Matsukata Masayoshi: A Reformer in a Transformation

Matsukata Masayoshi

He was the man that cemented Japan’s transformation. In an era of aggressive foreign expansion in Asia, Japan decided to pursue a course towards modernization and industrialization under the slogan of Fukoku Kyohei – Rich Nation, Strong Army. But in the late in 1870’s Japan’s transformation faced a tough challenges. The Land of the Rising Sun might just set with an economic crisis, which could not afford. But one man had the guts to solve this crisis – Matsukata Masayoshi.

Matsukata Masayoshi (1835 – 1924) served Japan under the Meiji Government. He served as finance minister from 1881 up to 1892. He became Prime Minister twice. However, he was much better known for his economic achievements rather than political milestones. Like any other personalities in the Meiji Government, he was controversial for the policies he took during his service in the government.

But who was Matsukata Masayoshi? Born in 1835 in Kagoshima, Satsuma, he came from a low-ranking samurai clan. Like any other son of a samurai, he delved himself in studying martial arts, calligraphy, and Confucianism. Altough he came from a poor family, he still received formal education at a young age. After which, in 1850 he served as a clerk to the head of the Shimazu Domain. While working in the treasury of the Shimazu Domain, he met some official who later rose to prominence under Meiji. For instance, he met Okubo Toshimichi who later recruited him to the cause of the Emperor. Meanwhile, while working, he earned knowledge of business, finance, and trade, which became his foundation for his later work.

During the Boshin War, Matsukata sided to the Emperor. And when the Tokugawa fell the Meiji Emperor restored, in 1868 high officials of the new Japan rewarded Matsukata with the position of Governor of Hita in Northern Kyushu. He build upon his knowledge of economics and used it to administer his dominion with efficiency. His province recovered from the chaos of the previous years under Matsukata’s stewardship. In 1870, Tokyo transferred Matsukata back to the capital. He then began to work in the economy-related agencies. He worked in the tax bureau and planned with Finance Minister Okuma Shigenobu in instituting a new land tax system.

Matsukata and Shigenobu enacted a new land tax system for the agricultural sector and the peasants. During the Tokugawa Era, land taxes were based on the harvested crops. But Matsukata and Shigenobu knew, that the government should have a steady flow of income to fund the country’s recovery, industrialization, and modernization. And so, they reformed the land taxes and made the amount based on a percentage of assessed land value of an area. This prompted a survey of lands of country, which ended before the turn to the 1880’s.

In 1878, Matsukata went on a mission abroad that brought huge influence to his life. In 1878, Matsukata along with other Japanese officials went to Paris in order to plan Japan’s participation in the Paris World’s Fair. While staying in Paris, he had the chance to have a meaningful conversation with France’s finance minister, Leon Say. Say made a name for his capitalist policy. The two had conversations which had a tremendous effect in Matsukata’s career.

By 1880, Matsukata had returned to Japan that faced economic difficulties. Japan for a decade had underwent the process of modernization, industrialization, and westernization. It realized, for Japan to survive the era of western imperialism, it had to strengthen its military force, but in order to so, it must have a strong economic foundations to build; and hence, the slogan Fukoku Kyohei – Rich Nation, Strong Army. The government then spent heavily in building up Japan’s industry to the extent of establishing business by itself. Many of industries, however, became bogged down by bureaucracy and mismanagement and became a liability rather than an asset. In addition to this, the government spent huge sums of money in paying the pensions of former daimyos and samurai during the process of changes in the social structure of the country. Most of the government’s budget went into paying this pensions. And for this reason, many of the government’s economic projects had been funded by deficit spending. Moreover, the when Japan’s financial system had also been in disarray. Government allowed banks to issue paper currency. It became uncontrollable and the amount of paper money circulated increased immensely that prompted a soaring inflation rate. With the paper money losing value, foreigners did not trust the yen’s value. And so, as Matuskata returned to Japan, he saw a Japan with a government virtually bankrupt and a soaring inflation that hurt the Japanese people, and threatened the goals of the nation’s existence in a bigger picture.

In 1880, the Finance Ministry suffered a shakeup. Matsukata had arguments with Finance Minister Okuma Shigenobu, while Shigenobu had political problems with Ito Hirobumi and Okubo Toshimichi. Matsukata and Okuma had different perspectives in the method of solving the economic crisis. Matsukata, influenced by monetarist and capitalist ideal either consciously or subconsciously, argued the path of austerity. Okuma, on the other, proposed that Japan should get foreign loans. This, however had significant political implications. Many in the Meiji government viewed the proposal as a threat to national security. They already believed that foreign loans equally meant allowing foreign influence and intervention. They saw what happened to China when they borrowed from the foreigners and became bullied as result. Ito and other officials viewed negatively to Okuma’s proposal as a contradiction in view of their ultimate goal of maintaining national independence. Ito and Okubo sided with Matsukata. They removed Okuma as finance minister and replaced him with Matsukata.

