Thursday, May 7, 2015

The Industrial Revolution of Japan

Emperor Meiji
Japan’s independence came under threat from the increasing presence of westerners in Asia. In 1858, the ships of American Commodore Mathew Perry opened Japan’s doors to the world. With opening came a change in leadership, from the Tokugawa Shogunate, power returned to the Emperor. Under the Meiji Emperor and the spirit of Fukoku Kyohei or rich country, Strong army, Japan underwent an industrial revolution that made it into the economic powerhouse of Asia.

In 1858, Japan started a period of change in its course. The American Commodore Mathew Perry arrived with a squadron of warships demanding for Japan to open up for trade. The ruling Tokugawa Shogunate, dumbfounded by the mysterious appearance of black ships in the Tokyo Bay, nervously accepted the demands of the foreigner in their presence. A decade later, a power struggle erupted and ended with the return of power to the Emperor Mutsuhito and the downfall of the Tokugawa Shogunate. Mutsuhito's reign became known as Meiji or the enlightened and he proved it by launching an era of the reform that aimed in modernizing Japan’s politics, society, and most importantly its economy. Meiji and his ministers believed that for Japan to survive and maintain its independence, it must follow the idea of Fukoku Kyohei, under which a strong economic foundation would result to a powerful and a formidable military. To do this, the Meiji Restoration in the economy called for an industrial revolution.

But the task on hand was not easy. Japan had nothing special and did not have the resources required for an industrial revolution. Besides few reserves of coal and copper, it had mountainous terrain and few navigable rivers for transportation and distribution. It also had little capital on hand, hence credits and loans had to charge high 10% interest. Centuries of isolation from the world led to stagnation in the field of science and technology and trade. Many new technological and scientific breakthrough failed to enter the country. Japan also had few and limited trade relations because of the policy. The Japanese people and society, however, proved to be the greatest asset of Japan. Although Confucian social strata placed merchants bellow the nobles, samurai, peasants, and artisans, the Japanese people showed open mindedness to new ideas and thoughts. Moreover, the Japanese became well-known for their diligence, discipline, perseverance, and hard work. They also showed great communal spirit that placed the welfare of the community and the country above individual prosperity. With this, the Japanese looked up to their Emperor and his advisers for strong leadership and guidance towards prosperity. And the government did so with great energy and intensity. This led to an exemplary cooperation between the private sector and the government that contributed to the success of the Meiji Restoration and industrial revolution of Japan.

The 1870’s entered with Japan facing an unfavorable economic situation. Japan suffered a trade deficit. Japanese silk, a major export of Japan, experienced a decrease in international demand because of the recovery of European silk. In addition, unequal treaties with western countries resulted to large importation of cheaper manufactured goods. This eventually resulted to the weakening of small local industries, mostly, small time artisans and poor peasant families who engaged in handcraft works for extra income felt the effects. In financial terms, the massive importation resulted into an outbound flow of specie that resulted to the decreasing value of paper money. And so, the government acted quickly in order to fulfill their objective of rich nation, strong army.

The government engaged in industrial development. In December of 1870, the Meiji government established the Ministry of Industry, and three years later passed its management to the statesman and later Prime Minister Ito Hirobumi who held the post until 1878. Under the ministry, the government provided support to business and undertake industrial ventures as well. The ministry provided technical assistance, credit, and also subsidies to Japanese businessmen engaging in industries that the government had interest in.

Usually, the government itself became the entrepreneur and founded factories and mines. For example, in 1873, the government formed the Bureau of Mines that handled the Japanese mining industry and government-owned mines. In 1874, it purchased a mine in Hinzen developed it by installing modern technology. After its success, it then applied the same to 8 other mines. Although the Japanese government saw foreign assistance as something dangerous, the complexity of the technology in mining made them to make an exception. They allowed British technician to provide technical assistance. 34 foreigners worked as advisers in the bureau in order to transfer technology to the Japanese. Other than mines, the government also established factories. It built a machine tool factory (1871), cement plant (1875), glass factory (1876), and a brick factory (1878).

