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 The past and present of Japanese commerc 
 
 3 1924 013 953 074 
 
Cornell University 
 Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924013953074 
 
STXTDIES IN HISTORY, ECONOMICS AND PUBLIC LAW 
 
 EDITED BY THE FACULTY OF POLITICAL SCIENCE OF 
 COLUMBIA UNIVERSITY 
 
 Volume XVI] [Number 1 
 
 THE 
 
 PAST AND PRESENT OF JAPANESE 
 COMMERCE 
 
 TETARO KINOSITA Ph.D 
 
 THE COLUMBIA UNIVERSITY PRESS 
 
 THE MACMILLAN COMPANY, AGENTS 
 
 London : P. S. King & Son 
 
 1902 
 
TABLE OF CONTENTS 
 
 rACK 
 
 Introduction 9 
 
 CHAPTER I 
 
 The Finance and Economy of the Primitivk Japanese 
 
 I. Early Industry 33 
 
 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 the 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 of European Trade 
 
 I. Economic Condition of Europe from the i6th to the 
 
 i8th 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] 5 
 
6 CONTENTS [<J 
 
 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 Activity 
 
 I. Protection for Young Industries 141 
 
 II. Japan's Commercial Attitude 151 
 
 Appendix 160 
 
 Bibliography 162 
 
PREFACE 
 
 The Japanese students who come to America to study 
 economic science are singularly handicapped by the fact 
 that the appearance of this science in Japaij 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 in the old literature of Japan are 
 few and widely scattered. There is no treatment of Japanese 
 7] 7 
 
8 PREfACB [8 
 
 history from the economic standpoint. The nearest approach 
 to 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 Wirischaftliche Entwicklung 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 are all of value for the economic interpretation of 
 Japanese history. 
 
INTRODUCTION 
 
 "Le commerce est la base et Vkme d'un empire; Qu'il perisse, 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 difference in 
 time and space of the values exchanged. 
 
 Exchange of goods necessarily implies a division of labor, 
 9] 9 
 
lO PAST AND PRESENT OF JAPANESE COMMERCE [lo 
 
 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 may 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 
 1 J. B. Clark, DislribuHon of Wealth, p. II. 
 
II j INTRODUCTION 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 of 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 waterways 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. 
 
 ^ Falgrave, 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, commercial dealings between 
 nations." 
 
 Seeley, TAe Expansion of England, p. 103. 
 
12 PAST AND 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 
 
13] INTRODUCTION 1 3 
 
 of civilization. The center of activities passed westward, 
 from Greece 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 primarily, its chief interest in commerce was for 
 direct pecuniary profit. The imports of the empire were 
 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 went 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. 
 
14 PAST AND PRESENT OF JAPANESE COMMERCE [14 
 
 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 
 diffusion 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, Wistern Cimlixaiion, vol. ii, p. 108. 
 ^ IHd.,^. 125. 
 
15] TNTRODUCTION ig 
 
 Africa came the knowledge of maize and sugar cane.' The 
 chief commodities of the Levant trade were silk, silk fabrics, 
 spices, sugar 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 geograph- 
 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 
 
 'Palgrave, Dictionary of Political Economy, vol. i, p. 470. 
 •Seeley, The Expansion of England, p. 120. 
 
l6 PAST AND PRESENT OF JAPANESE COMMERCE [i6 
 
 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 sealed by the 
 defeat of the Armada, the bullion policy and her mistaken 
 colonial policy. Colbert, with his French tariff war, and 
 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- 
 forming 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, Western Civilixalion, vol. ii, pp. 225 et seg. 
 
17] INTRODUCTION 1 7 
 
 World to the New. The immigration of intelligent and skil- 
 ful labor is a conspicuous economic factor in the attainment 
 of industrial greatness. English industry 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 
 effect 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 
 War 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 nations 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 
 ^ Brooks Adams, America's Economic Supremacy, p. 51. 
 
1 8 PAST AND PRESENT OF JAPANESE COMMERCE [ig 
 
 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 lake 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 Richesses, 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 It£4y the ordinary and postal saving 
 institutions had at the same time deposits of $400,000,000. 
 The savings deposits in Russian banks of different classy 
 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 
 
 * ZaauBli, The United Stattt m. tht Orient, pp. ^Jtseq. 
 
 * Conant, The United Statei in Ae Orient, p. 171. 
 
19] INTRODUCTION I9 
 
 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 will 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 
 markets 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 4,760 10,080 
 
 Hong Kong 18,180 15,201 11,038 4,163 
 
 Yokohama ' 7,679 16,1 go 9,363 6,827 
 
 Melbourne 13,502 13,290 10,000 3,290 
 
 New Zealand 12,550 14,125 8,680 3>870 
 
 Hawaii 14.230 6,388 7,840 
 
 Lirerpool, 
 
 San Francisco 14,690 7>5o8 7>l83 
 
 Melbourne 13.352 «3.I40 12,748 392 
 
 New Zealand 12,400 13,975 ".349 1,051 
 
 Hong Kong 18,030 15.051 13,786 1,265 
 
 Yokohama 17,529 16,040 12,111 3,929 
 
 Hawaii 14,080 9,136 4,944 
 
 ' Johnson, Tht Nicaragua Canal and the Economic Dtvelopmtnt oj The 
 United States, p. 46. > 
 
I] 
 
 INTRODUCTION 
 
 
 21 
 
 New Orleans, 
 
 
 
 
 
 
 San Francisco 
 
 '5.052 
 
 4.047 
 
 11,005 
 
 Hamburg, 
 
 
 
 
 
 
 Mazatlan 
 
 13.931 
 
 6,880 
 
 7.051 
 
 
 Acapulco 
 
 13.371 
 
 6,320 
 
 7.051 
 
 
 Fonseca 
 
 ",430 
 
 5.530 
 
 5.900 
 
 
 Punta Arenas 
 
 11,120 
 
 S.515 
 
 5.60s 
 
 
 Costa Rica 
 
 
 
 
 The advantages for sailing vessels, of the Central American 
 canal over the Mediterranean Sea and the Suez Canal, are 
 ably discussed by McCarkle 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, with 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 PAST 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 ol 
 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 history 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 
 
 ECX)NOMIC 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 civilization. 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 wafm climates 
 where the necessities of life were 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 
 
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 efiforts 
 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 follow- 
 ing edict was issued : = 
 
 " Ships are of cardinal importance to the empire. At 
 
 ' Takekoshi, The History of z^oo years, pp. 3 et seq. 
 
 ' Giddings, Principles of Sociology, p. 306. 
 
 ' Biicher, The Evolution of Industry, p. 86. 
 
 * Fukuda, i^sV Gesellschaftliche und Wirtschaflliche Entwicklungin yafan,'p. 6. 
 
 ' Transactions of the Japan Society, London, p. 161. 
 
25] FINANCE AND ECONOMY 2$ 
 
 present, the people of the coast, not having ships, suflfer 
 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 transportation 
 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 difficulty 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 Taikwa 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. Grififis 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 
 
 ' Griffis, The Mikado's Empire, pp. 58, 88. 
 
26 P^ST 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-Private 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 fir^st 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 of Japan, p. 9. 
 ' Seligman, Essays in Taxation, p. 266, 
 
27] FINANCE 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 locality 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 Mikatawere 
 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- 
 
 1 Hagino, The Finanical History ofjafan, p. 29. 
 ' Ibid., p. 25. 
 
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, Taikwa. 
 All Japanese were made the direct subjects of the Emperor ; 
 
 ' The Department of Finance in Japanese government is called " Okura-Sbo,' 
 and the name might have been derived from it. 
 'Giddings, Principles cf Sociology, p. 305. 
 
29] 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 were let out to tenants." 
 
 Land measures, the " cho," "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, 
 
 ^Takekoshi, The History of 2300 years, p. 116. 
 ' Hagino, The Financial History of Japan, p. 44. 
 
30 PAST 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 age, the division was as follows : 
 
 (a) Young — Between the ages of 17 and 20 years. 
 
 (b) Regular — Between the ages of 21 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' apportionment. 
 
 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 Royal 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. 
 
 ' nid., pp. 54-56. * Ibid., p. 74. 
 
CHAPTER II 
 The Intercourse with Korea and China 
 
 INFLUENCE OF CHINESE CIVILIZATION, AND ECONOMIC CONDITION OF 
 JAPAN, 554 A. D. TO 154I 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 civilization 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 
 of 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- 
 
 •Takekoshi, The ffistery tfsjoo years, p. 27. 
 
 ' See Mayo-Smith, Emigration and Immigration, p. 35, for " colonists and 
 immigrants," and their differing influence. 
 
 31] 31 
 
32 P^ST AND PRESENT OF JAPANESE COMMERCE [3^ 
 
 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, aad 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 Griffis, The Mikado's Empire, p. 83. 
 
 • Yokoi, The History o/yapanese Commerce, vol. i, p. 37. 
 
33] 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. 
 Grifhs 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. Emperor 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 wealth 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 wealth 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. 
 
