as with the contemporary Dutch and
the more ancient Phoenicians, commerce was not a means to
an end, but an end in itself.* He advocated a •' peace at
any price " program, seeking only prosperous trade con-
nections with other countries. Even though Japanese mer-
chant ships might be plundered by pirates, and Japanese
settlers in foreign lands driven away or murdered, lyeyasu
did not consider it of sufficient importance to cause him to
risk, by any interference, the hazard of a foreign war. The
spell of Hideyoshi's disastrous expedition to Korea was on
him, and he purposed to av^oid foreign entanglements at
whatever cost. Such a policy of non-resistance to the last
extremity made the decline of Japan's commerce inevitable,
lyeyasu would gladly enjoy the luxury of a prosperous
foreign commerce, but he had no mind to endure the
anxieties and perils of an aggressive foreign policy to sus-
tain it. Yet the one invoh^es and implies the other. The
decline of Dutch commercial supremacy illustrates this fact.
Just so far as the States-General were for " peace at any
price " so far were they opening the way for ultimate com-
mercial defeat.
lyeyasu, admonished by the early extinction of his prede-
cessor's family, sought to augment the power and prestige
of his own house. His policy of internal administration was
shaped to this end. It w-as an ingenious arrangement by
which feudal chiefs were made to offset each other, and
clans were set over against clans. The dynasty founded by
lyeyasu endured for nearly three centuries, so shrewdly and
carefully were his plans devised. He did not scruple to
sacrifice the general good at such times as he deemed the
security and permanence of his Shogunate at stake. When
* Cunningham, Western Civilization, vol. ii, p. 205.
'j^ PAST A.\'D PRESENT OF JAPANESE COMMERCE [76
some of the southern feudal lordj were engaged in foreign
trade and profiting greatly by it, he issued an edict closing
some of the ports. He plainly feared that too great wealth f
in their hands would menace his authority, and that the |
descendants of these trader-chieftains might assert their |
strength to the overthrow of his 'iaaiiiy and its hereditary |
power. His Shogunate continued until the Restoration of \
1868. During this long period his descendants and succes- .;;
sors both misunderstood and misapplied the actual policy of .,
lyeyasu. They overlooked or ignored its elements of |
breadth and strength, while they emphasized its weaker
features and enforced them to the great detriment of Japan. -t
They perpetuated those parts of his policy which sprang
from his determination to put an end to religious and poli-
tical interference. They excluded the main feature of his
policy, "open doors" and full freedom of industrial inter-
course.
(c) Exclusive and Inclusive Policy.
(i.) The Era of Dutch Commerce. (2.) Internal Trade.
From the foregoing narrative it must be evident that the
commercial and social isolation of Japan from the rest of the
world was never in the mind of lyeyasu, but that, on the
contrary, he used every opportunity for opening up inter- \
course with foreign countries. On one occasion, replying j
to the demand of the Spanish representative from the Phil- !
ippines that the Spaniards and Portuguese in Japan should !
be delivered up to be taken to the Philippines, lyeyasu is
said to have answered that his country was a free country and
that nobody should be forced to leave it, but that if the rep-
resentative could persuade any of his countrymen to go,
they should not be prevented.'
* Hildbreth, Japan and the Japanese, p. 171 et seq.
\
-^j THE BEGIN.\'ING OF EUROPEAN TRADE yy
The subsequent change in his policy was due to his fear
of the result of the constant bickering and interference of the
Jesuit and monastic missionaries, whose meddlesome quarrels
were a menace to the national existence. In this respect
his policy diftered in no way from that of Hideyoshi, who
would not tolerate the confusion of religion and commerce.
The most striking feature of lyeyasu's policy was the aim of
mutual advantage as distinguished from the hostile and
mutually destructive policies of the European nations of
that time. It was in fact the exact opposite of the western
idea of mercantilism. The chief cause of the reaction and
the appearance of the exclusive policy was his antagonism
to the political activities of Roman Catholicism. The Dutch
traders told lyeyasu that the Reformation movement in
Europe had brought about the exclusion of the Catholics
from Germany, Holland, and other nations, on the ground
that they were a menace to the safety of the state. William
Adams verified these statements. Thus lyeyasu was led
to the conviction that the Portuguese and Spaniards, to-
gether with their missionaries^ were conspiring against
Japan. In 1613 lyeyasu obtained, through the Dutch,
documentary evidence that such a conspiracy existed among
the Christian converts. The document was captured on
board a Portuguese vessel. Although religious persecution
had begun in the time of Hideyoshi, the policy which lye-
yasu pursued as regards both foreign commerce and internal
administration prevented it from becoming general. But
his grandson, lyemitsu, succeeded to the Shogunate in
1623, and the persecution burst forth with renewed vigor.
The wholesale slaughter rivals in horror ** the fires of Smith-
field or the rack of the Inquisition." It comes to an end
with the revolt of Shimabara in 1637. Christianity was
rooted out, and the Shogunate not only perfected the mildly
exclusive policy of lyeyasu's later days, but broadened it so
\
78 PAST AND PRESENT OF JAPANESE COMMERCE [73
as to make it inclusive also. Stringent orders were promul-
gated in the years 1634 to 1639. All ports except Naga-
saki were closed to foreign commerce; all licenses which
had been granted to numerous vessels were cancelled and
withdrawn. By the famous edict of 1638, not only were
foreigners forbidden to come to Japan, but the native
Japanese were forbidden on pain of death to leave the
country. The edict runs as follows : *
"No Japanese ship or boat whatever, nor any native of
Japan, shall presume to go out of the country; whoso acts
contrary to this shall die, and the ship with the crew and
the goods shall be sequestered till further order. All
Japanese who return from abroad shall be put to death.
Whoever discovers a priest shall have a reward of from 400
to 500 sheets of silver,' and for every Christian in propor-
tion. All persons who propagate the doctrines of the
Catholics, or bear this scandalous name, shall be imprisoned
in the Omura or common jail of the town.
"The whole race of the Portuguese, with their mothers,
nurses, and whatever belongs to them, shall be banished to
Macao.
*• Whoever presumes to bring a letter from abroad or to
return after he has been banished, shall die with all his I
family; also whoever presumes to intercede for him shall \
be put to death. No nobleman nor any soldier shall be ]
suffered to purchase anj'thing from a foreigner." I
The extremest possible measures were resorted to, and j
orders were issued forbidding the construction of vessels
above a certain tonnage — 500 koku, or 2500 bushels, 74.4
tons — and with more than one mast. This legislation aimed
to make long voyages impossible and to prevent the people
1 Suganuma, The Commercial History of Japan, p. 568. See KSmpfer, The
History of Japan, book iv, p. 319.
' A she^t of silver weighs about five ounces.
.(jfd^.o
X^fi''
ry ^'- m>
79] THE BEGINA'ING OF EUROPEAN TRADE jg
from going out of the country.' The only exception was in
favor of the Chinese and the Dutch, who were permitted to
trade at Nagasaki. Through these alone was news of the
outside world brought to Japan. At this point begins a new
period of the Japanese foreign commerce, namely, the
period of Dutch and Chinese commerce, from 1641 to 1854.
( I ) The Era of Dutch Commerce.
The expulsion of the Portuguese was followed three years
later by an edict which confined the Dutch and Chinese re-
sidents to a small island in the bay of Nagasaki. They were
not permitted to leave the island even for purposes of trade.
Despite these restrictions the Chinese trade of that time was
prosperous, for the Manchu dynasty, which came into power
in 1644, was favorable to foreign commerce. At one time,
it is said, two hundred Chinese junks, each with fifty Chinese
on board, arrived at Nagasaki in one year. However, the
restrictions bore too heavily, and Vv^hile Japan's foreign com-
merce experienced many fluctuations, it regularly dwindled
until it came to be almost nothing. A study of the articles of
commerce of the period reveals the fact that raw silk v/as the
chief item of imports. Japan had not been without silk since
the first silk-worms and mulberry trees were brought iii from
China in the sixth century. During the Middle Ages the
silk industry was encouraged and made to flourish, but it
had been greatly neglected during the war period. Among
other imports, all kinds of raw material were included.
Among the exports, gold, silver and copper v/ere by far the
most important. Many products of the dextrous arts were
also exported. For a high development of the arts and let-
ters was attained during the Ashikaga period, and although
there was a marked decline during the war period, there was
great progress again with the rise and growth of cities under
■- * Nitobe, Intercourse between the U. S. and Japan, p. 14.
80 PAST AND PRESENT OF JAPANESE COMMERCE [go
the Tokugavva regime. Kampfer gives the following list of
imports and exports as handled by the Dutch commerce.
The Chinese trade was much the same throughout. Imports
to Japan :'
" Raw silk from China, Tonquin, Bengal and Persia, all
sorts of silks, woolen and other stuffs (provided they be not
wrought with gold and silver), Brazil wood, buffalo and
other hides from Persia, Bengal and other places, but none
from Spain and Manila, under pain of incurring the utmost
displeasure, paper, sugar in powder and candied, cloves, nut-
megs, camphor from Borneo and Sumatra, quicksilver, cinna-
bar, saffron, lead, saltpetre, borax, alum, musk, gum benzoin,
gum lac, rosmal or storax liquida, catechu, commonly called
Terra Japonica, fustic, corals, amber, right antimony (which
they use to color their chinaware), and looking-glasses (which
they cut up to make spy-glasses, magnifying glasses and
spectacles).
" Other things of less note are snake-wood, mangoes, and
other unripe East India fruits, pickled with Turkish pepper,
garlic and vinegar, black lead and red pencils, sublimate of
mercury (but no calomel), fine files, needles, spectacles,
large drinking glasses of the finest sort, counterfeit corals,
strange birds, and other foreign curiosities, both natural and
artificial."
Exports from Japan :
" Refined copper, coarse copper, Japanese camphor, all
sorts of Japanese cabinet-boxes, chests of drawers, umbrellas,
screens, and several other manufactures made of cane, wood,
buffalo and other horns, hard skins of fishes, stones, copper,
gold. Paper made transparent with oil and varnish, paper
printed and colored with false gold and silver for hanging of
rooms, rice, soy, indented tobacco, tea and marmalades, gold
in specie."
' ' KS.mpfer, Thr History of Jafan, book iv, p. 353 et itq.
8(1 THE BEGINNING OF EUROPEAN TRADE gj
At this time customs duties were introduced into Naga-
saki for the first time in the history of Japanese commerce.
The tariff was peculiar in that it was for purposes neither of
revenue nor of protection. It was more in the nature of a
reprisal, and was levied for the sole purpose of cutting off
part of the profits which the Dutch and Chinese traders
were making in the traffic. The duties laid on the Dutch com-
modities were ad valorem and specitic. There was an ad val-
orem duty of 15 per cent, en all the goods belonging to the
Company, and all goods belonging to private persons were
assessed at 65 per cent, when sold by the piece and 70 per
cent, specific duty when sold by weight. The difference
between the duty on Company goods and those of private
persons was made on the grounds that private goods were
brought over in Company ships and at the expense of the
Company, and were, therefore, deserving of less profit. A
discrimination was also made against the Chinese, their
goods being charged with much heavier duties, i. e,, 60 per
cent, ad valorem. This was based on the ground that the
Chinese were much nearer to Japan and not subjected to
such long and hazardous voyages as the Dutch^ and that
their expenses were correspondingly less. The customs
duties which were thus secured to the nation were dis-
tributed in sums of from three to fifteen taels to the poor of
Nagasaki.
Kampfer estimates the profits of the Dutch traders ' as
about 40 to 45 per cent, net on imports to Japan and 50
per cent, on the exports, or from 80 to 95 per cent, clear
profit on an entire voyage. This profit seems incredible
and disproportionate to modern profits, but it must be
remembered that there were not only imusual risks con-
nected with the commerce of this period, but that there were
heavy incidental expenses connected with the maintenance
* Kimpfer, The Hittory of Japan, book iv, p. 366,
y
82 PAST AND PRESENT OF JAPANESE COMMERCE [82
of trade and trade stations. M. Fraissinet gives the follow-
ing tabulation of these expenses : '
Presents k la cour 6,000 taels.
Moyenne de chaque annee, liais de voyage \ la cour. 5,060 taels.
Redevance annuelle et f-.ux frais 5.300 taels.
Loyer de Desima, du ciraeti^re; salaires des gardes. . 7,908 taels.
24,268 taei3.
A diduire, pour les autres annees, les salaires des gardes. 2,39 1 laels.
Total.... , 21,877 taels.
**L'ancienne compagnie des Indes ne donnait ^ ces em-
ployes qu'un modique salaire mensuel; mais elle abandonnait
au Directeur, au Maitre de magasins, au Scribe et aux
commis, cinq pour cent sur I'achat et la vente."
The gold Koban was the standard money of the country,
and silver passed mostly by weight. The gold Koban
weighed 47 kondering, or 274 grains Troy, and contained
232 grains of pure gold. The Koban was exchanged at the
rate of four " ichibu " which was a token money. Owing to
the comparative abundance of gold in the country, the ratio
between gold and silver at this period was six to one, while
in Europe it was nearly twelve to one. Hence the exporta-
tion of gold was one of the most profitable parts of the
trade. In 1644 the export of copper began and gradually
increased. According to the calculations compiled by J. J.
Rein, the Dutch exported 206,253 tons of copper from 1609
to 1858.' The total amount of metal exported by the Dutch
during these 249 years is calculated at 4,209,500 piculs.'
During the thirty years of greatest profit, 161 1 to 1641, the
average annual sale by the Dutch was about 60 tons of gold,
* Fraissinet, Le Japon, tome 2, p. 253.
* Rein, Industries o/yapan, p 335
'^itobe, Intercourse between the U. S. and Japan, p. 21.
5^
g,-] THE BEGINNING OF EUROPEAN TRADE 83
or $2,400,000.^ According to this calculation the precious
metals exported during those thirty years reached the sum
of seventy-five million dollars.
It could only be expected that the balance of trade would
be heavily against Japan, and that there should be this great
drain on her natural store of mineral deposits. The people
were now accustomed to long peace, they were enervated by
luxury, their wants multiplied, and at the same time the
productive forces of the country were comparatively unde-
veloped. The increasing demand for foreign articles could
be supplied only by the export of the precious metals, and
the balance against Japan was accordingly paid in gold
specie. Formerly the sole cause of opposition to the Euro-
peans was Roman Catholicism, but now, for the first time in
Japan, economic reasons began to be urged against foreign
trade. In 1671, the export of silver was forbidden. This
restriction was aimed at the Chinese trade, which had rela-
tively increased since 1641. In 1684, restrictions were
placed on both Dutch and Chinese trade. The iinportations
of the Dutch were limited in amount to ten and a half tons
of gold, or $420,000, and their exports of copper were lim-
ited to 25,000 piculs. The Chinese were limited to imports
amounting to 600,000 taels, the equivalent of $840,000.
These restrictions, even though violation was subject to
the penalty of death, resulted only in turning the channels
of trade into the hidden routes of smuggling, and the effiux
of precious metals continued. The mines of Japan were in-
capable of producing sufficient quantities of the metals to
meet this constant demand. According to Mr. Takekoshi's
computation,^ the coins issued between the years Keicho
and Hoei (1603-1708 A. D.), amounted to 14,727,055 gold
^The Japanese picul equals 130 pounds. A Dutch ton of gold equals ICX),ooo
florins, or $40,000.
*Takekoshi, The History of 2^00 Years, p. 6a2.
84 PAST AND PRESENT OF JAPANESE COMMERCE [84
Kobans (Rio) and 1,220,000 Kwamme of silver. Of these,
6,192,800 Kobans (goldj and i, 122,687 Kwamme (silver)
were exported, and the amounts smuggled cannot, of course,
be estimated. There remained for currency not more than
8,634,252 Kobans of gold and 77,313 Kwamme of silver for
a population of 25,862,210 persons. This deficiency of cur-
rency, and the extravagance of the Shoguns, which precipi-
tated financial difficulty, led to the appearance of debased
coins from time to time. In 1696, a new kind of Kobau was
issued which contained only about two-thirds as much gold
as the old one, and it was required that it be passed on the
same terms as the old one. In 17 10, another debasement of
the coinage occurred, when the Koban was reduced in
weight nearly one-half. This debasement not only greatly
disturbed the economic development of the country, but it
struck a fatal blow at the Dutch trade, since these debased
coins were forced on them at the same rate as the old ones.
In 1708, Kumrni Arai discussed in a tract, the Origin of
Wealth in Japan, the necessity of financial reform and the
necessity of checking the exportation of the precious metals.
The following passage from the tract shows that the author
was a " mercantilist" of the most pronounced type:^
" There goes out of the Empire annually about one hundred
and fifty thousand Kobans, or a million and a half in ten
years. It is, therefore, of the highest importance to the pub-
lic prosperity to put a stop to this exportation, which will
end in draining us entirely. Nothing is thought of but the
procuring of foreign productions, expensive stuffs, elegant
utensils, and other things not known in the good old times.
Since lyeyasu, gold, silver and copper have been abundantly
produced; unfortunately the greater part of this wealth has
gone for things we could have done quite as well without.
The successors of lyeyasu ought to reflect on this, in order
* * Hildbreth, Japan and the Japanesf, p. 386.
\
g - 1 r//£ BE GINNING OF E UR OPE AN TRA DE 5 5
that the wealth of the Empire may be as lasting as the
heavens and the earth."
The debasement of the coinage made the export of copper
alone profitable to the Dutch traders, but in 1714 the export
of this commodity was further limited to 15,000 piculs, and
in 1 72 1 it was reduced to 10,000 piculs. This so decreased
the Dutch commerce that two ships annually sufficed for all
its needs, and the Chinese trade was restricted to ten junks
annually.
(2) Internal Trade.
The exclusive and inclusive policy which had been entered
on by the Tokugawa administration had the same effect on
the country as an effectual blockade in time of war. The
growth of population diversified the wants of the people, and
these had to be supplied by home productions. Conse-
quently, under the long peace of the Tokugawas, all kinds of
industry were developed under the direction of feudal chiefs.
