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Japanese Economic History Prior to the Meiji Restoration

Korean Minjok Leadership Academy
International Program
Nam, Sangjoon
Research Paper, Fall 2010

Table of Contents

I. Introduction
II. The Social Background of Japan's Pre-Modern Economy
II.1 Changes in the Manorial System
II.2 Characteristics and Kinds of Money
II.3 The Rise of Markets
II.4 The Momentum of Economic Progress
III. Agriculture prior to the Edo Period
III.1 Changes in Agricultural Production
III.2 Independence of Peasants
III.3 Introduction of Incentive for Economy
IV. Further Changes in Social Structure
IV.1 Changes of Cities
IV.2 The Social Effects of Sengoku Period (1467-1573) and the Sengoku Daimyo
IV.3 Regional Differences
IV.4 The Emergence of Middle Ground and the New Manorial System
V. Foreign Trade and Relations
V.1 International Environment
V.2 Japan's development in contact across the sea
V.3 Expansion of Portuguese Colonial Rule and Trade
V.4 The Relationship between Portugal and Japan
V.5 Expansion of British and the Dutch Trade
V.6 The Impact of Isolation
VI. Prosperity within Edo Economy
VI.1 History of Maritime Shipping
VI.2 Factors of Development
VI.3 Centralization of Wealth in the Capital
VI.4 Exchange between Currency and Rice
VI.5 Improved Demand, Improved Consumption
VI.6 Economic Cycles
VI.7 Kinds and Usages of Currency
VI.8 Middlemen and their Roles in Market
VII. Changes in Edo City
VII.1 Tenka-Hushin: Definition and Characteristics
VII.2 Effective Demand at the City of Edo
VII.3 Development of Market Economy
VII.4 Old Money and New Money
VII.5 The Structure of Edo City
VII.6 The Use of Fire to Clear Areas for Planned Reconstruction
VII.7 Inland Waterway System
VIII. Middle Phase in Edo Period
VIII.1 Isolation
VIII.2 Kyoho Reform
VIII.3 Era of Tanuma
VIII.4 Kansei Reform
VIII.5 Tenpo Reform
IX. Fall of Tokugawa Shogunate
IX.1 Intrusions from the West
IX.2 Ideal of Agrarian Society and the Coalition of Critics
IX.3 Affairs with Commodore Perry
IX.4 Meiji Restoration
IX.5 The Japanese Economy during the Last Years of the Edo Period
X. Conclusion

I. Introduction
            In discussing the Japanese economic history, Western historians have focused largely on the Meiji Restoration and post-Edo period. Although Meiji Restoration lit the first light on the Japanese modern economy, they often neglect the factors that brought the sweep economic reform. Although the word "revolution" often follows the Meiji Restoration, the revolution itself cannot take place without any preparation. Before Meiji Restoration, there had been developments in the Japanese economy. Structural changes in society, agriculture, foreign relations, and later in commerce can all be seen as the preparatory steps toward Meiji Restoration. Unfortunately for foreigners, these preparatory steps have not widely been disclosed in languages other than Japanese. The primary objective of this paper lies in analyzing the Japanese historical books and the researches of Japanese historians, organize them, and reveal them in English. Therefore, this research uses the Japanese historical texts on pre-Meiji Restoration as the primary sources to discuss the economic development during the Edo Period and its influence on the Meiji Restoration.

II. The Social Background of Japan's Pre-Modern Economy

II.1 Changes in the Manorial System
            In the formation of economic society, the first changes occurred inside the manorial system. Money reimbursement was the only means to put the seniority devotion in the manorial system. It came from the end of Kamakura period but progressed in earnest in late 14th century through 15th century. At this time, perhaps a seniority-based product in the form of transportation seemed to be difficult because the administrative power of statute government indispensible for the peaceful transportation had been reduced decisively. The Invasion upon manor by forces of arms made the manor keep losing the conditions necessary for the acquisition of the seniority. The amount of seniority itself was so reduced that the manor took it unavoidable that he should choose whether abandon the urban life for rural life or lower the standard of living in Muramachi Period (1336-1573). The only remaining means is to receive the seniority by easier transportation. (1)

II.2 Characteristics and Kinds of Money
            There were many obstacles in replacing seniority with money: it did not have sufficient savings and regular farmers were completely outside the fence of monetary circulation. If money was received as a tribute, it had to be exchanged for everyday essentials, but it was not prepared. (2) Therefore, paying money to manor rather than seniority never occurred; however, it went in parallel with the resolution of these issues while they had a long and slow progression.
            The first problem was how the money had to be made. As a casting coinage, so-called Kowoojyo 12 was available at this time since the statute regime established at the late Heian Period (794-1192) and there was distribution of gold and silver as a quantitative monetary but somehow was not good enough to cover. So, a number of foreign coins began to be imported. After the end of Kamakura Period (1192-1333), the Chinese coins such as those from Ming Chuan and Song Chuan were imported from China in a big volume through Wakou (Standing commercial tube for Japanese) or ship for trade with Ming Dy\nasty in China. As a result, a large scale trade with the onset of Kamakura Period led a competition in trade privileges politically and the formation of trade merchant layer, trading port and trade city economically. Import could not be made without export. Export form Japan at that time centered on weapons, especially Japanese sword, lacquer and sulfur. (3)
            The second issue was how the farmers acquired money. It is thought that a 3rd party, maybe a trader or a merchant who held currency acted on credit basis. In this case, the farmers paid in product but alongside it, the trader converted it to money.

II.3 The rise of markets
            When the manors receive the tribute in the form of currency, they needed to live to spend it to buy goods. In other words, it could be met through the market. The city changed from the group of self-sufficiency under the manor lord-farmers to that of money spending for goods. It decomposed the population group who can have economic function. In this case, the place under the strongest influence was the rural area that surrounded the city where monetization was developing and the scope of the monetary impact was expanding. Thus, the farmers of this region caught up in the distribution of money are able to pay seniority in the currency of their own. Then production purpose for sale added to the purpose of the traditional seniority-based conventional and self-sufficiency made significant changes in the way of production relationship. (4)
            Hence money that was paid to seniority gave larger impact to each floor of the society than usually expected. While this kind of changes occurred slowly over one or two centuries, the recipients became noticeably difficult even though tribute giving to manor was changed to money paying seniority. If you see Kyoto only, the size and the population in Muramachi Period rather declined than before and the life of manor class became into poverty according to stories often been handed down. On the other hand, new types of city were born continuously. In addition, not only the manor and the parasitic class but the merchants and craftsman dealing with necessities of life can travel to Kyoto and the number of the latter was increasing. At this time, the formation of a public street can be explained from this background. (5)

II.4 The Momentum of Economic Progress
            Although the preliminary steps toward economic society had been observed during as early as Heian Period, it was not until the development of Kinai Plain in 15th century that economic production, diversification, and distribution gained its momentum. Throughout the late 16th century and early 17th century the process of forming economic society extended nationwide. During this period, Japanese economy would experience large regional differences. As to the period earlier than the unification of regime (era before the end of Sengoku Period: 1467-1573), we can say that the characteristics are roughly the same politically. (6) The details about the Kinai Plain will be dealt with in the next chapter.

III Agriculture prior to the Edo Period

III.1 Changes in Agricultural production
            Concerning the impact on rural caused by this change, the process of supplying fish and food already existed on the outskirts of the city. This time, however, currency distribution and types of production for sales had expended around the city. By just adding the element of "sales" to the conventional purpose of production, technical conditions and productive conditions were alleviated.
            Farmers earned the money by selling the surplus of production. With the money into their lives, a wide variety of influences come out. The expansion of cultivated area could be realized without the need to change the traditional farming organization. However, it is thought that there is not so much non-tilled land in Kinai Plain, where the cultivation progressed at the earliest time by farming technology at that time. Thus, the production increase was nothing more than very small portion. The next way we can consider is the increase of output under a certain cultivated area. This is of course an increase in land productivity, which means the advancement of land use. However, it was difficult to achieve this change by the conventional production method and organization. The land use for cultivation under the previous labor force was nothing more than poor level because the production organization moved by only forced labor. In particular, agriculture, owing to the difficulties in the intensive management for labor forces, depended on the attitude of the individual so highly that it is hard to realize such kind of labor as bulk of labor input or high density labor operation. It is assumed that there had been no any other way than crying out loud to strengthen the labor, thus, the agriculture had limits that much. Hence the management transition from the farming labor forces to family business with the need of increasing production came from producer-side response. (7)
            However, this transition never simply can happen. For example, in practice, sudden change of management split into several smaller families was very risky behavior to manors who continued to leverage on their managements customarily over the centuries using as serfs, servants. It is thought that management entity changed by splitting the blood family first and after a long period of time it had been dismantled into the management for taking advantage of serfs and servants later. (8)