 1 Griffis, 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 Perry. 
 
34 P-^ST AND PRESENT OF JAPANESE COMMERCE [34 
 
 The Chinese system of officialism gradually created a class 
 of nobility and land owners. The nationalization of land 
 was 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 sufifering, 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 would 
 stimulate the desires. Such a belief put at the heart of 
 human life could not but have a profound efifect 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 efifect, 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] INTERCOURSE WITH KOREA AND 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, 
 
 II. 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 GesellschaflHche und Wirtschaflliche Entwicklung in Japan, 
 p. 9. Also Takekoshi, The History of 2500 Years, p. 69. 
 *Yokoi, The History of Japanese Commerce, vol. i, p. 3. 
 
36 P'^ST 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 market 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 arrows, lacquer 
 ware, fans, screens, and gold and silver. 
 
37 commerce in the middle ages [37 
 
 Commerce in the Middle Ages. 
 I. Money and Usury Laws in Japan. 
 
 Money economy comes later than barter, and, regardless 
 of the substance of 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. DifTerent 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 medium of ex- 
 change. Prices were originally fixed at so many bundles of 
 rice. Later, when a standard of measurement was estab- 
 lished, the " koku " of rice was the standard. 
 
 Taxes were commuted for a time, as we 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 silver 
 
 1 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, price* 
 
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 conquest 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 
 
 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 Japanese Commerce, vol. i, p. 8. 
 ^ Ibid., p. 10. 
 
39] COMMERCE IN THE MIDDLE AGES. 39 
 
 issued an edict in 708 A. D.' granting titles to those who 
 stored more than ten Kvvamme of money. 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 
 money. 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 of 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 : ' 
 
 1 Suganuma, The Commercial History of Japan, pp. 180 et sej. 
 *IUd., p. 184. 
 
40 PAST AND PRESENT 
 
 Year. Kind of Coin. Weight. 
 
 MommS. Fun. 
 
 708 Silver 2 i 
 
 708 Copper I o 
 
 761 Gold 3 I 
 
 761 Silver — — 
 
 761 Copper I 2 
 
 767 Copper I o 
 
 797 Copper — 9 
 
 821 Copper I o 
 
 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. 
 o 
 o 
 
 o 
 
 S 
 
 9 
 
 o 
 o 
 
 f One silver coin equals twenty-five 
 
 l coppers. 
 
 (-One gold coin equals 10 silver 
 coins'. One siver coin equals 10 
 copper coins. One copper coin 
 equals 10 of previous coinage. 
 Same legal value. 
 
 1 One coin equals 10 of previous 
 
 \ coinage. 
 
 {One equals 10 of previous coin- 
 age. 
 c One equals 10 of previous coin- 
 l age. 
 
 {One equals 10 of previous coin- 
 age. 
 
 f One equals 10 of previous coin- 
 1 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 slowjdevelopment of " money econ- 
 omy" unquestionably retarded [the fgrowth 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 
 
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 1868. 
 
 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 
 difTered from the Mediaeval "just price," which was an ab- 
 stract conception of the worth of a commodity by common 
 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 
 allowed to purchase only such articles as were required by 
 their personal necessity. 
 
 1 Cunningham, Growth of English Commerce and Industry, vol. i, p. 252. 
 
42 PAST 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 " mutuum," ' 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 charged.^ 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.t 
 
 ^ Cunningham, Growth of English Industry and Commerce, vol. i, pp. 256, 257, 
 2 Yokoi, The History of Japanese Commerce, vol. 1, p. 22. 
 ' Ibid., p. 58. * Ibid., p. 84. 
 
43] COMMERCE IN THE MIDDLE AGES 43 
 
 II. Commerce and Foreign Intercourse. • 
 
 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 Fujiwara 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 1186, 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 — over the literary 
 
 'GrifEs, The Mikado' i Empire, p. 114. 
 
 ' Fukuda, Die GeseUschaftliche und Wirtschaftlicht Entwicklung in yapan, 
 P-79- 
 
44 ^^ST 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 de facto rulers of Japan, the de jure 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 Fujiwara 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 mihtary 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 
 
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 
 Medieval 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 Geselkchaftliche und Wirtschaflliche Entwicklungin Japan, pp. 109, no. 
 
46 PAST 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.' 
 
 rrhe 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. 
 'Takekoshi, The History of 2^00 Years, f. ^"ji. 
 
47] COMMERCE 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 i6oo, 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 History of Japanese Commerce, 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, modified 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. x\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 ^g 
 
 couraged agriculture and all kinds of industries in their 
 provinces, and the productive labor forces were easily led 
 to establish themselves in the cities about the castles. 
 Many of the nobles, who were actually governing independ- 
 ent princedoms, and especially those in the southwest, en- 
 gaged in the Chinese-Korean trade, and the importation of 
 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, TAe Mikado's Empire, p. 246. 
 
 ' The Portuguese are said to have exported 59}^ millions sterling of precious 
 metals, chiefly gold, from 1550 to 1639. (See next chapter.) 
 
 • Fukuda, Die Gesellschaftliche und Wirthschaflliche Entwickefung in Japan, 
 p. 114. 
 
50 P^ST AND PRESENT 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 making 
 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, 154I TO 1 868 A. D. 
 
 I. Economic Condition of Europe from the i6th to the i8th 
 
 Century 
 
 (a) Mercantilism — Its Development 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-sufficiency 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 Medisevalism 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 wealth are intimately re- 
 lated. In order to promote national power, the endeavor to 
 increase wealth became a sort of national passion. As the 
 state became more concentrated politically, its added strength 
 S«] SI 
 
52 PAST AND PRESENT OF JAPANESE COMMERCE [52 
 
 and prestige were used more directly for commercial ends. 
 The creation of commercial and industrial strength was 
 aimed at and sought by such exercise of sovereign authority 
 as was deemed expedient. National jealousies and rivalries, 
 as well as 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 money economy was cor- 
 respondingly broadened. Money became the one object of 
 desire and was counted the one essential item of wealth. As 
 a corollary af 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 
 
53] 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 
 SchmoUer, 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 
 ofTense, on its organized efSciency. 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 efifect 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 nationalism 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., pt 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 was 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 of Economics, p. 39. 
 
55] THE BEGINNING 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 
 consumption 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 mind that restrictive duties 
 were not in themselves an essential condition of mercantilism, 
 but depended rather on the relation of industry 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 diflfers 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 modern 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 estabhshing 
 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 [56 
 
 (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 largely for the same reasons, 
 came the rise of competition and competitive prices in place 
 of former monopoly and fixed prices. Capital had long been 
 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 Medisevalism 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. 211. ^ Ibid. 
 
57] THE BEGINNING OF EUROPEAN TRADE 57 
 
 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 monopoly 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 Far 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 
 i Cunningham, Western Civilization, vol. ii, p. 189. * Ihid., 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 the 
 luxurious extravagance of Philip II. made it impossible to 
 keep these deposits of treasure at home despite the bullion 
 policy of the government. Few 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 five 
 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 difficulty in establishing trading- 
 posts in the East. By this purely economic policy the 
 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. 
 
59] THE BEGINNING OF EUROPEAN TRADE 50 
 
 fell before the energetic and centralized rivalry of France 
 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 supply 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 Hollanders 
 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 western 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 PAST AND PRESENT OF JAPANESE COMMERCE [60 
 
 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 were driven by a Monsoon storm to Tanega- 
 shima, Japan. It was this Pinto who introduced fire-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.3 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 which were 
 
 ^Nachod, Die Beziehungen der Niederlandischen Ostindischen Kompagnie 
 zu Japan, p. 30. 
 
 ' Hildbreth, Japan aud the Japanese, p. 67. 
 
 ' Satow's account of the introduction of the weed in Transactipns of the Asiatic 
 Society of Japan, vol. vi, p., 68. 
 
6l] THE BEGINNING OF EUFOPEAN TRADE gi 
 
 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 Japan, p. 10. 
 'Suganuma, The Commercial History of Japan, p, 322. A copy of the 
 original letter from the feudal chief of Bungo to the Pope. 
 
62 P'^ST AND PRESENT 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 indififerent 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." ^ 
 
 'Suganuma, The Commercial History of yapan, ^. jp^, 
 •Nitobe, Intercourse between the U. S. and yapan, p. II. 
 
^3] THE BEGTNXING OF EUROPEAN TRADE 63 
 
 Hideyoshi, having restored the unity and order of the 
 country, saw the threatening character of the new rehgion. 
 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 me, 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 Japan, pp. 329-330. The original 
 letter is copied here. A translation is found in Hildbreth, Jafan and the 
 jfapanese, p. 1 10. 
 
64 PAST 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 II. 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 1 548, 
 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 XIII., in 1585, forbade under 
 
65] THE BEGINNING OF EUROPEAN TRADE ge 
 
 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 Charity, 
 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 narrated 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 Japanese, p. 117. 
 
 ' Nachod, Die Beziehungen der Niederldndichen Ostindischen Komfagnit %u 
 Japan, p. 94. 
 
