Discussion Papers In Economics
And Business

Rise of the Japanese fiscal state
Masaki Nakabayashi

Discussion Paper 08-12

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANRise of the Japanese fiscal state
Masaki Nakabayashi

Discussion Paper 08-12

March 2008

この研究は「大学院経済学研究科・経済学部記念事業」
基金より援助を受けた、記して感謝する。

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANRise of the Japanese fiscal state∗
Masaki Nakabayashi†
Osaka University
March, 2008

Abstract
A sustainable fiscal state needs to have two critical factors: A stable tax base and access to an efficient bond market. The Tokugawa Shogunate had a stable land tax revenue,
which was inherited to modern Japan after the Meiji restoration. Taxation, however, wasrestricted by the constitution after the Meiji restoration. The parliament opposed to expansionary policy in the early 1890s, and then it turned to support that at the exchange ofgovernmental commitment to investment in social infrastructure. The government committed to investment to increase productivity, and was allowed to raise tax rate. About the bondmarket, at the other hand, the government had issued bonds only in the domestic market
until the mid 1890s. In the late 1890s, after Japan joined the international gold standard,
the government began to issue considerable amount of bonds, and the balance surged during the Russo-Japanese war in 1904-1905. Now the London market efficiently financed
Japanese government. In the early 20th century, the government was one and only one
player that had established its own reputation in the international financial market. Hencebalance of Japanese government bonds was the only route to import capital. This routealso provided Japanese economy with macroeconomic stability, offsetting short-term current account deficit by import of capital. Japan had finally been equipped with necessary
instruments as a stable and sustainable fiscal state.
Key words: Fiscal state, government bonds, macroeconomic stability.
JEL: N45, N25.

∗

This study has been supported by the JSPS Grant-in-Aid for Scientific Research, No. 18203024.
Corresponding address: Graduate School of Economics, Osaka University, Machikaneyama 1-7, Osaka 5600043, Japan. phone: +81-6-6850-5240. e-mail address: masaki.nakabayashi@gmail.com / masaki@econ.osakau.ac.jp†

Introduction
Tokugawa Japan had relatively stronghold of stable tax basis, as a feudalist country, and thiswas an important legacy for the New Imperial Government after the Meiji Restoration in 1868.
The New Imperial government, after taking over the early modern tax basis, formed the modern
domestic bond market first, and then went into the London market, to settle the fiscal system inthe financial market so that it could be efficiently financed. To understand this process of rise of
the Japanese fiscal state, it would be helpful to inquire three aspects.
The first one is process of centralizing taxation and stabilizing tax revenue. A nationwide tax
and land reform by Hideyoshi Toyotomi, who was the ruling samurai then, was the landmarkof simplification and centralization of taxation in feudalist Japan. By this reform, the central
government and feudalist states (hans) acquired strong tax control. The tax payment ratio in
agricultural crop reached as high as 40 percent. This regime was inherited to the Tokugawa
Shogunate. This was the historical origin of feudalist Japan, where fiscal stability was high as
a feudalist country. This legacy of strong taxation scheme was took over by the New Imperial
Government after the Meiji Restoration in 1868. The New Imperial Government conducted a
big tax and land reform again, by which autonomy of feudal states was removed and all tax
revenue of the country came under control of the central government.
The second one is the big change of political environment after Japan developed into a
constitutional state in 1890, which meant the taxation and expenditure had to be approved by
the parliament. In the process of modernization and Westernization, people had grown up as“citizens” who thought they had the right to control taxation and expenditure. The New Imperial
Government had no other option than to change into a constitutional state in order to justify
their rule. In the early 1890s, right after the constitution became effective and the parliament
was called first, the parliament was a battle field where the majority of representatives strongly
asserted the tax cut and the administration, which was not elected from representatives in the
period and sought expansion of military expenditure. However, in the late 1890s, they moved
to the other equilibrium where the parliament agreed to tax increase and the administration
increased expenditure for civil capital formation, not only for military. Stable tax revenue andpublic capital formation became the rule of fiscal policy since then.
The third one is the government’s access to the bond market. While some feudalist statesissued bonds and notes which were permitted to circulate only within the issuer state in Tokugawa Japan, the Tokugawa Shogunate, the central government, did not issue bonds, so that the
Shogunate capital Edo (later Tokyo) and Osaka, the two biggest cities ruled by the Shogunate,
did not have any secondary bond market. The role of capital market in fiscal policy was negligible in Tokugawa Japan. The New Imperial Government began to issue government bonds
right after the Meiji Restoration, which was the historical origin of the modern capital market in
Japan. However, because the New Imperial Government considered the risk of being colonizedby Western powers, it had hesitated to issue government bonds in international markets until
the late 1890s. The circumstances gradually changed in the mid 1890s. Leaving from the silver
standard and joining the gold standard in 1897 decreased Japan’s country risk that led to smaller
country premium rate required when to issue government bonds. A big turning point came in
1904-1905 when Japan was in a war against Russia. Japanese government finally decided to1issue huge amount of Japanese Government Bonds at the London market, endorsed by British
merchant banks, to afford the Russo-Japanese war. Both of this issue and the war were successful, and then connection to the international capital market became an important instrument bothfor fiscal stability and for macroeconomic stability. Issuing bonds in the international market
could decrease “crowding out” effect in the small domestic capital market, so that the government had a more flexible arm to raise funds. Also, import of capital when the current accountdeficit increased enabled the Bank of Japan, the central bank, to take a more moderate financial policy. Otherwise the Bank of Japan should have increased interest rate suddenly to keep
the parity of Japanese yen against the starling pound any time current account deficit surged.
In the 1900s, when Japanese private companies had not yet established their own reputationin the international financial market, Japanese Government Bond was the dominant channel toimport capital. Thus fiscal policy gave the macroeconomic stability to Japanese economy, andthe macroeconomic stability in turn provided the government with stable tax revenue.
In the phase where Japan developed to a modern “fiscal state,” therefore, the well-functioning
international financial market centered at London took a critical role. However, at the sametime, if the government had made a mistake about when to enter the international market, Japan
could have faced with the risk to be colonized. After establishing a constitutional state, creating a nation state, and being heavily armed, then the Japanese government got into the London
financial market without being politically threatened. Whether exploiting or being exploited by
the London market was a critical junction to the first rising non-Western country.

I. Formation and development of early modern fiscal state:1192-1867
A. From an ancient empire to a feudalist country
Since the late 6th century, ruling family in the Kinki region,1 the ruling family, which was latercalled the imperial family, had made efforts to introduce sophisticated political institutions andtechnologies from the Chinese empire. In 701, the Taiho Imperial Legal Codes (Taiho Ritsuryo),a land mark of ancient legal history was promulgated. That legal codes was a modified copy ofthe legal codes of the Chinese empire, written in classical Chinese. The Imperial Legal Codes
stipulated very centralized scheme of legal and political system, but the Imperial Government
did not hold sufficient resources to really enforce the scheme. The Imperial Government therefore delegated duties to keep orders in segmented domains to the Imperial family, nobles andlarge temples, and those delegatees were guaranteed privileges to collect some portion of rents
from the relevant areas. This was an origin of Japanese manorial system.
In many manors, real enforcement power was provided professional worriers, not by theowners of manor. Those worriers came to be called “samurai”s, which originally meant “servants.” samurais were delegated duties to keep orders and peace in local communities, and tocollect tax, at the exchange of the privilege to correct some rent for themselves. By the 11th
1

The central area of Honshu island, the main island of Japanese islands.

2

century, in some regions, especially in Eastern Japan which is far away from Kyoto, the Imperial Capital, samurais formed groups led by noble samurais,2 and had acquired enough power
to rule the areas.
In 1192, a big group of samurais in Eastern Japan finally established their own government,
the Kamakura Shogunate. samurais did not follow the Imperial Legal Codes, but they did
their common law. The court of the Shogunate enforced this Japanese common law. However,in terms of the fiscal regime, the Kamakura Shogunate was basically a part of the manorial
system at least in the 12th century. The main revenue of the Shogunate was from manors the
Shogunate family held, and income of samurais still depended on rent guaranteed by owners
of manors. A critical feature with the manorial system was in that sovereignty to rule people
and to correct taxes from them was not explicitly distinguished from ownership of land thatallowed the owner to claim residual return, and in that either sovereignty over or ownershipof land was fragmented. Typical case was as follows: The sovereignty over a piece of land
officially belonged to the Emperor, the highest-rank duty to rule the piece of land was delegatedto the Imperial family (Imperial family as private agents) with privilege to collect some rent,
some high-rank duty with privilege to collect rent was delegated to high-class nobles such as the
Fujiwara family,3 middle-rank duty with privilege to collect rent was delegated to middle-class
metropolitan nobles or local nobles, and the low-rank duty to keep orders and to really collectland taxes from peasants cultivating the piece of land was delegated to local samurais with someprivilege to collect rent at the exchange of their duty. Thus a fragmented stratus of sovereignty
and ownership was built on the same piece of land.4
Samurais were delegated to only the lowest rank of duty, but they had the real power for
enforcement. Since then samurais therefore gradually eluded the manorial system and expanded
their interests. In the 14-15th centuries, Japan entered the period of warfares, when the manorial
system was almost destroyed.