However, the main priority of government’s interest laid in the heavy industries. Shipbuilding became one focus of the government. As an archipelago, ship played a vital role in its transportation, trade, as well as security. Because of this, the government deemed shipbuilding as an important and strategic industry for Japan. Already, the Tokugawa made initiatives to develop and modernized the Japanese shipbuilding industry. After the appearance of Perry’s “black ships” in Tokyo Bay, the shogunate found out that their wooden ships would not stand a chance in the ironclad and steam powered warships of the west. And so, a process of adopting western design for shipbuilding began. In 1857, a shipyard in Nagasaki succeeded in building Japan’s first steamer. A shipyard was then built in Yokosuka that would have the capability of building steamers. The leader of the Meiji government then followed through these development and built another shipyard in Hyoga to add to the capacity of the Japanese shipbuilding industry. Eventually, by 1883, Nagasaki had already built about 10 steamers while the Hyogo facility had built 23 warships. By the 1890’s, Japan had over a 100 steam-powered vessels either built locally or bought from abroad. The government also saw weapons manufacturing as a strategic industry. They build arsenals in Tokyo and Osaka capable of producing cannons, rifles, and ammunition. In addition to these, the government also built a gun powder factory. All of these achieved by adopting western technology and design but not accepting foreign advisers and managers for the sake of national security. It became a vital part in achieving the principle of Fukoku Kyohei.

Besides strategic and non-strategic industries, the Meiji government also supported the development of Japan’s infrastructure and communication. The leaders of the government saw it vital to the modernization and administration of the country. Railroad became one of its main projects. In 1872, with government support, the 19-mile railroad between the main port of Yokohama and Tokyo opened. A much extensive line began operation in 1874 that connected the main cities of Kobe and Osaka, and later extended to Kyoto by 1877. For the next decade, the government and private sector expanded the railroad network but found it difficult to complete because of Japan’s mountainous terrain. Alongside railroads, the telegraph line crisscrossed the country. By the 1880’s the government had succeeded in connecting telegraph lines between all major Japanese cities.

The iron and steel, a vital industry for industrialization continued to develop during the Meiji Restoration. Weapons and warships required iron and steel and so the Japanese showed enthusiasm in developing the industry. Even during the days of the Tokugawa, there had been some developments. With the help of the Dutch present in Dejima Island, Nagasaki, the domains of Hizen, Mito, and Satsuma developed European iron smelting techniques. Later on, they grew into major iron production centers. During the Meiji Restoration, iron production grew in the cities of Nagasaki, Yokohama, and Yokosuka. Major government incentives and support provided stimulus to businessmen to engage in the industry. The government itself build some of the smelting facilities. In the 1890’s the government made move towards building a steel mill in Yawata. In 1897, the steel mill in Yawata became the first in Japan to have a blast furnace dedicated in producing steel.

During the 1870’s, textile industry became an interesting industry in Japan. It faced challenges and only developed with the combine initiative of both private and public sector. During the 1860’s up to 1880’s textile filled half of the amount of Japan’s imports. Wool became one of the most imported goods ever since the wealthy, government officials, and the army adopted western-style clothing that used wool. In order to reduce the amount of imported wool, the government built woolen mills in 1877. Another widely used textile material in Japan was cotton. Both private and public sector vainly attempted to plant huge quantities of cotton in Japan. However, the cotton harvested proved to be in poor quality. Because of the failed results of attempting to grow cotton in Japan, they settled in processing cotton. But in order to produce cotton textile cheap enough to compete against highly competitive European and American textile, it had to be produce in huge quantities by using more machinery. This posted a problem to the Japanese. Machinery meant it required huge capital, which did not had. Nevertheless, the government and the private businessmen attempted to established cotton mills. In the 1860’s, cotton mills began operations in Tokyo, Satsuma, and Osaka. The Osaka mill in particular became under government control in the 1870’s after its owner fell bankrupt. To provide incentives for businessmen to enter the cotton industry, the government set up in 1878 a fund amounting ¥10 million to be used to provide capital through credit. From 1880 to 1881 the government built to more mills in order to add to the capacity of Japan to produce cotton. Silk on the other hand grew without too much problem. Silk had been part of the Japanese economy for centuries. It became a highly regarded trade among artisans. Because of the existing interest of the private businessmen in silk, the government did not much interfere in the industry. Development and mass production began at the earnest after the Meiji returned to power. In the 1870 the first reeling plant for silk began operation in Central Honshu. The government build three pilot reeling plants for private factories to emulate in 1872 up to 1877. The use of steam power in the industry drove production up. By the 1880’s silk took 43% of Japan’s exports.