66 P^ST AND PRESENT OF JAPANESE COMMERCE [66 
 
 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 unto 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 Grififon, 
 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 
 
 ' Hildbreth, Japan and the Japanese, p. 139. 
 
6^'^ THE BEGINNING OF EUROPEAN TRADE (,-j 
 
 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 way 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 Holland, 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 
 Kampfer, The History of Japan, b. iv., p. 382. 
 
68 P'^ST 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 they need 
 not to bring silver out of Holland to the East Indies, for in 
 Japan there is much gold and silver to serve their turn in 
 other places where need requireth." He enumerated as 
 vendible in Japan for ready money, raw silk, damask, black 
 tafTetas, black and red cloth of the best kinds, lead, etc. 
 This letter, under date of October 22, 161 1, appears to have 
 reached England finally. But independently of Adams' 
 letter, the London merchants obtained the news from the 
 crew of the Dutch ship, the Red Lion, and they had already 
 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- 
 mand of Capt. John Saris, an old adventurer in the East, 
 and arrived at Hirato on June 10, 1613. Capt. Saris pre- 
 sented a letter and presents from King James I. to lyeyasu, 
 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, 
 which may be regarded as the first commercial treaty be- 
 tween the two countries, were as follows : ^ 
 
 "(1) 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, y apart and the jfapantse, p. 160 
 
 ' Suganuma, The Commercial History of Japan, p. 518. For English transla- 
 tion iee Hildbreth, Japan and the Japanese, p. 169. 
 
69] THE BEGINNING OF EUROPEAN TRADE Qg 
 
 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 authorize 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, we 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 Cape-merchant, or their 
 assigns; and that they shall or may build one house or 
 more for themselves 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, 
 
yO PAST AND PRESENT OF JAPANESE COMMERCE \jq 
 
 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, 1613, and arrived at Plymouth, September 27, 
 1614. These Japanese sailors must have been the first 
 Japanese who landed in England. 
 
 The English had an auspicious beginning and seemed to 
 have every opportunity before them. While the Portuguese 
 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- 
 tion of the Dutch. Inasmuch as King James I. was a Roman 
 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 1616, the religious intolerance 
 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,ooo in the effort to maintain it, the 
 English East India Companj- decided, at the Council of 
 
 ^ Cape-merchant may mean a general commercial manager. 
 
7i] THE BEGJNNING 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 1635-1637, 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 between the U. S. and Japan, 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 on 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 efifect, 
 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, lyeyasu 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 161 0, 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 of Japan, p. 374. 
 ' Ibid., pp. 380-383. Letters-patent to Spanish vessels. 
 
73] THE BEGINNING 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 1616, a Japanese vessel, having on board a mission to 
 the Pope from a feudal chief of Sendaif 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 way to discourage 
 it while he was trying to establish commercial relations with 
 foreign nations. He adopted the system which Hideyoshi, 
 his 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 1616. 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 Commercial History of Japan, pp. 4^7 '' ^'i- 
 • Ibid., p, 394. 
 
74 A4.ST 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 
 Chew islands, which 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 
 the laws he established.'' 
 
 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. 
 
75] THE BEGINNING OE 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 sufificient 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 avoid 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 involves 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 was 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 ag 
 carefully were his'^ptels-^vised. He did not scj^iKi^le^to 
 sacrifice the general good at such^^times as hg,,..d^med the 
 security and permanence of his Shogurtate'c^t stake. When 
 ' Cunningham, Western Civilization, vol. ii, p. 205. 
 
ye PAST AND PRESENT OF JAPANESE COMMERCE [76 
 
 some of the southern feudal lords 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 
 in their hands would menace his authority, and that the 
 descendants of these trader-chieftains might assert their 
 strength to the overthrow of his family 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. 
 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 
 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 
 ■■jjjat nobody should be forced to leave it, but that if th^' rep- 
 resent'^ could persuade ^■mj^"^'^ countrymen to go, 
 they shmiti^-ot be preven$e^.i 
 
 1 Hildbreth, Japan and the Japanese, p. 1 71 et seq. 
 
y^-j THE BEGINNING 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 differed 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 [78 
 
 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 
 family; also whoever presumes to intercede for him shall 
 be put to death. No nobleman nor any soldier shall be 
 suffered to purchase anything from a foreigner." 
 
 The extremest possible measures were resorted to, and 
 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 
 
 ' Suganuma, The Commercial History of Japan, p. 568. See KSmpfer, The 
 History of Japan, book iv, p. 319. 
 ' A sheet of silver weighs about five ounces. 
 
79] THE BEGINNING OF EUROPEAN TRADE yg 
 
 irom 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 while 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 was the 
 chief item of imports. Japan had not been without silk since 
 the first silk-worms and mulberry trees were brought in 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 were 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 
 
 1 Nitobe, Intercourse between the U. S. and Japan, p. 14. 
 
8o PAST AND PRESENT OF JAPANESE COMMERCE [80 
 
 the Tokugawa 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." 
 
 ' K^mpfei, The History of Japan, book iv, p. 353 et seq. 
 
8iJ THE BEGINNING OF EUROPEAN TRADE 8 1 
 
 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 specific. There was an ad val- 
 orem duty of I S per cent, on 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' ass 
 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 unusual risks con- 
 nected with the commerce of this period, but that there were 
 heavy incidental expenses connected with the maintenance 
 1 KSmpfer, The History of Japan, book iv, p, 366. 
 
82 PAST AND PRESENT OF JAPANESE COMMERCE [82 
 
 of trade and trade stations. M. Fraissinet gives the follow- 
 ing tabulation of these expenses : ' 
 
 Presents ^ la cour 6,000 taels. 
 
 Moyenne de chaque annee, Frais de voyage 4 la cour. 5,060 taels. 
 
 Redevance annuelle et faux frais • • 5,300 taels. 
 
 Loyer de Desinjia, du cimetifire; salaires des gardes. . 7,908 taels. 
 
 24,268 taels. 
 & d6duire, pour les autres ann^es, les salaires des gardes. 2,391 taels. 
 
 Total • 21,877 t"lS' 
 
 "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 iSsS.'' 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, l^ Japan, tome 2, p. 253. 
 { Rein, Industries of Japan, p 335 
 Nitobe, Intercourse between the U, S. and Japan, p. 21. 
 
83] 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 importations 
 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 efflux 
 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 100,000 
 florins, 01 %\ofxo. 
 
 'Takekoshi, Tht History 0/2300 Vtari, p. 642. 
 
84 PAST AND PRESENT OF JAPANESE COMMERCE [84 
 
 Kobans (Rio) and 1,220,000 Kwamme of silver. Of these, 
 6,192,800 Kobans (gold) 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 Koban 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, Kummi 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 Japanese, p. 386. 
 
85] THE BEGINNING OF EUROPEAN TRADE 55 
 
 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 r5,ooo 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 Gesellsckaftliche und Wirtschaftliche Entaicklung in Japan, 
 p. 155. 
 
86 P'AST AND PRESENT OF JAPANESE COMMERCE [86 
 
 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 effects 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 necessary 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 Japanese Commerce, p. 153. These 6gures 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 mommfe of silver for a letter, and fifty mommS of silver for 
 each kwamm6 of goods. 
 
8;] THE BEGINNING OF EUMOPEAN 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 were made more so by the establishment 
 of a shipping combination known as the " Higaki-Kwaisen." 
 So profitable and prosperous were the routes of the Higaki- 
 
 1 The family, not the individual, was the social unit. Every five families were 
 united in a company, and one of the number was 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 Gesellschaftlicht und Wirtschaftlicht Entwicklutig in Japan, 
 p. 158. 
 
88 PAST AND PRESENT OF JAPANESE COMMERCE [gg 
 
 Kwaisen that at one time the number of vessels entering 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 181 3 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 Kumiai, and these were 
 transferable only among 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 yapanese Commerce, p. 199. 
 » IHd., 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 [50 
 
 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 (i 717-1744) 
 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 
 . effect 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 (1730-1801). His followers, Hirata and 
 others, began criticizing, in most uncompromising fashion,, 
 
 ' Griffis, The Mikadafs Empire, p. 291. 
 • Ibid., p. 297. 
 
 ' Ibid., p. 298. The five relations were those of sovereign and minister, parent: 
 and child, husband and wife, elder and younger brother, and friend and friend. 
 
91 j THE RESTORATION OF 1868 gj 
 
 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, Prince Mito Komon 
 completed his great work The History of Great Japan, 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 Constitutional Development of Japan, p. 22. 
 2 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 
 between 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 weather. 
 XI. U. S. consuls or agents to reside at Shimoda. 
 XII. Ratifications to be exchanged within eighteen months. 
 
 ' Griffis, The Mikado' t Empire, p. 301. 
 
 ' Nitobe, Intercourse between the U. S. and Japan, p. 53; for full text of treaty 
 see Treaties and Conventions between U. S. and other Powers, pp. 512 */ seq. 
 