B. Land and tax reform in the 1590s
The period of warfares ended by Nobunaga Oda, the ruling samurai, and his successor, Hideyoshi
Toyotomi. Given the virtually destroyed manorial system, Toyotomi’s government conducted adrastic land and tax reform in the 1590s. The essential factors of his reform were, 1)he officiallydenied the fragmented sovereignty over land, declared that land of whole Japan belonged officially to him, and delegated one and only one feudal lord he recognized as his subordinate theduty to rule a certain domain with the authority to collect tax; 2)he determined the standard of
taxation and ordered his feudal lords to commit to certain tax rates to peasants; 3)he guaranteed
the right to occupy and cultivate a piece of land to one and only one registered peasant on thepiece of land.
Now a piece of land had one and only one lord who held authority of taxation and one andonly one holder of the right of cultivation. Provided that feudal lords were forced to commit to2

They were originally sent by the Imperial government as governors or bureaucrats, and then stayed the areas.
The family led assembling the Imperial Legal Codes in the 8th century.
4
Nagahara (1973).
3

3

some explicit taxation policies and were prohibited from discretionarily imposing taxes, eachpeasant virtually had the right to acquire residual crop after he paid tax. Toyotomi conducted
the reform to maximize land tax revenue in the long term by protecting the residual claim ofpeasants.5

C. Revenue stability of the Tokugawa Japan
When Ieyasu Tokugawa took over the government from the Toyotomi family and establishedthe Tokugawa Shogunate in 1603, he inherited this scheme of explicitly committed taxation
policy with guaranteed property right of peasantry. Taxation mainly consisted of three kinds ofitems. The first one is called “Primary Tax (Hon nengu),” “Small Crops (Ko mono nari),” and“Charter Fee (Myoga kin)” and other kinds of indirect taxes. “Primary Tax” is land tax officiallydenominated by the amount of rice, and considerable portion of that was indeed paid in kind.
The measure of crop and tax was “Koku.” One Koku is 180.39litters, which was thought to be
standard amount for an individual to live a year, so that productivity of a domoain measured by“Koku” was supposed to also show the amount of human resources that could be mobilized for
warfares. “Small crops” were imposed on other crops than rice. “Charter Fee” were imposedon privileged merchants mainly in big cities such as Osaka, Edo, renamed to Tokyo after the
Meiji restoration, and Kyoto.
The “Primary Tax” was indeed the main source of revenue in Tokugawa Japan. The Shogunate and feudal lords conducted inspection of rice production in their domains from the 1590s to
the 1600s, and the result was registered at the Tokugawa Shogunate. This registered estimationof crop was the tax base of “Primary Tax.” By the early 18th century, the taxation policy was
based sharecropping. The Shogunate and feudal lords committed to some tax rate, such as 40
percent or 50 percent, and unless the crop was very bad, the tax rate was imposed on crop of
the year.
In the early 18th century, the Tokugawa Shogunate changed its taxation policy. Under the
new policy, the amount of tax was fixed. The Shogunate inspected crop of each peasant for
the latest several years up to the inspection year, and then determined the tax amount for his
farm, and this fixed amount of tax instead of rate was effective for next several years. Thus,
while peasants took on more risk of bad cropping, they were given more incentive to increase
production, given that all residual after tax deduction belonged to them.
Feudalist Japan was fragmented to small states and domains governed by different feudallords, and each lord held taxation autonomy. While it is difficult to show tax revenue of all feudal lords, about the Tokugawa Shogunate, the central government, revenue of “Primary Tax” isavailable from 1716 to 1841. After the reform of taxation in the 1710s, tax revenue moderately
increased, which indicated that the new taxation policy gave peasants stronger incentives. Thisshows the tax revenue of the Tokugawa Shogunate was fairly stable.

[Figure 1].
5

Araki (1986).

4

While tax officially amounted to near 35 percent in the period (Figure 1), we should be
careful because this ratio was based on the official expectation of crop. Mainly based on crop
inspections in the 17th century, official expected crop was determined as tax base. This official
expected crop was hardly changed, thus official expected crop of whole the Shogunate domain
was stable, except for minor changes in acreage of the domain. Officially expected crop per
acreage of land seems to have been stable.
However, Hayami and Miyamoto (1988) estimates the country wide crop increased from 31
million kokus in 1700 to 41 million kokus in 1850, and land productivity (crop per cho) also
increased since 1700 (Table 1).

[Table 1].

In the Tokugawa Shogunate Domain, tax rate ratio generally lower than other feudal lords’
domains, and autonomy of villages were stronger, hence peasants had stronger incentives to increase productivity. Thus the increase of crop in the Tokugawa Shogunate Domain in the period
is supposed to have been considerable. As a conservative estimation, we applied the countrywide increase rate of land productivity to the Shogunate Domain, and estimated real crop in the
18-19th centuries, and then effective tax rate.6 Based on this estimation of crop, effective tax
rate drop below 30 percent in the early 19th century. The Tokugawa Shogunate provided strong
incentives to increase productivity with peasants, but the fruit belonged to peasants themselves,
not to the Shogunate.
This bargaining result favorable to peasants was partly due to the structure of governanceitself. The Shogunate deployed few officials in rural area, and it was a delegated duty of villages to keep order, and to collect tax. Taxation policy including tax amount imposed on avillage was a kind of contract between the Shoguate and the village. As long as the village paid
the prescribed tax, the village kept its autonomy. This was an efficient way of collecting tax,
and economizing costs of ruling society. However, small number of officials meant that harshasymmetric information existed between the village and the Shogunate. Given this asymmetric
information, ex-post renegotiation of taxation policy accompanied large costs. When the crop
was bad, due to natural disaster for instance, the village called for temporal tax cut. Because the
Shogunate wanted to stabilize tax revenue in the long term, and really bad crop was easy to observe, it basically accepted this kind of tax cut. However, incremental increase of productivity
6

Put yt and yt+n as crop in the t th year and (t + n) th year. Then average growth rate r between t th year
and (t + n) th year is shown by r = (yt+n /yt )1/n − 1. From the Table 1, we have average growth rate r in
1720-1730, 1730-1750, 1750-1800, and 1800-1850. “Officially expected crop in the domain” (a) in the Appendix
I can be interpreted as a proxy of acreage rather than real crop. Thus we can estimate crop in the t the year bt by
bt = (1 + r) × (at /at−1 ) × bt−1 . For 1721-1730, 1731-1750, 1751-1800, and 1801-1841, we used r calculated by
the procedure above. Before 1720, we assume that the “Officially expected crop a” was fairly close to real crop,
thus we inserted a1716 to a1720 as b1716 to b1720 .

5was hard to observe from the Shogunate side, and any renegotiation for tax increase incurredhuge cost on the Shogunate, which strongly depended on autonomous villages as instrumentsof governance. Therefore, while the Shogunate could keep the stable land tax revenue, marginalincrease of agricultural productivity drained from the Shogunate treasury.
Consequently, the Shogunate came to rely more on indirect taxes from merchants in the big
cities in the mid 19th century (Table 2). Increased expenditure for salaries and civil services
forced the Shogunate to find new revenue sources (Table 3).7

[Table 2], [Table 3].

Even though the imbalance between stable land tax and increasing expenditure was a serious
problem to the Shogunate, the Shogunate did not issue neither bonds nor notes.8 The Shogunate allowed other feudal lords to issue bonds and notes that circulated only within their own
territories, but the Shogunate itself never issued. Because the Shogunate exclusively held thecurrency sovereignty to issue coins, it could acquire extra revenue by re-coinage to deteriorated
quality coins (Table 2). This was a useful inflation tax to transfer from the private sector to thegovernment sector, but only temporarily. The Shogunate can be said to had stable tax base, but
not to have had any sustainable institution to finance the government.

II. The Meiji Restoration: 1868-1889
A. Abolition of feudalist system and fiscal centralization
The Tokugawa Shogunate exclusively had held the sovereignty over diplomacy and national
security. However, when Commodore Matthew Calbraith Perry of the US Navy arrived with
4 battleships at Uraga of the Edo bay, the Shogunate could not exclude them. Furthermore,when he came back in the next year with 7 battleships this time, the Shogunate concluded atreaty of peace and amity under which Japan was obliged to open Shimoda Port in Shizuoka
and Hakodate Port in Hokkaido, to provide the United States with a most-favored-nation treatment, to accept a consul at Shimoda port, and to give the US consular jurisdiction, but the US
was obliged to give Japan neither a most-favored-nation treatment nor consular jurisdiction.
Under the Tokugawa ideology, peasants had obligation to pay tax while the samurais had the
responsibility to national security. Thus a historically shameful treaty with a foreign country
made feudal lords and people sceptical against the Tokugawa Shogunate sovereignty.
In 1858, the Shogunate concluded a treaty of friendship and commerce with the UnitedStates, under which Japan was obliged to open Yokohama, Nagasaki, Niigata, and Hyogo astreaty ports, to accept the free trade mechanism, and to give up tariff autonomy. This sudden
7

Oguchi (1976).
More precisely, there was an exception. In 1867, the Shogunate issued convertible notes at Yokohama, thetreaty port, and Edo, to facilitate foreign exchanges.
86joining the international market provided Japan with a drastic change of relative prices, where
huge loss belonged to relatively disadvantaged industries, and huge gain to relatively advantaged industries. This drastic change meant destroyed was the existing commercial network
which large merchants privileged by the Shogunate had managed. Losing ability to control politics and economy, the Shogunate lost to the Boshin Civil War with the State of Choshu and theState of Satsuma, on the side of which the Emperor stood, in 1868.9
In 1871, the New Imperial Government abolished any autonomy of 260 feudal states anddomains, and declared sovereignty all over Japan exclusively belonged to the New Imperial
Government. Feudal lords received government bonds to compensate their financial benefit
from their domains, but they lost any authority against their domains. Now all tax revenue ofthe country belonged to the central government.