The country was divided into two hundred and sixty-eight
provinces, and in matters of internal administration each
province was left entirely independent. Each had its own
military system and its departments of justice, treasury and
public works. Japan consisted then of numerous semi-
independent petty princedoms, each with the economic
policy of self-sufficiency. Industry was localized and pro-
vincial, and the special product of each province, according
to its peculiar economic conditions, was highly developed.
The porcelain industry was developed in the province of
Owari ; fabrics of " crepsede " in Nakahama ; paper in Tosa ;
lacquer-ware and delft-ware in Kaga; the silk industry in
Kozuke and Shimotsuke, and others under the protection
and patronage of feudal lords.' Even to-day these provinces
• Fukuda, Die Gtselhchaftl'uhe und Wirtschaftlicht Enivjtcklung in Japan,
P- 155-
*¥1 ^..
86 /V/^r AND PRESENT OF JAPANESE COMMERCE ^^
are renowned in Japan for their special products. Horse
breeding was much encouraged by the chief of Sendai, and
the Sendai horse is the standard of excellence in Japan as
the Kentucky horse is in the United States.
The economic condition of the country was in many ways
similar to that of France before Colbert's administration and
to that of the United States in the years immediately follow-
ing the War of Independence. The mutual jealousies of the
feudal chiefs made inter-provincial trade more like for-
eign than domestic trade, and comparatively little was car-
ried on. The migration of capital and labor was a thing
almost impossible.
During the rule of lyemitsu, the grandson and successor
of lyeyasu, the feudal chiefs were compelled to reside in
Yedo for six months of each year and to leave their families
there as hostages for the remainder of the time. Although
the economic eflfects of this policy were many and far-reach-
ing, they have been almost wholly overlooked. The popu-
lation of Yedo increased rapidly, and it soon became the
largest city in the country. In 1721, its population was
placed at 501,394.* The feudal chiefs, required to pay their
homage annually to the Shogun at Yedo, came with their
trains and retinues in pomp and splendor. This caused-
many prosperous towns to spring up along the routes. It
became necessarj' to perfect the highways for the passage
of these companies, and the Tokaido, Nakasendo and other
roads became the " Roman " highways of Japan. Trans-
portation and communication were greatly improved over
former conditions.' Communication between Yedo and
^Yokoi, The History of Japanrse Commerce, p. 153. These figures do not
include the retainers of the resident feudal chiefs.
'The carrier system existed between Osaka and Yedo; thrice a month each
way despatches were sent, and the distance of 300 miles was made in six days.
The charges were two momm6 of silver for a letter, and fifty niomme of silver for
each kwamme of goods.
87] THE BEGINNING OF EUBOPEAN TRADE 87
Osaka, which was the center of the distribution of the pro-
vincial products, was facilitated by the correspondence and
interchange of the merchant gilds of both places.
The"za" system, which originated in the Hojo period,
had well nigh lost its economic importance by the time of
the Tokugawa regime. At this time the municipal system,
or "Goningumi" plan, came into being. A new merchant
gild, the Kumiai, was a mixed product of the older "za'*' and
the " Goningumi " systems ; from the former it took its tech-
nical and economic character, and from the latter, its social
functions/
One feature of the Kumiai was that it was not so exclusive
as the "za." Any kind of business or occupation might
create its own Kumiai and any person could become a mem-
ber who was willing to share equally the expenses of the gild.
Monopolistic privileges were granted to the gilds on payment
of certain sums of money to the Shogunate government and
no taxes were levied on the gild, except occasional extor-
tion, which was known, rather grimly, as " Goyo-Kin," or
" Thanks money."
In 1694 there were but ten Kumiai in Yedo and the same
number in Osaka, but, owing to the commercial and indus-
trial growth of the country, at the end of twenty-six years
there were twenty-two in Yedo and twenty-four in Osaka."
The relations between the gilds in Yedo and Osaka were
very intimate, and v/ere made more so by the establishment
of a shipping combination known as the " Higaki-Kv/aisen."
So profitable and prosperous were the routes of the Higaki-
' The family, not the individual, was the social onit. Every five families were
united in a company, and one of the number w?3 elected by themselves as " head-
man." The company as a body was responsible for the conduct of its members.
The system was an administrative device to secure order and the good conduct of
the community.
*Fukuda, Die Gesdlschaftliche und Wirtschaftlicht Entivicklung in yapan,
p. 158.
88 PAST AND PRESENT OF JAPANESE COMMERCE [88
Kwaisen that at one time the number of vessels entermg the
port of Yedo in one year amounted to 1570.'
Meanwhile the number of the Kumiai had so increased
that their monopolistic character became less significant and
important. In 1813 the Yedo gilds petitioned the Sho-
gunate to limit the number to 68 with a membership of
1995.^ The Shogunate, being in financial straits, was
willing to grant them more privileges and monopolies only
on the payment of more money. Certificates of membership
were given to each member of the Kumaai, and these were
transferable only am.ong the members of a family, and those
who had no certificates were excluded from the gild. Be-
coming more monopolistic and exclusive, they began to
charge exorbitant monopolistic prices for the commodities
in which they dealt. This, added to the debasement of the
coinage year after year, caused a general rise of prices.
Mr. Midzuno, the Councillor of the Shogunate government,
thought that the normal price of commodities could be
established only by freedom of trade and the working of the
natural law of supply and demand. He, therefore, abolished
the Kumiai in 1841, greatly to the benefit of society. But
the extinction of the Kumiai did not accomplish all that had
been hoped in the way of declining prices, because of the
debasement of the currency and the inflation of the provin-
cial paper currency. An attempt was made in 1851 to
reorganize the Kumiai system, but the effort was buried in
the political disturbances of the time, and finally the Resto-
ration of 1868 brought about the most sweeping changes in
the social and economic organization of the country.
' Yokoi, The History of Japanese Commerce^ p. 199. ^
» Ibid., p. 158.
CHAPTER IV
The Restoration of 1868.
OPENING OF THE COUNTRY TO THE WORLD
I. The Causes.
The dual system of government was a creation of the Ka-
makura Shogunate by Yoritomo in 1184. The system was
perfected by lyeyasu and his successors for two hundred and
eighty years. It is strange indeed that the Japanese people
gave no critical attention to the repository of sovereignty
during this long period. Although the Mikado was the re-
cognized head of the nation, he was a political figure-head,
all the functions of government and administration being
usurped by the Shoguns. Diplomatic intercourse hardly
existed, for the relations with the Dutch and Chinese were
almost wholly commercial. The policy of the Tokugawa
Shogunate involved, on the one hand, an exaggeration of
the sacredness of the Mikado, and on the other, a stultifica-
tion of the intellectual life of the common people. Thus,
for centuries, down to the close of the Tokugawa rule, the
dualism existed as a historic fact, a political puzzle for the
philosophers of the world, without criticism or comment in
Japan. The people were taught simply to believe in the
Mikado as a divine personage. As soon as Japan entered
into political relations with other nations the dual system
was doomed, because the foreign powers would naturally
seek out the sovereignty of the country. This fact has led
the historians of Europe and America to attribute the down-
fall of the dual system and feudalism immediately to the ad-
89] 89
90 PAST AND PRESENT OF JAPANESE COMMERCE [90
vent of foreigners in Japan, and the opening of commercial
and political relations with foreign powers. Griffis says,
however, that " the foreigners and their ideas were the occa-
sion, not the cause; the causes were mainly from within, not
from without; from impulse, not from impact, and they were
largely intellectual." ^
During the peaceful seclusion of the Tokugawa regime,
Japan appeared to be fast asleep, so far as the outer world
was concerned, but she was not wholly isolated from the
rudiments of western civilization. Yoshimune (1717-1744)
repealed the law which forbade the importation of books, in
order to shut out Christianity more effectually, and Dutch
and Chinese books were permitted to be brought in. And,
besides this, the Dutch language was eagerly studied by
some of the liberal and progressive minds, and there came
about also a revival of Chinese learning, especially in the
Confucian and Mencian politico-ethics.
The fall of the Ming dynasty and the accession of the
present Manchu dynasty to the Chinese throne, had a similar
efifect in the Far East to that which the fall of Constantinople
in the thirteenth century' and the dispersion of the Greek
scholars had in Europe. Many Chinese refugee scholars
came to Japan and added stimulus to the study of the Con-
fucian " Five Relations." 3 While the Chinese learning was
giving an impetus to the better definition and understanding
of the true relation between sovereign and subjects, the re-
naissance of the old Japanese literature was taking place.
At the head of this movement was the famous scholar No-
bunaga Motoori (i 730-1 801). His followers, Hirata and
others, began criticizing, in most uncompromising fashion,
* Griffis, The Mikado's Empire, p. 291.
^ Ibid., {). 297.
^ Jbid., p. 298. The five relations were those of sovereign and minister, parent
and child, husband and wife, elder and younger brother, and fiiend and friend.
gjl THE RESTORATION OF tS6S qI
the inutility of studying foreign literature and history with-
out first knowing that of their own country. It so happened
that the spirit of the old Japanese literature was an exalta-
tion and high appreciation of the beauty and symmetry of
the centralized monarchy which preceded the Shogunate
usurpation. The historians had been glorifying the dual
system as best for the Japanese people. They now became
intellectually enlightened and more courageous, and began
to direct the minds of the people to the Emperor as the real
source of power and honor. In 1715, Pi'ince Mito Kom.on
completed his great work The History of Great yapatiy and
it quickly became a literary and historical classic. So great
was the influence of this history on Japanese minds that Mr.
Earnest Satow rightly calls its author " the real author of
the movement which culminated in the revolution of 1868."*
In 1727, Rai Sanyo's great work, the result of twenty
years of continued labor and research, was published. This
was the Nihon Gwaishi. The secular intellectual activity of
Japan had been quietly fostered during the secluded peace
of more than two hundred and fifty years, and attained its
meridian only at the close of the Tokugawa period.
The revival of learning is sure to be accompanied or fol-
lowed by a revival of religion.' It was no mere accident or
coincidence that the Renaissance was followed by the Refor-
mation. In Japan, the revival of learning was followed by
the revival of Shintoism. According to the Shintoist, Japan
is the land of the Gods and the Emperor is a direct descend-
ant of heaven. To the Emperor, says the Shintoist, are due
powers and honors, and the allegiance of all Japanese people.
The direct result of the renewed vigor of this teaching was
an increase of reverence for the Emperor and the recognition
of his sovereign power. Griffis does not put the case too
* lyenaga. The Coiislitutiona! Development of Japan, p. 22.
"* Ibid., p. 24.
92 PAST AND PRESENT OF JAPANESE COMMERCE [92
strongly in saying that long before the advent of Commodore
Perry and the opening of Japan to the world " the seeds of
revolution were above the soil and would alone have brought
about that fruit in due season." ^
A new epoch, political and economic, in the history of
Japan began with the coming of Commodore Perry, on July
14, 1853, and the conclusion of a treaty of peace and amity
betv/een the United States and Japan on March 31, 1854.
A synopsis of this important treaty is as follows: '
I. Peace and Friendship.
II. The ports of Shimoda and Hokodate open to Ameri-
can ships, and necessary provisions to be supplied
them.
III. Relief of shipwrecked people ; expenses thereof not to
be refunded.
IV. Americans to be free as in other countries, but amen-
able to just laws.
V. Americans at Shimoda and Hokodate not to be sub-
ject to restrictions ; free to go about within defined
limits.
VI. Careful deliberation in transacting business which
affects the welfare of either party.
VII. Trade in open ports subject to regulation.
VIII. Wood, water, provisions, coal, etc., to be procured
through Japanese officers only.
IX. Most favored nation clause.
X. U. S. ships restricted to ports of Shimoda and Hoko-
date, except when forced by stress of v/eather.
XI. U. S. consuls or agents to reside at Shimoda.
XII. Ratifications to be exchanged within eighteen months.
' Griftis, The Mikadoes Empire, p. 301.
* Nitobe, Intercourse between the U. S. and Japan, p. 53; for full text of treatj
see Treaties and Conventions between U. S. and other Poivers, pp. 512 */ teq.
Q2] THE RESTORATION OF i86S 93
On the return of Commodore Perry to the United States,
Townsend Harris was sent in August, 1S56, bythe United
States government as Consul-General to Japan. July 29,
1858, he negotiated and signed at Yedo the commercial
treaty between the United States and Japan, The main feat-
ures of this treaty are as follows : ^
I. Peace and friendship. Diplomatic agent and Consul-
General. Privileges of residence in Japan ; travel
beyond treaty limits. Consuls to reside at open
ports. Reciprocal privileges to like officials of
Japan.
II. Mediation of the U. S. in differences between Japan
and European powers. Assistance by U. S. ships
of war to Japanese vessels of the high seas, and by
U. S. Consuls in foreign ports.
III. Additional ports to be opened: Kanagawa and Naga-
saki on the 4th of July, 1859; Neegata, January I,
i860; Hyogo, January I, 1863. American citizens
may reside in them. Rules and regulations as to
their residence. Provision as to residence of Amer-
icans in Yedo and Osaka. Regulations of trade.
These provisions to be made public by Japanese
government. Munitions of war; to whom only to
be sold ; rice and wheat not to be exported from
Japan; surplus thereof to be sold to residents, and
for ships* crews, etc. Copper surplus to be sold at
auction. Americans may employ Japanese.
IV. Duties to be paid according to tarifT. Pioceedings
where there is a difference as to value of duties.
Supplies for U. S. navy. Opium prohibited ; pen-
alty for smuggling. Imports on which duties are
* Nitobe, InUrcourse bthieen the U. S. and japan, pp. 65 et seq. For full
text of treaty see " Treaties and Conventions between the U. S. and cthef Powers^*
pp. 526 etseq. (The U. S. Govt. Publication.)
94 PAST AND PRESENT OF JAPANESE COMMERCE [94
paid may be transported without further tax. No
higher duties than are fixed by this treaty.
V. Foreign coins to be current in Japan ; may be used in
payments ; to be exchanged for Japanese coins, etc.
Coins, except copper, may be exported; uncoined
foreign gold and silver may be exported.
VI. Jurisdiction over offences, Americans against Japan-
ese in Consular courts ; Japanese against Americans
by local authorities. Consular courts open to Japan-
ese creditors. Forfeitures and penalties for viola-
tion of treat}'. Neither government to be responsi-
ble for debts of its subjects or citizens.
VII. Limits of right of travel (ten "ri" in any direction)
from open ports. American criminals (^. g., con- |
victed of felon}') shall lose right of permanent resi- |
dence in Japan, Such persons to have reasonable |
time to settle their affairs, to be determined by
American Consul.
VIII. Religious freedom. Religious animosity not to be
excited.
IX. Japanese authorities, on request of Consul, will arrest
deserters and fugitives from justice. Will receive
prisoner in jail. Consul to pay just compensation.
X. Japanese government may purchase or construct ves-
sels of war, etc., in U. S. May engage from the
U. S. the services of scientific men and advisers.
XI. Regulations appended (pertaining to trade) made part
of treaty.
XII. Conflicting provisions of treaty of March 31, 1854, and
the convention of June 17, 1857, repealed. Regu-
lations made to carry this treaty into effect.
XIII. Revision of treaty and trade regulations may be made
upon one year's notice, at any time after July i,
^ 1872, if desired by either party.
Q c ■] THE RES TOR A TION OF j86S g 5
XIV. Treaty to take effect July 4, 1859. Ratifications to be
exchanged at Washington, D. C. Signed in Eng-
lish, Dutch and Japanese languages; in case of dis-
putes, Dutch version to be considered the original.
The tarifif schedule and regulations of this treaty are the
following:'
Duties shall be paid to the Japanese government on all
goods landed in the country, according to the following
tarifif:
Class I. All articles in this class shall be free of duty.
Gold and silver, coined or uncoined ; wearing
apparel in actual use. Household furnitures
and printed books not intended for sale, but
the property of persons who come to Japan
to reside.
Class II. A duty of five per cent, shall be paid on the
following articles: all articles used for the
purpose of building, rigging, repainting or
fitting out of ships. Whaling gear of all
kinds. Salted provisions of all kinds. Bread
and bread stuffs. Living animals of all kinds.
Coals, timbers for building houses, rice,
paddy, steam machinery, zinc, lead, tin, raw
silk.
Class III. A duty of thirty-five per cent, shall be paid on
all intoxicating liquors, whether prepared by
distillation, fermentation, or in any other
manner.
Class IV. All goods not included in any of the foregoing
classes shall pay a duty of twenty per cent.
By the convention of 1 864 the duties were reduced by this
provision.
" The following articles shall be admitted at the reduced
* 7reaiies atid Conventions bttween the U. S. and other Powers, pp. 516 ^/ seq.
!>1i*^> W.
96 FAST AND PRESENT OF JAPANESE COMMERCE [96
duty of five per cent. : machines and machinery, drugs and
medicines, iron in pigs or bars, sheet iron and iron wire, tin
plate, white sugar in loaves or crushed, glass and glass ware,
clocks, watches, and watch chains, wines, malted and spiritu-
ous liquors,"
A five per cent, export duty was laid on Japanese produc-
tions, except gold and silver coins and copper in bars.
Similar treaties were concluded with Great Britain, October
4, 1854; with Russia, January 26, 1855; with Netherlands,
November 9, 1855; with France, October 9, 185S; with
Portugal, August 3, i860; with the German Custom Union,
January 25, 1861 ; and with other countries, — Italy, Spain,
Denmark, Belgium, Switzerland, Austria-Hungary, Sweden-
Norway, Peru, Hawaii, China, Korea, Siam, and lastly with
Mexico in 1888.
We have already noted how the abnormal ratio between
gold and silver had caused a pronounced efflux of gold from
the country. At this time the value of the silver coin
"ichibu," which was a token money, was about 33 cents in
United States gold, that is, one Mexican dollar was ex-
changeable for three " ichibu," while a gold Koban, which
was worth $3.75 of United States gold, exchanged for four
"ichibu." Hence about the most profitable part of trade
for the foreigners was to bring Mexican dollars to Japan, ex-
change them for the token money " ichibu," and exchange
these in turn for gold Koban s. Some time later these gold
Kobans were purchased at the rate of $2.50 and taken to
China and sold for $3.75. The profit accruing from this
double exchange was about 70 per cent.' While this dis-
astrous drain of gold was going on, the successive debase-
ments of the coinage and the inflation of the provincial paper
currency brought about a complete disarrangement of
* Treaties and Conventions between the U. S. end other Powers, pp. 516 et seq.