III.2 Independence of Peasants
            The specific motivation and process concerning the independence of peasants is less clear than other topics within the economic history of Japan. Some authors say that this was a policy of manors but the others say that this was achieved by peasants who won manors. However, it is difficult to accept both of two different argue. Some say that self-reliance started even before the advent of the manors but that the conventional tillage farmers stood as one of the movement is unthinkable. Especially, when this problem is associated with land holdings, it becomes more difficult to understand. If independent peasants had been the holder of the land, it is comparable to the liberation war of farmland that was a big social change. At this moment, it is fair to suspect that any good-tempered manors giving the land to serfs and servants to allow independence really existed. (9)
            Thus, several questions actually remain on the process of self-reliance peasants. The author himself does not have a clear answer. However, there was a gradual change over long periods in this process, too, and perhaps the independence did not include land holdings. As to the latter, the peasants who held the land as a result through the process of independence are also involved. The fact that branch family set-up and provision of temporary fields so-called Homachi were made customarily might mean that the land tenancy was granted. As to the land ownership favorable due to the pressure of population increase since the middle of Edo Period, or prior to the development of landownership system with such conditions immobilized institutionally, the relationship of landlord and tenant should be separated from that of parasitic landownership The lords of manor dismantled lord management because they judged it would be advantageous. Unless it is dismantled by the system, to the lord of manor the management of labor by their families was deemed more favorable shift than his direct management of the cultivation by his serfs. (10)

III.3 Introduction of Incentive in the Economy
            The implementation of peasant farmers' management will be accompanied by the change of production purposes. In other words, production for sale had been entered for that purpose. However, regardless of land tenure, farmers, as the unit of couple families, they became the being responsible for each self-management. Of course, even so, the type of crop and cultivation period was not completely freed. As to the use of common land, water and selection of specific kind of farming works to be done as a community, they were obliged to follow the order. However, if the farmers could take these economic opportunities as the purpose, the possibility of increasing profits in the form of money could be provided to them. The necessary goods are required to be exchanged at any time because the accumulation became possible as one of the benefits of the currency. Some farmers were also able to purchase the land by some money gathered. The same opportunity was given to the independent farmers who did not hold the land. (11)
            Since the economic incentives came to the farmer's living, all daily action and awareness of the farmers would be greatly changed. The way of thinking on the production changed. It would change from laborious and unavoidable work to the virtue of labor with higher fees bringing a better life. Therefore, physical pain can be endurable one, Family labor was the best labor force to this concept. Because family members are the ones who make up the management, the hard work and long hours of labor was a sort of pre-paid investment.
            Apart from tangible incentives, diligence had also taken part in the growing economic incentives. Before Edo Period, we can hardly find any work or idea originating from thinking that labor is a virtue. However, the hard work was enough to be regarded as a virtue in Edo period. In Japan, this is a kind of morality and it is being delivered through the channel of family system. Characterized by intense prolonged labor, or with the Japanese farmers' mentality or on the current assessment of the current Japanese work ethic, the principle of industriousness is thought to have been formed at this time. However, economic purpose and money penetration into farmer's life did not give only economic development. On the other hand, some people got a chance but some failed to fall at the same time. In some cases, especially with regard to monetary pressure on borrowed money, it is thought that there were many farmers plagued with money. Peasant revolt which won Kinai plain in 15th century had a deep relationship with the foregoing voluntary union of peasants, but it was one of their response entangled in the currency distribution because the main target of attack were the land, warehouses owned by financiers. (12)

IV. Further Changes in the Social Structure

IV.1 Changes of Cities
            With the change of rural area, the change occurred in the city. The city of Kyoto and Nara had functional alteration, and in addition, new types of city appeared such as Sakai, Hyogo which can exist only by the economic activity of the original inhabitants. So, as the production for sale being penetrated, materials are gathered at the place easy to use waterways and roads while market streets were established in a chain reaction where merchants and craftsmen live. The shadow is left even today at Imai, Yamato where are the markets founded at that time. Thus, Kinai Plain was covered with the product distribution network connecting these cities. (13)
            However, it is not possible to simplify these changes. Since the riot of Onin, Kinai Plain had been kept under the wing of wars and the decadence of Kyoto was more severe. Of course, one step forward to go out from Kinai Plain, there was almost no changes of situation. Except a handful of cities, the function was not properly exercised while the conventional production technology and organization was still in rural areas and the presence of the money was unknown to most of the farmers. Therefore, the production level was so low that there was a considerable distance in the formation of economic society. So, there was a very big regional difference in economic aspects. In Kinai Plain, the production was done for sale and currency was in circulation while the formation of a group of people based on the principle of economic behavior and economic value were progressed, especially several cities were known as "municipal" However, it need to be considered that the unusual existence of "municipal" was possible under a form of political anarchist at that time in the history of Japan. (14)

IV.2 The Social Effects of the Sengoku Period (1467-1573) and the Sengoku Daimyo
            In Kinai, not anything new political system was made corresponding to economic changes. Rather, this area was the last stronghold to the manor and Ashikaga shogunate and the last remaining area for manorial system. On the other hand, in provinces, though there were moderate disorders in the period of Muramachi through Warring states caused by the non-implementation of statute and manorial system, local forces came to grow slowly through the power competition among the manors classes who had land in their hands. This is called Nationwide Shogun, or Sengoku Shogun.
            Until the end of the Warring States Period lived in the country, Da-te, Gohojo, Imakawa, Murata and Uesgi were standing in East Japan and Josokabe, Mori, Nabeshima and Simazo were standing in West Japan. However, they raged forces over the centuries across a few dozen provinces. As described above, these Daimyo had bases in frontier zones which are materially different from the area of Kinai which was economically advanced. But their governance has no material relationship to the statute system manorial system and Suigo Daimyo (a kind of top-down system) and totally new one in that sense. Basically nationwide shoguns promoted to expand the territory by establishing allegiance relationship while acknowledging the right of manor, originally localized, as the same one but under their inland territory. Of course, in parallel with enlargement of the area, the power of connecting the land often got weaker and there was a form of governance on behalf of officials for the crown land of Daimyo, though, being with the land was strong in principle. Most of the feudatories were located in a rural area and military service and agricultural farming was in a non-separate situation, thus the formation of castle streets did not appear or even if any, the street remained in small. However, in the form of master and servant relationship was established, the pyramid was a hierarchical order, it was worthy of the name of a "feudal system" because, under this system, most importantly, the feudatories were recognized as lower manor authorities. With preparation of force, they resided in rural trails dominating the manor including the management of Daimyo's estates of larger space and this state was preserved. If Daimyo expands the territory, it also needs an order as one of the country. However, the instability could be involved in the relationship with the feudatories as long as the recognition of the lower manor authority can prevail. Through the form of legislation, there came a series of laws which are so-called family law or splitting country law. (15)
            While local and provincial canal constructions followed, more than 90% of today¡¯s Grand Canal was completed during Sui Dynasty. By 600, Under the Sengoku Daimyo system, the relationship between feudal lord and the peasant is surprisingly not well known One is a conventional system which could maintain the relationship but situation was not uniform. However, in case that the conventional relationship was destroyed by military conquest, there was a need to set up a new relationship.