B. Land tax reform in the 1870s
In Tokugawa Japan, a registered peasant exclusively held the right to cultivate his registered
farm and to take residual after tax payment. However, he could not freely sell his farm, or atleast, the Shogunate court did not enforce any contract of trading registered farm.10 In 1872, the
New Imperial Government officially allowed farm holding peasants to sell and buy their farm.
Then, in 1873, the Land Tax Act was promulgated. The act guaranteed modern property rightof farm to the registered farmer at the exchange of tax payment. Also the act prescribed thatland tax be paid by money, not in kind. Procedure of the tax reform was as follows: First theprefectural government inspected productivity of a piece of land and calculated average returnfrom the piece of land; second, the prefectural government determined the principle value fromthe calculated return and prescribed the principle value as the “land price”; third, 3 percent of
the “land price” is the designated land tax from the piece of land. Thus the “land price” wasthe new tax base, and this “price” was fixed and had no direct relation with real trades in themarket.
Another object in enforcement of the act was to have stable land tax revenue. Because
the New Imperial Government had announced the land tax would be cut before it defeated the
Shogunate in order to gather people’s support, some peasants rose in revolt. Riots were suppressed by the Imperial Army nation-widely deployed, but also the government had to concede:
tax rate of “land price” was reduced to 2.5 percent.
That effort was so effective that land tax revenue increased rapidly in the early 1870s, and
it is thought to have recovered to the level in the Tokugawa period in the mid 1870s (Figure 2).

[Figure 2].
9

Even after the Shogun surrendered in 1868, the Shogunate Navy and Northeastern states continued to fightthe Imperial army. The last battle between the Shogunate Navy and the Imperial Army ended in May, 1869, in
Hokkaido.
10
Trade of non-farm land was legal, and transfer of the right over non-farm land was enforced by the Shogunate
court.

7

However, in 1877, the New Imperial Government faced with the last civil war with exsamurais in Kyushu region, which incurred huge costs on the government. The government
issued considerable amount of government notes, and it led to rapid inflation. Since the “landprices” were fixed, inflation meant tax cut in real term. This real tax reduction stimulated rural
economy.
In 1882, Masayoshi Matsukata took over the chair of Minister of Finance, and started harshdeflationary policy, where the government repaid the government notes by the budget surplus(Appendix 3). While the primary object of this deflationary policy was to stabilize prices andfinancial system, another important by-product was real increase of land tax. This deflationary
policy gave disastrous damages to rural economy especially in Eastern Japan, partly because it
started occasionally at the same time European economy turned down in 1882. Silk reeling was
the export industry of Eastern Japan, so that the region hit both by the international businesscycle and the fiscal policy.
Therefore, it is not clear whether Matsukata’s deflationary policy increased social welfare
or not,11 but it stabilized the budget of the government anyway. In the 1880s, the governmental
budget strongly depended on the land tax (Figure 2) and its dependence was actually as high as it
was in the mid Tokugawa period (Table 2). In terms of tax base, the New Imperial Government
in the late 19th century relied on the Tokugawa heritage.

C. Government Bonds in the domestic capital market
As an effort to modernize financial system, the government promulgated the National BankAct in 1872, which was a copy of American national bank system, so that national banks wereactually joint stock companies that held privilege to issue bank notes as currency. Under thisact, 153 national banks were established. Correspondence network among those national banks
began to integrate fragmented financial markets.
Departing from the Tokugawa shogunate policy for the central government not to issue notes
nor bonds, the New Imperial Government issued government notes and bonds from the very
beginning. Transformation of feudal lords’ revenue to government consul bonds also increased
the amount of circulating government bonds. The bond market therefore emerged in the 1870s.
This was the birth of the capital market in Japan.
Thus infant financial and stock markets were being formed in the 1870s. After he took his
office, Matsukata, the Minister of Finance, was dedicated to also complete modernization offinancial system. Under his leadership, the Yokohama Specie Bank, the state-backed foreignexchange bank, was established in 1880. Also he chose the British style of central banking as abetter system, so he established the Bank of Japan in 1882 as the central bank that exclusively
issue bank notes. The Bank of Japan began to allow the bank notes to be convert to the silver
11

Patrick (1965) points out that Matsukata’s policy balanced the governmental budget by transfer from fromthe private sector to the government sector at the expense of growth.

8coins of Japanese yen.12 Since then, the Bank of Japan held the silver standard until October
1897, when it moved to the gold standard.
Provided that the value of currency had become stable and modern financial market wasformed, the government acquired a well-functioning government bonds market. Since the late
1870s, the balance of issued domestic bonds gradually increased (Figure 3). The domestic bondmarket had become a sustainable instrument to finance the government.13[Figure 3].

III. Fiscal state under the constitution: 1890-1914
A. Rivals in the parliament
In 1889, the Constitution of the Empire of Japan was proclaimed. The constitution basicallyfollowed the one of Prussia, and it gave a strong power to the lower house as well as the upperhouse consisting of nobles and other characters chosen by the government: The budget of eachyear had to be approved by both houses. If the government failed to pass the budget, it had toenforce the budget of the last year. Following the Prussian constitution, the constitution did not
officially take the parliamentary cabinet system, while the leading drafter of the constitution,
Hirofumi Itoh, thought Japan should move to the parliamentary cabinet system soon or later.
In the early 1890s, the prime minister and other ministers ware appointed independently to theparliament. On the other hand, the opposition parties kept the majority of the lower house.
The government sought to build a strong military, to stand against the Western powers. On
the other hand, the opposition parties led by the Liberal Party were supported by rich landowners, who cared more of economic development than military. Thus the majority of the lower
house strongly called for large tax cut. However, the opposition parties had also a weak point.
The Clause 67 of the constitution prescribed that items belonging to the imperial sovereignty
in the budget could not be cut by the parliament without approvement by the cabinet. A typical item belonging to the imperial sovereignty was military expenditure, that took a large partof the budget in that period. Therefore, unless the cabinet approved, the parliament could not
cut the military expenditure. Given the structure of the constitution, harsh rivalry between theparliament and the cabinet gave any benefit neither to the cabinet nor to the parliament.
The Sino-Japanese war, whose main issue was the “independence” of Korea against China,
gave a momentum. This was the first war since the Mongolian invasion to Japan in the 13th
century. Facing with a national event, the parliament stop to fight the cabinet, and approved alarge increase of military expenditure.
12

In this period Mexican dollar was the key currency in treaty ports of East Asia, so 1 Japanese yen coincontained the same amount of silver that 1 Mexican dollar did.
13
Kamiyama (1995), Hoshi and Kashyap (2001).

9B. Increasing tax with increasing capital formation
After the price index dropped in the mid 1880s, it began to inflate again since the late 1880s.
This was mainly because Japan took the silver standard. From the 1870s to the 1880s, most
European countries decided to accept the gold standard, which led to the decline of the international silver price. This meant decreasing exchange rate of Japanese yen. Under the silver
standard, the Bank of Japan controlled the domestic financial market to have exchange rate ofJapanese yen fixed on the international silver price. Low exchange rate finally led to inflation ofdomestic prices. A serious result of the inflation was decrease of governmental revenue in realterm, given that the “land price” was nominally fixed, hence the land tax was too. The cabinet
desperately sought land tax increase.
On the side of the opposition parties, the Liberal Party, the leading opposition party, drastically changed its stance against the cabinet, after the Sino-Japanese war. Under the effectof clause 67 of the constitution, the parliament could not increase expenditure for public welfare. Therefore, the party finally approved the land tax increase at the exchange of the cabinet’scommitment to considerable increase in expenditure for public welfare, especially for social
infrastructure. This strategic change of the Liberal Party resulted in the establishment of the defacto parliamentary cabinet system, where the majority of the lower house held the cabinet.14
The effect of the structural change in politics was remarkable. The government expenditurein the Gross National Expenditure steadily increased since the mid 1890s (Figure 4). Not only
the military expenditure, also the governmental non-military capital formation surged in thelate 1890s, showing that the cabinet indeed committed to investment in social infrastructure.
Especially from the late 1890s to the early 1900, the period of Japanese industrial revolution,
the governmental investment in infrastructure had a considerable role (Figure 5).