' Nitob^, Intercourse hettveen the U. S. and Japan, p. 72,
g^l THE RESTORATION OF i868 c)y
market conditions, and especially in the prices of the neces-
saries of life. To these distresses were added, most unfor-
tunately, destructive earthquakes, typhoons and floods.
This accumulation of calamities and disasters was ascribed
by the mass of the people to the opening of the country to
foreign commerce. As this feeling took shape and gathered
force, the anti- foreign prejudices of the populace were
kindled and inflamed. The history of japan from 1853 to
1868 is largely the history of the struggle betv/een the two
parties known respectively as the " Joyi-to " and the " Kai-
Koku-To," or the anti-foreign party and the " opening-up-
of-the-country " party. The former consisted of the southern
feudal chiefs backed by the Imperial Court of Kioto, while
the latter was the Shogunate government supported by the
northern feudal chiefs. It was a collision between the domi-
nant forces of the north and the south. The bombardment
of Kagoshima on August 11, 1863, by the British fleet, and
of Shimonoseki" on September 5, 1864, by the allied fleets of
the four powers. Great Britain, France, Holland, and the
United States, taught a most important lesson to the two
powerful southern chiefs, Satsuma and Choshiu. They
learned their own utter weakness and the superiority of west-
ern civilization.
Subsequently the anti-foreign party saw the necessity of
national unity regardless of the question of the opening of
the country. Consequently they changed their plea to that
of national unity and the restoration of sovereign power to
the Emperor, the recrudescence of the centralized monarchical
government. Thus the once anti-foreign party was trans-
formed into the Restoration party and the character of the
struggle was wholly altered. Henceforth the strife was
* The Shimonoseki Indemnity paid by Japan amounted to $3,000,000. By
Act of Congress, Feb. 22, 1SS3, the United States refunded its share, $785,000, to
Japan.
98 PAST AND PRESENT OF JAPANESE COMMERCE [98
political in nature rather than commercial or economic, and
it centered about the seats of rule of the Yedo and Kioto
governments. In this way the Tokugawa Shogunate and
the northern feudal chiefs made themselves " Choteki " or
"enemies of the Mikado,"'
It may be merely a coinc-.idence and wholly without
significance, but it is a striking fact that no " Choteki " has
ever succeeded in the history of Jap^m, whatever has been
the cause for which it stood. The struggle was soon ended
in the triumph of the Restoration party in 1867.
What caused this Restoration party to become the advo-
cate of western civilization and the creator of New Japan?
This question is often asked and answered in many different
ways. " It was the lesson taught at Kagoshima and
Shimonoseki," say some. " It was the benefit they saw
would arise from commerce," say others. "The child of
the revolution was changed by its nurse, and the government
now in power was put into its cradle by mistake or design,"
say still others.
At best, the causal influences were numerous, complex,
and difficult to trace. Impulses originating wholly within
Japan made her at least a ripened soil for forces entering
from without. The isolation of centuries, broken only by
the slender thread of communication which the Dutch main-
tained, had borne its fruit in an irrepressible desire to know
and to share in the things which were of the outer world.
The eager national spirit which had slumbered for so long
was now awakened and would not brook restraint. A latent
life of marvelous adaptability coursed in the veins of this
child among the nations. Old ideas and old faiths, old
forms and customs, old incentives and old aspirations, every-
thing which was old was now to be held in abeyance or
* * Griffis, Tfu Mikadoes Empire, p. 316,
■ if:
^fwlu '
QQ-j THE RESTORATION OF 1868 99
folded away forever, while the New Japan would try the
new things of earth, and trying, test herself and them.
II. Economic Effects.
(a) Development of Commtmication and Transportation.
With the restoration^ of political power to the Emperor
by Shogun Hisayoshi on November 19, 1867, the dual sys-
tem of government which had existed in Japan for seven
centuries came to an end. The centralized monarchy was
established on the basis of pure absolutism. The Emperor
became the sole legislative and executive authority. In
1 87 1 the southern feudal chiefs, Satsuma and Choshiu, de-
clared their purpose to surrender voluntarily their princi-
palities to the Emperor, and accordingly, they sent out a
general memorial to that effect.'' Their example was fol-
lowed by all the other chiefs of the country. The following
brief Imperial edict, issued in August, 1 871, aboHshed once
for all the feudalism which had been the life of Japan for
eight centuries. The terse sentence is historic.
"77/^ cla7ts are aboHshed and prefectures are established
in their places!'
It is unprecedented in human history that the overthrow
of an established social and political order required no
church, no ambitious kings, no free cities, no industrialism,
none of those influences which wrought so powerfully in un-
dermining the feudalism of Europe, but that it was simply
the voluntary giving up by the feudal lords of their privileges
and prerogatives. The most immediate and conspicuous
effects of this over-turn were national unity and the unifica-
tion of customs, habits and thoughts. In this instance is an
' American Executive Documents, Diplomatic Correspondence, 1S67, Part ii,
p. 78 (2d sess. 40th Cong.).
* lycnaga. The Constitutional Development of Japan, pp. 3S-39.
m t
200 PAST AND PRESENT OF JAPANESE COMMERCE [joo
apt illustration of the generalization that " like-mindedness
and consciousness of common interest, namely homogeneity,
is a step toward the progress of equality and liberty." '
The new government was an embodiment of the two prin-
ciples drawn from widely separate sources, the liberalism q\
western civilization and the comparatively democratic doc-
trine of the Chinese sages, *' the people are the most import-
ant element in a nation, and the sovereign is the lightest."
Naturally, the government began at once to inaugurate radi-
cal changes. Among the most important of these was the
rapid development of the means of transportation and com-
munication, which in themselves exercise so great an influ-
ence on the productive phases of the organization of society.
As affecting Japan, the effect of this influence has been ex-
ceedingly great on commerce and industry. During the
feudal regime the size of towns and cities was limited by the
available supply of food, and small communities were, there-
fore, the rule.
The government removed all legal and political obstacles
to the freedom of intercourse and communication. With
the development of the facilities of transportation, a new form
of production, that is, place utility, came to be an important
item. If the history of civilization may be regarded in part
as the history of the development of methods and means of
transportation and communication, the details of this phase
of Japan's growth will be something more than interesting,
as indicating the economic significance of increased place
utilities, and the social importance of this important indica-
tion of progress in civilization. The historical and statistical
account of the postal and telegraph systems, railroads, and
merchant marine, and their remarkable growth since the
present Meiji administration began, in 1868, is here given:
^ * Giddings, Democracy and Empire, p. 62.
lOi] THE RESTORATION OF i86S \q\
Postal and Telegraph Systems.
" Louis XI. of France, in his efforts to create a national
power," says President Hadley, "was compelled to take the
postal service out of the hands of the cities and other feudal
authorities and make it a matter of national admihTstration."'
The first progressive undertaking of the nev/ government
toward a national economic life was the introduction, in 1871,
of the modern postal system, modeled after that of the
United States. The following year the system was extended "•
to all seats of provincial governments, ports, towns and other
localities of any business importance, with the exception of
certain ports in the Hokkaido and Lew Chew Islands. In
1873, rates based on distance were abolished and the Roland
Hill system of uniformity of rates as modified by weight v/as
adopted. The American postal agencies continued at the
treaty ports until the end of 1873, and the French and Brit-
ish agencies until April i, 1879.' In this year Japan entered
into the International Postal Union with full right to manage
all her postal affairs. In 1S86, the postal and telegraph
services, which had hitherto existed separately, were united
into a single establishment, for the greater convenience of
the public. The present Japanese postal system is said to
be the most complete organization of the kind in the world,
— quickest, safest and with free rural delivery throughout the
country. The low labor cost and the rapid development of
the means of transportation make this possible. The census
figures of 1900 are the most recent we have been able to
obtain. They are given herewith: '
* Hadley, Railroad Tramportation, p. 3.
* Chamberlain, Things Japanese, p. 295,
' Publication of Dept. of Communication of Japanese Government. A Short
SktUh of the Progress of the Postal Service, Eug. Trans,, p. 16.
I02 PAST A.\'D PRESENT OF JAPANESE COMMEJiCi-: ^iq2
Total: Boeks,
V*ar. Leiten. Postal Cards. Newspuptrs. Jncludir.s
Samples, etc.
187I 565-934
1S72 2,431, cSo 40,649 2,510,656
1S73 9»723.Sy5 514.61? '0,550,902
1874 16,732,030 2,629,64^ i9.9i7»643
1875 17.054.631 3.693.973 4,152.374 25,-^98.171
1876 21,152,975 5.214,189 4,077-095 32,220,398
1877 22,665,699 9,047,886 4,257,461 "38,060,267
1878 25,430,129 12,300,033 5,216,866 45,504,276
1879 29,881,177 15,620,843 7,023,686 56,047,229
1880 32,923,277 21,576,436 8,962,393 68,013,225"
1881 39.193.5^1 26,834,719 12,537,591 84,177,162
1882 44,599,440 32,034,581 15,898,167 99,327,812
1883 49,206,979 32,894,283 15,226,397 106,754,496
1884 50,329,099 36,662,267 15,087,091 112,862,308
1885 48,605,921 40,254,085 15,259,721 115,072,665
1886 47.545.874 45.695.759 16,015,085 121,265,456
1887 50.955.970 55.627.595 18,248,305 136,655,274
1888 55.55 1. 99S 68,837,285 21,176,278 158,265,209
1889 59.377.250 83,852,814 27,066,852 183,600,105
1890 64,268,328 96,469,222 41,255,492 216,644,487
189I 66,406,800 106,612,264 49,081,974 238,979,882
1892 72,122,000 133,260,000 50,829,000 277,805,000
1893 80,604,000 158,146,000 56,968,000 320,895,000
1894 94.453.653 190,691,321 80,415,390 392,519,462
1895 109,400,947 228,502,113 78,962,299 446,384,710
1896 122,351,532 262,861,315 86,801,875 503.359.682
1897 145.737.719 289,771,172 88,750,347 557.717.702
1898 157,526,607 329.934,746 91,521,339 612,775,413
1899 148,530,721 333,988,921 110,068,789 629,893,815
1900 180,232,438 399.529,531 135.326,541 751.U3.978
In 1874 the postal money order system was introduced.
In 1885 the service was opened with several European
countries and with the United States. In the same year
Japan entered into the Universal Postal Union's arrange-
ment for exchange of postal money orders. The progress
of this system has been as follows : '
' Publication of Dept. of Communication of Japanese Government, A Short
Sketch of the Progress of the Postal System, Kng. Trans., p. 27.
I03] THE RESTORATION OF iS6R IO3
Numbtr of Number of Ordinary Amcvnt in Yen
Ytar. Offices and Domestic Money of Domestic
Agencies. Orders Issued. Money Orders.
1875 222 115.703 2,123,145
1S76 309 257,443 5,lSo,22I
1877 309 202,624 2,692,679
187S 370 223,077 3,322,782
1879 458 275,16-?^ V 4,140,309
18S0 619 350,483 5,250,404
1S81 67S 489,568 7,655,201
18S2 813 630,713 9,188,262
1883 884 663,353 7.650,494
1884 886 704.365 6,850,9-/6
1885 886 725,349 6,911,954
1886 945 584,905 7.714,927
1887 946 706,438 9,397.955
1888 1,014 821,991 11,295,680
1889 1,015 889,103 12,313,542
1890 1,599 1.064,911 14.593.083
1891 1,928 1,360,796 17,499,111
1892 2,276 2,944,000 23872,000
1893 2,488 3,372,000 28,560,000
1894 2,495 4.022,903 34,013,447
1895 2,500 4,486,346 42,410,621
1896 3,124 4,931,694 45,687,907
1897 3.231 5.793,401 54,54M23
1898 3406 6,338,469 56,201,432
1899 4.539 6,786,583 68,874,271
1 900 4,930 7.499.892 80,942,45a
t
In 1875, postal savings banks were introduced and the
government sought to encourage in every way the practice
of thrift and saving. In recent years the institution has be-
come popular and, although it does not offer so templing a
rate of interest on deposits as do the private banks, the
postal savings bank is becoming an important branch of the
postal service as the following table shows :^
' One of the inducements of the postal savings banks is that when the amount
of the deposits reaches 100 yen for one depositor, the sam will be converted into
a government bond which pays better interest.
$i
I04 PAST AND PRESENT OF JAPANESE COMMERCE [104
Number of Nunthtr of De- „ .
,, r> • J , • J ^' Df testis tn
Year. Banfii and posiiors at ine ,s .
, . n- . -■ t - \ en at ikt
Aj^erurtes. End of i ear. „, , ,,
Close 0/ Year.
1875 22 1,843 »5.224
1876 161 4,44-2 4i»S45
1877 175 5,761 100,138
187S 405 14.137 286,290
1879 652 26,473 494,"S
l88o Sio 36,126 662,091
i88i 1,016 38,974 821,938
1882 1,339 46,211 1,058,224
1883 1,468 87,014 2,298,503
1884 i>469 141,202 5,260,484
1885 4,338 293,297 9,050,254
1S86 3,110 490,337 IS'462,053
1887 3,067 568,849 18,218,323
1888 3.071 665,822 19,758,482
18S9 3,074 762,869 20,441,354
1890 3,032 797.486 19,5x4,844
1891 2,864 841,643 20,700,076
1892 2,928 947,934 22,826,060
1893 3.023 1,060,235 26,155,499
1894 3.028 1,108,712 25,901,325
1895 3,030 1,223,085 28,965,427
1896 3,497 1,279,210 28,479,684
1897 3,576 1,234,604 26,157,083
1898 4,334 1,255.577 22,490,918
1899 4,458 1^0,171 24,014,043
1900 4,930 2,011,467 24.733.449
The depositors in the postal savings banks were classified
in 1897 according to occupation. This classification on a
basis of 100 per cent, is as follows: *
Agriculturalists 39
Merchants ••• 16
Mijcellaneous 6
Workingmen 5
Officials 5
* Austin, Commercial Japan, p. 63. (U. S. Treas. Dept. Pub., 1899.) Monthly
Summary of Commerce and finance.
I05] THE RESTORATION OF x8b8 105
Manufacturers 7
Students 6
Fishermen and sailors I
Without occupation I
Temples, shrines, and other corporate bodies 2
Occupations unknown 12
Total 100
Although the first telegraph line was constructed in 1857
as an experiment by a feudal chief of Kagoshima,^ it was
not until 1869 that the government constructed the line
between Tokio and Yokohama, and opened it to the public.
As the historic telegraph line was constructed between
Baltimore and Washington in 1844, Japan was but twenty-
iive years behind the United States with that important
channel of communication. But Japan at that time was so
little advanced from the conditions of feudalism that the
people did not know how to appreciate and utilize the tele-
graph system. With the advancement of scientific knowl-
edge and of changed economic conditions, the public began
to understand the benefits of this modern means cf rapid
communication. In 1874 the administration of the system
was reorganized and legally established. The Civil War of
1877 vindicated this change by showing the government's
need of it for its own purposes. Since then telegraphic com-
munication has become a government enterprise and mono-
poly. In 1879 Japan entered into the International Tele-
graph Union.' On April i, 1 891, the government bought
that part of the cable, the property of the Great Northern
Telegraph Company of Denmark,^ which connects Japan and
^ Yokoi, The History of Japanese Commerce, toI. ii, p. 44.
* Resumi Hiitorique et Statistique de la Tiligraphe et de la Tcliphone au
yapan, p. 2. (Japanese Govt. Publication.)
* G. N. T. Co. owns the lines between Nagasaki and Shanghai and Nagasaki
and Vladivostock, but the terminals at Nagasaki are operated by the government.
I06 PAST AND PRESENT OF JAPANESE COMMERCE [io6
Korea. The following table exhibits the growth of the
system in Japan :
No. of Length of Lints No. of Damestit
Bureaus. in Kilometers. Ttltgrants.
1869 2 31
• 870 4 75
1S71 4 75 19448
1872 18 628 80,639
1873 28 1,390 185,889
1874 34 1,705 351.272
1875 47 2.502 517,891
1876 51 2,639 678,030
1877 68 3,719 852,619
1878 97 5,145 1,028,155
1879 112 5,962 1,646,936
1880 155 6,763 2,027,382
1881 169 7.34S 2,571,009
1882 185 7,815 2,963,085
1883 195 8,074 2,662,538
1884 . 212 8,703 2,699451
1885 *.. 215 8,809 2,641,080
1886 219 8,895 2,508,552
1887 230 9,213 2,607,344
1888-1889 259 9,971 2,844,985
1889-1890 311 10,203 3,579,155
1890-1S91 407 11,389 4,210,587
1891-1892 523 12,740 4,623,616
1892-1S93 632 13,969 5,360,452
1893-1894 715 15,065 6,444,463
1894-1895 759 15,624 8,120,962
1895-1896 784 15,882 9,097,861
1896-1897 1,122 19,255 10,857,653
1897-1898 1*256 23,061 13,979,872
1898-1899 1,267 23,839 14,867,368
Telephone connection was first tried between Tokio and
Yokohama in November, 1877. In 1890 the telephone ex-
changes were opened in Tokio, and in 1893 in Osaka and T
Kobe. After some years of operation, the demand for in-
stallation of lines becam.e so great that the administration
had to ol^tain from the state an extraordinary fund in order
1
r
107] THE RESTORATION OF i8b8 IO7
to be able to meet the ^public demands. In February, 1899,
the first line of long-distance telephone was constructed be-
tween Tokio and Osaka.
The statistics of growth are as follows: *
Length in No. of Sub- No. of Connec-
Ytar. Kilometers. scrihtrs. tions.