93] THE RESTORATION OF i868 93 
 
 On the return of Commodore Perry to the United States, 
 Townsend Harris was sent in August, 1856, by the 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 ofiScials of 
 Japan. 
 II. Mediation of the U. S. in dififerences 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 pubhc 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 tariff. 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 
 
 1 Nitobe, Intercourse between the U. S. and Japan, pp. 66 et seq. For full 
 text of treaty see " Treaties and Conventions between the U. S, and other Powers," 
 pp. 526 et seq. (The U. S. Govt. Publication.) 
 
94 P^ST AND PRESENT OF JAPANESE COMMERCE [g^ 
 
 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 treaty. 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 {e. g., con- 
 victed of felony) 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. 
 
55] THE RESTORATION OF i8b8 gj 
 
 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 tariff schedule and regulations of this treaty are the 
 ioUowing:' 
 
 Duties shall be paid to the Japanese government on all 
 goods landed in the country, according to the following 
 tariff: 
 
 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 1864 the duties were reduced by this 
 provision. 
 
 " The following articles shall be admitted at the reduced 
 
 • Trtatics and Conventions bttween the U. S. and other Powers, pp. 516 et sej. 
 
96 PAST AND PRESENT OF JAPANESE COMMERCE U^^ 
 
 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, 1858; 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 efiflux 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 Kobans. 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, and other Powers, pp. 516 et seq. 
 * Nitobe, Intercourse between the U. S. and yapan, p. 72, 
 
97 J THE RESTORATION OF i8bS m 
 
 market conditions, and especially in the prices of the neces- 
 saries of Hfe. 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 between 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, 1883, the United States refunded its share, ^785,000, to 
 Japan. 
 
98 P'AST AND PRESENT OF JAPANESE COMMERCE [pg 
 
 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 coincidence and wholly without 
 significance, but it is a striking fact that no " Choteki " has 
 ever succeeded in the history of Japan, 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, The Mikado's Empire, p. 316. 
 
99] THE RESTORATION OF i868 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 Communication 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, 1871, abolished once 
 for all the feudalism which had been the life of Japan for 
 eight centuries. The terse sentence is historic. 
 
 '^'■The clans are abolished 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 ExeciUive Documents, Diplomatic Correspondence, 1S67, Part ii, 
 p. 78 (2d sess. 40th Cong.). 
 
 'lyenaga, The Constitutional Development of Japan, f^. ^Z-Z'). 
 
100 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 of 
 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. 
 
I O I ] THE RES TOR A TION OF 1868 j q i 
 
 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 administration." ' 
 
 The first progressive undertaking of the new 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 was 
 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 afifairs. In 1886, 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 : 3 
 
 '■ Hadley, Railroad Tramfertation, p. 3. 
 ' Chamberlain, Things Japanese, p. 295. 
 
 ' Publication of Dept. of Communication of Japanese Government. A Short 
 Sketch of the Progress of the Postal Service, Eng. Trans., p. 16. 
 
I02 PAST AND PRESENT OF JAPANESE COMMERCE [102 
 
 Total; Books, 
 Year. Letters. Postal Cards, Newspapers. Including 
 
 Samples^ etc. 
 
 1871 565,934 
 
 1872 2,431,280 40.649 2,510,656 
 
 1873 9.723.89s 514,610 10,550,902 
 
 1874 16,732,030 2,629,648 19.937.643 
 
 1875 17.054,631 3.693.973 4.152.374 25,998,171 
 
 1876 21,152,975 5,214,189 4.077-095 32.220,298 
 
 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 39.193,581 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 55.551.998 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 109,400,947 228,502,1 13 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 75'.i33,978 
 
 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, Eng. Trans., p. 27. 
 
I03] THE RESTOJiATJOA OF i868 103 
 
 NuHtierof N-umher of Ordinary Amount in Yen 
 
 ■ Offices and Domestic Money of Domestic 
 
 Agencies. Orders Issued. Money Orders. 
 
 'g^5 222 115,703 2,123.14s 
 
 "''7° 309 257.443 5,180,221 
 
 '^77 309 202,624 2,692,679 
 
 '^7^ 370 223,077 3,322,782 
 
 "79 458 275,162 4,140,309 
 
 'ff° 619 350,483 5.250,404 
 
 ^^^■••••, 678 489.568 7,6;s,2oi 
 
 '^^2 813 630,713 9,188,262 
 
 'f^3 884 663,353 7.650.494 
 
 '^*4 886 704,365 6,850,976 
 
 ■f^5 886 725,349 6,911,954 
 
 '^f 945 584.905 7.714.927 
 
 '^^7 946 706,438 9.597.955 
 
 "88 1.014 821,991 11,295,68a 
 
 '^^9 1,015 889,103 12,313,542; 
 
 '^9° '.599 1.064,911 14.593.083, 
 
 '891 1,928 1,360,796 17499,111 
 
 '892 2,276 2,944,000 23,872,000. 
 
 '893 2,488 3,372,000 28,560,000 
 
 '^94 2,495 4.022,903 34,013,447 
 
 '895 2,500 4,486,346 42,410,621 
 
 '896 3,124 4,93i'.694 45,687,907 
 
 *^97 3.231 5.793.401 54,541,423 
 
 1898 3,406 6,338,469 56,201,432 
 
 '899 4.539 6,786,583 68,874,271 
 
 '900 4,930 7.499,892 80,942,452 
 
 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 tempting 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 sum will be converted into 
 a government bond which pays better interest. 
 
I04 PAST AND PRESENT OF JAPANESE COMMERCE [104 
 
 Number cf Number of Di- Amount of 
 
 Year. Banks and fositors at the Deposits «t 
 
 Aeencies. Etido/Year. Yen at the 
 
 Close of Year, 
 
 '875 22 1,843 IS>224 
 
 1876 161 4i442 4I184S 
 
 1877 17s 5,761 100,138 
 
 1878 405 14.137 286,290 
 
 •879 652 _ 26,473 494.115 
 
 1880 810 * 36,126 662,091 
 
 1881 1,016 38.974 ' 821,938 
 
 1882 1,339 46,211 1,058,224 
 
 1883 1,4^8 87,014 2,298,502 
 
 1884 1,469 141,202 5,260,484 
 
 1885 4,338 293,297 9.o5°>2S4 
 
 1886 3,110 490.337 15.462,053 
 
 1887 3,067 568,849 18,218,322 
 
 1888 3,071 665,822 19,758,48a 
 
 1889 3,074 762,869 20,441,354 
 
 '890 3,032 797.486 19,514,844 
 
 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 1,254,604 26,157,083 
 
 1898 4,334 1.255,577 22,490,918 
 
 1899 4,458 1,420,171 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 
 
 Miscellaneous 6 
 
 Workingmen 5 
 
 Officials 5 
 
 'Austin, Commercial Japan, -p. t'i. (U. S.Treas. Dept. Pub., 1899.) Monthly 
 Summary of Commerce and Finance. 
 
I OS J THE RESTORATION OF 1868 105 
 
 Manufacturers 7 
 
 Students 6 
 
 Fisbermen 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- 
 ^ve 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 of 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, 1891, the government bought 
 that part of the cable, the property of the Great Northern 
 Telegraph Company of Denmark,^ which connects Japan and 
 
 1 Yokoi, Tht History of Japanese Commerce, vol. ii, p. 44. 
 
 • Resumi Historique el Statistique di la Tiligraphe et de la Tiliphone au 
 Japan, p. 2. (Japanese Govt. Publication.) 
 
 » G. N. T. Co. owns the lines between Nagasaki and Shanghai and Nagasaki 
 *nd Vladivostock, but the terminals at Nagasaki are operated by the government. 
 
I06 PAST AND PRESENT OF JAPANESE COMMERCE [jog 
 
 Korea. The following table exhibits the growth of the 
 system in Japan : 
 
 „ No. of Length of Lines No. of Domestic 
 
 Bureaus, in Kilometers. Telegrams. . 
 
 1869 2 31 
 
 '870 4 75 
 
 '871 4 7S 19.448 
 
 1872 18 628 80,639 
 
 1873 28 1,390 185,889 
 
 "874 34 1.705 35'.272 
 
 '875 47 2,502 5'7.89> 
 
 '876 51 2,639 678,030 
 
 1877 68 3,719 852,619 
 
 '878 97 5,145 1,028,155 
 
 1879 112 5.962 1,646,936 
 
 '880 155 6,763 2,027,382 
 
 1881 169 7,348 2,571,009 
 
 1882 185 7,815 2,963,085 
 
 1883 195 8,074 2,662,538 
 
 1884 212 8,703 2,699,451 
 
 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 
 
 1890-1891 407 11,389 4,210,587 
 
 1891-1892 523 12,740 4,623,616 
 
 1892-1893 632 13.969 S.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 1 893 in Osaka and 
 Kobe. After some years of operation, the demand for in- 
 stallation of lines became so great that the administration 
 had to obtain from the state an extraordinary fund in order 
 
I07j THE RESTORATION OF 1868 107 
 
 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- Jfo. of Connec- 
 
 year. Kilometers. scribers. tions. 
 