[Figure 4].[Figure 5].

C. Government Bonds in the international capital market
Except for the very beginning of the New Imperial Government, the government had hesitate
to issue government bonds in the international market, because it considered the risk of being adependency on Western powers. The victory in the Sino-Japanese war mitigated this consideration.
In October, 1897, Japan switched from the silver standard to the gold standard. A reason of
the decision was in access to the international financial market. As long as Japanese yen pegged
to silver, issue of bonds in the London market would require some premium to compensate thedownward risk of the silver price. The government indeed resumed issuing government bondsin the London market in 1898 (Figure 3). Government bonds issue shot up during the RussoJapanese war from 1904 to 1905. After the war, the London market had kept its critical role in
14

Mitani (1995).

10Japanese fiscal policy. To avoid high interest rate in the domestic market directly, hence to calm
crowding-out effect indirectly, the government actively issued bonds in the London market after
the Russo-Japanese war.15
Moving to the gold standard and joining the international financial market centered at the
London market had important implication both in handling government budget and in sustaining
macroeconomic stability. In Japan as a developing country, governmental investment in infrastructure took a critical role. However, even if investment in social infrastructure could increase
productivity in the long term, governmental expenditure and investment themselves stimulated
effective demand in the domestic economy in the short term that led to the current accountdeficit. If the Japanese capital market had effectively been integrated in the international market, this current account deficit in the short term would not be a serious problem. Expecting
increased productivity, capital inflow would offset the short-term current account deficit, so thatthe Bank of Japan, which was responsible for the value of yen against the hard currency, did notneed to trigger a financial panic by a sudden increase of interest rate as an instrument to havethe domestic demand suddenly shrink.16 However, in the early 20th century, no Japanese firm
established its own reputation in the international market, hence it could not be expected for theprivate sector to successfully import capital.
By defeating Russia, only the government established its own reputation in the international
financial market. Therefore, if any importer of capital, the government was one and only one.
Issuing the government bonds in the international market was a critical macroeconomic stabilizer for a emerging country.
The government gave a contract the Yokohama Specie Bank, a partly state-owned foreignexchange bank, to issue bonds. The London branch office of the Yokohama Specie Bank have
British merchant banks endorse the bonds, and then sell the bonds. The gold standard before theWorld War I was basically the sterling pound exchange standard, hence reserve of the starlingpound supported trust in the yen. The balance at the London branch of the Yokohama Specie
Bank was then included into reserve of the Bank of Japan. The Bank of Japan considered
not only its own reserve in Japan, also reserve at the London branch of the Yokohama Specie
Bank, when it determined official discount rate.17 As long as the London market expected thatJapanese economy was on a sustainable growth path, Japanese government was financed, whichmeant Japanese economy was financed too.
After the Russo-Japanese war, not only the international financial market provided a sustainable channel of fund raising with the government, capital import through the government
bonds had become an important instrument to keep macroeconomic stability of Japan.
For this mechanism to work well, the market had to be efficient, in terms of imposing risk
premium. Otherwise the governmental budget would just lose discipline. Or, the fiscal stability
could be hurt if the market were instable. For instance, the American economy had been attacked by instable international financial market in the 19th century. In that sense, joining theLondon market in the early 20th century was a good decision. Exactly at that time, financial
15

Kamiyama (1995).
Net export ([Exports] − [Imports]) must equal to Net capital outflow. Thus net capital inflow offsets net
import.
17
Kamiyama (1995).
16

11

market was globally integrated and the London market functioned very well as the center.

Conclusion
The Tokugawa Shogunate guaranteed the right to cultivate and to take residual after tax payment
to registered peasants, and respected autonomy of local communities as long as those communities took responsibility to tax payment. This institution gave the Shogunate a s table land tax
base. This land tax kept being the main revenue not only to the Tokugawa Shogunate, also to
the New Imperial Government after the Meiji restoration.
After 1890, the constitution admitted the authority to approve budget to the lower house,
while the government was eager to increase tax revenue in order to enhance military ability. The
leading opposition party chose a way where the party approved increased expenditure on the one
hand, the government committed to investment in social infrastructure. Japanese democracy
finished its youth at that point, and the fiscal policy came to have internalize a sustainablemechanism to invest in infrastructure and to increase tax revenue.
Facing with short of revenue during its centralization process, the New Imperial Government
had issued bonds in the domestic market since the 1870s. Establishment of modern financial
system facilitated it. However, the domestic market was not sufficiently large especially when
the government came to take an important role in building infrastructure. Therefore Japan
moved from the silver standard to the gold standard in 1897, and accessed the international
financial market. The government indeed began to issue bonds in the London market in thelate 1890s, and the balance surged during the Russo-Japanese war from 1904-1905. Now thegovernment had a stable instrument to finance itself.
The channel to the London market had another implication. In the early 20th century, any
Japanese firm had not established its own reputation in the international capital market. Thus
the government bonds was the route to import capital. This channel enabled the government
and the Bank of Japan to hold growth-oriented fiscal and monetary policy, without considering
short-term current account deficit too much.
While the central government had built a stable tax base in the 17th century, this was finallyequipped with a sustainable financing mechanism when it entered the London market in the late
1890s. At this point, Japanese fiscal state was formed as a sustainable mechanism.

12References
Araki, Moriaki, Bakuhan taisei shakai no seiritsu to kozo (Formation of the Shogunatefeudalist society and its structure, 4th ed., Tokyo: Yuhikaku, 1986.
Hayami, Akira and Matao Miyamoto, “Gaisetsu 17-18 seiki (Overview of 17-18 centuries),”in Akira Hayami and Matao Miyamoto, eds., Nihon keizaishi 1: Keizai shakai no seritsu (Economic history of Japan, vol.1: Formation of economic society), Iwanami Shoten
Tokyo 1988, pp. 1–84.
Hoshi, Takeo and Anil Kashyap, Corporate financing and governance in Japan: The road tothe future, Cambridge, MA: The MIT Press, 2001.
Kamiyama, Tsuneo, Meiji keizai seisakushi no kenkyu (Research on economic policy of Meiji
Japan), Tokyo: Hanawa shobo, 1995.
Mitani, Taichiro, Nihon seitou seiji no keisei: Hara Takashi no seiji shidou no tenkai (Reflections on the formative period of party government in Japan : the political leadership ofHara Takashi), 2nd ed., Tokyo: University of Tokyo Press, 1995.
Nagahara, Keiji, Nihon chusei shakai kozo no kenkyu (Research on the social structure ofmedieval Japan), Tokyo: Iwanami shoten, 1973.
Oguchi, Yujiro, “Tmpoki no seikaku (Specific features of Tempo period),” in Naohiro Asao,
Susumu Ishii, Kotei Inoue, Kaichiro Oishi, Masanao Kanoh, Toshio Kuroda, Jun’nosuke
Sasaki, Yoshimi Toda, Kojiro Naoki, Keiji Nagahara, Masahide Bitoh, Akira Fujiwara,
and Takayoshi Matsuo, eds., Iwanami koza Nihon rekish 12: Kinsei 4 (Iwanami series on
Japanese history 12: Early modern 4), Iwanami Shoten Tokyo 1976, pp. 325–362.
Patrick, Hugh T., “External equilibrium and internal convertibility: financial policy in Meiji
Japan,” The journal of economic history, 1965, 25, 187–213.

13

Table 1 Population and rice production in the
Tokugawa period.
Cultivated
Rice
Year Populationacreageproduction
d ti
thousands of thansands of
cho
koku
1600
1,200
2,065
19,731
1650
1,718
2,345
23,133
1700
2,769
2,841
30,630
1720
3,128
2,927
32,034
1730
3,208
2,971
32,736
7
,
,97
,7
1750
3,110
2,991
34,140
1800
3,065
3,032
37,650
1850
3,228
3,170
41,160
1872
3,311
3,234
46,812
Source : Hayami and Miyamoto (1988), p. 41.
thousands

Table 2 Revenue Structure of the Tokugawa Shogunate thousands of Ryo
1730
1843
1844
Land tax (Nengu, paid
a
509.0
603.7
646.8
officially
ffi i ll iin ki
kindd off rice)i )Direct tax for state public
24.9
20.2
7.2
works (Kuniyaku, paid in
Direct tax for small public
works (Kobushin, paid in

26.9

22.4

23.3

General
Direct tax for special civil
Account
service (Shoyakusho no, paid

55.0

45.9

71.3

d ect tad byIndirecttax (Goyo(Goyokin,, pa
paidmoney)

29 0
29.0

158 0
158.0

706 4
706.4

b

644.8

850.2

1,455.0

a /b

79%

71%

44%

112.9

45.7

32.1

20.8

208.8

165.7

Special
Account Surplus from recoinage
s

10.4

394.4

856.4

Other revenues

9.8

43.8

66.3

c

153.9

692.7

1,120.5

b +c

798 7
798.7

1 542 91,542.9

2 575 52,575.5

Subtotal

Surplus from selling tax rice
(Kome uri harai dai)
Repayment of lending (Shokashitsuke hen no,no paid in

Subtotal
Total
Source : Ohguchi (1976), p. 352.

thousands of Ryo
Table 3 Expenditure Structure of the Tokugawa Shogunate
1730
1843
1844
Salaries of public
297.3
405.0
428.3
servants (Kirimai,(Kirimai
Expenses of Shogunate
house (Okumuki)

60.4

91.9

89.0

Civil services (Yakusho)

149.5

337.0

288.8

Public works

68.5

73.0

68.0

12 1
12.1

146 5
146.5

183 7
183.7

Expenses for Nikko visit

0.0

101.0

2.0

Restoration of the Edocatsle

0.0

0.0

836.1

other expenditures

5.2

66.5

57.5

593.0

1,220.9

1,953.4

103.5

96.8

95.0

34.9

127.7

80.8

b

138.4

224.5

175.8

a +b

731.4

1,445.4

2,129.2

GeneralGeea
Subsidies
Account

Subtotala

Government purchase ofrice

Special
Account Government lendings
Subtotal
Total

Source : Ohguchi (1976), p. 352.

