Economic History of Japan - Meiji Period

Meiji Period

After 1854, when the Tokugawa shogunate first opened the country to Western commerce and influence (Bakumatsu), Japan went through two periods of economic development. When Tokugawa shogunate was overthrown and Meiji government was founded, Japanese Westernization began completely. The first term is during Prewar Japan, the second term is Postwar Japan.

The industrial revolution first appeared in textiles, including cotton and especially silk, which was based in home workshops in rural areas. By the 1890s, Japanese textiles dominated the home markets and competed successfully with British products in China and India, as well. Japanese shippers were competing with European traders to carry these goods across Asia and even to Europe. As in the West, the textile mills employed mainly women, half of them under age twenty. They were sent there by their fathers and turned their wages over to them. Japan largely skipped water power and moved straight to steam powered mills, which were more productive, and created a demand for coal.

One of the biggest influences on the economy that the Meiji period brought was the end of the feudal system. With a relatively loose social structure, the Japanese people were able to advance through the ranks of society more easily than previous generations. They were able to do this by inventing and selling their own wares. More importantly however, was the fact that the Japanese people now had the ability to become more educated. With a more educated population, Japan's industrial sector grew significantly. Implementing the Western ideal of capitalism into the development of technology and applying it to their military helped make Japan into both a militaristic and economic powerhouse by the beginning of the 20th century.

In the Meiji period, leaders inaugurated a new Western-based education system for all young people, sent thousands of students to the United States and Europe, and hired more than 3,000 Westerners to teach modern science, mathematics, technology, and foreign languages in Japan (O-yatoi gaikokujin). The government also built railroads, improved roads, and inaugurated a land reform program to prepare the country for further development.

To promote industrialization, the government decided that, while it should help private business to allocate resources and to plan, the private sector was best equipped to stimulate economic growth. The greatest role of government was to help provide the economic conditions in which business could flourish. In short, government was to be the guide and business the producer. In the early Meiji period, the government built factories and shipyards that were sold to entrepreneurs at a fraction of their value. Many of these businesses grew rapidly into the larger conglomerates. Government emerged as chief promoter of private enterprise, enacting a series of probusiness policies.

The development of banking and reliance on bank funding have been at the centre of Japanese economic development at least since the Meiji era.