 '890 196 343 264,998 
 
 »^9' 361 821 1,654.597 
 
 '^92 601 1,504 3,171,940 
 
 '893 648 2,672 7,702,402 
 
 '894 691 2,843 13.417,804 
 
 '89s 699 2,858 13,088,830 
 
 •896 848 3,232 12,238,407 
 
 '897 1,241 5,326 16,342,468 
 
 '898 2,513 8,064 27,706,327 
 
 '899 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 
 
 ' Resume Historique et Statistique de la TiUgraphe el de la TiUphone au Japan, 
 pp. 17-19. (Japanese Govt. Publication.) 
 
I08 PAST AND PRESENT OF JAPANESE COMMERCE [log 
 
 built. On 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.' 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. 
 
109] THE RESTORATION OF i868 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 
 effected 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 Hfe, and especially in 
 the administration of the government. In consequence, 
 state ownership of railroads has been agitated, chiefly as a 
 political afTair. 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 [j jq 
 
 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 footing 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 Owner- 
 ^""'- shit (.Miles). ship {Miles). '^°*"'- 
 
 1872 18 
 
 1873 18 
 
 1874 38 
 
 1875 38 
 
 1876 65 
 
 1877 65 
 
 1878 65 
 
 1879 73 
 
 1880 98 
 
 18 
 18 
 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. 
 
1 1 1 J THE RESTORA TION OF 1868 1 1 1 
 
 1881 122 122 
 
 1882 170 170 
 
 1883 181 36 217 
 
 1884 181 80 261 
 
 ■885 223 134 357 
 
 i886 264 165 429 
 
 1887 300 293 593 
 
 1888 505 406 911 
 
 1889 55° 585 ».i3S 
 
 1890 550 848 1,398 
 
 1891 550 1,165 1,715 
 
 1892 550 1,220 1,770 
 
 1893 557 1,381 1.938 
 
 1894 580 1,537 2,"7 
 
 1895 593 1,697 2,290 
 
 1896 631 1,87s 2,506 
 
 1897 661 2,287 2,948 
 
 189S 768 2,652 3,420 
 
 1899 832 2,806 3,638 
 
 1900 948 2,905 3,853 
 
 1901 1,059 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 was estimated to be 320,946,093 
 yen, and the following table shows how much has been ex- 
 pended for construction : 
 
 Ytar. Government Road {yen) , Private Road {yen). Toial{yen). 
 
 1885 14,887,085 3,106.253 17.993,338 
 
 1887 22,447,622 6,702,924 29,150,546 
 
 1 892 35,41 8,997 47,508,303 82,927,300 
 
 1897 61,866,374 122,828,189 184,694,563 
 
 1900 107,263,300 i97,S"3,S3o 304,776,830 
 
 The roads are equipped with the following rolling stock : 
 
 Govtrnmtnt Roads, Private Roads. 
 
 Year. Engines, Coaches. Freight cars. Engines. Coaches. Freight cars, 
 
 1872 10 58 75 
 
 1877 38 160 320 ... .... 
 
 1882 47 240 503 
 
 1887 53 313 887 30 138 364 
 
 1892 133 630 1,753 185 739 2,819 
 
 1897 258 871 2,930 636 2,029 8,541 
 
 1900 387 1,085 4,245 892 3,331 14,046 
 
112 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 Passtngtrs. 
 
 Yt»r. Govt, Railroad. Privati Railroad. Total. 
 
 '890 11,265,383 11,575,247 22,840,630 
 
 189* 12,873,547 15,290,168 28,463,715 
 
 1897 27.927.577 S7.i7S.60O 85,098,177 
 
 »900 31.944.856 81,766,015 113,710,871 
 
 Passenger Mileage. 
 
 Year. Govt. Railroad. Private Railroad. Total. 
 
 '890 284,831,381 185,469.252 470.300.63s 
 
 1892 298,958,693 283,962,002 582,920,695 
 
 •897 623,335,927 839,1 18,735 1,462,455,662 
 
 «900 715,273,181 1.187,768,933 1,903,042,114 
 
 Passenger Fares. 
 
 Year. Govt. Railroad {yen). Private Railroad {yen). Total {yen)^ 
 
 1890 3.183,383 1.966,532 S.I49.9IS 
 
 1892 3.335.609 3.122,946 6,458,555 
 
 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 982,404 1,719.316 2,701,720 
 
 1897 1.558.194 7.070,31s 8,628,509 
 
 1900 2,806,560 11,594,960 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 223,654,688 508,844,010 732,498,698 
 
113] ^-^^ RESTORATION OF 1868 1 13 
 
 Freight Charges. 
 
 Year. Gevt. Railroad (yen). Private Railroad (yen), Tetal (yen), 
 
 '890 778.798 998.742 1,777.540 
 
 '892 1.075.342 1.743.455 2.818,797 
 
 1897 2,064,716 6,055,547 8,120,263 
 
 '900 4.499,792 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 
 gioss 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. Railroads (yen). Private Railroads [yen). Total (yen), 
 
 1887 1,698,873 1,182,345 2,881,218 
 
 1892 4.580,632 5.096.634 9.677.266 
 
 1897 9.727.490 16,800,057 26,527,547 
 
 1900 1 5,920,385 29,014,009 44,934,394 
 
 Expenditures. 
 
 Year. Govt. Railroads (yen). Private Railroads (yen). Total (yen), 
 
 1887 677,124 392.542 1,069,666 
 
 1892 2,166,199 2,437,138 4.603,337 
 
 1897 4,786,049 7.578.047 12,364,096 
 
 1900 7,101,108 13,622,156 20,723,264 
 
789.803 
 
 1,811,552 
 
 2,659.496 
 
 5.073.929 
 
 io,i86.i29 
 
 I5.'27.570 
 
 15.391.853 
 
 24.21 1.130 
 
 1 14 PAST AND PRESENT OF JAPANESE COMMERCE [j 14 
 
 Profits. 
 
 '887 , 1,021,749 
 
 1892 2,414,433 
 
 '897 4.941,441 
 
 1900 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 
 
 Expenditures | Government Railroad 21 yen 72 sen 
 
 •- Private Railroads 13 yen 10 sen 
 
 p gj f Government Railroads 26 yen 98 sen 
 
 t 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 Marine. 
 
 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 0/ Merchant Marine in Japan, Publication of Dept. of Communica- 
 tion, Japanese Government, 1883. 
 
115] THE RESTOSA TION OF i86S 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 shipping 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 o/ioo tons and upwards. Sailing ships of so tons and upwards. 
 
 No. of Gross Nit. No. of Net 
 
 *'""■• Ships. Tonnage. Tonnage. Ships. Tonnage. 
 
 1891 147 123,279 76,412 J°4 27.721 
 
 1892 146 120,882 75,459 98 25,602 
 
 1893 143 121,697 78,860 100 26,505 
 
 1894 179 142,095 88,838 260 37.615 
 
 1895 193 171.901 108,179 256 36,867 
 
 1896 i42 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 30,515 
 
 1900 332 455.535 282,549 316 40.966 
 
 1901 338 477.3" 296,639 1,053 117.364 
 
 ' From 1877 to 1890 the annual average of wrecked junks was 383. 
 ' U. S. Report of Commission of Navigation, zgoi. 
 
Il6 PAST AND PRESENT OF JAPANESE COMMERCE |^ii6 
 
 There are three leading merchant marine companies in 
 Japan. They are ' The Japanese Mail Steamship Company : 
 
 Capital 22,000,000 yen. Gross Tonnage 202,366 
 
 No. of Steamers 67 Distance of voyages, 1,311,726 nan- 
 No. of Voyages 906 tical miles. 
 
 The Osaka Merchant Marine Company : 
 
 Capital 10,000,000 yen. Gross Tonnage 421851 
 
 No. of Steamers 57 Distance of voyages, 867,772 nautical 
 
 No. of Voyages 1882 miles. 
 
 The Toyo Steamship Company : 
 
 Capital 6,500,000 yen. Route between Yokahama 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, 
 1 896, 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 
 
 ' Vokoi, The History o/yapanest Commerce, vol. ii, pp. 83 et stg. The fignrei 
 given represent the standing of the companies in March, 1900. 
 
 • U. S, Report of Commission 0/ Navigation, 1901. 
 
1 1 7] THE RESTORA TION OF t868 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 1 899-1900. 
 
 Yokohama — Melbourne Line 525,657 yen. 
 
 Yokohama — Bombay Line 192,108 yen. 
 
 Yokohama — Europe Line 2,673,894 yen. 
 
 Hong Kong — Seattle Line r. 654,030 yen. 
 
 Hong Kong — San Francisco Line 1,01 3,880 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, annually 930,000 yen. 
 
 1896 1,027,275 yen. 
 
 1897 2,127,086 yen. 
 
 1898 4,132,123 yen. 
 
 1899 • 5,846,956 yen. 
 
 (^) 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 Commtrce and Finance. 
 • U. S. Report of Commission of Navigation, 1901. 
 
1 1 8 PAST AND PRESENT OF JAPANESE COMMERCE [ i j g 
 
 There were innumerable improvements to be made, many 
 abuses to be abolished and eradicated, and many western 
 institutions to be introduced 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 
 rebuild." 
 