Figure 1 Land tax collection of the Tokugawa Shogunate Domain: 1716-1841.
Koku
6,000,000

45%

40%
5,000,000
35%

4,000,000

30%

25%
3,000,000
Officially expected crop (left)

Land tax (left)

Official tax rate (right)

Estimated effective tax rate (right)

20%

Estimated crop (left)

15%2,000,000

10%
1,000,000
,
,
5%

Year

Source: Appendix. 1.

1841

1836

1831

1826

1821

1816

1811

1806

1801

1796

1791

1786

1781

1776

1771

1766

1761

1756

1751

1746

1741

1736

1731

1726

1721

0%
1716

0

Fogire 2 Land tax revenue in total tax revenue of the central government: 1868-1914.
millions of yen
400

100%
Total Tax Revenue (left)

Land Tax Revenue (left)

Land Tax/Total Tax (right)
90%

350

80%
300
70%
250

60%

200

50%

40%

150

30%
100
20%
50

10%

year

Source: Appendix 3.

19114

19112

19110

19008

19006

19004

19002

19000

18998

18996

18994

18992

18990

18888

18886

18884

18882

18880

18778

18776

18774

18772

18770

0%
18668

0

Figure 3 Amount of central governt issued bonds: 1870-1914.
millions of yen
30,000100%( )Government bonds,, total (left).
Government bonds, foreign currency bonds (left).

90%

Foreign currency / total (right).
25,00080%

70%
20,00060%

15,00050%

40%
10,000
30%

20%
5,000
10%

0%
1870
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914

0

year

Source: Appendix: 6.

Figure 4 Gross National Expenditure and governrnent expenditure: 1885-1914.
millions of yen
6,000

0.4
Gross National Expenditure (a, left)
Total government account including special accounts (b, left)
Total government current account expenditure (c, left)b/a (left)
c/a (left)

5,000

0.35

0.3
4,000
0.25

3,000

0.2

0.15
2,000
0.1
1,000
0.05

year

Source: GNE: Appendix 2. Government expenditure: Appendix 4.

19144

19133

19122

19111

19100

19099

19088

19077

19066

19055

19044

19033

19022

19011

19000

18999

18988

18977

18966

18955

18944

18933

18922

18911

18900

18899

18888

18877

18866

0
18855

0

Figure 5 Fixed capital formation by government and private sectors: 1868-1914.
Total government fixed capital formation (left)
Non-military government fixed capital formation (left)
Private fixed capital formation (left)
Non-military government/Total government (right)
Private/Non-military
Private/Nonmilitary government (right)

millions of yen
4,000

4.5

4

3,500

3.5

3,000

3
2,500
2.5
2,000
2
1 500
1,500
1.5
1,000

1

Source: Appendix 5.

year

1914

1912

1910

1908

1906

1904

1902

1900

1898

1896

1894

1892

1890

1888

1886

1884

1882

1880

1878

1876

1874

0
1872

0
1870

0.5

1868

500

Appendix 1 Rice production and land tax revenue of the Tokugawa Shogunate
Domain: 1716-1841.
Land Tax
Official
Estimate
estimationi i
Estimated Officially
Officialdof crop in
crop
tax
rate
effective
calculated
Paid inthe
Year
Paid in kindtax rate
amountmoney
domain(Koku)(Koku)(Koku)(Koku)abc1716 4,088,530 4,088,530 1,389,570 1,074,035
1717
1,080,090
7 7 4,098,371, 9 , 7 4,098,371, 9 , 7 1,365,060
,
,
,
, 9
1718 4,044,570 4,044,570 1,435,542 1,127,181
1719 4,050,850 4,050,850 1,393,529 1,092,581
1720 4,057,180 4,057,180 1,395,682 1,098,490
1721 4,066,500 4,069,249 1,305,650 1,027,061
1722 4,043,320 4,048,788 1,414,290 1,115,508
1723 4,112,390 4,120,735 1,303,930 1,050,289
1724 4,278,370 4,289,949 1,488,360 1,190,997
1725 4,360,670
4 360 670 4,375,427
4 375 427 1,466,215
1 466 215 1,166,544
1 166 544
1726 4,310,100 4,327,609 1,500,691 1,204,965
1727 4,414,850 4,435,781 1,621,980 1,374,545
1728 4,409,753 4,433,655 1,465,486 1,181,659
1729 4,446,688 4,473,812 1,608,354 1,292,703
1730 4,481,056 4,511,437 1,551,345 1,233,428
1731 4,530,908 4,569,682 1,365,049 1,080,557
1732 4,521,401 4,568,146 1,392,391 1,062,635
1733 4,541,744 4,596,802 1,461,986 1,153,187
1734 4,541,816 4,604,992 1,343,519 1,061,441
1735 4,539,331 4,610,600 1,462,706 1,137,432
1736 4,565,359 4,645,224 1,334,481 1,018,661
1737 4,567,151 4,655,253 1,670,819 1,314,779
1738 4,580,554 4,677,159 1,533,133 1,181,529
1739 4,583,446 4,688,377 1,668,584 1,313,907
1740 4,581,523
4 581 523 4,694,685
4 694 685 1,492,492
1 492 492 1,153,881
1 153 881
1741 4,586,472 4,708,055 1,570,388 1,228,550
1742 4,614,502 4,745,193 1,419,558 1,140,592
1743 4,624,664 4,764,040 1,636,409 1,298,149
1744 4,634,076 4,782,165 1,801,855 1,462,749
1745 4,628,935 4,785,295 1,676,322 1,335,114
1746 4,634,065 4,799,057 1,766,214 1,422,876
1747 4,415,820 4,581,117 1,551,214 1,237,156
1 48 44,411,241
1748
411 241 44,584,448
84 448 11,590,491
90 491 11,270,661
2 0 661
1749 4,397,089 4,577,809 1,673,573 1,354,984
1750 4,390,109 4,578,613 1,693,726 1,380,425
1751 4,394,525 4,590,948 1,704,664 1,389,211
1752 4,409,637 4,614,504 1,715,630 1,398,975
1753 4,413,541 4,626,378 1,680,002 1,365,578
1754 4,407,515 4,627,853 1,650,387 1,336,747
1755 4,412,347 4,640,739 1,642,551 1,336,213
1756 4,406,064 4,641,946 1,649,384 1,331,264
1757 4,420,503 4,665,012 1,552,846 1,262,896
1758 4,426,889 4,679,630 1,649,532 1,332,456
1759 4,471,712 4,734,983 1,701,560 1,383,755
1760 4,461,631 4,732,276 1,685,345 1,369,539
1761 4,465,654 4,744,530 1,680,127 1,359,958
1762 4,458,083 4,744,474 1,674,699 1,354,852(Ryo)
115,176
102,494, 9
111,765
109,236
107,949
100,722
108,478
91,534
107,910108 849
108,849
107,182
110,750
101,501
114,346
115,654
100,769
119,558
113,489
101,655
119,238
115,445
128,643
127,282
127,838
122 431
122,431
123,445
98,989122,666
123,262
124,001
124,602117,334
11
117,702
02
117,411
115,691
115,471
115,947
115,165
114,783
113,371
116,328
105,630
116,202
116,464
115,982
117,523
117,320

c /a
34%
33%
%
35%
34%
34%
32%
35%
32%
35%
34%
35%
37%
33%
36%
35%
30%
31%
32%
30%
32%
29%
37%
33%
36%
33%
34%
31%
35%
39%
36%
38%
35%
36%
38%
39%
39%
39%
38%
37%
37%
37%
35%
37%
38%
38%
38%
38%

b /a
34%
33%
%
35%
34%
34%
32%
35%
32%
35%
34%
35%
37%
33%
36%
34%
30%
30%
32%
29%
32%
29%
36%
33%
36%
32%
33%
30%
34%
38%
35%
37%
34%
335%
%
37%
37%
37%
37%
36%
36%
35%
36%
33%
35%
36%
36%
35%
35%