IV.3 Regional Differences
            The constituents of warring period have a combination of political and economic development with mutual cross shape due to regional structure, for Kinai's case, the old form remained politically while economically progressed, as a result, manor system deployed separately but economically Kinai was backward state. So, in order to unify Japan under this state, unified governance structure was needed to integrate the two areas by a few principles of unity. Therefore, we can't say it a coincidence that unification was implemented by Oda Nobunaga, Toyotomi Hideyoshi, and later by Tokugawa Ieyasu, all of whom were all from the middle of both regions (16)

IV.4 The Emergence of Middle Ground and the New Manorial System
            When Sengoku Daimyo oriented to the center of the region by the expansion of the zone in the second half of the 16th century, a new type of manor system had grown around Kinai area, especially Nobi plain. Unlike the rest of Sengoku Daimyo, the power structure of Nobunaka had the system for the separation of military and agriculture and it had a standing army to conduct the collective training, a number of apparently small, but powerful military force was paramount. Exactly as described below, the iron gun was introduced by contact with the Portuguese and it was very suitable type of weapons for this kind of military organization. Novi Plain was located in the region surrounding Kinai, and thus by some infiltration of economic society transition deployed continuously the gradual change would have started to happen during this period. Increasing output was realized by a change to peasant management in the agricultural production, as a result, the manors were able to enforce a bold reform in the military system by separating military service and agriculture. Since the consumer population was brought by so called street below the castle which was not affected by the traditional dominance, the new manors did not need to consider the existing system. (17)
            The new manor system exerted the benefits even in military conflict with Sengoku Daimyo and thereby the unification of the country was completed by Hideyoshi followed by Nobunaka in a relatively short time. In this system, generalized peasants management, penetration of money distribution and the separation of military and agricultural conditions are maintained to enable it occurred, but in the process of conquering the country, it was expanded nationwide beyond the area occurred. In other words, by redistribution of Daimyo and implementation of this system by Sengoku Daimyo except for a very small number, the manors lost the combination with the land around late 16th century until the 17th century. What enabled it is the adoption of system like land inspection and amount of crops, with regard to this are described later. In this regard, leading authority, Hideyoshi, Tokugawa Ieyasu, and the subsequent shogun were able to have a strong authority to control a multiple of Daimyo. Extremely speaking, Daimyo did not know when the command of movement could be received to the will of Shogun. Mostly concentrated in the castle and even if a certain territory was given in the form of local bound, authority of exercising was limited. In other words, it's sort of a poor rate to receive seniority rights of the human ruling confined to the farmers of the manor and other tributes to receive than regular seniority and jurisdiction for the people of territory was forbidden. As such, it could be switched to the salary system at any times. (18)
            It is difficult to understand if we put the name of this form of governance as feudal. Even in Edo period, due to such reasons, it is expressed as ruling feudalism or something dismantling feudalism. Therefore, in Japan's feudal history, the most similar age of dominant form of feudalism to that of European history had a relatively short period of time in a limited area. So what came after that was not without the manor system had a dominant form including the formation of urban governance and separation of the military service and agriculture. They were subject to some advanced state of economic activity. (19)

V. Foreign Relations

V.1 International Environment
            At the time of the Meiji Restoration, Japan had experienced repeated periods of stress in foreign relations. In foreign relations, Japan temporarily had taken an opening stance aggressively from the passive stance, and then confronted the forces of Eastern expansion from Christianity and Europeans and eventually turned into rejecting response with so-called "Isolation" (1641). During this process, entangled in various forces competing domestically in Japan and inside Europe since the end of the 16th century throughout early 17th century, the most delicate reaction lasted. From the 16th century throughout the 17th century, the international environment surrounding Japan were varied enough to be eye popping. The international relations including the domestic changes conducted in the same period were under the turbulent era and finally so-called isolation policy in its most extreme form of proximity to the closure of foreign relations was chosen. During the era, isolation would be politically, economically and culturally significant and it is necessary to look the foreign relations of this era as a whole. (20)

V.2 Japan's development in contact across the sea
            From the early Muramachi Period (1336-1573), the piracy had been done already by the pirate forces of north-western coast of Kyushu who went to Korean Peninsula by small vessels and to Mainland China by assault on the coast. People say it Japanese raiders. Though not necessarily limited to Japan, there was a military vacuum at that area. Holding hands with the Joseon Dynasty, China's Ming government made requests a number of times for banning that piracy to the Muramachi Shogunate; however, the Shogunate did not have that much power. In view of the Japanese overseas expansion, Japanese raiders can be thought of in conjunction with subsequent entry into Southeast Asia. From the late 16th century to early 17th century throughout China, Indochina Peninsula, Guam, the Malay Archipelago, and the Philippines, a number of traders appeared on Japanese streets, and some of them were employed as foreign mercenaries. Toyotomi Hideyoshi and Tokugawa Shogunate issued red stamp paper for the trade permit to get overall control of all the financial resources and finally greeted the new era of so-called red stamp trade. (21)
            Thus, no foreign relations existed before this time when they shifted the stance from Japan to overseas by the positive attitude. After the fall of Su and Tang Dynasty, strong presence in the ancient empire was in a recession in the Korea Peninsula and Mainland China and meantime, Japan finally came to establish a nation with its own power, which resulted in the change in the relative position. So the aforementioned power struggle ended by the reckless invasion into Korea Peninsula by Hideyoshi after the complete reunification of the national territory but it was a short-lived one by the failure of the Expedition and followed by the isolation policy which contradicted toward inside as a result. (22)
            On Foreign Relations, an important experience was in contact with the European powers and Christian culture. At the initial stage, state monopoly was made by Portugal as a country and Jesuit Order as a Christian missionary organization and in late 16th Century Spain and the Franciscan and Jesuit Orders joined and in 1641 the V.O.C. (Dutch East India Company) was granted a monopoly for trading with China; Portuguese, Spanish and English merchants were banned from entering Japan. (23)

V.3 Expansion of Portuguese Colonial Rule and Trade
            Portugal had a strong relationship with Japan late 16th century; in the 15th and 16th century, together with the states that were to form Spain they were active in expanding aboard especially to Africa and Asia via the Cape of Good Hope and monopolized trade by installing colonial strongholds. The overseas expansion should be understood as an extension of the Reconquista Movement on the Iberian Peninsula. (24)
            However, trade and mission were inextricably linked in Portuguese maritime expansion. From the beginning, the motive for expansion was trade and mission and the vertex was the royal household. . This is why you can see in the historical background of the two Iberian countries. Extremely speaking, the society of the two countries was composed of the royal court and the nobility over the royal court and the peasants and there was no choice for the general populace to be involved in the economic activity especially with the thin middle tier status. Thus, the royal monopoly in the form of trade carried on and if any rival emerged in the course of it, the weakness had been thoroughly exposed. (25)
            Nevertheless, the country with a small military force could monopolize oriental transoceanic trade because the disruptive circumstance of the Asian countries at that time. For example, when they first arrived in India, it had been divided into several states, as well as the struggle between Muslims and Hindus. It was the only possible way of expansion for Portugal with low population by focusing the organizations on the base and connecting it with naval forces. Portuguese monopolized the Eastern trade for censers primarily and had not entered more than that required and kept by silence. That's why the trade with southern China was the only contact and it was nothing more than pursued. Not any original goal such as the case of Japan was known at all. Therefore, the relationship between Japan and Portugal, close to half a century elapsed since entry of the East had been made by accident. One day in the 1540s, the Portuguese aboard the Chinese ship adrift in Tanegashima was said as the beginning. But when the relationship with Japan had begun, Japan was a perfect target for the missionary and the trade. (26)

V.4 The Relationship between Portugal and Japan
            In Japan, the religious activities were not very strong to challenge the Christian missionary unlike India and Southeast Asia. Above all, at the level of ordinary citizens at that time there was a missionary activity such as Nichirensyu and Jyorensyu but it was limited to near the center of Japan and still did not reach the West of Japan. Through the long-lasting war there were potential needs among the people to obtain the peace of mind and in the late 16th century the Christianized proceeded rapidly in the West. By the Jesuit Order, churches, monasteries, hospitals and schools were installed and finally Japan had experienced a Christian century. Meanwhile, speaking about trade with Japan, it was revealed to be one of the benefits. It was to use the difference of price between gold and silver, in Japan at that time, nearly Gold 11 or 12 to Silver 1 ration but silver was much more expensive in China (Ming Dynasty) Nevertheless, this difference would not have been conscious by the severed diplomatic status between Japan and Ming. As intermediate traders, the Portuguese, 3rd party country could reap huge profit when functioning as intermediary in the trade between the two countries. They export silver from Japan and replace it with gold in China and bring to exchange the gold for silver in Japan. It is clear that it would have been able to calculate by just a second look how much profit they could get from the exchange which do not require expenses too much. Thus, the trade and missionary became an important goal in Japan and, Macau, as a base, it took more importance than before. Silver exports from Japan became the most prosperous at the late 16th century and it was found in a recent study that the output reached one third of world output (about 40 to 50 tons) at that time. So the trade became an important source of funds required for Portugal's Asian operation and the Jesuit mission. (27)

V.5 Expansion of British and Dutch Trade
            Meanwhile, Spain, in the wake of loss of power by the defeat of the invincible Armada in 1588, could not prevent the British and Dutch forces from expanding internationally. Followed by the arrival of a Dutch vessel in 1600, relationship between the Britain and Japan was created, thereby opening the trade competition between British and Dutch chartered companies engaging in transoceanic trade. These two companies concentrated on trade only and refrained from engaging in or promoting Protestant mission. The V.O.C. (Dutch East India Company) obtained the privilege as a merchant organization, which was in good terms with Tokugawa Shogunate. The commercial depot of Dutch East India Company was built in Hirado at first and in Nagasaki later by the order of the Shogunate and offices in each city was established to care for extremely efficient marketing, thus the royal household trading of Portugal was forced to face slowdown. However, the Portuguese, who did not separate trade from missionary work, were expelled from Japan trade so that the Dutch were the only left (1641). Here in Nagasaki by the Dutch East India Company's monopoly (though a Chinese vessel was recognized as an exception), the isolation would be completed from the Japanese perspective. (28)