1890 196 343 264,998
1891 361 821 i>654,597
1892 601 1,504 3,171,940
1893 648 2,672 7,702,402
1894 691 2,843 13,417,804
1895 699 2,858 13,088,830
1896 848 3,232 12,238,407
1897 1.241 5.326 16,342,468
1898 2,513 8,064 27,706,327
1899 2,556 11,813 45,136,233
1900 3,102 18,668 65,793,500
Railroads.
The first railroad in Japan was built between Tokio and
Yokohama, a distance of eighteen miles. The work was
begun in 1869, under the superintendence of English engi-
neers, and the line was opened for traffic in the autumn of
1872. Kioto and Kobe, by way of Osaka, were connected
in 1877. Since the first railroad construction, the Japanese
system has been modeled on that of England. Hence the
difference between the Japanese and the United States sys-
tems of railways is similar to that which exists between those
of the United States and those of Great Britain. The condi-
tions in England and Japan are unlike the conditions in the
United States. The latter being a young country, the lines of
railroad are frequently constructed with the view of develop-
ing new country, and, not unfrequently, for the purpose of lay-
ing out beforehand and plotting a new city which is yet to be
* Rhwne Hhlorique el Stathtiqtu de la Tilegraphe et de la Telephone au fapan,
pfK 17-19. (Japanese Govt. Publication.)
I08 PAST AND PRESENT OF JAPANESE COMMERCE [io8
built. Oa the other hand, railroads in Japan and England
have been built to meet existing requirements.' Or, ex-
pressing the" same truth in other terms, England built her
railroads to meet present needs, Japan to meet present and
future needs, while America built very largely for the future.
Imitation of the English plan of construction and the topog-
raphy of the country have caused the tunnels, bridges and
stations along the Japanese roads to be built with a view to
stability and substantial permanence. The country is largely
mountainous and is crossed by many streams, which the
heavy rains turn to raging floods, sweeping away bridges
and embankments. The cost of the first road, eighteen
miles in length, was 2,855,732 yen.'
The cost of construction is high in Japan when the low
labor cost and the low price of all materials other than iron
are considered. According to the last report of the Depart-
ment of Communication, the average cost per mile of rail-
roads in Japan is $35,000, while in America the per mile
cost was about $60,000, and in England it was more than
$200,000.3 As already said, the roads are narrow gauge,
and the coaches and equipment are modeled on the English
style.
In extending the system throughout the country, economic
considerations have been entirely subordinated by the gov-
ernment to those of military need or strategy. It was this
view that led the government to ignore the insuperable
engineering difficulties and to attempt the construction of
the Nakasendo, or Middle road, connecting Tokio and
Kioto, and running along the ridge of mountains which
traverses the interior of the country.
' Hadley, Railroad Transportation, p. 147.
» The U. S. Consular Reports, vol. 83.
* Hadley, Railroad Transportation, p. 146.
I09] THE RESTORATION OF i8t>8 109
The railway enterprise was started in Japan by the gov-
ernment, and it was a government monopoly until 1882, and
the policy of the government was expected to be that of gov-
ernment ownership. But the Civil War of 1877 increased
the public debt considerably, and the fiscal condition of the
government after that time did not permit it to incur further
debt for the construction of lines of railway. For this
reason the government determined to encourage the con-
struction of railroads by private companies, for commercial
and industrial ends. Since 1882 a number of such com-
panies have been organized, and relatively rapid progress in
construction has been made. This is especially true since
the China-Japan war, for a sort of mania for enterprises
seemed to prevail, and the extension of railroad lines was
accelerated.
There are at present 43 private railroad companies which
are now operating 2,961 miles of road. During the past
few years the consolidation of small companies has been
eflfected to the benefit of both companies and public. The
government operates 1,059 miles, so that the total mileage in
operation is 4,021 miles. The total amount of capital in-
vested by the government and by private companies has
reached the sum of 321,000,000 yen.
During recent years German influence has dominated in
almost all spheres of Japanese public life, and especially in
the administration of the government. In consequence,
state ownership of railroads has been agitated, chiefly as a
political affair. It is not our purpose to enter on a discus-
sion of state ownership or state control of the roads. It is
enough to say that the magnitude of the business is steadily
increasing in Japan as elsewhere, and that the economic
influence of this quasi-monopoly is very great. In the
determination of a railroad policy, a nation must consider
the topography of the country traversed; the relation
■
I lo PAST AND PRESENT QF JAPANESE COMMERCE [no
between the roads and other means of transportation and
communication ; and the relation between the public carrier
and the producers and consumers it is to serve. As a part
of the program of socialism, government ownership of rail-
roads is impossible for many reasons; as a business proposi-
tion the matter is put on an entirely different looting and is
both possible and in many cases probable. It Is needful for
Japan to mature and to announce a definite and fixed rail-
road policy, either of public or of private ownership, for a
medley of practices is productive only of discord.
To favor now a government monopoly, now private
monopoly, and now a form of competition between govern-
ment activities and private enterprise, has been the somewhat
devious course followed by Japan in the past. More settled
conditions will greatly favor a final decision of some sort.
The experience of Belgium, with a mixed system has
failed to solve the problems of railroading. The history of
Italy shows the disadvantages of an unstable and hesitating
policy. A healthy growth of the business is possible only
when the government's attitude may be known and enter in
as one of the fixed conditions.
The following table ^ shows the development of the R. R.
enterprises in Japan :
Government Owner- Private Oivner-
Year. .i..-j. t \r.-r..\ .z.-j. fiif.-r..\ Total.
skip {Miles). ship {Miles)
1872 18
1873 18
1874 38
1875 38
1876 65
1877 65
1S78 65
1879 73
1880 98
18
iS
38
38
65
65
65
73
98
'The figures are. given in the government's publications; Reports of the De-
partment of Communication, Japanese Government.
I I I J THi: RE ST OR A TlOX OF i86S 1 1 i
1881 122 .... 122
18S2 170 170
1883 181 36 217
1884 I Si 80 261
1885 -23 134 - 357
18S6 264 165 429
1S87 300 293 593
1888 505 406 911
1S89 550 585 1,135
1890 550 848 1,398
1891 550 1,165 i»7'5
1S92 550 1,220 i>770
1893 557 1.381 1,93s
1894 580 1,537 2,117
1895 593 1,697 2,290
1896 631 1,875 2,506
1897 ^^^ 2,287 2,948
189S 768 2,652 3,420
1899 832 2,806 3,638
1900 948 2,905 3,853
1901 I»C59 2,961 4,020
The greater part of the railway capital of Japan is invested
in construction. The total amount of capital invested in rail-
roads at the end of 1900 v/as estimated to be 320,946,093
yen, and the following table shows how much has been ex-
pended for construction :
Year. Ccv*rnment Road {yen). Private Road {yen). Total {yen).
1885 14,887,085 3,»o6.253 17.993,338
1887 22,447,622 6,702,924 29,150,546
1892 35.418,997 47.508,303 82,927,300
1897 61,866,374 122,828,189 184,694,563
»900 107,263.300 I97.5»3,530 304,776,830
The roads are equipped with the following rolling stock :
Government Roads. Private Roads.
Year. Engines. Ccackts. Freight cart. Engines. Coaches. Freight car*.
1872 10 58 75
1877 38 160 320 .... ....
1S82 47 240 503 .... .... ....
1887 53 313 887 30 138 364
1892 133 630 1,753 185 739 2,819
1897. f 258 871 2,930 636 2,029 8,541
1900 387 1,085 4,245 892 3,331 14,046
1 12 PAST AND PRESENT OF JAPANESE COMMERCE [112
If these figures are correct, there are for each one hun-
dred miles of railroad in Japan, 33 engines, 115 coaches,
and 415 freight cars.
Passengers and Freight.
The following tables indicate the volume of business and
its growth :
Number of Passengers.
Ytmr. Govt. Railroad. Private Railroad. Total.
1890 11,265,383 11,575.247 22,840,630
1892 12,873,547 15,290,168 28,463,715
1897 27,927,577 57,175,600 85,098,177
1900 31.944.856 81,766,015 113,710,871
Passenger Mileage.
Ytmr. Govt. Railroad. Private Railroad. Total.
1890 284,831,381 185,469,252 470,300,633
1892 298,958,693 283,962,002 582,920,695
1897.. 623,335,927 839,118,735 1,462,455,662
1900 7^5.273.181 1,187,768,933 1,903,042,114
Passenger Fares.
Yt»r. Govt. Railroad (yen). Private Railroad (yen). Total (.yeti).
1890 3.''83,383 1,966,532 5.*49.9»5
1892 3.335.609 3,122,946 6,458,55s
1897 7.003,795 9.904.292 16,908,087
1900 10,441,171 16,100,291 26,541.462
Tons of Freight.
Year. Govt. Railroad. Private Railroad. Total.
1890 671,561 1,088,645 1,760,206
1892... 982404 1,719,316 2,701,720
1897 1,558.194 7.070,315 8,628,509
1900 2,806,560 1 1,594,960 14,401,520
Freight Mileage,
Year. Govt. Railroad. . Private Railroad. Total.
1890 25,744.580 39.337.845 65,082,425
1892 44,827,316 92,017,807 136,845,123
1897 99.480,877 312,901,264 412,382,141
1900 223,654,688 508,844,010 732,498,69s
113] ^^'^ RESTORA TION OF j868 1 1 3
Freight Charges.
Year. Ccvi. Railroad {ytn). Private Railroad {y»ff), T«tal {yen),
X89O.. 778,798 998,742 1-777.540
1894 1.075,342 1.743,455 2,818,797
1S97 2,064.716 6,055,547 8,130,263
1900 4,499,79* 10,926,376 15,426,168
From these figures it appears that in the past ten years
the number of passengers carried increased five-fold ; freight
tonnage, eight-fold ; total passenger mileage, four-fold ;
amount of fares five-fold ; total mileage of freight eleven-fold ;
and revenue from freight traffic nine-fold. A comparison of
gross revenue from passenger service with that from freight
hauled, shows that the latter is but about one-half that of the
former. This is in direct contrast with the present revenue
from railroads in Europe and America, where the freight
earnings are always in excess of those of the passenger ser-
vice. This is accounted for by the geographical conditions
ofjjapan. The coastwise trade is well developed, and ship-
ping still plays a larger part in general traffic, because it is
so much cheaper as a means of transportation. Such heavy
commodities as rice, coal and timber are transported largely
by water. Inasmuch as the Japanese railroads are con-
structed on narrow gauge, they are not well fitted for convey-
ing freight of unusual bulk and weight. The following tables
show the receipts, expenditures and profits of the business:
Revenue.
Year. Govt. Railroadit {yen). Private Railroadt i yen). Tclal {yen).
1887 1,698,873 1,182,345 2,881,218
1892 4,580,632 5.<^6,634 9,677,266
1897 9,727.490 16,800,057 26,527,547
J900 15.920,385 29,014,009 44,934,394
Expenditures.
Yaar. Govt. Railroads {yen). Privat* Railroads (yen). Total {yen),
1887 677,124 392,542 1,069,666
1892 2,166,199 2,437.^38 4.603,337
1897 4,786,049 7.578,047 12,364,096
1900 7,101,108 I3,622;i56 20,723,264
31;
114 PAST AND PRESENT OF JAPAaSESE COMMERCE [114
Profits.
1887 , 1,021,749
1892 2,414,433
1897 4»94i.44i
19CO 8,819,277
This showing gives the following rate of receipts, expendi-
tures, and profits per mile per day :
{Government Railroads 48 yen 70 sen
Private Railroads 27 yen 91 sen
789,803
1,811,552
2,659,496
5,o73»929
10,186,129
15.J27.570
15.391.853
24,211,130
Expenditures / Cvernment Railroads 21 yen 7:
^ Private Railroads 13 yen i<
r2 sen
10 sen
p^ cj^ / Government Railroads 26 yen 98 sen
I Private Railroads 17 yen 81 sen
It will be seen that the expenditure of the government
service is much larger than that of the private companies.
The government's larger net revenue is due to the fact that
it owns the most desirable and profitable lines, i. e., where
passenger traffic is heaviest. On its invested capital, the
government realized about 8 per cent, while the private
concerns made about 7^ per cent.
Merchant Maritie.
The edict of lyemitsu of 1638, which has been mentioned
before, seriously crippled the art of ship building and navi-
gation for more than 250 years. All the ships which were
constructed were junks of less than 500 koku (74.4 tons) in
capacity, with only one mast. They were made without
keels, so that they were unfit even for coast navigation. The
appearance of the " black ships " of Commodore Perry con-
vinced the Shogunate government of the necessity of having
larger ships for the commerce of Japan. The edict of 1638
was revoked so as to allow the government to own large
vessels for official use. In 1858 the Shogunate bought a
Dutch ship, the Catalina,' which was the first three-master,
^History of Merchant Marine in Japan, Publication of Dept, of Communica-
tion, Japanese Government, 1883.
115] ^^^ RESTORA TION OF j868 1 1 5
of foreign model and of foreign build, ever owned by Japan
or her subjects. The new government repealed the old edict
and used every possible means to encourage the ship build-
ing industry. In 1888 the construction of junks of more
than 500 koku burden was again prohibited, but this time
the motive prompting the legislation was exactly opposite
to that which called out the edict of lyemitsu. The Jap-
anese junks were so fragile they were not fit for any consid-
erable voyage, and the number of wrecked junks each year
was so great * that the government determined to encourage
the construction of large vessels on the model of European
ships. English navigation and shipp ing has been taken as
the model, and the merchant marine of Japan has been de-
veloped largely by government initiative. Merchant marine
colleges were established in Tokio, Osaka, and Hakodate.
Docks were built by the government as well as by private
enterprise. The Yokosuka dock is said to be the finest in
the Orient. Several merchant marine companies were in-
corporated, and the remarkable progress of Japanese navi-
gation and ship building will be best explained by the fol-
lowing tables :
Steam and Sailing Vessels in Japan}
Steamers 0/ too tons and up-warde. Sailing ships fl/sQ tons and upwards.
No. of Cross Net. No. of Net
Year. Ships. Tonnage. Tonnage. Ships. Tonnage.
1891 147 123,279 76,412 »04 27,721
1892 146 120,882 75,459 98 25,602
1893 143 121,697 78,860 100 26,505
1894 179 142.095 88.S38 a6o 37»6i5
1895 193 I7x,90i 108,179 256 36,867
1896 242 274,659 172,977 255 37,655
1897 267 313,568 192,400 249 33.880
1898 318 408,503 246,933 234 31,750
1899 334 439,509 282,908 240 30,5*5
1900 332 455.535 282,549 316 40,966
I901 338 477.3" 296,639 1,053 117.364
''From 1877 to 1890 the annual average of wrecked junks was 383.
• LJ. S. Report of Commission of Ncivigalion, igoi.
Il6 PAST AND PRESENT OF JAPANESE COMMERCE [ii6
There arc three leading merchant marine companies in
japan. They are ' The Japanese Mail Steamship Company. |
Capital 22,000,000 yen. Gross I'onnagc 202,366
No, of Steamers 67 Distance of voyages, 1,311,726 nau-
No. of Voyages 906 tical miles.
The Osaka Merchatit Marine Cc^npajiy.
Capital lo,ooo,coo yen. Gross Tonnage 42,851
No. of Steamers 57 Distance of voyagei, 867,772 nautical
No. of Voyages i S82 miles.
The Toyo Steamship Company:
Capital 6,500,000 yen. Route between Yokahaoia and San
No. of Steamers 3 Francisco.
After the China-Japan War, 1894-1895, the government
adopted a new policy for the encouragement of the shipping
industry. By the laws which became of force on October i,
1896, three classes of bounties were provided for.' There are,
( I ), bounties for encouragement of navigation ; ( 2}, bounties
for encouragement of ship-building ; and (3), bounties granted
to special lines. In the first of these classes are the ships
built of iron or steel, owned exclusively by Japanese, and
plying between Japan and foreign ports. For these vessels
the bounty is given at the rate of twenty-five sen per thousand
miles per gross ton for a ship of one thousand tons burden
and steaming at a rate of ten knots per hour, ten per cent,
for each additional five hundred tons, and twenty per cent,
for each additional knot of speed are also given until the
maximum of six thousand tons and seventeen knots is
reached. The bounty on ship-building requires the fulfil-
ment of the following specifications : Ships for bounty must
' Yokoi, The History of yapanese Commerce, vol. ii, pp. 83 et seq. The figurei
given represent the standing of the companies in March, 1900.
% * U. S. Report of Commission of Navigation, 1901.
i V
1 1 7] THE RESTORA TION OF 1868 i j 7
be constructed by Japanese companies whose shareholders
are exclusively Japanese, and built of iron or steel and of
more than seven hundred tons burden. The rate of bounty
is twelve yen per ton for a vessel of between seven hundred
and one thousand tons burden and twenty yen per ton for
vessels of more than one thousand tons burden. In addi-
tion, when the engines are built in Japan, a further bounty
of five yen per horse-power is given. The amount of bounty
to each special line running under contract with the govern-
ment is as follows: ^ figures for 1899-1900.
Yokohama — Melbourne Line 525.657 yen.
Yokohama — Bombay Line 192,108 yen.
Yokohama — Europe Line 2,673,894 yen.
Hong Kong — Seattle Line 654,030 yen.
Hong Kong — San Francisco Line 1,013,880 yen.
Other minor lines 366,639 yen.
Total bounties . 5,416,208 yen.
Amount of bounty granted to shipping, whether as sub-
sidy for mail service or otherwise, by the government, was
as follows : "^
In 1890 and 1891, annually 945,000 yen.
In 1892 to 1895, anou^ly 930,000 yen.
1896 1,027,275 yen.
1897 2,127,086 yen.
1898 4,132,123 yen.
1899 5,846,956 yen.
(d) Fiscal and Monetary Systems.
The change from a long established feudalism to a cen-
tralized and unified government in 1868 naturally called out
many extensive and striking political and financial schemes.
* Austin, Commercial Japan, July, 1899, (U. S.Treas. Dept. Pub.) Monthly
Summary of Commerce and Finance.
