Financial Stabilization in Meiji Japan

Reviewed by: Financial Stabilization in Meiji Japan: The Impact of the Matsukata Reform by Steven J. Ericson Masato Shizume (bio) Financial Stabilization in Meiji Japan: The Impact of the Matsukata Reform. By Steven J. Ericson. Cornell University Press, Ithaca NY, 2019. x, 198 pages. $49.95. Matsukata Masayoshi (1835–1924) served two stints as Japan's minister of finance in the late nineteenth century (14 years in total, 1881–92 and 1895–98). As minister he introduced metal standard systems (first silver, then gold) and established the central bank as vehicles for Japan's modernization and sustained growth. Above all, he is famous for a fiscal austerity program he is believed to have initiated in the early 1880s, at the start of his tenure as minister, and the resulting, eponymously named "Matsukata deflation." He has been widely viewed as a hard-line advocate of the British-style orthodoxy of the mid-nineteenth century and a predecessor of the reformers equipped with the structural adjustment program by the International Monetary Fund in the late twentieth century. Steven Ericson revisits Matsukata's accomplishments to challenge the widely held view that Matsukata was a hard-liner. He argues that Matsukata was not a single-minded hard-line reformist but rather an incrementalist who proceeded flexibly and pragmatically with priority placed on monetary stability as a prerequisite for the development of a modern economy. Ericson attributes Matsukata's thought to several origins: (1) his pre– Meiji Restoration education on ancient Chinese and early modern Japanese financial reforms, (2) his experience as an official in the new Meiji government, and (3) his exposure to Western ideas and precedents in the 1870s (p. 28). The author mentions sources from ancient China and early modern Japan that influenced Matsukata: an ancient Chinese compilation (Guanzi) on tax reform and state monopolies of salt and iron by Prime Minister Guan Zhong from the State of Qi in the seventh century BC, and the writings of Arai Hakuseki, an advisor to the Tokugawa shogun in the early eighteenth century, on monetary reforms to restore the value of the national currency (pp. 30–31). Regarding Matsukata's experience in the new Meiji government, Ericson cites Matsukata's communications with mentors in his early career and his on-the-job training as governor in Hita Prefecture, central Kyushu. A notable action by Matsukata in this period was his memoranda to the central government calling for the unification of the nation's currency. In considering Matsukata's exposure to Western ideas and precedents, Ericson describes Matsukata's visit to Europe in 1878–79 and meetings with French confrères to learn the classical economic liberalism originating from Britain and the developmental strategy of the German historical school. The pivotal [End Page 552] figure in Matsukata's journey was the French economist and minister of finance, Léon Say (1826–96), grandson of Jean-Baptiste Say (1767–1832), who presided over an international monetary conference in Paris in 1878. Ericson concludes that the model for the Matsukata financial program of the early to middle 1880s was "neither single nor static but rather a composite informed by a fluid array of Asian and Western precedents and typifying the pragmatic, eclectic approach the Meiji leadership took to the whole project of modern nation building" (p. 50). Ericson goes through the process of Matsukata's reforms in detail: fiscal austerity and the redemption of nonconvertible notes, the consumption tax hike, the issuance of a public bond, export promotion, the off-loading of state enterprises, and the transformation of industrial policy. The author clarifies that some austerity measures had already been initiated during the tenures of previous ministers, such as tax hikes and the sell-off of state enterprises. Matsukata, moreover, flexibly adjusted his ministry's policy course in response to changes in economic conditions to offset the contractionary effect of the reform. Some measures, such as the sell-off of state enterprises, were not the main causes of the recession in the early 1880s. "Matsukata," Ericson argues, "seems to have staked his reputation on putting in place a central bank as the centerpiece of his entire financial program" (p. 101). The introduction of the silver standard "insulated

Ancient history · Austerity · Economic history · Economics · Meiji period · Modernization theory · Orthodoxy · Political science · Chinese history and philosophy · History · Japanese History and Culture · Law