V.6 The Impact of Isolation
            Losing contact with the world, Japan showed an aggressive attitude, which was a great loss both economically and culturally. As the market was limited to the domestic market only, Japan of Edo Period had become the laboratory of isolated economy. In terms of economic history, at least during 1st half of the Edo period, the narrowness of the market did not work so much as there remained room to expand the domestic market. But in 2nd half, we can only say that economic limitation also hindered the economy. On the whole, the negative evaluation was given to isolation, but it was not considered in the past as to what it gained by running it through the determination of isolation by the government. Above all, isolation has to be precisely expressed as one to be referred to be a series of diplomatic actions as a result because Japan had never had a sense of it. (29)
            It is no doubt that a great change of attitude would be taken against the Christianity and the Netherlands and the UK Inner Harbor (harbor arrival) if the unification of Japan delayed more decades. Otherwise, the isolation status might be impossible. The contact was made when the most dramatic development in the history of both parties was made. Through Nagasaki the window was open to foreigners and they managed to come to Nagasaki and travel to Edo. The Japanese also came to be apprised of the world affairs incoming through Nagasaki. In Nagasaki, the trade was managed by the Shogunate, and even though the trade quantity and items did not cause the decisive influence on the national economy such as Meiji period, it played an important role economically and politically. Not only Nagasaki but also the trade with Joseon Dynasty through Tsushima and trade with Okinawa through Sajjieuma (Southern Kyushu) had been authorized and it was found that the trade and volume were far ahead of Nagasaki's according to a recent study. At Busan the foreign trade was carried at Wakou. Overseas Knowledge came through the study of books imported from the Netherlands, and remarkable especially in the field of medicine and natural science and art which made a great influence on the formation of rational thinking. It is wrong to obtain the cause of isolation from the Japanese side only. Japan was a leading exporter of silver and copper at that time. Competition between European countries surrounding the acquisition of those would be aimed at a type of the monopoly in the mercantilist era and it need to look the "isolation" from the international and historical perspectives. (30)

VI. Prosperity within Edo Economy

VI.1 Political Background
            To understand the Edo Period and its economy, it is essential to understand the political circumstances surrounding its Shogun, Tokugawa Ieyasu. In the history of Japan, two power centers have existed over decades: Tenno's Court, which was represented by the Emperor of Japan, and the shogunate, which held the greatest power in the military class. From Kamakura Period, which started in 1185, rough equilibrium in authority had been maintained between two power centers, although occasional periods of conflicts, like Kenmu Restoration (1333-1336) existed. It was Tokugawa Hideyoshi, the first shogun of Tokugawa Shogunate, who broke the peaceful equilibrium. Tokugawa Shogunate, as US historian Edwin O. Reischauer coined, brought about a "centralized feudal" form of government, in which the most powerful shogun held the control not only around his region but also a wide range of Japanese territory. (31)
            After the Battle of Sekigahara (October, 1600), in which Tokugawa Ieyasu defeated Western Daimyo led by the bakufus under Toyotomi Hideyosi, Tokugawa Shogunate grasped the virtual control over Japan. Tokugawa Ieyasu declared the city of Edo as the capital of Japan, a proclamation that gave Edo period its name. Although Edo Period officially initiated in 1603, it was not until 1615 that Tokugawa Ieyasu finally shattered the remaining power of Toyotomi Hideyosi and the Western Daimyo centered in Osaka. Therefore, during the short term of 12 years, Tokugawa shogunate funneled its attention to military conquest and this is why the record of sea trade between Edo and Osaka began to appear roughly from 1620 onwards. Although the city of Edo enjoyed peace during the same 12-year period, the peace was confined to the city and its surrounding areas (i.e. today's Saitama and Yamanasi Prefactures). Thus, the first several years did not provide a favorable environment for the future merchants and traders of Edo, who urgently needed safeguarded roads under a stabilized political power. (32)

VI.2 Rice-Based Economy and the Currency-Based Economy
            The economy of Edo Period was established on two existing economic systems: rice-based economy and currency-based economy. These two pillars of Edo economy have been maintained until the Meiji Restoration introduced western free market system. But as time went by, Edo's economy was more influenced by the exchange of money rather than rice-based economic system. The shift from rice-based to monetary economy in Edo Period shifted the position of warriors (known as samurais in Japan) and the commons: the commons, through trade, would become a stronger force of Edo society. (33)
            "Since the Shogunate became the dominant political structure of Japan, the warrior families were usually the landlords who gained economic superiority through the exploitation of crops. From the vast domain of their territory, the commoners, who should better be defined as farmers, harvested rice, potato, corns, and other grains and vegetables and gave large proportion of their crops to warrior families in respective regions. The warrior families then exchange the crops to gold and silver, using them to support their farming business and maintain their own living." (34)

VI.3 Accumulation of Wealth in the Capital
            Before the Edo Period, the landlords expanded the domain of arable lands, which boosted the gross harvest in many areas. On the other hand, during the Edo Period, most of these landlords restrained themselves from further expansion of lands; instead, they started to plant crops that had higher values in the market. The kinds of crops variegated from simple rice in the Heinan Period to high-quality rice and various vegetables in the Edo Period, marking the beginning of "Quality-over-Quantity" style of Edo agriculture. Still, the main crop in the market was rice, and many commoners preferred rice as their customary standard of currency that was used in smaller-scale economic transactions. The rice-based economy, therefore, was still conspicuous in the Edo economic system. (35)
            Among the landlords were some of the most prosperous, politically influential landlords, who were collectively called as Daimyo. During the Azuchi-Momoyama Period, which continued for about 35 years just before the Edo Period (1603~1868), along with the movement toward administrative centralization, the Daimyo were occasionally demanded to pay sums of capital to build various social infrastructures at that time. In the Edo Period, the Daimyo had to sacrifice more amount of wealth to build roads, bridges, and other public facilities in the city of Edo. Under the policy of "Tenka Fusei (Worldly Unification), "a term that never implied unification in reality, the shogun demanded Daimyo to deliver their money for the holy cause. Daimyo's wealth was centered in the city of Edo, an area that surrounds today's central and eastern Tokyo, Kawasaki, and the northeastern part of Yokohama. According to historian Oishi Junsanroh, the average tax rate imposed to farmers in the beginning of Edo Period was about 70 %, reflecting the necessity of landlords to collect huge capital from their commoners to pay for Tenka Fusei. By 1620, Tenka Fusei succeeded in concentrating 42 % of Japanese national wealth on the city of Edo, which has been approximately 35 % around 1610. (36)

VI.4 Exchange between Currency and Rice
            Thanks to the massive centralization of wealth, the city of Edo could enjoy substantial development in commerce. Commercial development triggered the necessity of currency, which was used to purchase consumer goods and other necessities in the city's open market. Meanwhile, the use of currency spread to the countryside. Not only did the expanding market of Edo extended its scope to the farming villages around the city of Edo, but also the merchants from city provided currency in exchange for the crop they bought from landlords and individual farmers. The currency-based economy naturally soaked into the heart of farming provinces, increasing the usage of currency for economic transactions in Edo Japan overall. As time went by, the net agricultural production in Japan also increased, which exhilarated economic activities around major cities like Edo and Osaka. Economic growth in major cities furthered the centralization of capital in major cities and increased the power of merchants. (37) In theory, the rice-based economy was still in existence in the Edo Period but in reality, the currency-based economy was the heart of Edo economy from its early stages. A quotation below represents the superiority of money (gold, silver) to rice as a form of currency.

            Translation : "Throughout Edo Period, rice-based economy maintained its form, but the landlords could not get anything unless they exchange their rice into tangible money. In reality, rise-based economy had almost been assimilated into currency-based economy." (38)

            Now comes the part where historian and the prominent Edo specialist Suzuki Kouzou called "the world of gold, silver, and sen." (39) Sen referred to a type of coin made of copper alloy, by and large similar to Joseon's sang-pyeong tong-bo in appearance, which was used in the markets of Edo. It was during the beginning of Edo period that people agreed upon the official rate of exchange among three money. Rice-based economy, although meager to currency-based economy, was still visible, which means that the exchange rate between rice and metal currency was also agreed upon.