• XJ. S. Report of Commission of Navigation^ 1901.
1 1 8 PAST AND PRESENT OF JAPANESE COMMERCE [ 1 1 g
There were innumerable improvements to be made, many-
abuses to be abolished and eradicated, and many western |
institutions to be inrroduced for the development of the
country. The new government had to face the condition
referred to in the old saying, " easy to break and hard to 1
rebuild." [
Although political power was restored to the Emyeror, *
and a centralized government established, there was no pro- $
vision made for any fixed revenue. Such expenses as those
made necessary by the Restoration should be paid by the
people as a whole, and taxation is naturally the proper
method for securing to the government the required sums.
But the government found its hands so full of other matters,
its position was too precarious to admit an immediate resort
to heavy taxation. Such a course would doubtless have
worked the speedy downfall of the new regime. The other
possible measures of relief, and those to which the govern-
ment did resort, were public loans and the issue of paper
currency.
There is no part of governmental functions more import-
ant and more far-reaching than its fiscal system and the
general conduct of its financial affairs. The history of its
public debts and monetary systems is an interesting and
instructive part of the history of the Japanese government.
It requires for its full elaboration much larger consideration
than is possible here. However, a summary is here given.
The voluntary surrender of feudal principalities to the
Emperor made it necessary to remunerate the feudal chiefs,
at least in part, for their patriotic sacrifices. Their retainers
and vassals, who had been dependent on the fixed allowance
made to them, had also to be provided for. Hereditary ^
Pension Bonds were given to them according to the amount
of their former income. But seeing that they needed some
capital, with which to embark in different business enter •
1 1 9] THE RESTORA TION OF j868 i i 9
prises, the government saw fit to take up the Hereditary
Pension Bonds and to issue instead of them the Voluntary
Capitalized Pension Bonds. A good part of the first bonds
were exchanged for the later issue ; the payment of the
principal of which was to be made in annual installments.
Soon after the Restoration, the obligations of the feudal
chiefs were converted into state liabilities in the same way
that the United States assumed the liabilities of the different
states in 1790. These constituted the OfH and New loans of
1873. Prior to the Restoration, the Shinto priests were
supported by an allowance made to them by the Imperial
Court or by the chiefs. Their landed property was confis-
cated by the new government, and in place of it they were
given Pro-Rata Pension Bonds.
The first foreign loan, amounting to 4,880,000 yen, was
raised in England in 1869. This loan was made to provide
for the construction of the railroad between Tokio and
Yokohama and for other industrial enterprises. The second
foreign loan was floated in England in 1873. The amount
of this was 11,712,000 yen, and was chiefly for the purpose
of supplying capital to the feudal chiefs and their retainers.
Besides these, several domestic public loans were floated in
amounts as shown in the following tables. These bonds
differed in management, rate of interest and manner and date
of redemption, and confusion resulted. The economic de-
velopment of the country and the growth of credit organi-
zations brought about a favorable condition of the money
market. In 1886 all the domestic loans were consolidated,
the aggregate of the new loan being limited to 175,000,000
yen at 5 per cent, interest. All public loans and outstand-
ing debts are shown in the table. The table is constructed
showing the account on December 31, 1899.
V.
120 PAST AND PRESENT OF JAPANESE COMMERCE [120
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1 2 1 ] THE RESTORA TION OF jS6S i 2 1
From the above table it is seen that 154,437,000 yen out
of a total of 500,700,000 yen are devoted to productive
purposes. The so-called non-remunerative debt of 346,-
263,000 Y&n for a population of 44,000,000 is but little more
than 7 yen ($3-5o) per capita. The general census figures
for 1890 give the per capita debt of various nations as
follows : Great Britain and Ireland, $87.79 ; France, $1 16.35 »
Germany, $1.72; Italy, $76.06; Russia, $30.79; Austria-
Hungary, $72.42.'' However, the burden of the debt de-
pends on the national wealth and the productivity of the
country. The ratio of pubHc debts to national wealth is
given as follows:' United States 1.4 percent.; the United
Kingdom, 6 per cent.; Germany, 8yV per cent.; Russia,
II. r per cent.; France, 12.8 per cent,, while Japan, is but
3.3 per cent.3 Moreover, in a country like Japan, where
nearly everything is done by government initiative, and
under its protection, the national indebtedness tends to be
greater than in England and the United States, where
government activity is minimized by the highly developed
individualism. At any rate, Japan is not burdened by her
national debt.
At the beginning of the Meiji administration the revenue
of the government was estimated at only 700,000 Rio,*
while the enormous expense connected with the restoration
of the order of things had to be met. The government
adopted the plan of meeting the emergency with the issue
of a cheap medium of exchange. The first paper currency
» U. S. Census, 1890. Wealth, part i, p. 8.
* Year Book of the London Daily Mail, 1902.
'Austin, Commercial japan, 1899, (U. S. Treas. Dept. pub.) "Monthly sum-
mary of commerce and finance." The national wealth of Japan is greatly under-
estimated at 15,000,000,000 yen, but as these are the only data obtainable, I have
made them the basis of my calculations.
C«c * Yokoi, The History of Japanese Co/nmerce, vol. ii, p. 17.
■ii
X 22 J'-'i^'y' AND PRESENT OF JAPANESE COMMERCE [122
issued on April 2, 1868, was known as *' Dajokwan Satsu,"
and the period of its circulation was set at thirteen years.
The amount of this issue reached 48,000,000 Rio by the
close of the next year. On September 17, 1869, another
issue of paper currency appeared, known as " Mimbusho
Satsu," amounting to 7,500,000 Rio. This later issue was
to redeem and retire the Dajokwan Satsu which was in large
denominations, and also to meet the need for small currency
in the money market. But the deficit of the government's
revenues was so great that the government felt itself com-
pelled to re-issue the notes instead of cancelling them. The
over-issue of this cheap money, together with the yet un-
stable condition of the new government, made it impossible
to circulate this currency except at a great depreciation in
value. This paper currency was said to be convertible into
specie at par, but one hundred Rio of the paper money was
exchanged for forty Rio in specie. The government made
several vain attempts to maintain the credit and circulation
of the currency, and finally shortened the period of the circu-
lation of the Dajokwan Satsu and the Mimbusho Satsu to
five years, and pledged itself to regard the notes at the end
of that period as government bonds bearing 6 per cent,
interest. On October 12, 1 871, Treasury Convertible Bonds
to the amount of 6,800,000 yen were issued. The avowed
object of this issue was "to call forth hoarded old coins in
order to have them re-coined into new coinage," and to fill
up a yearly deficit of revenue in disguise.^ January 14,
1872, 2,500,000 yen of Kaitakushi Convertible Notes were
issued. This issue was to defray the expenses of the
colonial government of Hokkaido.
As one result of the restoration, the government was
obliged to take over the various kinds of paper money issued
by more than 270 feudal chiefs. This money, called *' Han
* Count Matsukatat Report on the Adoption of Gold Standard in Japan, p. 20.
1
^%
123] THE RESTORA TION OF j868 1 25
Satsu," was of all shapes, kinds, and of 1 694 varieties, amount-
ing in all to 38,551,132 yen. In order to unify the paper
money and to prevent counterfeiting, which was then very
prevalent, the government decided to exchange all paper
currency into notes of more skillful workmanship. The new
money, made by a firm in Frankfurt, Gei'many, was issued
in 1872 in exchange for all of the previous issues — the Da-
jokvvan Satsu, the Mimbusho Satsu, the Treasury Convertible
Notes, the Kaitakushi Convertible Notes, and the Han Satsu.
The extraordinary feature of this last issue was that it was
inconvertible, and thus, without exception, the paper cur-
rency of the country came to be inconvertible.
The monetary system which was established by lyeyasu
in the sixth year of Keicho, 1600 A. D., remained un-
changed to the last days of the Tokugawa Shogunate.
Through the successive debasements of the coinage during
260 years, the character of the Keicho system had been lost
and the currency of the country was in the utmost disorder,
but it remained, nevertheless, a gold standard money. The
amount of the different coins in circulation at the beginning
of the Meiji government was estimated to be as follows:'
Old Gold and Silver Coins 97,030,000 Rio.
Gold Coins 87,610,654 Rio.
Silver Coins 52,665,000 Rio.
Copper, etc 6,303,000 Rio.
The new government undertook to meet the pressing need
of monetary reform. In view of the existing industrial con-
ditions, and the wealth of the country, the government
deemed it wise to have an inexpensive metallic currency for
the circulating medium of the country. In a low stage of
industrial development, it is true that a plentiful supply of a
cheaper money is better for the development of the resources
^ Report of Department of Finance, Japanese Government, 1876.
124 PAST AND PRESENT OF JAPANESE COMMERCE [124
of the country than a scarcity of dearer money. Adam
Smith wrote that " no complaint is more common than that
of scarcity of money." The government needed a large
supply of money for all the enterprises and undertakings
which were springing up, and, inasmuch as the Oriental
countries were on a silver basis, silver was made the standard
in Japan, and gold subsidiary. In November, 1870, the
government began to coin silver. Meanwhile, early in 1 871,
a memorandum' from Mr. (now Marquis) Ito, Vice Minister
of Finance, who was traveling in the United States, com-
mended to the notice of the government the advantages of
the gold standard monetary system. In this way a change
was effected in the coinage policy of the country, and the
gold standard was adopted. At that time, Mexican dollars
were used universally in the commerce of the Far East, and
in order to facilitate foreign trade, silver yen, which were
called "Trade Dollars," were coined for use, and to be legal
tender only in treaty ports.
The yearly deficit in the revenues and the Civil War of
1877 compelled the government to issue a large amount of
inconvertible paper currency, and this, added to the fall in
price of silver, drove the gold almost entirely out of the
country. In 1878 the government adopted the policy of a
bimetallic standard, and the Trade Dollar was made legal
tender outside the treaty ports. Silver yen acquired the same
legal value as gold yen throughout the country, and the
monetary system of the country was changed from the gold
standard to the " double standard." But this did not stop
the efflux of gold, for the fall in price of silver continued.
The world's production of this metal had already increased
since 1871 ; the German Empire had adopted the gold
* Count ^t,'\t5Hlcclta, Report on tht Adoption of the Cold Standard in Japan, pp.
2 // ieq^ The igitation wbiclr attended the passage of the Act of 1873 in the
U. S. may have influenced Mr. Ito to some extent.
125] THE RESTORA TION OF iS68 1 2 5
standard in 187 1. Silver coinage was repudiated by the
Latin Conference,* and the Act of 1873 had been passed by
the United States. Japan was legally on a bimetallic basis
of coinage, but actually on a monometallic basis, that is,
the silver standard.
Mr. Tooke and other economists have fully established
the fact that depreciation is not a necessary consequence of
inconvertibility of paper currency, if the money be not issued
in excess. But the ever-recurring deficit in the revenue of
the government led it again to over-issue paper currency,
and an enormous depreciation was the inevitable result. In
order to withdraw some of the paper money from circula-
tion the government issued Paper Money Exchange Bonds
bearing 6 per cent, interest. To ease the money market,
the establishment of national banks was encouraged, the
national banking legislation of the United States being made
the basis of Japanese legislation. It was ordered that '* the
national bank was to deposit with the government paper
money equal in amount to six-tenths of its capital, in return
for which the government was to deliver to the bank the
same amount of the Paper Money Exchange Bonds bearing
six per cent, interest. On the security of these bonds, the
same amount of bank notes were delivered. Of the capital
of the bank, four-tenths was to be in specie, and kept for
the conversion of these bank notes." ' But as soon as the
bank notes were issued, the demand on the banks for ex-
change was so great that the full amount of bank notes were
not issued, . . . the amount of the issue did not reach two
million yen. Meanwhile with the older view that public
debt is capital, the government issued 174 million yen of
the Hereditary Pension Bonds in order to supply the needs
* Shaw, History of Currency, pp. 190, 276.
' Count Matsulvata, Report on the Adoption of the Ccld Standard in Japan,
P-25-
126 PAST AND PRESENT OF JAPANESE COMMERCE [126
of the market for capital. The banking legislation was so
modified that bank notes were to be issued to the amount of
34 million yen on the security of these bonds, and the bank
notes were to be convertible, not into specie, but into cur-
rency. As the currency of the time was inconvertible paper
money, these bank notes were simply another kind of incon-
vertible paper. The mistaken policy of the government was
based on " the erroneous conception that capital and currency
were interchangeable terms." ' National banks were estab-
lished throughout the country to the number of 153 in 1879.
As the following table' shows, the increase of the paper
currency was so great that the difference between silver and
paper became marked and disproportionate:
Government Pa^er
*'""'• Money {yen).
1868 24,037,389
1869 50,090,867
1870 55,500,000
1871 60,272,000
1872 6S,400,CX30
1873 88,281,014
1874 101,802,304
1875 99.<>7i.869
1876 105,147,582
J877 105,797,092
1878 139,418,592
J879 130,308,921
18S0 124,940,485
i88x 118,905,194
Bank Notre
Specie Reserve
(.yen).
<.y*n).
19,611
39.873
191,287
14,709,800
1,362,210
14,819,127
1,995,000
18,483,983
1,420,000
14,664,027
1,744,000
15,171,224
>3.352.75»
15,115,405
26,279,006
17.837,729
34.046,014
9.967.879
34,426,351
7,166,819
34,396,818
12,699,576
In 1879 the ratio between silver and paper was i yen of
silver to i yen 21 sen of paper. The government thought
the existing condition of affairs was due to the appreciation
of silver and not to the depreciation of paper. It, therefore,
attempted to keep the price of silver down. In 1881 i yen
* Count Matsukata, Report on the Adoption of tlie Gold Standard in Japan,
p. 35.
*Ibid., jp. 29.
%t-
%
■^
ts.«?
127] THE RESTORATION OF iSbS 12/
of silver brought i yen 8i sen of paper, and this was the
lowest point ever reached. The immediate effects of this
disordered financial condition were a general rise of prices,
lack of available capital, rapid rise of the rate of interest,
and wild speculation. Imports exceeded exports, and this,
taken in connection with the other unhappy conditions,
caused an increasing eftlux of specie. The following figures
illustrate the conditions ;
Exports and Import: of Commodities {in yen).
Y*ar. Export* Imports. Dalancf.
1868 i5»5S3.473 10,693,072 * 4,860,401
1869 12,908,978 20,783,633 7.874.655
1870 14,543,013 33.74«.637 19,198,624
1871 17,968,609 21,916,728 3,948,119
1872 17,026,647 26,174,815 9,148,168
1873 21,635,441 28,107,390 6,471,949
1874 19.317.306 22,461,814 4ti44.5oS
1875 18,611, ui 29,975,628 11,364,517
1876 27,711,52s 23,964,679 13,746,849
1877 23,348,522 27,420,963 4.o7^^38I
1878 25,988,140 32,874,834 6,886,694
1879 28,175,770 32,853,002 4.777.232
1880 28,395,387 36,626,601 8,231,214
i88x 31,058,888 31,191,246 1321358
Exports and Imports of Gold and Silver {in yen).
Export*. Importt. Balance.
Year. Cold. Silver. Gold. Silver. Gold. Silver.
1868 ^
1870 I No reliable returns before 1872.
1S71 J
1872 2,684,786 1,796,109 3,691,510 2,684,786 1,895,401
1873 2,614.055 2,508,872 2,013,907 1,066,635 600,148 1,442,237
1874 8,726,290 5,868,912 2,700 1.069,031 8,123,590 4,799,8Si
1875 10,603,345 4,060,626 26,515 27;,So7 10,629,860 3,788,819
1876 5.872.356 4.803.345 721,465 7.545.776 5.^^0,891 2,742,431
1877 6,221,777 3,219,494 162,281 2,011, 2i8 6,059,496 1,208,276
1878 4.601,083 3.727.570 243 2,188,838 4,600,840 1,538,712
1879 4,749.635 8,029,229 731,666 2,403,138 4,0:7.969 5,626,091
18S0 5,888,174 7,334.819 20,618 3,617,6.2 5,867,556 3,717,207
1881 2,246,889 5,243,658 150 1,855,997 2,246,739 3.387,661
'In 1868 and in 1876 the exports exceeded the impor'^s. The failure of the
•ilk industry in France and in Italy caused an unusually large exportation of raw
silk in 1876; in all other years the balance was regularly against Japan.
Si
128 PAST AND PRESENT OF JAPANESE COMMERCE [128
Imports of silver were in excess in 1872 and in 1876.
The former v/as due to the foreign loan of 1871, and the
latter to the export of raw silk.
The above is the monetary history of japan to 1881, when
another financial reform took place, and paved the way for
the adoption of the gold standard in 1897. With the ap-
pointment of Mr. Matsukata to be the Minister of Finance,
in 1 88 1, a new epoch in the financial history of Japan was
inaugurated. His financial policy embraced two leading
principles. First, to increase the revenues of the govern-
ment by means of additional taxation and by lessening the
burden of the central government through the increase of
local taxation, and with the increased revenue to augment
the specie reserve for the redemption of paper currency.
Second, to establish a central bank which should serve as a
regulator of the currency of the country. Mr. Matsukata
believed that the lack of capital and the rise in the rate of
interest were both due to unequal distribution and restricted
circulation of currency in the country. The system of
national banking was so imperfect that correspondence and
intercommunication between the banks was not well organ-
ized. In fact, the condition approached that of a banking
" feudalism," each bank working within a narrow sphere of
influence.
The history of banking in the various European states
discloses the fact that while the influences which called into
existence large, central banking institutions varied widely,
the result of the establishment of these great banks was ''^^
identical in every case, /. e., a semblance of financial order
was instituted and the banks served to regulate, within their
spheres of influence, the circulation of currency.
In 1882 the Bank of Japan' was established after the
* Count Matsukata, Report on the Adoption of the Gold Standard in Japan, pp.
43-67, fot his memorandum in regard to the establishment of a central bank in
Japan, pp. 67-71, for regulations cf the Bank of Japan.
, m^ik?