1763 4,375,836 4,664,797 1,643,963 1,334,204
1764 4,376,432 4,673,300 1,636,386 1,324,862
1765 4,387,292 4,692,797 1,594,040 1,284,248
1766 44,387,045
387 045 44,700,447
700 447 11,538,971
538 971 11,241,941
241 941
1767 4,394,756 4,716,649 1,598,767 1,287,527
1768 4,378,684 4,707,325 1,547,248 1,229,794
1769 4,378,574 4,715,145 1,594,461 1,275,740
1770 4,371,923 4,715,922 1,467,010 1,131,973
1771 4,375,647 4,727,899 1,353,282 1,021,543
1772 4,375,961 4,736,212 1,525,624 1,193,539
1773
1,175,311
77 4,378,819, 7 , 9 4,747,297,7 7, 97 1,508,026
,
,
, 7 ,
1774 4,379,699 4,756,259 1,530,615 1,208,170
1775 4,387,091 4,772,321 1,520,866 1,199,900
1776 4,387,201 4,780,489 1,569,988 1,250,265
1777 4,392,791 4,794,652 1,556,681 1,237,369
1778 4,372,435 4,780,482 1,517,858 1,190,441
1779 4,373,996 4,790,253 1,525,452 1,194,575
1780 4,371,639 4,795,746 1,427,789 1,124,839
1781 4,348,278
4 348 278 4,778,163
4 778 163 1,465,836
1 465 836 1,147,934
1 147 934
1782 4,332,441 4,768,789 1,460,933 1,138,370
1783 4,350,709 4,796,972 1,219,484 968,418
1784 4,360,521 4,815,899 1,492,139 1,172,935
1785 4,330,634 4,790,956 1,403,708 1,093,200
1786 4,341,213 4,810,759 1,081,485 851,493
1787 4,361,544 4,841,440 1,444,933 1,164,205
1788 4,384,334 4,874,945 1,433,377 1,162,389
1789 4,384,279 4,883,104 1,410,414 1,118,088
1790 4,380,524 4,887,150 1,442,995 1,159,230
1791 4,382,813 4,897,950 1,356,289 1,088,669
1792 4,393,572 4,918,253 1,470,399 1,187,978
1793 4,393,000 4,925,906 1,476,278 1,199,720
1794 4,403,622 4,946,144 1,471,301 1,190,091
1795 4,504,516 5,068,000 1,545,767 1,257,316
1796 4,507,226
4 507 226 5,079,601
5 079 601 1,559,023
1 559 023 1,269,573
1 269 573
1797 4,501,193 5,081,356 1,561,828 1,274,532
1798 4,504,565 5,093,739 1,544,821 1,256,977
1799 4,499,020 5,096,048 1,501,108 1,121,107
1800 4,493,395 5,098,259 1,552,740 1,265,727
1801 4,474,977 5,081,896 1,558,351 1,273,466
1802 4,488,636 5,101,959 1,443,666 1,170,456
1803 4,485,711 5,103,187 1,562,872 1,272,120
1804 44,487,780
48 80 5,110,099
110 099 11,536,203
36 203 11,266,228
266 228
1805 4,487,885 5,114,782 1,546,915 1,277,485
1806 4,482,740 5,113,480 1,519,075 1,250,456
1807 4,453,870 5,085,084 1,425,102 1,163,522
1808 4,459,079 5,095,577 1,391,881 1,151,226
1809 4,457,080 5,097,840 1,501,989 1,230,897
1810 4,455,394 5,100,462 1,527,031 1,256,777
1811 4,478,873 5,131,919 1,532,910 1,241,483
1812 4,434,556 5,085,677 1,520,969 1,240,486
1813 4,437,458 5,093,549 1,501,877 1,221,763
1814 4,442,669 5,104,084 1,535,799 1,249,917
1815 4,423,929 5,087,092 1,501,023 1,214,791
1816 4,423,274 5,090,880 1,483,067 1,196,505
1817 4,412,452 5,082,959 1,518,991 1,231,283
1818 4,334,570 4,997,701 1,519,374 1,233,374

113,262
113,954
113,332
108
108,724724
114,163
116,619
117,153
123,549
123,363
123,281
123,413,
119,349
117,750
117,405
116,793
118,462
119,859
108,691
114 663
114,663
116,529
95,865
116,465
114,41283,945112,291
108,395
107,612
105,731
99,550105,196
103,481
105,320
107,963
108 164
108,164
107,273
107,609
107,801
107,103
106,658
102,311
107,627
10
107,990990
107,771
107,447
107,211
96,261
108,436
99,994
108,476
102,732
103,459
105,053
105,240
105,212
105,629
104,982

38%
37%
36%
35%
36%
35%
36%
34%
31%
35%
34%
%
35%
35%
36%
35%
35%
35%
33%
34%
34%
28%
34%
32%
25%
33%
33%
32%
33%
31%
33%
34%
33%
34%
35%
35%
34%
33%
35%
35%
32%
35%
34%
34%
34%
32%
31%
34%
34%
34%
34%
34%
35%
34%
34%
34%
35%

35%
35%
34%
33%
34%
33%
34%
31%
29%
32%
32%
%
32%
32%
33%
32%
32%
32%
30%
31%
31%
25%
31%
29%
22%
30%
29%
29%
30%
28%
30%
30%
30%
31%
31%
31%
30%
29%
30%
31%
28%
31%
30%
30%
30%
28%
27%
29%
30%
30%
30%
29%
30%
30%
29%
30%
30%

1819 4,352,548 5,022,910 1,537,207 1,250,568
1820 4,333,634 5,005,549 1,490,752 1,205,297
1821 4,326,489 5,001,758 1,433,694 1,148,678
1822 44,320,482
320 482 44,999,273
999 273 11,496,240
496 240 11,208,342
208 342
1823 4,333,886 5,019,261 1,403,384 1,117,660
1824 4,223,923 4,896,276 1,427,619 1,158,677
1825 4,223,068 4,899,656 1,317,840 1,065,745
1826 4,229,389 4,911,371 1,428,537 1,163,502
1827 4,218,089 4,902,622 1,434,498 1,166,669
1828 4,194,554 4,879,621 1,339,578 1,077,787
18299 4,201,033
4,891,522
1,399,289,,, 9 ,, 99, 9 1,133,201,,
1830 4,182,691 4,874,514 1,378,578 1,113,204
1831 4,201,301 4,900,574 1,429,328 1,162,448
1832 4,204,038 4,908,145 1,396,390 1,120,504
1833 4,205,910 4,914,715 1,258,230 1,005,367
1834 4,202,806 4,915,473 1,427,193 1,150,709
1835 4,205,570 4,923,097 1,304,313 1,036,653
1836 4,202,493 4,923,888 1,039,970 807,068
1837 4,229,581
4 229 581 4,960,051
4 960 051 1,392,915
1 392 915 1,122,234
1 122 234
1838 4,194,210 4,922,963 1,305,746 1,046,104
1839 4,192,637 4,925,510 1,407,218 1,140,499
1840 4,166,475 4,899,146 1,382,698 1,138,359

105,133
104,672
104,968
105
105,244244
105,592
98,88994,194
97,406
98,52396,223
97,797
97,71597,980101,292
96,022
101,648
98,054
93,161100 023
100,023
97,412
99,31197,735

35%
34%
33%
35%
32%
34%
31%
34%
34%
32%
33%
%
33%
34%
33%
30%
34%
31%
25%
33%
31%
34%
33%

31%
30%
29%
30%
28%
29%
27%
29%
29%
27%
29%
9%
28%
29%
28%
26%
29%
26%
21%
28%
27%
29%
28%

1841 4,167,613 4,904,860 1,434,342 1,168,412

97,73734%

29%

Source : Official expected crop and land tax: Seisai Mukouyama, "On tori ka tsuji
kakitsuke (Record of tax collection)," in Seisai Mukouyama, Mukouyama Seisai
Zakki (Memorandum by Seisai Mukouyama), Tempo-Koka Hen, vol. 3, Tokyo:
Yumani Shobo, 2003. Estimated crop: See the text.
Note : 1 Koku = 180.39 litters = 5.12 US bushels.