VI.5 Improved Demand, Improved Consumption
            In most areas, as gross consumption of products increased, not only the quantity but also the quality of consumption improved. In Edo Japan, as people consumed more products, not only did the quality of consumption increase but also the demand for currency escalated. Alcohol is often cited as the prototype for this consumption trend. Before the Edo Period, people around Kanto Province, which encompasses areas around Tokyo, Yokohama, and Sendai, produced thick, turbid alcohol called daku-shu. Residents of Kanto Province regarded daku-shu as their daily alcohol, an alcohol that they could afford in ordinary times. Another kind of traditional alcohol, called sen-shu, was also consumed in Japan, but it was only made in the inner hinterlands for the limits in transporting ingredients. Kanto people knew about sen-shu, which was daily alcohol for hinterland populations, but in a different manner: for them, sen-shu was an expensive gift that could be imbibed only in specific occasions among privileged people. This conception gradually changed by the beginning of the Edo Period. In the midst of vibrant economic atmosphere were the transporters and merchants who specialized in "connective distribution." (39)
            The popularization of sen-shu in Edo commercial market changed the pattern of daily alcohol consumption. It was the year 1610 when bottles of sen-shu emerged in Edo market through mountain routes. From about 1630, sen-shu gathered in the City of Edo is transported by merchant ships - called Tarukai-sen - and was shipped to major cities like Osaka. Through the commercialization and distribution of products, the people in Edo Period, especially those living in Edo city, were able to enjoy diverse selections of products. Their aggregate demand enhanced, which led to the improved quality and quantity in their consumption. (40)
            General quality of demand and consumption kept improving throughout the entire Edo Period. Shoyu, or Japanese soy sauce, was a condiment transported mainly from Saitama Province, which is less than a hundred kilometers away from the city of Edo. The proportion of dai-tou (a kind of soybeans used to make shoyu) was high in the shoyu of Saitama, which made it impossible to season food with great delicacy. Cooks of military class and meticulous housewives in Edo city demanded shoyu with low proportion of dai-tou. Finally in about 1711 to 1715, high-quality shoyu began to be imported from Osaka in great quantity. These shoyu were lower in the concentration of dai-tou and acted as a high-class condiment in Edo city. As people ceaselessly demanded high-quality shoyu from Osaka, import from Osaka continued until 1753 when a wealthy merchant, backed by the government subsidy, built a high-quality shoyu factory in the City of Edo and produced the same quality of shoyu produced in Osaka. (41)

VI.6 Economic Cycles
            Before the Tokugawa Ieyasu exterminated the remaining powers of Toyotomi Hideyoshi, his Shogunate took part in shaping economic policies. During the first 50 years, the City of Edo could grew rapidly thanks to Tokugawa's financial support channeled to activating markets and vitalizing trades among the Edo merchants and those from the surrounding regions which were not affected by belligerence between Toyotomi. Particularly benefited from Tokugawa's support was in the field of architecture. Japanese historian Suzuki Kozo even termed it Construction Boom (42) describing the massive amount of construction effort exerted within the City of Edo. The Construction Boom not only provided new homes but also provided them with new jobs. The jobs created by the Construction Boom provided financial support to the immigrants who had been small, independent farmers in rural regions.
            The economic boom, however, did not benefit every single class of people. During the commercial revitalization, the influence of military class had declined as the national wealth once accumulated on their vaults spread in the form of commercial capital. Since Tokugawa shogunate relied on numerous small military classes to retain its power, it could not ignore their complaints. In addition, around the late 17th century, the shogun also felt that the commerce was flourishing excessively, since merchants imported goods from virtually all around the nation (i.e. Osaka, Kyushu, and Tohoku). (43)
            Throughout the Edo Period, Tokugawa Shogunate intermittently loosened and tightened its economic control. Thus the ups and downs in commerce, or economic cycles, were created by artificial policies. Since the concept of market economy and a set of commercial laws had not been introduced, human factors would have probably been the means to control economic cycles. Fortunately, as the current economic theories state, economic cycles are the natural regulators that precluded bubbles and hyperinflations. (44)

VI.7 Kinds and Usages of Currency
            Japanese historian Suzuki Kozo coined the term Gold of East, Silver of West (45) to recapitulate the core of currency used in the Edo Period. In Japan, the East refers to the Kanto region around Tokyo (the city of Edo during the Edo Period) while the West refers to the Kansai region around Osaka. As Suzuki's term implies, there were two compatible currencies in the Edo Period, but they were used primarily in different regions. In the Kanto region, gold was the standard currency both among the merchants and consumers. On the other hand, in the Kansai region, silver was the standard currency among the two classes. Meanwhile, bronze, in the form of irregularly minted coin (sen) was used all around the nation as the subsidiary form of currency that were mainly circulated among mid-income families, retail merchants, and small-scale consumers. (46)
            It does not mean, however, that Edo people could never buy goods with silver and Osaka people could never buy goods with gold. They could, and indeed, there was a limited exchange market for gold and silver. Only did people get disadvantage in the quantity/quality of their value when they presented money that are not dominantly traded. For example, if silver was one-eighth value of gold, one could buy a pack of rice with one men of gold in Edo while the same person could buy the same quantity and quality of rice in only one-tenth amount of the pack in Osaka. The price discrimination was also imposed on the basis of class level and the currency possessed by a certain class. For example, Japanese during Edo period believed that gold was the right currency for the powerful military class and large-scale merchants. (48) If, let's say, a farmer wishes to buy rice with gold, the merchants were likely to provide less quantity of rice to farmer than to those who were "fit" for gold.
            Some variation in dominant/subordinate currency existed according to the kind of products. In the city of Edo, all goods were traded in gold except tea, woods, clothes, medical ingredients, candies, and salt. For these goods, silver served as the dominant currency instead. This rule was particularly strict for military class (daimyos) and wholesale merchants, whose level of transaction was regular in period and higher in quantity in general. (49).

VI.8 Middlemen and their Roles in Market
            One of the most distinguishing characteristics during Edo Period was the influence of middlemen on the overall economy. As nationwide trade system developed, so did middlemen who purchased goods from an outskirt region and transported them to the major cities. By doing so, middlemen did not only create a new kind of well-paid occupation but also enhanced the value of products. You may think of these middlemen as the ones under current capitalistic society who efficiently distributed goods from one region to another. Their importance in Edo Period is illustrated in the quotation below, which compares them as the first signal of a capitalist economy :

            Translation : "Commercial capital developed during the Edo Period came not from merchants who lived on commissions but from the professional middlemen who happened to have followed capitalistic principles of economy." (50)

VII. Changes in Edo City

VII.1 Tenka-Hushin: Definition and Characteristics
            As discussed in the previous chapter, one of the driving forces of Edo economy in its commencing stage was the construction boom. Although the construction boom might have taken place anyway as Edo was becoming the commercial, social center of Japan, it was largely encouraged by the shogun-driven movement called Tenka-Hushin. Tenka-Hushin refers to the reestablishment, or restructuring of the universe, with Tenka meaning the heaven and the land and Hushin meaning the construction of god's holy places (in the context, temples). As Suzuki defined in the quotation below, Tenka-Hushin originally meant that the Japanese people rose upon to the cause of massive construction, though it was not in reality :

            Translation : "People of Tenka ordered Daimyo to build castles, civic infrastructures, temples, waterways, and other constructions." (51)

            Considering the omnipotence held by the Shogunate in Edo Period, the definition does not seem to be practical at all. In fact, it was Tokugawa Shogunate that proclaimed Tenka-Hushin in order to build a strong, unified nation by creating and fixing social infrastructures and centralizing both human and financial resources in its capital, Edo. Meanwhile, Tenka-Hushin was also effective in subjugating the military classes, Daimyo, which were spread all over the nation. Although Tenka-Hushin was initiated by the Shogun, it was Daimyo's responsibility to oversee and finance the construction process. Since Shogun could usurp the authority of Daimyo which failed to achieve its obligation, the Daimyo was eager to contribute to the cause of Tenka-Hushin. Japanese historians often point to Tenka-Hushin as a prominent example of Keynesian policy during the Edo Period, since the movement resembled in its methods to Roosevelt's New Deal. It is also widely cited as an example which shows that the Edo economy was not singularly marked by the influx of capitalistic systems. (52)