'A *>.-3«-
.t
I
129] THE RESTORATION OF i8b8 129
model of the Bank of Belgium. The Bank of Japan was to
issue convertible bank notes which were exchanged for the
inconvertible paper money of the government and for the
national bank notes.' In 1890 the government adopted the
plan by which it set apart a Special Comptabilite Fund for
the entire withdrawal of the government paper money which
ceased legally to circulate on December 31, 1899. The
charters of the national banks expired by limitation in 1897,
and after twenty years of experiment and experience, these
institutions became private banks. The notes of the national
banks ceased to circulate on December 9, 1899. Thus all
paper currency was replaced by the convertible silver certifi-
cates of the Bank of Japan, and Japan became de facto a sil-
ver standard country. The success of Mr. Matsukata's
policy is indicated by the following figures :
Amount of Paper Currency in Circulation and Specie Reserve.
Government Paper
Y»»r. Money and Bank Specie Reterve (ytn) .
Notes (,yen).
1882. I43»754.363 16,730,267
1883 132,275,012 25,876,230
1884 124,396,175 33.569.188
18S5 118,500,485 42,265,640
1886 97.302.323 25,865,864
1887 84,419,177 19.790.388
1S88 74,414,389 8,150,822
X889 67,929,788 10,709,953
1890 59.083,435 25,000,000
1891 52,756,229 20,500,000
1892 44,718,754 15,000,000
1893 39,163,118 12,000,000
1894 35.186,343 9,000,000
1895 31,926,010 8,000,000
1896 25,874,060 7,365,000
1897 14,100,989 6,965,000
* Op. cit., p. S^i ^or regulation of redemption of national bank notes; pp. 85-86
lor regnlations of Conyertible Bank Notes of Bank of Japan.
J30 PAST AND PRESENT OF JAPANESE COMMERCE [130
The following figures exhibit a trend directly opposite to
the table, showing the balance of exports and imports up to
1882; that is to say, imports exceeded exports in but two
years, 1890 and 1894. The first was due to the failure in
part of the rice crop in Japan. The excesses of imports
over exports since 1895 are chiefly due to the influx of
Chinese indemnity and to the Post-Bellum industrial ex-
pansion of the country.
E'xporis and Imports of Commodititt {given in yen").
Ytar, Exportt. Importt. Balance.
1882 37,721,751 29,446,594 8,275,157
1883 36,268,020 28,444,842 7,823,178
1884 33,871,466 29,672,647 4,198,819
1885 37,146,691 29,356,968 7.789.723
1886 48,876,313 32,168,432 16,707,881
1887 52,407,681 44,304,252 8,103,429
1888 65,705,510 65,455,234 250,276
1889 70,060,706 66,103,767 2.956,934
1890 56,503,506 81,728,581 25,125,075
1891 79.527,272 62,927,268 16,600,004
1892 91,102,754 71,326,080 19,776,674
1893 89,712,865 88,257,172 1,455.693
1894 113,246,086 117,481,955 4,235,869
1895 136,112,178 129,260,578 6,851,600
1896 117,842,761 171,674,474 53.831.713
1897 163,135,077 219,300,772 56,165,695
1898 165,753,753 277,502,157 111,748,404
1899 214,929,894 220,401,929 5,472,032
IQOO 204,429,994 287,261,846 82,831,852
131 ] THE RESTORATION OF i8bS j^j
Exports and Imports of Gold and of Silvtr {given in ytn")
Exports. Imports. Balance.
Gold. Silver. Gold. Silver. Gold. Silver.
1883... 1,251,035 3,179,16a 300 6,160,334 x>3So,53S •3.581,06a
1883 1,009,570 3,146,995 SS9 S.4S0.9** 1,009,011 '3.303.947
»884 1,433,654 3,581,418 399,303 5.3H.S57 1.1*4.45' 'i.73i.»39
1885 493,636 3,763,809 608,813 6,938,038 *ii6,i77 3,174,319
i830 302,543 9,323,905 1,159,468 3,012,405 '856,926 1,311,500
3t837 86,336 10,949,25a 1,259.527 7,6",739 '1,173,291 3,337,513
1888 450,234 7,383,160 1,203,253 7,529,239 '753,968 '146,079
1889 268,010 4,930,530 749,934 13,423,323 '481,914 '502,803
1890 1,687,606 12,090,926 360,343 840,365 »,327,364 x«,350,55i
1891 230,446 1,333,518 283,144 13,605,383 '52,698 '12,382,864
1893 8,544,523 1,185,330 395,493 22,488,264 8,149,030 '21,303,034
1893 2,303,678 9, •386,510 496,730 10,689.757 1,805,948 '703,474
1894 3.547,^3' 30.831,973 555,966 36,327,687 2,991,173 4,604,28s
1895 3,791,953 24,509,747 1,039,912 4,844,253 1,762,040 19,665,495
1396 1,996,576 9,603,308 10,317,458 28,924,750 '8,320,882 '19,323,443
1897 8,863,79s 10,355,366 64,313,493 17,153,220 '55.449,695 '6,797,854
1898 46,281,349 40,706,132 37.027,753 5,536,028 9,253,596 35»i70.»04
1899 8,768,365 3,409,832 20,080,696 83,805 '*J»3i2,33i ',327,077
X900 51,761,630 4.945.443 8,967,198 9,550,637 43,794,433 »,394,8o6
- Denotes excess of imports over exports.
It appears that the increase of the specie reserve, the fav-
orable balance of trade, and the influx of specie relieved the
strained conditions of the country, brought about a fall in
the rate of interest and the gradual rise of paper money,
until it was at par with specie, and thus effected a more
healthy circulation of currency throughout the country.
The change from inconvertible paper currency to the de
facto silver standard was a step toward the goal of Mr. Ma-
tsukata's financial policy. His next undertaking was a mon-
etary system based on the gold standard. A commission
was appointed on October 14, 1893, to investigate regarding
the finances of the nation. After exliaustive research and
careful deliberation, the commission reported' in July, 1896,
recommending the adoption of a gold monometallic mone-
tary system. The one difficulty which seemed to offer an
effectual bar to further progress in that direction was solved
' Count Matsukata. Report on the Adoption of Gold Standard in Japan, pp.
161-4163.
■-■*:
'•;'^,
132 PAST AATD PRESENT OF JAPANESE COMMERCE [132
in a manner similar to that which led the German Empire
to the financial reform of 1871. The war indemnity which
Japan exacted from China amounted tc about 380,000,000
yen. Within a period of one year Japan was made a gold
standard country.
To change the monetary system of a nation is to change
the whole standard of price-making. It is theieiore a matter
of prime economic importance, and cannot be too carefully
managed. The situation as it then existed in japan was
briefly this :
The money standard was nominally bimetallic, but actu-
ally the monometallic silver standard prevailed. The market
ratio between the two metals was 32 to i. One gold yen
was worth exactly two silver yen. In order to obviate the
danger of a sudden fluctuation in price, and a violent dis-
turbance between the debtors and creditors under existing
contracts, the new gold yen was made one-half the value of
the former gold yen, and exactly equal to the silver yen. In
this way, without any friction or disturbance, Japan put her-
self in position to keep pace with civilized nations, and to
keep her foreign trade intact and free from the inconsisten-
cies and incongruities which otherwise must have been made
more or less painfully apparent.
It is impossible, at this time, to form an intelligent judg-
ment of the effect on the foreign trade relations of this
change in the monetary system, for there have been too
many disturbing forces in operation since the change
was made, notably, the various effects of the war, failure
of the rice crop, enforcement of a new tariff, etc. But
the judgment of the commission is commendable when it
says, " basing the monetary standard on the falling metal
may not be consistent with the real and lasting welfare of
the country." Freedom from constant fluctuation in the
rate of exchange may have facilitated Japan's trade with
n c m
^M
»di M
133] ^^'^ ^^^ TOR A TION OF 1868 1 3 3
gold standard countries. This trade now amounts to about
two-thirds of the entire volume of our foreign trade, as may
be seen in the following tables; and a cioHer and safer con-
nection between Japan and the central money markets of the
world may have been effected by the change.'
The gold standard countries used in the compilations arc
the United States, Great Britain, includir^g Canada and
Australia and excluding British India; France, Germany,
Belgium, Switzerland, and Italy. The silver standard coun-
tries are China, Korea, Hong Kong, French India, the
Philippines, Russia, Siam, Peru, and Mexico.
_ , , „ . , Imports frofH
Exports to Imperii from Exports to _ _
Ytart. Gold Standard Gold Standard Silver Standard _ ^ .
„ . ^ . . rs . ■ Countries
Countries. Countries. Countries. , .
{,in yen).
1893 58,343.976 46,669,990 25,454,018 29,858,187
1894 77,222,724 68,010,849 28,646,992 38,274,038
1895 94,676,111 76,102,130 32,879,632 40,156,284
1896 68,994,843 107,201,306 39,298,089 40,700,962
1897 97,256,310 122,696,245 54,203,008 65,457,099
1898 85,244,959 145,060,872 69,087,376 77.i79.7c9
1899 116,720,000 117,594,000 85,201,000 53,215,000
1900 99»56o,3i7 185,879,404 86,6ii,6iS 61,967,371
It is impossible to enter on a general discussion in this
place of money economy and fiscal systems, but attention
may be called to some points which are often overlooked,
and especially the advantages which a silver standard coun-
try enjoys in the matter of foreign trade. For instance, when
the price of silver falls it is evident that the rate of exchange
between the silver using country and the gold standard
country will also fall. In that case the products of the silver
country would sell at a lower price in the markets of the
gold country. This would tend to increase the demand for
those products, and the price of them in the silver country
would rise accordingly. The rise in prices of the commodi-
<
^ Count Matsukata, Report on the Adoption of Gold Standard in Jcpan, p. 374.
'/Sl-St
is4l
134 PAST Ai\D PRESENT OF JAPANESE COMMERCE [134
ties in the silver country would give a larger profit per unit
of production. This is a reason why the exports of a silver
country increase with the fluctuation of ratio between gold
and silver, and it may be regarded as a feature of special
advantage to silver using countries. As indicated in the
above table, since her adoption of the gold standard, Japan's
exports to gold standard countries tended to decrease while
the imports from them greatly increased. The Spanish-
American war and the crop failures in Japan partly account
for the decrease of exports to gold countries, and the influx
of indemnity and the post-bellum industrial expansion of
the country partly account for the larger imports. But
over and above these, the change in the monetary system
has encouraged importation from the gold using countries.
It is true that two-thirds of our present foreign trade is with
gold standard countries, but it must be remembered that,
with the exception of the United States, there are no bright
prospects of future expansion of trade with them. It is
probable that our trade with foreign nations, especially those
of Europe, has come to a stand-still, if it has not even
reached and passed its climax. On the other hand, our
trade with China and Korea, and other silver standard coun-
tries of the Far East, has been increasing recently at a
remarkable rate, and is full of possibilities.
While the adoption of the gold standard has doubtless
brought Japan into commercial relations on a more equal
footing with gold standard countries, she may have sacrificed
(or that end the special advantages of silver standard
countries, and it remains to be seen which will serve her
best in the long run.
(c) The Era of'Frc^ Trade " and Industrial Revolution.
In the middle of the eighteenth century, with the rise of a
school of French economists known as the Physiocrats,
1 3 5] THE RESTORATION OF /86S 135
agriculture came to be considered the only source of wealth.
The Physiocrats " laid stress on the powers of nature as the
basis of national prosperity and of public wealth."* Their
doctrine dealt with the creation and consumption of wealth
rather than v/ith the problem how to increase and to dis-
tribute it. They taught that agriculture alone yields a
produit net, that is, a margin of value above labor cost, and
that manufacture, by costing all the additional value it im-
parted to a commodity, produced none and was "sterile."*
With the beginning of the industrial revolution which
started in England in 1770, the Physiocratic ideas were
gradually displaced by the much disci:ssed and much
emphasized *' doctrine of exchange" of the English classical
school. Until the close of the seventeenth century England
was but an agricultural country, and her commercial and
industrial supremacy was a characteristic feature of her
growth in the nineteenth century. This transformation was
a sequel, if not a consequence, of the agricultural, industrial,
and commercial changes.'
The inventions of Hargreaves, Arkwright, Watt, and Cart-
wright changed not only the method of production, but also
the organization of industrial society. The domestic stage
of industry became transformed into the factory system, and
the centre of economic power shifted from the landed
aristocracy to the capitalist class. The factory system, how-
ever, was much more due, as a system, to the expansion of
trade."* The rapidly increased facility of transportation and
communication widened the sphere of supply and demand
from local limits to the world market. The opening of the
Suez Canal in i86y so altered the channels of commerce
* Hadlcy, Eeonomics, p. 9.
' Higgs, The Fhysiocrad, p. 43.
• Price, English Commerce and Industry, p. 1 85.
** Toynbee, Industrial Revolution, p. 91.
Fooft^i
to ^ij
s-^oB
136 PAST AND PRESENT OF JAPANESE COMMERCE [136
and trade that large demands of distant markets were brought
so near as to make it necessary to produce on a larger scale
than ever before. This urged on what is called " the
Factory System."
It is said that the modern industrial revolution started in
the cotton spinning industry. The changes brought about
in the processes of manufacturing were so great as to be
termed "revolutionary." They were radical changes in the
method of production. The utilization of steam power and
the application of inventions to methods of production were
greater improvements in that line of activity than had ever
been made in human history. Economy in the labor used
in production was the cardinal point in the revolution.
Production is a collective operation, as Professor Ciark
says, and it is dependent upon organization, and is nothing
if not organized. The fall in the prices of manufactured
commodities no doubt increased, both directly and indirectly,
the wants and the capacity for consuming of the people.
And the abundance and consequent cheapness of one class
of commodities may have brought it into use as a substitute
for some other. The character and quality of consumption
were changed in the course of time, but this was a gradual
process, an evolution, and there was no general shock of
transition in the nature of general demand. It is necessary
to understand the importance of this feature of the yjdustrial
revolution in order to comprehend the radical contrast be-
tween it and the industrial revolution in Japan.
For the industrial revolution in Japan was altogether dif-
ferent from that which occurred in western Europe. It
happened, in the history of modern Europe, that the growth
of industrialism precipitated the overthrow of Feudalism,
and the industrial revolution paved the way for political
revolution. In Japan, on the contrary, the political revolu-
tion was the actual efficient cause of the industrial revolu-
137] THE RESTORATION^ OF i868 137
tion, and this in turn was not a change in the methods or
organization of the productive forces of society.
The poHtical revolution of 186S afifected, first of all, all the
traditional social institutions of the nation. The opening up
of the country to the world brought foreign commerce and
industrial capital into prominence as factors animating the
people toward national progress. All progress is condi-
tioned by cost, and social progress is always attended by a
more or less difficult readjustment involved in the breaking
up of long established relations, interests and occupations.*
When the destructive social activity exceeds that of con-
structive readjustment, it is disorganization, or chaos of
social orders. The political revolution of Japan had left the
nation almost at the point of such a crucial experience.
That characteristic of the Japanese people, their willingness
to adopt everything which is found to be superior and to
give up unhesitatmgly what is proved to be inferior, led
them to a blind craze for everything European-American.
The general human propensity to seek novelty and the force
of fashion and custom, are economic factors of self-evident
importance. It became the fashion to adopt whatever for-
eign thing was capable of being adopted. As Count Okuma
expresses it, it was as if " a new class of consumers with
widely different tastes had been suddenly called into exist-
ence among the old class of manufacturers, asking for things
which the manufacturers knew nothing of, and which, there-
fore, they could not supply." '
As change in the methods of production had been the
main factor in the industrial revolution of the West, change
in the nature of consumption was the conspicuous feature of
the revolution in Japan. And the change was no such
^ Giddings, Democracy and Empire, p. 77.
*Okxima, InduHrial Revolution in Japan, North Americaa Reyievir, Nor,,
1900. *
138 PAST AND PRESENT OF JAPANESE COMMERCE [138
gradual process as it was in Europe, but a quick, sudden,
impetuous transition affecting the whole element of demand.
Consumption is a fundamental economic principle; it is in-
dividualistic, not dependent on organization, and normally
its changes are gradual and quietly transitional.
Professor Jloscher argues that \Yhile a nation is politically
independent but economically in a low industrial stage, it 'is
the wise policy for that nation to adopt entire freedom of
trade and commerce with the outside world. " Such free-
dom will cause the influences of the incentives, wants, and
means of satisfaction of a higher civilization to be felt soon-
est in the country." ^
These conditions were perfectly fulfilled in Japan in the
period immediately succeeding the Restoration of 1868.
That movement had given to her a unified, centralized,
monarchical government, but she was in a low industrial
stage. It was the period of transplanting and of imitation.
Japan was searching the western civilization for whatever
seemed to bear the best fruits, choosing one thing from
France, another from Germany, others from England and
America and other countries. In such circumstances "free
trade" doubtless served as an incentive to national progress.
The essential feature of the free trade policy is to foster
the abundance and cheapness of consumers' goods. The
radical change in the nature of consumption, which has been
noted, made the adoption of perfect freedom of trade, or as
nearly that as conditions would allow, most advantageous to
the nation at large.
According to the provisions of the treaties negotiated^
Japan had no power of tariff autonomy. Circumstances
having been such as to impel her to such a course, she
could have adopted no measures for the encouragement of
home industries by laying protective duties, as seemed most
* ' Roscher, PolilicaJ Economy, vol. it, p. 434.
.1
J
11
1 3 9 J THE RES 7^ ORATION OF j868 j 3 g
desirable. The highest duty she could levy on foreign
goods was five per cent, ad valorem. Thus foreign goods,
finding no competition or hindrance to their ingress, flowed
into the country freely. The figures already adduced show
the excess of imports over exports during the first ten years
after the Restoration. As a result, many home industries
which had been established in the provinces in the feudal
regime were driven out of business and the greater part of
Japan's industrial world was paralyzed.