Appendix 2 Gross National Expenditure: Current prices, 1885-1914.
Exports ofImports of
Gross
Goods
and Goods andGeneralPersonal
Domestic
Sevices and Services
G
Government
S i
and
d
Consumption
Fixed
Factor
FactorYear Expenditure Consumption Capital
Government
IncomeExpenditure
Income Paid
SectorFormation
Received
Abroadfrom Abroad

millions of Yen
Suplus on
Current
Account

Government
Gross
Consumption
National
and
d Fi
Fixed
d
Expenditure
Capitalat Market
Formatin in
Prices
GNE

a
b
c
d
e
f
g =e −fa +b +c +g (b +d )/g
1885
652
60
97
23
42
45
-3
806
10%
1886
630
63
101
18
55
49
6
800
10%
1887
664
62
100
18
59
67
8
818
10%
-8
1888
677
62
133
20
74
80
-6
866
9%
1889
755
59
141
22
78
78
0
955
8%
1890
869
66
153
25
65
97
-32
1,056
9%
1891
903
63
160
34
89
76
13
1,139
9%
1892
888
70
153
30
102
88
14
1,125
9%
1893
970
66
165
29
100
104
-4
1,197
8%
1894
1,009
124
220
51
125
140
-15
1,338
13%
1895
1 160
1,160
148
251
49
150
157
-77
1 552
1,552
13%
1896
1,308
118
308
62
135
203
-68
1,666
11%
1897
1,545
111
402
112
191
292
-101
1,957
11%
1898
1,808
131
426
125
200
371
-171
2,194
12%
1899
1,776
150
376
134
257
245
12
2,314
12%
1900
1,914
183
391
143
259
333
-74
2,414
14%
1901
1,898
201
379
134
310
304
6
2,484
13%
1902
1,984
202
335
118
332
316
16
2,537
13%
1903
2,103
241
366
124
370
384
-14
2,696
14%
1904
2,259
546
364
128
383
524
-141
3,028
22%
1905
2,278
626
517
152
401
738
-337
3,084
25%
1906
2,312
485
540
147
540
575
-35
3,302
19%
1907
2,787
338
634
204
617
633
-16
3,743
14%
1908
2,884
307
663
254
506
594
-88
3,766
15%
1909
2,880
320
597
229
539
556
-17
3,780
15%
1910
2 967
2,967
338
689
244
587
656
-69
3 925
3,925
15%
1911
3,295
407
860
298
619
718
-99
4,463
16%
1912
3,657
370
857
294
727
837
-110
4,774
14%
1913
3,920
339
861
293
844
951
-107
5,013
13%
1914
3,595
354
806
285
799
816
-17
4,738
13%
Source : Kazushi Ohkawa, Nbukiyo Takamatsu, and Yuzo Yamamoto, Estimates of long term statitcs of Japan since
1868: 1 National income , Tokyo: Toyo Keizai Shimposha, 1974, pp. 178, 184-185.

Appendix 3 Tax Revenue of Central Government: Current prices,
1885-1914.
millions of yen
Consumer price
T
Tax
C
CorpoLand
IncomeLiqour Custom
indexinYear Total
ration
Tax
Tax
Tax
Duty
rural
Tax
a
3.157
4.399
9.323
12.852.
21.84565.01465.30359.19451.73047.92351.48555 57955.57955.26261.67567.73867.65967.2031885 52.581
1886 64.371
1887 66.255
1888 64.727
1889 71.294
1890 66.114
1891 64.423
1892 67.167
1893 70.004
71 2861894 71.286
1895 74.697
1896 76.387
1897 94.912
1898 97.629
1899 126.034
1900 133.926
1901 139.574
1 1 084
1902 151.084
1903 146.163
1904 194.362
1905 251.275
1906 283.468
1907 315.983
1908 322.636
1909 323.407
1910 317.285
1911 329.071
1912 360.969
1913 369.479
1914 343.708
1868
1869
1870
1871
7
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884

b
2.009
3.355
8.218
11.340.
20.05160.60459.41250.34543.02339.45040.45442 11242.11242.34643.27443.34243.53743.42543.03343.28242.15234.65042.16140.08437.45737.92538.80839 29139.29138.69237.64037.96438.44044.86146.71746.66646
46.505046.87360.93980.47384.63784.97385.41885.69376.29174.93675.36574.63574.925

c

0.527
1.066
1.052
1.092
1.110
1.132
1.238
1 353
1.353
1.497
1.810
2.095
2.350
4.837
6.368
6.836
7.460
460
8.247
14.36923.27826.34827.29132.14432.80031.72234.75538.93335.59137.157

d

e

1.520
2.244
2.176
22.267
26
2.355
3.753
7.945
9.435
8.345
8.918
8.254
7.527
9.713
11.47413.06813.222

0.016
0.961
1.683
2.555
1.911
3.050
5.100
6 463
6.463
5.511
10.64616.32913.49014.0681.053
11.74313.06917.06316.43913.91214.68615.812
16.63716 13016.13017.74819.47631.10532.95948.91850.29358.01763
63.7383852.82158.28659.09971.10078.40683.59091.48086.70186.03293.86193.22395.781fb /a0.720 64%0.502 76%
0.648 88%
1.071
88%
. 7
%
1.331 92%
1.685 93%
1.498 91%
1.718 85%
1.988 83%
2.358 82%2.351 79%
2 691 76%
2.691
2.624 77%
2.569 70%
2.613 64%2.681 64%2.750 65%
2.085 82%
2.989 67%
4.135 64%4.615 54%4.728 59%4.392 61%4.539 58%
4.991 56%
5.125 55%
5 755 55%
5.755
6.785 52%6.728 49%8.020 40%
9.092 39%15.936 36%
17.009 35%
13.630 33%
115.501
01 31%
17.378 32%
23.159 31%
36.757 32%
41.853 30%
50.027 27%
40.067 26%
36.423 26%
39.949 24%
48.518 23%
68.496 21%73.722 20%44.228 22%

100
114
126
118
99
95
95
87
86
83
87
94
89
91
93
96
105
113
129
139
132
147
144
150
158
161
168
172
189
182
175
176
189
199
205
190

Source : Tax revenue: Katsuma Ohsato, Hundred-year statistics of the Japanese economy , Tokyo: Statistics
Department, The Bank of Japan, 1966, p.136. Price index: Kazushi Ohkawa, Miyohei Shinohara, and Mataji
UE ti t
fl
t
t tit
fJ
i
1868 8 P i
T kT
K i i ShihAppendix 4 Total Expenditures of Government: Current prices, 1868-1914.
General AccountYear

Central
Local
Government Government
a

1868
1869
1870
1871
7
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914

30.5
20.7
20.1
19.2
9.
57.7
62.6
82.2
69.2
59.3
48.4
60.9
60 3
60.3
63.1
71.4
73.4
81.0
76.6
61.1
83.2
79.4
81.5
79.7
82.1
83.5
76.7
84.5
78 1
78.1
85.3
168.8
223.6
219.7
254.1
292.7
266.8
289 2
289.2
249.5
277.0
420.7
464.2
602.4
636.3
532.8
569.1
585.3
593.5
573.6
648.4

c

24.22
24
27.7
34.5
38.1
36.8
36.0
30.3
35.7
33.7
35.0
38.3
40.7
42.8
46.1
48.6
50 8
50.8
55.5
67.4
84.4
92.7
110.0
128.6
150.7
1 39
153.9
158.9
128.4
131.0
167.8
201.0
230.2
263.1
280.6
389.2
328.6
292.7
299.3

Transfer

Net Totalde =a +c −d
30.5
20.7
20.1
19.2
9.
57.7
62.6
82.2
69.2
59.3
48.4
60.9
81 9
81.9
87.2
104.5
110.2
116.1
111.1
89.5
116.7
111.4
114.7
113.7
119.2
115.8
117.7
121.4
124 3
124.3
136.4
224.7
297.5
304.6
353.4
412.1
408.4
432
432.33
397.4
397.6
543.2
620.0
785.9
849.6
779.0
837.3
959.8
910.7
853.7
933.2

22.66
3.6
1.4
1.3
1.7
1.5
1.9
2.2
1.7
1.8
4.3
3.6
10.5
5.1
11.7
46
4.6
4.4
11.5
10.5
7.8
10.7
9.2
9.1
10 8
10.8
11.0
7.8
8.5
12.0
17.5
16.9
16.9
12.4
14.7
11.4
12.6
14.5

Special
Account

f
0.0
0.0
0.0
0.0
.
0.0
0.0
0.0
0.0
22.4
18.8
0.4
26
2.6
3.6
1.4
1.3
1.7
1.5
1.9
2.2
1.7
1.8
5.2
0.0
0.0
0.0
0.0
91 4
91.4
149.4
-9.8
33.3
96.3
137.8
52.6
38.3
72.9
29
111.7
474.8
497.2
491.7
409.1
222.5
274.9
653.5
245.4
345.6
506.6
330.9

millions of Yen
Total Government
Expenditure
MilitaryandMilidWar-relatedExpneditureg =e +f
30.5
20.7
20.1
19.2
9.
57.7
62.6
82.2
69.2
81.7
67.2
61.3
84 5
84.5
90.8
105.9
111.5
117.8
112.6
91.4
118.9
113.1
116.5
118.9
119.2
115.8
117.7
121.4
215 7
215.7
285.8
214.9
330.8
400.9
491.2
464.7
446.7
505.2
0 2
509.1
872.4
1,040.4
1,111.7
1,195.0
1,072.1
1,053.9
1,490.8
1,205.2
1,256.3
1,360.3
1,264.1

h
5.6
4.0
2.7
3.8
.
10.5
11.6
15.9
12.2
35.6
42.4
25.0
26 4
26.4
27.3
26.8
27.0
33.3
34.9
32.4
34.9
36.4
36.5
37.5
34.1
37.0
36.8
37.3
140 5
140.5
133.8
93.4
132.4
134.6
139.9
159.9
133.7
114 8
114.8
180.9
726.7
843.2
514.4
358.7
344.1
319.0
332.8
350.1
342.3
335.1
345.5