 Although political power was restored to the Emperor, 
 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 j j g 
 
 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 Old 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 
 dififered 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. 
 
120 PAST AND PRESENT OF JAPANESE COMMERCE [120 
 
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 E 
 
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 ■a 73 
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 fi (C e£;z;<«(Sw 
 
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 S S. 
 
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 U P4 1-^ 
 
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1 2 1 ] THE RESTORA TTON OF 1868 j 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 yen for a population of 44,000,000 is but little more 
 than 7 yen ($3.50) 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 public debts to national wealth is 
 given as follows:^ United States 1.4 percent.; the United 
 Kingdom, 6 per cent. ; Germany, 8yV per cent. ; Russia, 
 I I.I 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 haTC 
 made them the basis of my calculations. 
 
 « Yokoi, The History of Japanese Commerce, vol. ii, p. 17. 
 
122 PAST 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, 1871, 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 Matsukata, Report an the Adoption of Gold Standard in Japan, p. 20. 
 
123] THR RESTORA TION OF 1868 j 2 3 
 
 Satsu," was of all shapes, kinds, and of 1694 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, Germany, was issued 
 in 1872 in exchange for all of the previous issues — the Da- 
 jokwan 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 diiiferent 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 Matsukata, Report on ihi Adoption of the Gold Standard in Japan, pp. 
 2 et seq. The agitation which attended the passage of the Act of 1873 in the 
 U. S. may have influenced Mr. Ito to some extent. 
 
1 2 5 J THE RESTORA TION OF 1868 1 2 5 
 
 Standard in 1871. 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 
 
 1 Shaw, History of Currency, pp. 190, 276. 
 
 ' Count Matsukata, Report on the Adoption of the Gold Standard in Japan, 
 P-2S- 
 
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 Paper 
 
 ^""'- Money (yen). 
 
 1868 24,037,389 
 
 1869 50,090,867 
 
 1870 55,500,000 
 
 I87I 60,272,000 
 
 1872 68,400,000 
 
 1873 88,281,014 
 
 1874 101,802,304 
 
 1875 99,071,869 
 
 1876 105,147,582 
 
 1877 105,797,092 
 
 1878 139,418,592 
 
 1879 130,308,921 
 
 1880 124,940,485 
 
 1881 118,905,194 
 
 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 188 1 i yen 
 
 ' Count Matsukata, Report on the Adoption of the Gold Standard in Japan, 
 p. 35. 
 
 • Ibid., p. 29. 
 
 Bank Notet 
 
 Specie Reserve 
 
 (yen). 
 
 (yen). 
 
 
 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 
 
 13.352,751 
 
 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 
 
127] THE RESTORATION OF i8b8 127 
 
 of silver brought i yen 81 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 efiflux of specie. The following figures 
 illustrate the conditions: 
 
 Exports and Imports of Commodities {in yen). 
 
 Ytar. Exports IfMports. Balance. 
 
 1868 15.553.473 10,693,072 >4,86o,40l 
 
 1869 12,908,978 20,783,633 7.874.655 
 
 1870 14,543,013 33.741.637 I9.«98,624 
 
 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 4.144.508 
 
 1875 i8,6ii,ni 29,975,628 11,364,517 
 
 1876 27,711,528 23,964,679 13,746,849 
 
 1877 23,348,522 27,420,963 4.072.381 
 
 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 
 
 1881 31,058,888 31,191,246 132.358 
 
 Exports and Imports of Cold and Silver {in yen). 
 
 Exforti. Imperil. Balance. 
 
 Year. Gold. Silver. Geld. Silver. Gold. Silver. 
 1868-) 
 
 1870 r ^° reliable returns before 1872. 
 
 1871 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 8,126,290 5,868,912 2,700 1,069,031 8,123,590 4.799.881 
 
 1875 10,603,345 4,060,626 26,515 271,807 10,629,860 3,788,819 
 
 1876 5,872,356 4,803,345 721,465 7.545.776 5.150,891 2,742,431 
 
 1877 6,221,777 3,219,494 162,281 2,011,218 6,059,496 1,208,276 
 
 1878 4,601,083 3,727,570 243 2,188,858 4,600,840 1,538,712 
 
 1879 4,749,635 8,029,229 731,666 2,403,138 4,017,969 5,626,091 
 
 1880 5,888,174 7,334,819 20,618 3,617.612 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 imports. The failure of the 
 silk industry in France and in Italy caused an unusually large exportation of raw 
 sUk in 1876; in all other years the balance was regularly against Japan. 
 
128 PAST AND PRESENT OF JAPANESE COMMERCE j^igg 
 
 Imports of silver were in excess in 1872 and in 1876. 
 The former was due to the foreign loan of 187 1, and the 
 latter to the export of raw silk. 
 
 The above is the monetary history of Japan to 1 88 1 , 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, i. 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 Cold Standard in Japan, pp. 
 43-67, for his memorandum in regard to the establishment of a central bank in 
 Japan, pp. 67-71, for regulations of the Bank of Japan. 
 
129] THE RESTORATION OF iSbS 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 1 897, 
 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 
 Year. Money and Bank Specie Reserve {yen). 
 
 Notes {yen). 
 
 1882 143.754.363 16,730,267 
 
 1883 132,275,012 25,876,230 
 
 1884 124,396,175 33,569,188 
 
 1885 118,500,485 42,265,640 
 
 1886 97.302.323 25,865,864 
 
 1887 84,419,177 19,790,388 
 
 1888 74.414.389 8,150,822 
 
 1889 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 I4.«oo,989 6,965,000 
 
 * Op. eit., p, 83, for regulation of redemption of national bank notes; pp. 85-86 
 for regulations of Convertible Bank Notes of Bank of Japan. 
 
1 30 P'^ST 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 
 1 882 ; 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. 
 
 Exports and Imports of Commodities (given in yen). 
 
 Year. Exports. 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 65,455,234 250,278 
 
 1889 7bj06o,7o6 66,103,767 2.956.934 
 
 1890 56,603,506 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 53.83i.7'3 
 
 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 5.472.03^ 
 
 iQoo 204,429,994 287,261,846 82,831,852 
 
131] THE RESTORA TION OF 1868 
 
 ni 
 
 Exports and Imports of Gold and of Silver {given inyev) 
 
 Extorts. Imfortt. Balanct. 
 
 Gold. Silver. Gold. Silvr. Gold. Silver. 
 
 ''^' I.SSI.035 3.i79.i6» 500 6,i6o,3!i4 1,250,535 >a,58i,o6» 
 
 '**^ 1.009,570 ",146,995 559 S,450,94» 1,009,011 '3,303,94, 
 
 ''^■» I,4a3,<>54 3,581,418 399,301 5.3",5S7 i,"4,4S3 'i,73i,l3» 
 
 '^*5 49^2,636 3.7631809 608,813 6,938,038 '116,177 3.174.>«e 
 
 ''^* 303.54" 9.323.905 1,159.468 8,012,405 "856,936 1,311,500 
 
 '^'7 86,236 10,949,353 1,259.527 7.6".739 '1,173,391 3,337,513 
 
 '*^* 450,384 7.383.160 1,303,353 7,529,239 '753,968 '146,075) 
 
 ^'^9 368,010 4,920,530 749.924 13.423,322 '481,914 '502,802 
 
 '^ 1,687,606 13,090,926 360,242 840,365 1,327,364 11,250,561 
 
 "'91 230,446 1,222,518 283,144 13,605,382 '52,698 'I3,382,8$4 
 
 '892 8,544,533 1,185,230 395.493 22,488,264 8,149,030 '31,303,034 
 
 '893 2,302,678 9,986,510 496,730 10,689,757 1,805,948 '703,474 
 
 '894 3.547.238 30,831,973 555,966 26,227,687 2,991,172 4,604,286 
 
 '89s 2,791,952 24,509,747 1,039,912 4,844,352 1,762,040 19,665,495 
 
 '896 1,996,576 9,602,308 10,217,458 28,924,75a '8,220,882 >i9,322,44* 
 
 •897 8,863,798 10,355,366 64,313,493 17,153,22a '55,449,695 '6,797,854 
 
 »'9' 46,281,349 40,706,133 37,027,753 5,536,028 9.253.596 35,170,104 
 
 '899 8,768,36s 2,409,882 30,080,696 82,805 '",312,331 2,327,o:;7 
 
 «90o 51,761,620 4.945.443 8,967,198 2,550,637 42,794,432 2,394,806 
 
 ' 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 exhaustive 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. 
 1 61-163. 
 
132 P^ST AND PRESENT OP 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 to 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 therefore 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 efifect 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 tariflf, 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 
 
133] THE RESTORATION OF t868 133 
 
 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 closer 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 are 
 the United States, Great Britain, including 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. 
 
 Exports to Imports from Exports to . „ <:i A il 
 
 Years, Gold Standard Gold Standard Silver Standard _ ^ . 
 