In England the progress of inventions and the introduc-
tion of machinery had gradually resulted in lifting the com-
mon laborer to the plane formerly occupied by the skilled
laborer. But in Japan the revolution involved the displace-
ment of labor by unequal competition forced on Japan by
the treaty inequalities and the peculiar nature of her in-
dustrial stress. She could not produce to meet the new de-
mands. The presence of foreign goods prevented an
enforced equilibrium of supply and demand by a gradual
change and modification of each. Her skilled laborers were
thrown out of employment and into the ranks of the un-
skilled, while these were forced nearer to the minimum of
subsistence line, or past it. A lower grade of land was
brought into cultivation, the wage level was lowered, the
price level of goods of domestic production was materially
decreased. The standard of living, never very high among
the laboring classes, was lowered still more. There was an
abundance of skilled labor at low wages, but the men could
not understand the use of modern complex machinery. The
capitalist could not apprehend the advantage of joint capital
and modern industrial organization.
The great expense connected with the opening up of a
new industry makes the interest obtained from the invested
capital for some time much below the level of that obtained
through other lines of investment. Not only did the gov-
140 PAST AND PRESENT OF JAPANESE COMMERCE [140
crnment give assistance to private companies sufficient in
amount to cover all losses incurred by foreign competition,
but it established several manufacturing industries byway of
experiment and example. By this government aid the peo-
ple began to grasp the significance and advantage of the
modern industrial system. Railways, mining corporations,
cotton mills, paper factories, and many other enterprises,
made their appearance as private undertakings.
Although there were many difficulties to be met in adopt-
ing the industrial system and many adjustments of institu-
tions to the new order of things, the home manufacturers
became able to meet in part the demands of New Japan.
The following figures will best illustrate the progress of
manufacturing industries. The imports of some staple raw
materials are steadily increasing, while those of manufactured
articles remain, relatively speaking, at a standstill. The ex-
port of manufactured articles is also increasing.
Cotton and Woolen Goods Imported into Japan {yen).
COTTON. WOOL.
M»nfd. Raw. Man/*d. Raw.
1882 10,898,000 483.CCO 1,838,000
1S87 11,652,000 913,000 3,875,000 208,000
1S92 11,930,000 12,324,000 5,318,000 323,000
1897 19,544,000 43,623,000 9,479,000 i,i68,oco
1900 14,364,000 62,210,000 8,252,000 4,445,000
Principal Manufactured Goods Exported from Japan (j/en).
Articles. iSSg. '597- jSqS. iSqq.
Habutaye.... 250,000 9,530,000 12,055,000 15,799,000
Other Silk Goods 553,coo 716,000 1,191,000 2,293,000
Silk Handkerchiefs .... 2,104,000 3,390,000 3»555jOOO 3,461,000
Cotton Goods 143,000 2,716,000 2,86o,cco 4,267,000
Carpets 54iOOO 847,000 850,000 721,000
Matches 1,137,000 5,641,000 6,273,000 5,890,000
Matting* l66,oco 3,232,000 3,938,000 3,710,000
Cotton Yarn 1,200 13,490,000 20,101,000 28,521,000
Porcelain and Pottery . . 1,529,000 1,819,000 1,989,000 2,181,000
Lacquer Ware 628,000 767,000 783,000 988,000
Straw Braid 146,000 3,181,000 2,404,000 2,770,000
Umbrellds 84,000 - 627,000 687,000 953,ooo
Totals 6,795,000 45,956,000 56,686,000 71,554,000
CHAPTER V.
G0VERN^fENTAL ACTIVITY
I. Protection for Yotuig Iitdustrie^.
The overthrow of Mercantilism and the rise of a more
liberal sentiment marked the middle of the eighteenth cen-
tury in Europe. The Natural Law of the Stoics had been
incorporated into the system of Roman law, and by means
of the pandects of Justinian it passed into the judicial
phraseology and thought of the western nations. It had
also been taken up by the philosophers, and through Locke,
Hobbes and Rousseau, it came into wider acceptance in the
thought of the time. It was Quesnay (1694-1774), the
leader of the Physiocratic school, who interpreted this
Natural Law in the terms of positive law as affecting the
social and economic .problems of the day. He contended
that natural law underlies and includes all just laws, and that
natural rights are the gift of Nature, universal and inviolable,
and the final standard by which the laws of man must be
adjusted and judged. The liberalizing influence of this posi-
tion was felt in all the commercial legislation of the European
nations. The Anglo-French commercial treaty of 1786 and
the treaties France made with Holland and Russia in the
succeeding years, embodied very liberal principles.* The
United States, before the Embargo Act, was practically a
free-trade country. The outgrowth of this liberal tendency
was shown in the development of individuahsm in economic
affairs and the doctrine of Laissez-Faire in governmental
* *Bastable, Commtrce cf Nations, p. 47.
141] I4»
■> .a •-
142 PAST AND PRESENT OF JAPANESE COMMERCE [142
activity. " Maintain that complete liberty of commerce,"
said Quesnay, "for the regulation of internal and external
commerce that is most certain, most precise and most •
profitable to the nation and to the state, which consists in i
full liberty of competition." ^ It was an age in which j
nations were made to give heed to the doctrine of humanity, !
and the people objected to state interterence with any kind j
of exchange on the grounds of man's natural right to ex- I
change his own products with whom he would. Thus the ';
doctrme which overthrew mercantilism and developed a \
free-trade movement had its roots In widely different soils.
It was Adam Smith who completed the overthrow of
mercantilism and created a new epoch in economic science.
He was largely an inductive economist, and laid stress on
the force of natural law in economics. His ethical system
was based on philanthropy and sympathy, while his economic
views rested upon self-interest and the working out of
natural law, — let each one develop along his own lines so as
best to utilize his own opportunities. The argument that
restriction in trade is a violation of natural right was carried
to its limit by Bastiat, who declared, " Protection, in all its
forms, is but a new kind of theft." ' The influence of Adam
Smith was destructive to mercantilism, and constructive in
its relation to economic science at large. Mercantilism,
based essentially on nationalism, was superseded by cosmo-
politanism and the doctrine of natural law and natural rights.
Adam Smith and his followers, having in mind but a small
part of the earth's surface as constituting the economic
world, assumed that all nations are equal and that, as a cor-
ollary of this fact, free exchange of commodities, the tangible
results of the division of labor among the nations, must be
universally profitable. The error of this position lies in the
^ Bastable, Commerce of Nations, p. 42.
' Basjtable, Theory of Jnternational Trade, p. 130.
143] GOVERNMENTAL ACTIVITY 1 43
fact which actual conditions exhibit, that nations are unequal
in every way and that the stronger is bound to swallow up,
economically, the weaker ones which lie in the outer zone of
the economic world, if absolutely free exchange of products
is the invariable rule. Free trade is the application to eco-
nomic relations of the doctrine of cosmopolitanism.
But the ideas of philosophers will fail to effect any change
in social organizations until all conditions conspire to bring
about such a situation that the incorporation of their ideas
becomes a natural, if not a necessary step in general pro-
gress. Such a combination of conditions as this occurred
toward the close of the eighteenth century. A great change
was made in the methods of agriculture in western Europe.
The system of rotation of crops and convertible husbandry,
as opposed to the old open field system were introduced.
This marked development was followed by the industrial re-
volution, and the economic features of the nations affected
were in a state of rapid modification and transformation.
Then came the equally rapid development of international
trade, and the widening of the sphere of supply and demand
to the world market instead of mere local influences.
The raison d'etre of international trade lies in the differ-
ence of comparative cost, as first detected by Ricardo, and
elaborated by Professor Cairnes in his Principles of Political
Economy. This comparative cost, contradistinguished from
absolute cost, refers to commodities which are subject to ex-
change within each country, not to those same commodities
in exchange between countries. This means that each coun-
try will produce only those commodities which cost least to
produce in that place, and will give them in exchange for
such commodities as cost more to produce. To withdraw
labor and capital from the production of commodities of
higher cost, and divert them wholly to the production of
corrrmoditi^s of least cost, would be a vast saving of labor
144 PAST AND PRKSEN'J- Of JAPANESE COMMERCE [144
and capital, and make possible production on a much larger
scale, if the ideal were capable of fulfilment. The theory-
would be conclusive if economic facts were as simple and
ideal as Ricardo assumes ; if society were in a state of com-
plete static adjustment; if labor and capital were perfectly
mobile and capable of ready transference from one industry
to another ; if the self-interest of the individual were identi-
cal with the interests of society. The absence of these con-
ditions makes the conclusions of less practical and decisive
force. Professor Bastable summarizes admirably the cardi-
nal points of the free-trade poHcy. " In every particular
exchange there is necessarily a gain to each party concerned,
but the sum total of exchanges is composed of the several
particular exchanges which have been made ; and as each of
the latter implies a gain, the immediate result must be bene-
ficial." '' This theory of exchange was put forward by the
Manchester school as the fundamental fact of all economic
science.
About the beginning of the nineteenth century all the
European nations found themselves drawn into war. The
theory of nationality was highly developed. The idea of
high tariffs is a creature of war. National industries, pro-
tected after a fashion by the fact of war, would find them-
selves more exposed to foreign competition, and crippled by
it, in peace than in war. Pressure was brought to bear on
the government to perpetuate, at least in part, the custom
duties, tariffs, and embargoes which were entered on orig-
inally as hostile and punitive measures directed at the enemy.
Such appeals, added to the increased burdens on the gov-
ernments, because of the wars or of necessary expenditures
growing out of them, made the protective policy the most
easy and most natural course. Moreover, growing popula-
tion and the comparatively decreased productiveness of the
^ * Bastable, Theory 0/ Internaiional Trade, p. 1 33,
II.
"C^-^i^'t
145] GOVERNMENTAL ACTIVITY j^^
soils made it highly expedient for the nations to depend less
on industries of decreasing returns and to foster and to
stimulate industries of increasing returns. The initial cost
of this class of industries is comparatively large, and the
period of increased cost may be protracted for a consider-
able time. In order to assure the industry against loss dur-
ing this period of high relative cost, a protective tariff, which
in other conditions is an economic waste, is a valid and
valuable governmental agency for its own prosperity and
wealth. Protective measures were taken to meet the re-
quirements of existing conditions.
Frederick List counteracted the " cosmopolitan economy"
of Adam Smith by his " national economy." List opposed
strongly the narrow balance of trade theory and the old
mercantile system, as well as the doctrines of free trade.
He pointed out that cosmopolitanism as an ultimate ideal
could be reached only through the development of national-
ism. To develop the welfare and energy of a nation by
increasing its productive force, was the key-note of his
theory.
The rise of the historical school marked another departure
in the development of economic science. This school
ignores the deductive method of economic study and denies
the existence of immutable natural law in economics. The
controversy vv^hich was waged for a time between the schools
is giving v/ay to broader views and the more general accept-
ance of another class of ideas. " The antithesis between the
historical school and deduction is giving place to a distinc-
tion between static and dynamic problems." ' But the his-
torical school must be credited with one marked contribution
to economic thought. It pointed out the fact that an
economic policy which had proved good for one nation at
one time could not be regarded as invariably good for other
* * Hadley, Economies, p. 23.
•"'?]
M
146 PAST AND PRESENT QF JAPANESE COMMERCE [146
nations and for other times. ^ The real position of the his-
torical school is that the economic policy of a nation must
be formulated in view of the dynamic conditions in which
that nation finds itself.
All the traditional arguments for free trade are based on
the theory of static conditions, and they define the economic
world as of smaller area than it really is. Grant the static
theory of social conditions and the argument for free trade
is conclusive. But a static state is only theoretical and im-
aginary; actual society is highly dynamic, whether viewed
as a whole or as composed of national units." This fact jus-
tifies the existence of the protective doctrines. The purpose
in view, according to the theory of protection, is to change
the character of industry by diverting capital and labor from
the channels they would seek in the absence of interference
by government to such channels as seem to offer ultimately
a larger return per unit of investment.
According to the famous report of Alexander Hamilton,
bounties and subsidies are the best means of giving efTect to
protective measures. Ihese may be used to divert both
capital and industry from their normal channels. But con-
sidered from the fiscal standpoint, bounties and subsidies are
payments made from other sources of revenue, while a pro-
tective tariff involves an addition of a certain amount of
revenue to that derived from other sources. A pure protec-
tive duty generally exceeds the maximum rate of revenue
production, but a tariff for revenue may be largely a protect-
ive measure. It is most natural that nations should prefer
a system which will produce revenue, even in a limited
amount, than one which has the same protective effect but
constitutes a burden on existing sources of revenue.
Economic investment of capital and labor is demanded if
* Patten, Economic Bam of Protection, p. 24.
» Clark, Distribution of Wealth, p. 29.
'A
147] GOVERNMENTAL ACTIVITY 1 47
natural resources and capacities are to be brought into play.
When a new industry is established, a tendency to static
adjustment is at once set in motion, with the new industry
as one of the essential elements. It may seem advisable to
foster this industry by means of a protective tariff covering
its products. This once in force, capital and labor are
attracted from other channels to the protected industry, and
there begins at once to be established a new static adjustment
under the new conditions. Inv-entions and improvements in
methods and organization must take place in the new
industry in order to meet competition from abroad or from
articles which may be substituted for the one in question.
Should this improvement and growth not take place the
protection given has resulted only in waste and loss.
A protective duty is justifiable within certain limits of time
and to a class of industries which are appropriate to the
economic conditions of the country. The static argument
maintains that it is wasteful and extravagant and disadvan-
tageous to divert labor and capital into artificial channels.
The dynamic argument maintains that the loss which is
incurred in the present by reason of the change in the
course of labor and capital is less, within the prescribed
limits, than the gain which will accrue in the future, and
which will continue to the advantage of the nation as a
whole.
There are political and anthropological arguments in favor
of protection, but the one which receives the general
approval of economists is the one above stated. It is com-
monly called the "protection to young industries" argument.
Professor Taussig gives a statement of the two conditions
in which protection may be applicable. These are, "(i) the
state of things in a new country which is rapidly growing in
population, and in which, as population becomes more dense,
there is a natural trend from exclusive devotion to the ex-
148 PAST AND PRESENT OF JAPANESE COMMERCE [148
tractive industries toward those branches of production
classed as manufactures. The transition from a purely agri-
cultural state to a more diversified system of industry may
be retarded, in the complete absence of governmental meas-
ures for introducing other occupations than agriculture,
beyond the time when it might advantageously take place.
(2) When a great improvement takes place in some of the
arts of production it is possible that the new process maybe
retained in the country in which it originates, and may fail
to be applied in another country, through ignorance, the
inertia of habit, and perhaps in consequence of the restric-
tive legislation at the seat of the new methods. Here again
the obstacles to the introduction of the new industry may
be of that artificial kind which can be overcome most easily
by artificial means." '
These conditions seem to have been fulfilled in the United
States at the beginning of the nineteenth century. The
economic history of the United States may be divided into
the four periods, from early time to 1808; 1808-1832;
1832-1861 ; 1861-1902. The free-trade policy prevailed
in the first and third of these periods, protection in the
second and fourth. In the first stage of its national exist-
ence, the United States remained practically a free-trade
country, even though protection had been proclaimed in
theory. In April, 1776, even before the Declaration of In-
dependence, the Continental Congress declared a free-trade * *\
policy in order to invite foreign goods, of which they stood
in so urgent need. The tariff of 1 789 and successive increase
of duties down to 1807, may have been the theoretical pro- \%
clamation of protection, but this view is denied by those who
consider them only political and fiscal measures.' Be that ':^
* Taussig, Tariff History of the United States, ^p. 5. ''%
^1^2Lhhtno, American Commercial Policy, v^. lii-i^^. Protectionist Theory, J
Bisliop, Bolles, Mason, Thompson, and others. Political and Fiscal Theory, Ely,
Taussig, H. C. Adams, and others. .fc^
D
149] GOVERNMENTAL ACTIVITY 149
as it may, the industrial condition of the country at that time
was colonial, and there was no immediate demand for pro-
tective measures. The country was wholly agricultural, and
protection was premature if not an impossibility. The wide
influence of Hamilton's report cannot be exaggerated in its
relation to the history'' of protection in America. Its pecu-
liar and striking force lay in the fact that it was both prac-
tical and scientific' The political idea dominated it, and the
economic arguments in favor of protection held an altogether
subordinate place in it. But the industrial transition of the
country had begun and the development of manufacturing
activity and capitalist industry extended the idea of protec-
tion. Scarcity of capital, want of skill and experience, lack
of machinery and severe foreign competition made it neces-
sary to adopt the policy of protection in order to develop
the capitalist industry of the country. Hamilton's prevision
enabled him to declare plainly that " the capitalist class had
a great mission to fulfill, a mission to produce and concen-
trate wealth — inseparable indeed from inequalities and in-
justice — but with which, none the less, the political and
economic greatness of the country is intimately associated." '
This sketch of the history of the United States is adduced
because there is a manifest parallel between it and the his-
tory of Japan, in the matter of the economic conditions
involved.
The Restoration of 1868 resembles the formation of the
Congress of the United States in 1789. The one was the re-
establishment of a monarchy, the other the establishment of
a Republic, but the subsequent changes in the industrial and
commercial life of the nations have, thus far in the history of
Japan, many striking similarities.
Prior to 186S the economic condition of Japan approached
^ Rabbeno, American Commercial Policy , p. 298.
' Quoted by Rabbitio, p. 322.
I^O PAST AND PRESENT OF JAPANESE COMMERCE [150
very nearly to a static adjustment. This was thoroughly
disturbed by the highly dynamic elements of modern indus-
trialism. At the time this took place Japan was a purely
agricultural country, and free trade would have been her
natural policy, even though she had not been coerced by
the treaty powers into the adoption of commercial treaties
to that end. Contact with nations possessed of a higher
civilization not only increased and diversified the wants of
the economically inferior nation, but it served also to increase
its productive capacity, since the energy of man increases
with the intensity of his desires. The industrial revolution
in Japan was followed by a rapid increase in population, and
the change from exclusive devotion to the extractive indus-
tries to diversified manufacturing industries is a distinctly
normal phenomenon.
The arts and sciences of western civilization and the
modern methods and organization of industry were intro-
duced, but through ignorance and the inertia of habits, the
establishment of new industries is confronted by many diffi-
culties. Lack of machinery, want of skill and experience,
and foreign competition will continue to retard the establish-
ment of new industries unless these hindrances are counter-
balanced by government patronage and encouragement.