VII.2 Effective Demand from Tenka-Hushin
            Tenka-Hushin was a nationwide movement that changed the landscape of Japan during the early Edo Period. A great proportion of investment for Tenka-Hushin, however, was channeled into the city of Edo. In theory, the Daimyo were supposed to take part only in the restructuring of its own provinces, but Tokugawa Shogunate summoned a number of Daimyos in Kanto region to restructure the city of Edo. During the first seventy years, Edo underwent a gradual process of transformation, as new buildings and markets along with the organized streets and canals were built in the heart of the city. The most notable ramification of Tenka-Hushin was the increase in effective demand at the City of Edo. The construction required a huge number of laborers and equally huge number of new residents, which Daimyo taking part in the Tenka-Hushin movement of Edo city summoned from their regions. They worked, ate, slept, and earned money in Edo city. Unlike merchants who perambulated from region to region, these laborers and residents spent their whole income within the city and since their spending was concerned with their daily living, the city could enjoy a constant, regular amount of transactions in the markets. Their regular spending stabilized the incomes of merchants and other residents, and their profits guaranteed the economic boom in the Edo city; in other words, they created what today's economists call "multiplier effect" in the Edo economy. (53)

VII.3 Development of Market Economy
            Tenka-Hushin was cited as a Keynesian aspect of Edo economy; ironically, however, it also instilled the concept of market economy. Tokugawa Shogunate ordered all Daimyo to take part in Tenka-Hushin. And each Daimyo was assigned randomly assigned tasks. However, not all Daimyo had the same skills, knowhow, and technicians for a particular project. For example, the Shogun ordered several Daimyos to produce stone walls in the outskirt of the city. Some Daimyo had technicians who knew where to get good rocks, how to cut them, and how to deliver them to the target point. Others did not have any technicians in their regions specialized in making stone walls, but they might have other professionals, such as blacksmiths. Through their own traders, these Daimyo looked for a Daimyo which had rock specialists and were willing to trade them with their blacksmiths. If the counterpart did not need blacksmiths, the Daimyo were also willing to reimburse gold and silver. Without human trade, many Daimyo would have failed to achieve their own projects and Tenka-Hushin might have been bungled. In the course of these trades, however, the Daimyo contributed greatly to the introduction of capitalistic concept to the Edo economy. The basis of capitalism lies in free trade of resources between two agents, just like two Daimyo that traded their technicians. In fact, the tradition resembles to today's "carbon emission trade," in which a country sell their part of rights to emit carbon dioxide to another country who need to produce more carbon dioxide for the sake of its industrial development. (54)

VII.4 Old Money and New Money
            1601 was the year when Tokugawa Ieyasu defeated the Western Daimyo at the Battle of Sekigahara. Soon after the victory, Tokugawa issued gold and silver currency under his daimyo's name - he was yet to be the Shogun. During the Tenka-Hushin, Tokugawa Shogunate increased the amount of issuance to support the construction. It was 1695 when the second gold currency, Gen-Roku Gold was introduced with lower purity in order to differentiate the laborers' wage further. Until the end of Edo Period, Tokugawa Shogunate issued different types of gold and silver currency with different shapes, engravings, and purity. The record of these money is listed in the diagram below.

Table : Gold and Silver Currency during the Edo Period (55) after Suzuki Kozo, Capitalism was born in the Edo Period, p 53
Gold mass (g) purity (%) period in use
Kei-Cho Gold 17.85 86.79 1601-1738
Gen-Roku Gold 17.85 57.36 1695-1717
Kan-Zi Gold 9.37 84.29 1710-1719
Sei-Toku Gold 17.85 84.29 1714-1860
Kyo-Ho Gold 17.85 86.79 1715-1860
Bun-Si Gold 13.17 65.71 1736-1827
Bun-Tei Gold 13.17 56.41 1819-1842
Ho-Si Gold 11.25 56.77 1837-1866
Sei-Zi Gold 9.00 56.77 1859-1866
Man-Tei-Sho-Han 9.00 56.77 1860-1877

Silver mass (g) purity (%) period in use
Kei-Cho Silver N/A 80 1601-1738
Gen-Roku Silver N/A 64 1695-1722
Oku-Hin Silver N/A 40 1710-1722
Bun-Si Silver N/A 46 1736-1827
Sho-Wa Silver 18.75 46 1765-1772
Ao-Ni-Tei Silver 10.12 99.75 1772-1828
Bun-Tei Silver N/A 36.00 1820-1842
Bun-ka-Hei-Ni Silver 7.5 99.75 1824-1842
Ho-Si Silver N/A 26.00 1837-1868
Tei-Si Silver N/A 13.00 1859-1868
Mexican Silver 27.00 87.00 1859-1868

            The leftmost corner is the name of gold/silver currency (the upper half is about gold and the down half is about silver). The next corner is mass (g) per unit. The third corner is purity and the fourth corner is the period of issuance. The merchants preferred the currency in issuance and were reluctant to give the same value to the old currency because it was the currency in issuance that was recognized by the Shogunate. It did not mean, however, that the use of old currency that was no longer issued was illegal in Edo Period; it was only that the old currency was as much appreciated as the new currency. (56) The merchants' penchant for new currency also helped the Shogunate, who could hold one further authority over the control of overall Edo economy by issuing currency.

VII.5 The Structure of Edo City
            The city of Edo was the first Japanese city that functioned as the center of both inland and marine economy. In Edo city, both the land and waterways were of paramount importance. The main street of Edo city formed along the straight canal covering Manse-bashi, Nihon-bashi, Kyo-bashi, and Shin-bashi, four "bridges" ("bashi" means bridge in Japanese) that are still constituting the economic centers of Tokyo. Along the canal under these bridges came the skippers from what is now Tokyo Bay, shipping products from Western cities that were carried to the markets formed along these bridges. (57) In short, as the map below shows, Edo possessed the harmony of sea, land, and inland waterways, all of which played a significant role in prospering Edo economy.

Picture: The Map of Edo City (58) Modified after Suzuki Kozo, Capitalism was born in the Edo Period, p. 58

VII.6 The Use of Fire to Clear Areas for Planned Reconstruction
            Throughout the history of Edo city, there had been a number of records about fire. No other cities in historical Japan - maybe in the world - could match Edo in terms of the number of fires they had. Most of fire in Edo, however, was not caused by arsonists or by accident; rather, they were caused deliberately. Throughout the first two centuries, numerous Japanese moved to the city, some by Daimyo's participation in Tenka-Hushin and some to look for a new job. The population increased so greatly that Tokugawa Shogunate deemed it necessary to tear down the old city structure and build the new, efficient constructions on the site. From 1650 to 1800, a number of "deliberate" fires, such as The Great Fire of Meiryaku cleared the main areas which were suffering from unbearably high population density. Within months, with meticulous blueprint, the site of fire was reconstructed into a well-planned district capable of encompassing massive population at once. (59)
            The reconstruction was a part of Tenka-Hushin, and it had the same positive impact as Tenka-Hushin had on Edo economy. Although the fires tear down the valuable buildings, the massive labor under Tenka-Hushin replaced these buildings very quickly. The workers earned money from the deliberate fires, which in turn created effective demand within Edo economy. (60) Ironically, the fire that destroyed the economic infrastructure stimulated its economy in the end.

VII.7 Inland Waterway System
            Initially, the canals in Edo city were limited to those that connected inner regions with what is now Tokyo Bay. However, as the city expanded throughout a series of fire, the small canals could not support the huge amount of traffic. The ships that carried goods to Edo were concentrated in the port of Edo, which was way beyond its capacity. It was then the Tokugawa Shogunate suggested a long, inland waterway system that connected main cities around Edo. The construction of waterway began in 1660 and lasted for 70 years. The completed waterway system extended from the northern province of Sendai to the southwestern neighbor of Edo, called Izu peninsula. Around Sendai stretched thousands of acres of farmland for rice, and it is the rice from Sendai that supported a large proportion of Edo people's appetite. Meanwhile, Izu peninsula was where the quarries were located. From these stone mines came the stones and other construction materials necessary for reconstruction in Edo city. Through the new waterway system, two main ingredients of Tenka-Hushin, as well as other subsidiary materials produced in the cities along it, were efficiently delivered to Edo city. (61)
            The inland waterway system was particularly effective because it vouchsafed the regular transportation of rice, rocks, and other materials. The ocean current along the pacific rim of Japanese island was often vicarious during the Edo Period, which sometimes made it difficult for middlemen to carry their goods through ocean route. Moreover, the regions that were laid alongside the waterway became the beneficiary with the introduction of regular passenger ships on the waterway. Thus the waterway helped to scatter the congestion around the "main street" of Edo city and to develop its suburban areas. Now-famous sites such as Ikebukuro and Omiya were the examples of suburban areas that were boomed during Edo period. (62)