 ^ . ^ . ^ . . 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 32,879,633 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 77.179.709 
 
 1899 116,720,000 117,594,000 85,201,000 53,215,000 
 
 1900 99,560,317 185,879,404 86,611,618 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- 
 
 1 Count Matsukata, Report on the Adoption of Gold Standard in Japan, p. 374. 
 
134 P'^ST AND 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 
 fexports 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 
 for 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 " Free Trade" and Industrial Revolution. 
 
 In the middle of the eighteenth century, with the rise of a 
 school of French economists known as the Physiocrats, 
 
135] ^^^ RESTORA TION OF 1868 j 3 5 
 
 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 with 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 discussed 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 
 
 * Hadley, Economics, p. 9. 
 
 * Higgs, The Physiocrats, p. 43. 
 
 •Price, English Commerce and Industry, p. 185. 
 
 * Toynbee, Industrial Revolution, p. 91. 
 
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 Clark 
 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 industrial 
 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- 
 
1 3 7] THE RESTORA TION OP 1868 1 3 7 
 
 tion, and this in turn was not a change in the methods or 
 organization of the productive forces of society. 
 
 The political revolution of 1868 afTected, 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. 
 
 'Okuma, Industrial Revolution in Japan, North American Review, Not., 
 J 900. 
 
138 PAST AND PRESENT OF JAPANESE COMMERCE [ijg. 
 
 gradual process as it was in Europe, but a quick, sudden, 
 impetuous transition affecting the whole element of demands 
 Consumption is a fundamental economic principle; it is in- 
 dividualistic, not dependent on organization, and normally 
 its changes are gradual and quietly transitional. 
 
 Professor Roscher argues that while 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, Political Economy, vol. ii, p. 434. 
 
I39j THE RESTORATION OF iS68 i,q 
 
 desirable. The highest fluty she could levy on foreign 
 goods was five per cent, pd 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 inyolved 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 P^ST AND PRESENT OF JAPANESE COMMERCE [140 
 
 ernment give assistance to privi\te companies sufficient in 
 amount to cover all losses incurred by foreign competition, 
 but it established several manufacturing industries by way 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. 
 
 Manfd. Raw. Manf'd, Raw. 
 
 i882< 10,898,000 483,000 1,838,000 
 
 1887 11,652,000 913,000 3,875,000 208,000 
 
 1892 11,930,000 12,324,000 » 5,318,000 323,000 
 
 1897 19,544,000 43,623,000 9,479,000 1,168,000 
 
 1900 14,364,000 62,210,000 8,252,000 4,445,000 
 
 Principal Manufactured Goods Exported from Japan (yen). 
 
 Articles. iSSg. iSqfr. 'S<)S. iSqg. 
 
 Habutaye 250,000 9,530,000 12,055,000 15,799,000 
 
 Other Silk Goods 553,ooo 716,000 1,191,000 2,293,000 
 
 Silk Handkerchiefs 2,104,000 3,390,000 3,S55,ooo 3,461,000 
 
 Cotton Goods 143,000 2,716,000 2,860,000 4,267,000 
 
 Carpets 54,000 847,000 850,000 721,000 
 
 Matches 1,137,000 5,641,000 6,273,000 5,890,000 
 
 Mattings i66,oco 3,232,000 3,938.000 3,710,000 
 
 Cotton Yam 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 
 
 Umbrellas 84,000 627,000 687,000 9S3,ooo 
 
 Totals 6,795,000 45,956,000 56,686,000 7 1,554,000 
 
CHAPTER V. 
 Governmental Activity 
 
 I. Protection for Young Industries. 
 
 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 Hberalizing 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, Commerce ef Nations, p. 47. 
 141] «4> 
 
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 
 full liberty of competition." ' It was an age in which 
 nations were made to give heed to the doctrine of humanity, 
 and the people objected to state interference with any kind 
 of exchange on the grounds of man's natural right to ex- 
 change his own products with whom he would. Thus the 
 doctrine 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 
 
 1 Bastable, Commerce of Nations, p. 42. 
 
 ' Bastable, Theory of International Trade, p. 130. 
 
143] GOVERNMENTAL ACTIVITY I43 
 
 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 
 commodities of least cost, would be a vast saving of labor 
 
144 P-^ST AND PRESENT 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 policy. " 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 of International Trade, p. 133. 
 
145j GOVERNMENTAL ACTIVITY j^e 
 
 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 which was waged for a time between the schools 
 is giving way 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 diistinc- 
 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, Economia, p. 23. 
 
146 PAST AND PRESENT OF 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 effect to 
 protective measures. These 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 Basis of Protection, p. 24. 
 
 • Clark, Distribution of Wealth, p. 29. 
 
147] GOVERNMENTAL ACTIVITY 147 
 
 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. Inventions 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 P-AST 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 may be 
 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; 
 1 832-1 861 ; 1 861-1902. 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 HUtory of the United Statu, p. 5. 
 
 ' Rabbeno, American Commercial Policy, pp. 111-133. Frdtectionist Theory, 
 Bishop, BoUes, Mason, Thompson, and others. Political and Fiscal Theory, Ely, 
 Tanisig, H. C. Adams, and others. 
 
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 1868 the economic condition of Japan approached 
 
 • Rabbeno, American Commercial Policy, p. 298. 
 ' Quoted by Rabbeno, p. 322. 
 
150 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, 
 
I5l] GOVERNMENTAL ACTIVITY jji 
 
 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 
 tariffs " consist of the statutory and the conventional tariffs ; 
 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 are 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 Treaties in Force, 1899. Pttbli- 
 cation of the U. S. Government, pp. 352 et ieq. 
 
 'For new tariff law see General View of Commerce and Industry of Japan 
 1900, pp. 333 et seq. Publication of the Japanese Government. 
 
152 PAST AND PRESENT OF JAPANESE COMMERCE [152 
 
 internal affairs, and the assimilation of such phases of west- 
 ern civilization 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 was 
 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 most 
 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 yards of English calico. It may cost ten days' labor 
 
153] GOVERNMENTAL ACTIVITY 153 
 
 to produce ten pounds of tea in Japan, while two days' labor 
 may produce fifty yards of calico 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 of 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 industry in 
 each country. 
 
 Agriculture. Manufactures. Commerce^ 
 
 United Kingdom 73 148 229 
 
 Germany 178 118 130 
 
 France 170 117 137 
 
 Belgium 166 160 46 
 
 United States 153 77 »'7* 
 
 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 Statistics. 
 
154 P^^T 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 of 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 
 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 : 
 
 COUBTRIES. . ^" 
 
 Asia 44,748,000 
 
 Euiope 55,182,000 
 
 America 27,750,000 
 
 1899. 
 
 Ihcsbase. 
 
 Ytn. 
 
 Ytn. 
 
 190,387,000 
 
 i4S.639.OOO 
 
 128,137,000 
 
 72,955,000 
 
 104,689,000 
 
 76,939,000 
 
155] GOVERNMENTAL ACTIVITY 155 
 
 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. 
 
 Distribution of Japantu Tradi with Asiatic Countries. 
 
 Countries. lB<jo(Yen). iSqq(Yin). 
 
 China 14,076,000 £8,944,000 
 
 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 4,650,00a 
 
 Asiatic Russia 7,090,000 
 
 Siam 246,000 783,000 
 
 Philippines ^.., ........ 452,000 2,669,000 
 
 Dutch Indi^.^.. 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 between 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 
 cruder 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 hand 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 
 trade. Several considerations conspire to make the rela- 
 tions .between these two nations, Japan and China, of 
 unusual national anjdL-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 Trade. 
 
 Countries. iSSj. tSqo. iSgf- 
 
 Great Britain 45,983,000 37.703,000 54,123,000 
 
 Hong Kong 51,138,000 104,987,000 189,941,000 
 
 India 16,737,000 11,355,000 33,642,000 
 
 United States 11,613,000 11,840,000 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 
 
157] GOVERNMENTAL ACTIVITY 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 common ; 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 
 boards to the effect that the Christianization of China will 
 
158 PAST AND PHESENT 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 industrial 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 poHtical complications and adjust- 
 ments she has not had time to become commercially self- 
 conscious. Her industrial and commercial growth has been 
 purely natural and without the stimulus of a predetermined 
 and studied plan. She has every needed factor in her favor 
 
159] GOVERNMENTAL ACTIVITY jcq 
 
 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 would 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. 
 
 Weight. 
 I Kw«mm£ equals i,ooo Momm^ equals 8.281 lbs. Avd. 
 I Kin '« 160 " " 1.325 " " 
 
 I Momm^ " 10 FUn " 2.12 Drams Avd. 
 
 I Fiin " 10 Rin " 5.79 Grains " 
 
 i Rin '• .1 Fun. 
 
 Land Mtasurt. 
 
 I Cho equals 10 Tan equals 2.45 Acres. 
 
 il Tan " 10 Se " .245 « 
 
 I Se " .30 Bu " 119 Square Yards, nearly. 
 
 Dry and Liquid Mtasurt. 
 
 I Koku equals 10 To equals 39.7 gallons, or 4.96 Busbeli. 
 I To " 10 Sho " 3.97 " " 1.98 Pecks. 
 