Japan is not yet a country of individualism, and governmental
initiative and interference are historically justified. Capital
is necessarily and wisely timid with regard to new industries
and undertakings, and in order to develop the resources and
capacities of the country the government must be the source
and ground of confidence on the part of capitalists that in-
dustries of increasing returns may be established despite the
initial difficulty of increased cost. Japan is now entering on
the period of capitalist industry. The possibility of the
successful establishment of diversified manufacturing is
assured by its history, by the facts of dense population,
151] COVERNMEXTAL A CTTVrrY le j
adaptability of the people, and an almost inexhaustible sup-
ply of coal. At all events, the commercial policy of a nation
is an effect rather than a cause of the economic condition of
the country. And the full force of the argument for the
protection of young industries applies to Japan, from what-
ever view of its economic conditions the argument is begun.
II. Japan's Commercial Attitude.
The inauguration of the new treaties' on July 17, 1899,
marks a new epoch in Japanese history. By special ar-
rangement, the new tariffs took effect January i, 1899. These
tarififs^ consist of the statutory and the conventional tarififs;
the latter, being terminable at the end of twelve years, was
appended to the treaties with France, Germany, Great Brit-
ain and Austria. The conventional tariffs cover some of the
principal imports from these countries. The articles men-
tioned in the conventional tariffs number not more than 59,
and the customs duties range from five per cent, to fifteen
per cent, ad valorem. Under the most favored nation
clauses of the new treaties, all the treaty powers will enjoy
the trade benefits obtained by these four nations. All articles
not mentioned in the conventional tariffs arc subject to the
general statutory tariffs. The power of regulating her own
customs duties has been restored in large measure to Japan.
Without going into the political aspects of the new treaties
which have lifted Japan to a position of equality in interna-
tional law, it is well to point out the importance of these
treaties as affecting Japanese commerce and industry.
Heretofore, the government has had a multitude of politi-
cal problems pressing for solution. The administration of
*For the new treaties see Compilation of Trtatits in Forct, 1S99. Fubli'
cation of the U. S. Government, pp. 352 et itq.
'For new tariff law see Gtnercl Vieiv of Commerce and Industry of Japan
1906, pp. 333 ct seq. Publication of the Japanese Government.
1^2 ^-^-^ T AKD PRESENT OF JAPANESE COMMER CE [152
internal affairs, and the assimilation of such phases of west-
ern civiiizalion as gave promise of bearing good fruit on
Japanese soil, were matters so engrossing that questions of
foreign trade were largely overshadowed, and the govern-
ment has had no fixed commercial policy. Furthermore,
under the old treaties Japan could levy no customs duties
higher than five per cent, ad valorem, and this fact would
have frustrated any attempt at formulating a commercial
scheme having an industrial effect. The whole subject v,'as
relegated to class-room discussion. The commercial policy
of a nation, however, is not a matter of bookish theory, but
a practical work, based on existing political and economic
facts. A wise commercial policy will not ignore experience,
but must be, in that regard at least, Baconian. No longer
do nations give attention to the occasional and temporary
gains, of individuals regardless of the nation as a unit, and of
its present and future welfare. National growth and energy
for the national unit are now the objects of first and m.ost
earnest search. For the development of the resources and
productivity of a people, •* what is not seen" must enter into
the considerations as well as " the things which are seen."
International trade is fundamentally the bartering of pro-
ducts, or the exchange of the products of human labor. The
ratio of exchange is determined, not by the cost of produc-
tion, but by the utilities embodied in the products which are
exchanged. The country, therefore, which produces com- \
modities which have greater utilities, with less expenditure
of human energy, has always an advantage over the country
which expends more energy in the production of commodi-
ties embodying the same or fewer utilities. In this light,
international trade may be regarded as an exchange of
human labor measured by the utilities of commodities. For
example, suppose ten pounds of Japanese tea are exchanged
for fifty ygrds of English calico. It may cost ten days' labor
^
153] ^O VERNMENTAL A CTIVITY 153
to produce ten pounds of tea in Japan, while two days' labor
may produce fifty yards of c?.lico in England. This would
amount to the exchange of two days' labor for ten days'
labor; but from the point of view of exchange in utilities,
both countries must be benefited ; otherwise there would be
no motive to exchange. Hence it is the policy 01 all civil-
ized nations to encourage those forms of industry by which
the embodiment of greater utilities in commodities can be
accomplished with the least expenditure of human energy.
Industries of increasing returns fill this requirement. Some
processes of fabrication are especially capable of producing
larger successive returns in response to the same, or even
relatively decreasing cost. The world's movement indus-
trially, during the last few decades, seems to establish the
fact conclusively that each civilized nation has been chang-
ing its national industry from extractive-agricultural to
commercial-manufacturing activity. The subjoined table
shows the occupation per thousand of population of each
nation, and explains the character of the leading industrj' in
each country.
Agriculture. Manu/acturts. Commerce.
United Kingdom 73 148 229
Germany 178 1x8 IJO
France 170 II7 137
Belgium 166 160 46
United States 153 77 II7*
The secret of England's wealth and greatness lies in her
mastery of machinery and her command of an extensive
market for her products. England commands the labor of
a large part of the world, especially in Asia, by exchanging
her machine products for the human-labor products of other
nations. She has harnessed the inanimate forces of nature
to the wheels of her industry, and the products of a short
^ • Mulhall, Dictionary of Statiitics.
1 54 PAST AND PRESENT OF JAPANESE COMMERCE [154
operation of automatic machinery she exchanges for the
product of hard manual labor and the sweat of many brows.
The lesson for Japan is so obvious as to make detailed ex-
planation 01 it superfluous.
The national policy of Japan should be the increase of her
efficiency of national energy by the establishment of manu-
facturing industries, sustaining them to the point of ability
to cope on equal terms with foreign competition, and by
finding markets for her products. Her fitness for manu-
facturing industries has been set forth in the foregoing pages,
and her progress along these lines has been altogether re-
markable. The one great element of commercial greatness
yet to be assured is that of an adequate market, one capable
of absorbing an ever increasing amount of her products.
To this end all avenues of foreign trade must be assiduously
, followed.
A brief study of the course and trend of Japanese foreign,
commerce reveals some significant and suggestive results.
In the period immediately succeeding the opening of the
country to the world, the foreign trade of Japan was monopo-
lized by the European powers and America. England was
the largest exporter to Japan, and the United States the
largest importer from Japan. In the past ten years, how-
ever, a radical change has come over the character and
direction of our foreign trade. While trade with the United
States continues healthy and prosperous, and that with i
European nations maintains a moderate rate of increase, the ^^
trade with Asiatic nations has increased by leaps and
bounds. The following tables will illustrate this condition :
Countries. . '"
Yen.
Asia 44,748,000
Europe 55,182,000
America 27,750,000
1899.
Incrxasb.
YtM.
YtH.
190,387,000
145.639.000
128,137,000
72,955,000
104,689,000
76,939,000
.f^'O t^;-
155] ^ ^ VERiWVENTAL A CTIVITY H 5
And the distribution of this trade among the various Asiatic
nations and principalities is equally important in its bearing
on the future of Japanese trade. The figures of this trade
are subjoined.
Diuribtiiicn of Jap ^-.t:i Trade with Asiatic Countries.
Countries . tSqo (Yen). jS<j<f < Y*n).
China 14,076,000 68,94.;.,coo
Hong Kong 14,861,000 41,629,000
British India 9,500,000 49,945,000
Korea 5,613,000 11,971,000
French India 4,650,000
Asiatic Russia 7,090,000
Siatn 246,000 783,000
Philippines 452,000 2,669,000
Dutch India 1,350,000
Hawaii 1,356,000
Total 44,748,000 190,387,000
These Oriental countries are mainly agricultural, and their
products differ little from those of the same industry in
Japan. So long as Japan remains an almost exclusively agri-
cultural country there is no great necessity or exceptional
opportunity for an increase of trade betv/een these nations
and Japan. But the increase of population and the spring-
ing up of factories in Japan has brought about the greater
part of this change, and is merely an indication of the larger
opportunities confronting the nation. Japan's tillable area
is limited and fixed. Cheap food stufifs and raw materials
must be imported, and her manufactures must find an outlet.
The raw materials are supplied by the adjacent countries in
great volume and at a low price. They themselves are in a
low industrial stage, their wants are simple, and they are
satisfied at present with crude and cheap articles of manu-
factures. And as if peculiarly adapted to this situation,
Japan's manufactures must begin with the simpler and
cruddr articles, and widen and expand both in quality and
156 PAST AND PRESENT OF JAPANESE COMMERCE [156
quantity of work as the development of skill on the one
hand, and of demand on the other may justify. That Japan
is capable of producing better and finer goods by machine
processes is fully established by the many products of exqui-
site workmanship which she has produced by band processes
in the past. And the Asiatic nations furnish better markets
to no countries and their products than to Japan. Of all \
Oriental countries China shares the largest part of Japanese i
trade. Several considerations conspire to make the rela-
tions between these two nations, Japan and China, of
unusual national and international importance in economic
and political relations.
China is a country of uncomputed wealth, a territory of
four million square miles, a population constituting one-
third of the human family. Her natural resources, mineral
and agricultural, would justify almost any predictions con-
cerning her future when these are systematically developed
and made available. Her foreign trade, stated in taels,
makes also an interesting exhibit.
Chinese Foreign TracU.
CouHtriti. tSSS' iBqo. /5w-
Great Britain , 45,983,ccx> 37.703,000 54,123,CX)0
Hong Kong 5i,i38,cxx> 104,987,000 189,941,000
India 16,737,000 11,355,000 33,642,000
United States 1 1,613,000 1 1,840,000 43,974,000
Continental Europe 9,822,000 14,100,000 46,935,000
Japan 6,755,000 12,221,000 53,147,000
Russia 5,047,000 9,754,000 22,079,000
A glance shows the great increase in her trade with Japan.
China is the most peace-loving nation of earth ; her people
are attached by many ties to their own land, they are indus-
trious and commercial. They have a pride in themselves,
in their antiquity, and in their civilization. They are con-
servative to the last degree, and turn but slowly and with
II
1 5 ; ] GO VERNMENTAL ACT I VI 'J Y 157
much friction from their treasured inheritance of civilization,
customs and religion. They need, and are fitted for, an Ori-
entalized form of Occidental civilization. The Boxer troubles
and the occasional disturbances in the Empire are but a
symptom of the presence of an undigested form of western
civilization within the body of the people. The western na-
tions have recently learned many things concerning this
Celestial people and their racial characteristics. Some mis-
takes have been made and more are inevitable. It is be-
coming more generally apparent that the step from the ven-
erable and venerated traditions of accumulated centuries is
too great a one to be taken with the brusque and impetuous
speed that the commercially grasping nations of the world
would see China take, that she might become what they
call civilized. Not even the integrity of the Empire forcibly
maintained nor a compulsory " open door " will effectually
accomplish the desires of the rest of the world in China's
behalf. It is at this point that Japan's relations to China
become clearly important in the play of world forces and in
the establishment of world relations.
Although the Chinese and the Japanese do not speak the
same language, they are of the same race and have a large
part of their history in com.mon ; they use the same idio-
graphic characters of letters in their writing; for fourteen
centuries they have been in almost constant intercourse and
communication, and Japanese customs and institutions have
been modelled after those of the Chinese civilization of by-
gone ages ; the Chinese classics are to the Japanese what
the Greek and Roman classics are to the nations of the West.
There is no nation which understands the Chinese people in
their individual and national traits better than does Japan.
The latest phase of the recognition of this fact is the very
recent utterance of some of the most effective missionary
iboards to the effect that the Christianization of China will
£l
158 PAST AND PRESENT OF JAPANESE COMMERCE [158
■ be more surely and quickly effected through Japan than by
the direct impact of western ideals and methods of the
Christian religion.
That the natural resources of China may be best devel-
oped, and her commercial and indiistrial habilitation and
organization brought most securely and safely to pass under
the tutelage of Japan, is now a generally admitted fact
among the students of the "eastern problem." from the
standpoint of the western civilization. An industrial and
commercial alliance between Japan and China is scarcely
more advantageous to these nations themselves than to the
benefit and advantage of the world's uplift and civilization.
In the markets of the Oriental countries Japan can
successfully meet foreign competition. The profits of
the entrepreneurs of Europe and America are chiefly
due to their advanced methods of production and their
better organization of the factors of industry. These are
being rapidly copied, adopted and assimilated by the Japa-
nese, and even while this process is continuing, Japan has
the advantage of geographical proximity, similarity of race
and customs, an increasingly dense industrial population and
an abundant supply of coal. And further than this, the
Japanese being distinctly Oriental are best fitted to read and
comprehend the economic mind of other Orientals, to
awaken and stimulate their wants, anticipate their needs, and
supply their demands with less of waste and economic fric-
tion than is possible to minds Occidental.
Japan has been an international factor, an awakened force,
for but a third of a century. In the press and stress of the
innumerable social and political complications and adjust-
ments she has not had time to become commercially self-
conscious. Her industrial and commercial growth has been
purely natural and v/ithout the stimulus of a predetermined
and studied plan. She has every needed factor in her favor
»4
■n
til
(i&i ^itd
'nuam
1^9] GOVERNMENTAL ACTIVITY 159
to cause her to become the entrepreneur of the Far East.
With other matters adjusted to customary methods of delib-
eration and adjudication, she will doubtless turn devoted
attention to the development of her commerce in Oriental
markets. Korea, Siam, and the Philippines have historic re-
lations with Japan, and v/ould be easily developed. The com-
mercial centers of southern China, Ningpo, Fouchoo, Amoy
and others have been frequented from the earliest days by
Japanese traders, and many of them have passed by reason
of their fame and renown into the traditions of the markets.
Since the Island of Formosa has fallen into Japanese posses-
sion, our interests are especially concerned with southern
China. More than two-thirds of the foreign trade of
Formosa is carried through southern China, and the future
development of the islands is vitally connected with that of
China.
The trend of commercial struggles has been westward
since the beginning of historic times. The mastery of the
Pacific is now the goal of all the commercial nations, and
China is the El Dorado of the Orient. "To China" will
be the watch-word of the matured commercial policy of
Japan.
APPENDIX.
Japanese Weights and Measures. I
Wtighl. ;
1 Kwainms equals i,ooo Momm6 equals S.28 1 ib3. Avd. I
1 Kin " 160 " " 1.325 " "
I Momm^ " 10 FUn " 2.1:? Drams Avd.
I Fun " 10 Rin " 5-79 Grains "
I Rin " .1 Fiin.
Land Measure. i
1 ChO equals lo Tan equals 245 Acres. i
I Tan " 10 Se " .245 " !
I Se " 30 Bu " 119 Sqnare Yards, nearly.
Dry and Liquid Measure.
•s
I Koku equals 10 To equals 39.7 gallons, or 4.96 Bushels.
I To " 10 Sho " 3.97 " " 1.98 Pecks.
X Sho " 10 Go " 1.58 quarts, " ,198 "
I Go " .1 Sho.
Linear Measure,
I Ri equals 36 Cho equals 2.44 Miles.
I Cho " 60 Ken " I.15 "
X Jo •' 10 Shaku " 3.31 Yards.
X Ken " 6 " " 5.96 Feet.
X Shaku" loSUn " 1 1.9 Inches.
X Sun " .1 Shaku " 1.19 "
Money Tables.
The Rio, known before the Meiji period, was derived fiom, and about the eqaira-
lent of the Chinese Tael.
The money is on the decimal system, i Yen being equal to 100 Sen.
Standard Gold Coins.
20 Yen, weight 16.6665 grammes, quality -| ^^ ^^^^ ^f ^^^^ ^^1^. ^^ p^^, ^j
10 Yen, weight 8.3333 grammes, quality \ copper.
5 Yen, weight 4.1666 grammes, quality J
'x6o [160
I6l] APPENDIX l6l
Subsidiary Silver Coins.
50 Sen, •weight 1 3.478-; grammes, qualitv \ q . . ., . ,
■^ *^ J t/ J 6 '1 - I ^^,o parts of pure silver; 200 parts of
20 Sen, weight 5.3914 grammes, quality V copper.
10 Sen, weight 2.6955 grammes, qualiLy )
Subsidiary Nickel Coins.
5 Sen, weight 4.6654 grammes, quality 250 parts of nickel and 750 parts of
copper.
Subsidiary Copper Coins.
I Sen, weight 7.12S0 grammes, quality -i 950 parts of copper; 50 parts of tin and
y^ Sen, weight 3.5640 grammes, quality / zinc.
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JAPANESE WORKS NOT TRANSLATED
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Fukutomi, C. Shunin V&shida, Life of. Tokio, 1893.
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Hagino, Y. Nihon Zaisei Slii (Financial History of Japan). Tokio, 1890.
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Walker, F. A. Money.
Wells, D. A. Recent Economic Changes.
Williams, E. E. The Case for Protection. \
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OFnCIAL PUBLICATIONS
The Annual Census of Japan (in Japanese) .
Histor)' of Merchant Marine in Japan.
Resume Historique et Statistique de la Telegraphic et de la Tdldphonc au Japon.
A Short Sketch of the Progress of the Postal Service in Japan.
The Financial Annals of Japan.
Reports of the Department of Communication (English and Japanese).
General View of Commerce ?nd Industry in Japan. 1893, 1900.
United States Consular Reports.
Report of the U. S. Commission en Navigation.
Monthly Summary of Commerce and Finance.
Commercial Relations of the United States and Other Countries.
Treaties and Conventions hetiveen the U. S. and Other Powers.
Eleventh Census of the U. S.
American Executive Documents : Diplomatic Correspondence.
PERIODICALS IN JAP.VNESE
The Tokio Economic Journal (weekly). Tokio.
Oriental Economist (tri-raonthly). Tokio.
The Sun (monthly). Tokio.
The Economic Review (bi-monthly). Tokio.
The Journal of Kokka-Gakkwai (monthly). Tokio.
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