In 1881, as the new finance minister, Matsukata began a policies towards deflation and stability. He implemented his policy with vigor aiming for efficiency. He reduced government spending. He limited government participation in the economy. He lowered government liabilities by selling many enterprises it owned. Some of them went to market and sold at a lower value. To increase government revenue, Matsukata raised sin taxes, specifically on tobacco and sake. He then controlled the amount of paper money circulating by limiting the number of banks issuing notes to only few and under the control of Bank of Japan in 1882. The Bank of Japan served as Japan’s central banks and regulated and monitored the country’s banking system. By reducing the amount of money circulating in the economy, inflation went down and later on, deflation set it. Deflation brought a slowdown in the economy, nevertheless, it stabilized the currency and the government’s finances. By 1886, the government achieved a balance budget.

However, Matsukata’s deflationary policy caused a social problem, particularly to the peasantry. As mentioned, land taxes were based on the appraised value of a land during a survey in the 70’s, the period of high inflation. In the 80’s prices went down, including land value and goods. As a result, the low prices of agricultural products meant lower income for farmers, while low land value meant, the lands they tilled valued less. They earned less, and their land valued less, but their taxes remained high. As a result, many famers lived in poverty. Many chose to leave farming. Many became drowned in debt. Because of this social effect, Matsukata’s policy inspired controversy and criticism.

But for Matsukata had a strong will in doing this. He believed that small sacrifices were needed for a bigger picture. He knew that in order for Japan to become strong, difficult decision were needed to be made, which what exactly he did. The plight of the farmers was a sacrifice for the strengthening of Japan. Other, especially, the Marxist, saw Matsukata’s actions decision to sell government enterprises to private individuals meant promoting capitalism. However, this view remained under debate as there were no evidence that Matsukata did it as part of a plan in moving towards capitalism. But the whole picture, Matsuka believed that his policy will make Japan stronger than ever before.

And indeed it became. In the following decade, economic boom followed. Under his guidance, Japan waged war against China in the early 1890’s without any financial difficulty. Industrial growth and development boomed. Businesses, once other government ownership, began to work efficiently because their management broke free from the politics and bureaucratic red tapes. It strengthened the position of conglomerates, known as Zaibatsu, in the economy. The modernization and industrialization continued in a much stronger financial situation.

As Japan progress, however, not the same could be said in Matsukata’s political career. In 1890’s he became Prime Minister twice: first in 1892 to 1896 and 1896 to 1898. His premiership became marred by his authoritarian style of leadership. He attempted to use his economic efficiency and absolutism to the political arena disastrously. Matsukata had a dislike of politics because in hampers the implementation of economic policies with veto and concessions leading to the weakening of a policy. He believed that economics should dictate the politics of the country and not the way around. And so, when he became Prime Minister he wanted politics to suit to his wants. He became infamous for his authoritarian ways, which include dissolving the Diet or the Japanese Parliament when it went against him and arrested political parties opposing him. Hi name continued to be notorious when he began to use bribery and intimidation to bend officials and the public to his will. Hence, his two terms of being Prime Minister were short-lived.

In 1901, he retired from the cabinet but continued to serve in the ceremonial Privy Council. He gave advice to the government concerning financial matters. He held his position in the council until 1922, when he finally retire as his age get older. Two years later, in July 2, 1924, Matsukata Masayoshi passed away.

Matsuka Masayoshi made a lasting impact in the history of Japan. He had the strength to implement policies which he deemed necessary for a greater good. Better to be known as a Finance Minister rather than a Prime Minister, he saved Japan’s economy. When Japan was in the middle of a transformation from an agricultural backwater to an industrial power, Matsuka Masayoshi was a reformer critical in the success of the transformation of his country.

See also:

Industrial Revolution: Japan

Bibliography:

Sagers, John. "Matsukata Masayoshi." in Japan at War: An Encyclopedia. Edited by Louis Perez. Santa Barbara, California: ABC-CLIO, LLC, 2013.

Bailey, Jackson. "The Meiji Leadership: Matsukata Masayoshi." in Japan Examined: Perspectives on Modern Japanese History. Edited by Harry Wray & Hilary Conroy. Hawaii: University of Hawa'i Press, 1983.

Fairbank, John et. al. East Asia: Tradition and Transformation. London: George Allen & Unwin, 1973.