Government participation in the economy cost literally a high price. Since the Meiji Restoration, the government had to spent huge amounts of money in paying former samurais in light of the Satsuma Rebellion and to prevent any further samurai rebellions. The government also had to pay huge compensation to former daimyos whose lands the government had taken. In order to finance Japan’s economic development, they had no choice but to use deficit spending or spending beyond the government’s revenue. In addition to this, much of the government business venture failed to make profits and recorded huge loses. With too much spending from the government, it resulted to inflation. Financial institutions contributed also in the inflation mainly because they did not had a central authority governing their issuing of paper money. The government had to act in order to control the situation or face a huge step back in achieving a rich nation and stronger army.

In the 1880's, the Ministry of Finance began to operate and initiated reform under new leadership. From 1881 up to 1892 Matsukata Masayoshi served as Japan’s finance minister. Under his support leadership he began reforms aimed in reducing government deficit and inflation. In order to control the amount of paper money circulating in the country, the government founded the Bank of Japan. It had the duty to monitor the banking sector of the country and the bank with the only right to issue paper money. Matsukata also oversee the selling of many government-owned business to reduce losses in part of the government budget. Many of these business went to the private sectors in a much cheaper price than the original capital investment that the government spent. Government-owned businesses landed into the private sector for only 11 to 90% of the original value. Much of the businessmen connected to the business or to officials. Later on, the privatization proved to be beneficial to the Japanese economy. Many of the once government business recorded better performance under private hands because managers were free from government bureaucracy and red tape. By 1886, Matsukata succeeded in balancing Japan’s budget.

Some businesses formerly owned by the government well to the hand of family business cartels known as Zaibatsu, a notable feature of Japan’s industrial revolution and economic history. Zaibatsus were conglomerates owned by a family. They acted like the cartel in the German economy. They made companies stronger and resilient to any sudden economic changes or competition. During the Meiji Restoration, Mitsui, Mitsubishi, Sumitomo, and Yasuda became the biggest of this Zaibatsus. They controlled a large part of the Japanese economy, which included mines, banks, shipping, and textile mills.

The four mentioned Zaibatsus came from different backgrounds. Mitsui and Sumitomo’s histories dated back as far as the 17th century. But when the Meiji Restoration began, they persevered to modernized and adapt to the new economic environment, one that was different that of the Tokugawa. Many prominent business houses failed after the Tokugawa fell, but Mitsui and Sumitomo modernized by sending some of their family members to abroad, mostly to the United States, in order to study their business practices. Once they returned to Japan, they applied their knowledge to their own houses. Mitsubishi on the other hand had its roots from a low status samurai name Yataro Iwasaki. Once a manager of the trading business of the Tosa clan, he rose to prominence and became one of the most prominent businessman in Japan. Yasuda’s history began with Yasuda Zenjiro, a peasant who run away and started to be a money changer. From then on, he diversified his business, growing into one of the biggest Zaibatsu in Japan. All four came from different background but with their ambition and hardwork, they rose to become the most powerful businessmen in Japan.

The Japanese economy continued to grow and mature in the 1890’s and the following decade. The reforms of Matsuka gave the Japanese economy a more stable footing for growth. The Sino-Japanese War in the 1890’s led to an industrial boom. The boom continued especially when the Russo-Japanese War. By that time, business matured and survived without too much government support. However, when the war ended without much gain, the Japanese economy went into a recession which lasted up to the First World War.

The industrial revolution during the Meiji Restoration marked the rise of Japan as an Asian power. Indeed, by becoming rich, they developed a strong army, which proved equal to that of the Europeans. Since then, the West treated differently than other Asians. In some way they looked to Japan in an equal footing. However, its industrial revolution of Japan made it hungry for more resources that led eventually to its imperial ambitions, but that’s another story. What is important, Japan’s industrial revolution set the tone for Japan’s rise as an economic powerhouse of Asia and the world.

See also:

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

Meyer, Milton. Japan: A Concise History. Lanham, Maryland: Rowman & Littlefield Publisher, 1993.

Woronoff, Jon. Asia’s ‘Miracle’ Economies. London: M. E. Sharpe Inc., 1992.

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