Economic Policy

Publication List of this Subject

The most pressing item on the agenda of the new Meiji government that took over from the Tokugawa Shogunate regime in 1868 was the creation of a modern centralized state with firm political and financial foundations. To get the Japanese economy on a sound footing, the government wrote off most of the liabilities carried over from the old regime, put into effect a wide range of economic and social reforms, and took up a policy of “increasing production and promoting industry” that could be achieved by the introduction of advanced technology from abroad.

However, within 14 years there occurred a severe inflation caused by repeated flotation of government bonds and by the increased printing of paper money in order to cover war expenditure and to provide the funds for the promotion of industry. In response, Finance Minister Masayoshi Matsukata carried out a drastic retrenchment policy. It was successful although it brought about a severe deflation.

In sum, the Matsukata deflationary policy created the foundations of modern finance in this country and thus provided the basis for the rise of modern enterprises in subsequent decades.