VIII. Middle Phase in Edo Period

VIII.1 Isolation
            The first decades of Edo Period was the last decades of Nanban trade period, in which Japanese traded intensely with Europeans and exchanged goods, machineries, and Christianity. It is at the beginning of the Edo period that Japan built her first ocean-going Western-style warships, such as the San Juan Bautista. At first, Tokugawa Shogunate did not intend to isolate Japan completely; rather, he had an ambition to develop Edo as the major port. However, he learned that the Europeans were willing only to engage in trade in Southern ports of Kyushu (i.e. Nagasaki), he deemed it necessary to restrict foreign trade. He was not sure about the impact the Europeans would have in the Southern regions, and he was highly suspicious that Christianity would break the peace of newly unified Japan. (63)
            By 1612, the shogun's retainers and residents of Tokugawa lands had been ordered to forswear Christianity. More restrictions came in 1616 when the Shogunate restricted foreign trade to Nagasaki and Hirado, an island northwest of Kyushu. In 1622, the Shogunate executed 120 missionaries and converts; in 1624 it expelled the Spanish from its land and in 1629 executed thousands of Christians in Kyushu. Finally, the Closed Country Edict of 1635 prohibited any Japanese from traveling outside Japan or, if someone left, from ever returning. In 1636 the Dutch were restricted to Dejima, a small artificial island-and thus, not true Japanese soil-in Nagasaki's harbor. Portuguese, meanwhile, were permanently expelled and its missionaries were executed at site. (64) Tokugawa Shogunate, on the other hand, was less suspicious about the Asians; he allowed a Daimyo to trade with China and Korea, the latter of which spread its cultural excellence through annual Josen Tsusinshi (Joseon Tongshinsa in Korean).

VIII.2 Kyoho Reform
            Kyoho Reform initiated in 1722 when the Shogun Tokugawa Yoshimune introduced agricultural reforms called Agemairei, although several Western sources, such as Wikipedia, date its origin to 1736. The reforms were aimed at making the shogunate financially solvent. Because of the tensions between Confucian ideology and the economic reality of Tokugawa Japan (Confucian principles that money was defiling was against the commercial progress within Edo economy), Yoshimune deliberately violated certain Confucian principles that were hampering his reform process. In this context, some Japanese historians claim that Kyoho Reforms demonstrated Shogunate's cherishment of economic prosperity over traditional value systems. (65)
            Kyoho Reform was implemented in order to compensate huge financial investment by Tokugawa Shogunate, which poured its money too much on the Edo economy to take care of its own living. It included an emphasis on frugality, as well as the formation of merchant guilds that allowed greater control and taxation. But the most important of all was Agemairei . Agemairei included two major changes: first, the Shogunate reduced workforces in its administration and second, it decreed a certain amount of rice for every ten-thousand seki to be provided additionally to the Shogunate. Both changes were intended to increase the asset of the Shogunate. Yoshimune later extended the latter policy in 1744 as to ensure the constant supply of rice. The policy in 1744 banned peasants from selling their lands, but guaranteed a certain amount of their production to be returned to them. The returning amount of production was roughly the same as before, but considering that Kyoho Reform restricted economic vitality, the policy was generous to the peasants. In reflection upon today's economic theory, Kyoho Reform was an artificial measure that promoted deflation. But the difference between the reform and general deflation was that Edo economy did not lose vitality through its continued construction boom and increasing trade. (66)

VIII.3 Era of Tanuma
            Era of Tanuma was the most prosperous era of Edo Period, which lasted from 1759 to 1786. It was named after Tanuma Okitsuku, who was a senior counselor of Tokugawa Shogunate and implemented pro-commerce, pro-merchant economic policies during "his" era. Era of Tanuma smoothed many restrictions imposed on the merchants and their commercial activities. Later, it also loosened a part of Shogunate's isolationist policy, allowing Christian books and a limited number of Western inventions - these inventions had been introduced to Japan either before the hard-line isolationist policy was implemented or through smuggling - to be traded freely in the Edo city's market. (67)
            By the beginning of Era of Tanuma, the city of Edo had a population of more than one million, and Osaka had more than 400,000 inhabitants. Many other castle towns along the waterway system grew as well. Osaka and Kyoto became busy trading and handicraft production centers, while Edo was the center for the supply of food and essential urban consumer goods. Although currency had become widespread before the Era of Tanuma, Rice still constituted the base of the economy, as the daimyo collected the taxes from the peasants in the form of rice. Taxes during the Era were high, about 40 % of the harvest. The rice was sold at the Fudasashi Market in Edo. To raise money, the daimyo used forward contracts to sell rice that was not even harvested yet. These contracts were similar to modern futures trading. (68)

Picture: Fudasashi Market in Edo during the Era of Tanuma (69) Modified after Suzuki Kozo, Capitalism was born in the Edo Period, p. 76

VIII.4 Kansei Reform
            Kansei Reform was a reactionary reform that was introduced in response to the growing economic flexibility accumulated during the Era of Tanuma. The reform was led by Matsudaira Sadanobu, the Shogun's chief councilor, who was disgruntled about the excessive liberalization implemented under Tanuma. Sadanobu implemented deflationary policy, expecting the positive effect that the Shogunate enjoyed in the Kyoho Reform. (70) However, his policy of banning any western influences, reducing liquidity in market, and discouraging immigration into the city of Edo only constricted the consumer spending and aggravated the economic prosperity. Japanese historian Oseki Sensanro summarized the side effects of Kansei Reform as follows : ("Kansei Reform delayed the Meiji Restoration for a hundred years.") (71).
            After the Kansei Reform came the "downs" in the economic cycle of Edo. Drought swept Kanto Province in the late 18th century, which decreased the total agricultural production, and thus commercial vitality. In 1835, an earthquake of 7.6 magnitudes, called Sanriku Earthquake, destroyed many infrastructures of Edo city. Although these events have little to do with the reform itself, the negative economic effects of the reform and the natural disasters together thwarted prosperity in Edo economy. The recession was, however, surprisingly mild considering the impacts the failed economic policy, drought, and the earthquake might have on one's economy. This was because more and more people were flowing into the Edo city, and since they had their jobs to reconstruct the hard-hit city, the overall demand in its economy kept increasing during the post-Kansei period. (72)

VIII.5 Tenpo Reform
            In 1842, Tokugawa Shogunate implemented its last social reform. Tenpo Reform was a socioeconomic reform that attempted to improve the economy and change the social landscape struck by the previous natural disasters. It was initiated by Mizuno Tadakuni, who tried to solve the problems within local politics at first but extended his measures to the nationwide scale. (73) Economic restrictions introduced in Kansei Reform, such as price control on certain commodity, were lifted to revitalize the economy. Social reforms were also introduced in order to bring order to Japanese society. Under the social reforms, a unified calendar system was introduced and the families were required to register themselves at their nearest Shinto shrine, which was a place for safekeeping sacred objects but also had administrative function during the Edo period. Meanwhile, as an effort to maintain social order, Tenpo Reform banned the distribution of Rangaku and restricted the influx of population into Edo city. Soon after Tenpo Reform was instituted, however, the focus of Tokugawa Shogunate turned to foreign intrusions which, within less than three decades, brought about its demise. (74)

IX. Fall of Tokugawa Shogunate

IX.1 Intrusions from the West
            Western intrusions were on the increase in the early nineteenth century. Russian warships and traders encroached on Karafuto (called Sakhalin in Russia) and on the Kuril Islands, the archipelago just north of Hokkaido's northernmost city, Asahikawa. A British warship entered Nagasaki harbor searching for enemy Dutch ships in 1808, and other warships and whalers were seen in Japanese waters with increasing frequency in the 1810s and 1820s. Whalers and trading ships from the United States also arrived on Japan's shores. Although the Japanese made some minor concessions and allowed some landings, they largely attempted to keep all foreigners out, sometimes using force. Rangaku became crucial not only in understanding the foreign "barbarians" but also in using the knowledge gained from the West to fend them off. (75)

IX.2 Ideal of Agrarian Society and the Coalition of Critics
            From the onset, the Tokugawa Shogunate considered agriculture as the pillar of growing Japanese society. In the economic history of Japan, we have explored different economic measures that supported commercial activities; however, Shogunate believed in the principle that the agrarian society could prosper only if their crops were smoothly distributed and sold in the markets. The Shogunate still retained the principle in the 19th century, though it had become much challenging for him to continue its emphasis on agrarian society. Although the natural disasters and Kansei Reform did not have as much impact in the economy, it did have negative ramifications in society and politics. Throughout the Edo Period, there were more than 20 nationwide famines, some of which invoked massive protests from the peasants. Some merchants, who owned greater fortune than the military class, meanwhile, demanded political power, only to be refused by the Shogunate. These merchants, based on their accumulated wealth, began to take advantage of social unrest launched by disgruntled peasants and formed so-called "coalition of critics." These critics would later contribute to the demise of Tokugawa Shogunate after Commodore Perry signed contract that opened Japanese ports to the United States. (76)
            Yet, the Tokugawa did not eventually collapse simply because of intrinsic failures. Foreign intrusions helped to precipitate a complex political struggle between the Shogunate and the coalition of its critics. The continuity of the protests in the mid-nineteenth century would finally bring down the Tokugawa Shogunate. (77)