Source : Koichi Emi and Yuichi Shionoya, Estimates of long term statitcs of Japan since 1868: 7
Government Expenditure , Tokyo: Toyo Keizai Shimposha, 1966, pp. 168-169, 186-187.

millions of Yen
Appendix 5 Gross Domestic Fixed Capital Formation, 1868-1914.
Government
Private
Total
NonYearC t ti Equipment
Constructio
C t ti Equipment
Constructio
E i
t
E i
t
a
b
c
d
e
f
g
h =a +e1868
19.32019.02014.1204.900
19.3201869
34.17032.51029.2803.230
34.1701870
36.56035.99032.4103.580
36.5601871
39.44038.30033.1805.120
39.4401872
54.14050.73041.3109.420
54.1401873
71.81058.72013.09072.3707772.370
. 7
7 .
.7
. 9
7 . 7
1874
99.66099.40080.92018.53011.14011.140110.800
1875
118.530
76.57061.9909.690
26.52026.520145.050
1876
107.91073.83066.09012.63017.89017.890125.800
1877
117.500
72.62057.42015.20043.9600.370
43.590161.460
1878
107.31068.87054.03014.84055.4000.500
54.900162.710
1879
96.80080.49064.24016.25065.2300.530
64.700162.030
1880
117.920
99.27074.79024.48087.2300.400
86.830205.1501881
118 310118.310
101 920101.92074 03074.03027 89027.89092 04092.0400 300
0.300
91 74091.740210 350210.3501882
130.290113.230
87.28025.95071.6600.270
71.390201.950
1883
167.260
125.750
98.53027.22084.1907.930
76.260251.4501884
189.510124.630
95.92028.71083.2109.940
73.270272.720229.900
156.380
121.680
34.70076.9408.960
67.980306.840
1885
123.660
99.82023.860109.630
20.19089.440284.030
1886 174.400
132.490109.050
23.440264.490112.480152.010449.560
1887 185.070
140.370
116.400
23.970560.950251.290309.660
758.200
1888 197.250
157.390133.420
23.970541.120300.630240.490763.130
1889 222.010
177.850
147.73030.120586.370291.890294.480
835.150
1890 248.780
259.480217.82041.660568.170
217.430350.740902.830
1891 334.660
226.480183.260
43.220470.340183.710286.630
771.5101892 301.170
227.210187.630
39.580650.910236.910414.000
946.370
1893 295.460
252.630211.49041.140932.360
321.390610.970 1,436.250
1894 503.890
256.590205.82050.770 1,053.530
392.210661.320 1,543.050
1895 489.520
632 030
411 370411.370
342 960
342.960
68 410 1,382.090
68.410
1 382 090
482 750482.750899 340 2,014.120
899.340
2 014 120
1896 632.030
590.390476.430113.960 1,809.670
804.000 1,005.670 2,929.480
1897 1,119.810
618.460
477.840140.620 1,810.560
848.060
962.500 3,057.790
1898 1,247.230
700.700
547.020
153.680 1,252.430
736.140516.290 2,595.640
1899 1,343.210
1,422.320
829.930
638.410191.520
1,310.830
666.490644.340 2,733.150
1900
899.710670.420229.290 1,271.030
757.950513.080 2,609.060
1901 1,338.030
871.060
642.010229.050976.450663.590312.860 2,155.970
1902 1,179.520
908.740661.540
247.200 1,112.070
748.880363.190 2,350.950
1903 1,238.880
1 281 140
688
688.600
600
4458.590
8 90
230.010230 010 1,316.560
1 316 60
568.58068 80
747.980
4 980 2,597.700
2 9 001904 1,281.140
747.370525.220222.150 1,930.930
672.080 1,258.850 3,451.430
1905 1,520.500
837.200
580.960
256.240 1,940.440
877.890 1,062.550 3,416.460
1906 1,476.020
2,037.140
1,337.930
995.210342.720
2,199.950
922.120 1,277.830 4,237.090
1907
427.370 2,045.780
944.430 1,101.350 4,581.720
1908 2,535.940 1,741.420 1,314.050
431.270 1,627.760
867.100
760.660 3,922.850
1909 2,295.090 1,642.490 1,211.220
462.550 2,478.750 1,439.050 1,039.700 4,915.030
1910 2,436.280 1,800.450 1,337.900
531.800 3,629.180 2,172.040 1,457.140 6,605.570
1911 2,976.390 2,202.700 1,670.900
633.990 3,500.540 1,451.660 2,048.880 6,434.670
1912 2,934.130 2,132.420 1,498.430
637.650 3,360.240 1,396.180 1,964.050 6,289.100
1913 2,928.860 2,119.830 1,482.190
637.610 2,912.230 1,376.550 1,535.680 5,765.530
1914 2,853.300 1,997.140 1,359.530
Source : Koichi Emi, Estimates of long term statitcs of Japan since 1868: 4 Capital Formation , Tokyo: Toyo
Keizai Shimposha, 1971, pp. 224-227.

Appendix 6 Cnetral Government Debts: Current prices, 1868-1914.
Long-term Government Securities

Year

Total

Domestic
Bonds

ForeignFi
Currency
Bonds

millions of Yen

Short-term
Governmentt Borrowings
G
Bi
Securities

Total
T t l

a
b
c
d =a+b+c
1870
48.80048.80048.8001871
48.80048.80048.8001872
280.560
231.760
48.800280.560
1873
406.400
245.360
161.040406.400
7
.
.
.
.
1874
469.190313.030
156.160
469.1901875
558.100
409.160
148.940558.100
1876
539.270
397.720141.550539.270
1877 2,268.540
2,134.550
133.990113.360
2,381.900
1878 2,373.640
2,247.400
126.240150.000
2,523.640
1879 2,351.980
2,233.690
118.290150.000
2,501.980
1880 2,343.380
2,233.250
110.130150.000
2,493.380
1881 2,311.270
2 311 270
2 209 540
2,209.540
101 730
101.730
150 000
150.000
2 461 270
2,461.270
1882 2,255.110
2,162.020
93.090150.000
2,405.110
1883 2,176.620
2,087.560
89.060100.000
2,276.620
1884 2,298.610
2,213.850
84.760120.000
2,418.610
1885 2,312.550
2,232.400
80.150153.960
2,466.510
1886 2,299.940
2,224.720
75.220198.180
2,498.120
1887 2,379.810
2,309.870
69.940179.750
2,559.560
1888 2,425.470
2,361.170
64.300145.230
2,570.700
1889 2,500.530
2,442.270
58.260100.000
2,600.530
1890 2,432.360
2,380.560
51.800320.000
2,752.360
1891 2,426.260
2,381.370
44.890320.000
2,746.260
1892 2,458.940
2,421.450
37.490320.000
2,778.940
1893 2,358.140
2,328.570
29.570320.000
2,678.140
1894 2,736.280
2,715.180
21.100525.000
3,261.280
1895 3,417.590
3,405.560
12.030679.000
4,096.590
1896 3,573.350
3 573 350
3 571 010
3,571.010
2 340
2.340
530 000
530.000
4 103 350
4,103.350
1897 3,992.450
3,992.450
0.000
220.000
4,212.450
1898 3,912.530
3,912.530
0.000
220.000
4,132.530
1899 4,809.670
3,883.370
976.300
252.000
5,061.670
1900 4,864.640
3,888.340
976.300
323.000
5,187.640
1901 5,022.260
4,045.960
976.300
100.000
563.000
5,685.260
1902 5,301.800
4,325.500
976.300
100.000
444.400
5,846.200
1903 5,389.620
4,413.320
976.300
0.000
783.490
6,173.110
1904 99,736.470
36 4 066,612.310
612 310
33,124.160
124 160
3350.000
0 000
701.490
01 490 10
10,787.960
8 960
1905 18,703.860
8,999.760
9,704.100
990.000
1,442.000 21,135.860
1906 21,957.070 10,495.460 11,461.610
962.000
351.560 23,270.630
1907 22,543.460 10,886.450 11,657.010
227.000
279.940 23,050.400
1908 22,283.060 10,626.050 11,657.010
370.000
275.050 22,928.110
1909 25,828.040 14,171.290 11,656.750
190.000
494.350 26,512.390
1910 26,503.550 12,031.400 14,472.150
100.000
1,199.860 27,803.410
1911 25,836.650 11,462.160 14,374.490
500.000
1,084.750 27,421.400
1912 25,732.190 11,162.470 14,569.720
350.000
1,424.490 27,506.680
1913 25,841.220 10,546.340 15,294.880
0.000
1,023.920 26,865.140
1914 25,063.710
9,915.310 15,148.400
0.000
1,433.480 26,497.190
Source : Katsuma Ohsato, Hundred-year statistics of the Japanese economy , Tokyo:
Statistics Department, The Bank of Japan, 1966, p.158.