 1 Sho •' 10 Go " 1.58 quarts, " .198 " 
 I Go " .1 Sho. 
 
 Linear Mtasurt. 
 
 I Ri equals 36 ChO equals 2.44 Miles. 
 
 I Cho " 60 Ken 
 
 I Jo " 10 Shaku 
 
 I Ken " 6 " 
 
 I Shaku " 10 Siin 
 I Sun " .1 Shaku 
 
 I.IS " 
 3.31 Yards. 
 5.96 Feet. 
 1 1.9 Inches. 
 I.19 « 
 
 Monty Tablts. 
 
 The Rio, known before the Meiji period, was derived from, and about the equiTa- 
 
 lent of the Chinese Tael. 
 The money is on the decimal system, I Yen being equal to 100 Sen. 
 
 Standard Cold Coins. 
 
 20 Yen, weight 16.6665 grammes, quality. ^ ^^^^ ^^ ^^^ ^^jj. ,^ ^^ „f 
 10 Yen, weight 8.3333 grammes, quality |- ^^^^^^ 
 5 Yen, weight 4.1666 grammes, quality J 
 
 160 [160 
 
I6lj APPENDIX l6i 
 
 Subsidiary Silver Coins. 
 
 CO Sen, weight 13.4783 grammes, quality-v o ^ , ., . , 
 
 •> ° J T/ J » ' ~i J \ jjQQ parts of pure silver; 200 parts of 
 
 copper. 
 
 20 Sen, weight 5.3914 grammes, quality >- 
 10 Sen, weight 2.6955 grammes, quality J 
 
 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 7.1280 grammes, quality -1 950 parts of copper; 5c parts of tin and 
 y^ Sen, weight 3.5640 grammes, quality j zinc. 
 
BIBLIOai>lAPHY 
 
 JAPANESE WORKS NOT TRANSLATED 
 
 Dai-Nihon-Shakwai-Jii. Social Encyclopedia of Japan. 2 vol. Tokio, 1890. 
 
 Fukutomi, C. Shunin Yoshida, Life of. Tokio, 1893. 
 
 Fukuchi, G. Bakufu-SuibO-Ron (Decline of Tokugawa Shogiinate). Tokio, 
 
 1892. 
 Hagino, Y. Nihon Zaisei Shi (Financial History of Japan). Tokio, 1890. 
 Koku-shi-Taikei. Collection of Ancient Histories of Japan. 17 vols, compl. 
 
 Tokio, igo2. 
 Nagata, K. ShyO-GyO-Shi-Ys (Outline of Commercial History). Tokio, 1899. 
 Shigeno, A. Koku-Shi-Gan (Outlines of National History). 7 vols. Tokio, 
 
 1890. 
 Suganuma, T. Dai Nihon ShyOgyO Shi (Commercial History of Japan). Tokio, 
 
 1892. 
 Shimada, S. Kaikoku Shimatsu (Opening the Country). Tokio, 1888. 
 Takekoshi, Y. Nisen-gohyaku-Nen-Shi (History of 2,500 Years) . Tokio, 1896. 
 Yokoi, T. Nihon ShyOgyO-Shi (History of Japanese Commerce). 2 vols. 
 
 Tokio, 1898, 1900. 
 Yokoi, T. Nihon Kogy5 Shi (History of Japanese Industry). Tokio, 1898. 
 
 JAPANESE WORKS TRANSLATED 
 
 Kojiki. The Oldest Chronicles of Japan. Composed in 712 A. D. Translated 
 
 by B. H. Chamberlain. Transactions of the Asiatic Society of Japan. Vol. 
 
 X, supplement. 
 Nihongi. The Second Oldest Chronicles of Japan. Composed in 720 A. D. 
 
 Translated by W. G. Aston. Transactions of the Japan Society, London. 
 
 Supplement, 1896. 
 
 REFERENCE WORKS IN EUROPEAN LANGUAGES 
 
 Chamberlain, B. H. Things Japanese. 
 
 Fraissinet, F. E. Le Japon. 2 vols. 
 
 Fukuda, T. Die Gesellschaftliche und Wirtschaftliche Entwicklung in Japan. 
 
 Griffis, W. E. The Mikado's Empire. 
 
 Heine, W. Japan, Beitrage zur Kenntniss des Landes und seiner Bewohner. 
 
 Hildbreth, R. Japan and the Japanese. 
 
 162 [162 
 
1 63 J BIBLIOGRAPHY 1 63 
 
 lyenaga, T. The Constitutional Development of Japan. Johns Hopkins Uni- 
 versity Studies. Vol. ix. 
 
 Kampfer, Englfbertus. The History of Japan. 
 
 Matsukata, M. Report on the Adoption of the Gold Standard in Japan. 
 
 Matsukata, M. The Post-Bellum Financial Administration in Japan. 
 
 Nachod, Oskar. Die Beziehungen der Niederlandichen Ostindischen Kom- 
 pagnie zu Japan. 
 
 Nitobe, I. The Intercourse between the U. S. and Japan. Johns Hopkins Uni- 
 versity Studies. Vol. viii. 
 
 Ono, Y. The Industrial Transition in Japan. Publications of The American 
 Economic Association. Vol. v, 1890. 
 
 Rein, J. J. The Industries of Japan. 
 
 The following works have been consulted in the composition of this essay, and 
 reference is made to them in the following pages wherever they have been drawn 
 upon directly, or where they give valuable discussion of the facts mentioned : 
 
 Adams, Brooks. America's Economic Supremacy. 
 
 Bastable, C. F. Theory of International Trade. 
 
 Bastable, C. F. The Commerce of Nations. 
 
 Bucher, Karl. The Evolution of Industry. 
 
 Bullock, C. J. The Monetary History of the United States. 
 
 Cairnes, J. E. Principles of Political Economy. 
 
 Clark, J. B. The Distribution of Wealth. 
 
 Conant, C. A. The United States in the Orient. 
 
 Cunningham, W. The Growth of English Industry and Commerce. 2 vols. 
 
 Cunningham, W. Western Civilization. 2 vols. 
 
 Ely, Richard T. Outlines of Economics. 
 
 Giddings, Franklin H. Democracy and Empire. 
 
 Giddings, Franklin H. Principles of Sociology. 
 
 Guizot, M. History of Civilization in Europe. 
 
 Hadley, A. T. Economics. 
 
 Hadley, A. T. Railroads and Transportation. 
 
 Hobson, J. A. The Evolution of Modern Capitalism. 
 
 Higgs, Henry. The Physiocrats. 
 
 Ingram, J. K. History of Political Economy. 
 
 Johnson, E. R. The Nicaragua Canal and the Economic Development of the 
 
 United States. Annals of the American Academy of Political and Social 
 
 Science. Vol. vii, 1896. 
 List, F. National Economy. 
 Marshall, Alfred. Principles of Economics. 
 McCarkle, W. M. The Nicaragua Canal. 
 Mayo-Smith, R. Statistics and Economics. 
 Morris, H. C. History of Colonization. 2 vols. 
 Newcomb, H. T. Railroad Economics. 
 
l64 BIBLIOGRAPHY [164 
 
 Nys, E. Researches into the History of Economics. 
 Patten, S. N. The Economic Basis of Protection. 
 Price, L. L. English Commerce and Industry. 
 Rabbeno, Ugo. American Commercial Policy. 
 Roscher, W. Political Economy. 2 vols. 
 Seeley, J. R. The Expansion of England. 
 Seligman, Edwin R. A. Essays in Taxation. 
 Schmoller, Gustav. The Mercantile System. 
 Shaw, W. A. History of Currency. 
 Taussig, F. W. Tariff History of the United States. 
 Toynbee, Arnold. The Industrial Revolution. 
 Vissering, W. On Chinese Currency. 
 Walker, F. A. Money. 
 Wells, D. A. Recent Economic Changes. 
 Williams, E. E. The Case for Protection. 
 
 OFFICIAL PUBLICATIONS 
 
 The Annual Census of Japan (in Japanese) . 
 
 History of Merchant Marine in Japan. 
 
 Resumd Historique et Statistique; de la T616graphie et de la TfiUphone au Japon. 
 
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 The Financial Annals of Japan. 
 
 Reports of the Department of Communication (English and Japanese). 
 
 General View of Commerce and Industry in Japan. 1893, 1900. 
 
 United States Consular Reports. 
 
 Report of the U. S. Commission on Navigation. 
 
 Monthly Summary of Commerce and Finance. 
 
 Commercial Relations of the United States and Other Countries. 
 
 Treaties and Conventions between the U. S. and Other Powers. 
 
 Eleventh Census of the U. S. 
 
 American Executive Documents : Diplomatic Correspondence. 
 
 PERIODICALS IN JAPANESE 
 
 The Tokio Economic Journal (weekly). Tokio. 
 
 Oriental Economist (tri -monthly). Tokio. 
 
 The Sun (monthly). Tokio. 
 
 The Economic Review (bi-monthly). Tokio. 
 
 The Journal of Kokka-Gakkwai (monthly). Tokio. 
 
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