IX.3 Affairs with Commodore Perry
            When Commodore Perry's four-ship squadron appeared in Edo Bay in July 1853, Tokugawa Shogunate was thrown into turmoil. Perry appeared in the coastline with two ships, demanding the Shogunate to open the ports, but the Shogunate had refused their offer. The chairman of the senior council, Abe Masahiro, was responsible for dealing with the Americans. Abe was confused to see the opposing sides: the Shogunate who did never want to welcome Americans and the local Daimyos who wanted to go war. Lacking consensus, Abe decided to compromise by accepting Perry's demands for opening Japan to foreign trade while preparing for future battle against him. In March 1854, the Treaty of Kanagawa opened two ports to American ships seeking provisions, guaranteed good treatment to shipwrecked American sailors, and allowed a United States consul to take up residence in Shimoda, a seaport on the Izu peninsula. Abe probably did not know that his preparation would be futile as the liberals and the coalition of critics worked together to draw as much Western influences as possible. The Harris Treaty, which opened still more areas to American trade, was forced on the Shogunate five years later. (78)

IX.4 . Meiji Restoration
            In the final years of Tokugawa Shogunate, not only the contacts with America but also the foreign contacts in general increased. The new treaty with the United States in 1859 allowed further concessions: unsupervised trade at four additional ports, and foreign residences in Osaka and Edo. It also embodied the concept of extraterritoriality; foreigners were subject to the laws of their own countries but not to Japanese law. Tokugawa Yoshinobu reluctantly became the last shogun in the middle of the political turnmoil. He tried to reorganize the government under the emperor, whose influence had been neglected during the previous decades, while preserving the shogun's leadership role. However, a complicated political understanding forced Yoshinobu to announce an "imperial restoration". He renounced the Shogun's power to the emperor unconditionally. The expression Meiji Restoration, or Meiji Yushin in Japanese, came from Meiji, the name of the emperor, and Restoration (Yushin), which implies that the emperor regained power. (79)

IX.5 . The Japoanese Economy during the Last Years of the Edo Period
            Although the politics in the last years of Edo Period was often marked by turmoil, the economy of Edo continued to prosper till the end of the Shogunate. After the damage from the earthquake of 1835 was recovered, Edo economy enjoyed as they did during the Era of Tanuma. Despite these efforts to restrict wealth and partly because of the extraordinary period of peace, the standard of living for urban and rural dwellers alike grew significantly during the end of the Tokugawa period. Better means of crop production, transport, housing, food, and entertainment were all available, as was more leisure time, at least for urban dwellers. The literacy rate was high for a preindustrial society, and cultural values were redefined and widely imparted throughout the military classes. (80) Although the guilds appeared in the Edo market, economic activities went well beyond the restrictive nature of the guilds, and commerce spread and a currency economy continued to develop. Although government heavily restricted the merchants and viewed them as unproductive members of society, the samurai, who gradually became separated from their rural ties, depended greatly on the merchants and artisans for consumer goods, artistic interests, and loans. In this way, a subtle subversion of the warrior class by the merchants took place until the Meiji Restoration channeled commercial authority to the Westerners. (81)

X. Conclusion
            Much is known and studied about Japanese economic history after the Meiji Restoration. Much is equally ignored and neglected, however, about how they developed their economy before the Meiji Restoration and how the Japanese paved their way for the Meiji Restoration. As the first country in Asia to open the ports to Western forces, Japan had undergone gradual economic changes for nearly a millennium before the Meiji Restoration. Different leaders have introduced various measures to improve the total agricultural production and vouchsafe their share of crops. Meanwhile, interactions between the Western forces started long before Commodore Perry arrived at Edo. Japan had altered policies between openness and seclusion and during the time of openness, it took advantage of western merchants and missionaries who brought such novel inventions as matchlocks. The openness was terminated with the start of Tokugawa Shogunate, and the Edo Period was marked by seclusion until the mid-19th century. During the same period, however, Japanese economy boomed tremendously. Based on the comprehensive social infrastructure built by Tenno-Hushin, Japanese economy prospered as merchants actively engaged in trade with other cities. Under the market system, Edo economy rapidly progressed as the Shogunate introduced capitalistic measures to support commercial activities. There were natural disasters and constrictive policies as well, but they were not enough to thwart the progress of Edo economy. By the time Meiji Restoration was signed, Japanese economy had enough concept of market economy, legal protections, and social infrastructures to accept the Western influences smoothly, leading to the continued success of Japanese economy after the Meiji Restoration.


1.      Akira 2003, p.12
2.      ibid. p.15
3.      ibid. p.15
4.      Kanji 2003, p.8
5.      ibid. p.9
6.      Akira 2003 p.16
7.      ibid.
8.      ibid. p.17
9.      Kozo 2002 p.20
10.      ibid. p.21
11.      Akira 2003 p.24
12.      ibid.
13.      ibid. p.25
14.      ibid. p.25
15.      ibid. p.26

16.      Kanji 2003 p.38
17.      Kozo 2002 p.28

18.      ibid.
19.      ibid. p.30

20.      Akira 2003 p.32
21.      ibid.
22.      ibid. p.33
23.      ibid. p.33
24.      ibid. p.35
25.      ibid. p.36
26.      ibid. p.36
27.      ibid. p.37
28.      ibid. p.38
29.      ibid. p.38
30.      ibid. p.40
31.      Wikipedia : Edo Period
32.      ibid.
33.      Kozo 2002 p. 33
34.      ibid. p.34
35.      ibid. p.35
36.      ibid. p.35
37.      ibid. p.41
38.      ibid. p.41
39.      ibid. p.42
40.      ibid. p.42
41.      ibid. p.43
42.      ibid. p.43
43.      ibid. p.45
44.      ibid. p.46
45.      ibid. p.46
46.      ibid. p.48
47.      ibid. p.48
48.      ibid. p.50
49.      Kanji 2003 p. 86
50.      Kozo 2002 p. 50
51.      ibid. p.51
52.      ibid. p.52
53.      ibid. p.52
54.      Changes during Edo Period:, from Hokusai Online
55.      Modified after Kozo 2002. p.53.
56.      Wikipedia : Economic History of Japan
57.      Ohno, Economic Development
58.      Modified after Kozo 2002 p.58
59.      ibid. p.58
60.      ibid. p.60
61.      ibid. p.60
62.      ibid. p.61
63.      ibid. p.65
64.      ibid. p.65
65.      Wikipedia : Kyoho Reform
66.      Kozo 2002 p. 69
67.      ibid.
68.      ibid. p.74
69.      Modified after Kozo 2002 p.76
70.      Wikipedia : Kansei Reform
71.      Kozo 2002 p. 80
72.      ibid.
73.      Wikipedia: Tenpo Reform
74.      Kozo 2002 p. 89
75.      Wikipedia : Edo Period
76.      ibid.
77.      Kozo 2002 p. 92
78.      Wikipedia : Edo Period
79.      Meiji Restoration, from Lycos Retriever
80.      Wikipedia : Edo Period
81.      Kozo 2002 p. 94


Note : websites quoted below were visited in December 2009.

Primary Sources
1.      Suzuki Kozo, Capitalism was born in the Edo Period, Japanese Society of Business and Economics, May 1, 2002, 1st Edition

2.      Hayami Akira, Economic Society of Contemporary Japan, Leizawa University Press, May 8, 2003, 1st Edition

3.      Ishii Kanji, Economic History of Japan, Jang Se-gi (translated), Du Nam Publishing Company, August 25, 2003

Secondary Sources :
4.      Wikipedia Article on Economic History of Japan
5.      Wikipedia Article on Kyoho Reform
6.      Wikipedia Article on Kansei Reform
7.      Wikipedia Article on Tenpo Reform
8.      Wikipedia Article on the Edo Period
9.      K. Ohno, Economic Development during Edo Period : "Edo Period - Pre-conditions for Industrialization"
10.      B. Gordon, Tokugawa Period's Influence on Meiji Restoration
11.      Social and Economic Changes during Edo Period, from Hokusa Online
12.      Meiji Restoration: Tokugawa Shogunate, from Lycos Retriever

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