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01_Sagers_FM.qxd 21/10/05 2:56 PM Page i Origins of Japanese Wealth and Power This page intentionally left blank 01_Sagers_FM.qxd 21/10/05 2:56 PM Page iii Origins of Japanese Wealth and Power Reconciling Confucianism and Capitalism, 1830–1885 John H. Sagers 01_Sagers_FM.qxd 21/10/05 2:56 PM Page iv ORIGINS OF JAPANESE WEALTH AND POWER © John H. Sagers, 2006. All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles or reviews. First published in 2006 by PALGRAVE MACMILLAN™ 175 Fifth Avenue, New York, N.Y. 10010 and Houndmills, Basingstoke, Hampshire, England RG21 6XS Companies and representatives throughout the world. PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 1–4039–7111–0 Library of Congress Cataloging-in-Publication Data Sagers, John H. Origins of Japanese wealth and power : reconciling Confucianism and capitalism, 1830–1885 / John H. Sagers. p. cm. Includes bibliographical references and index. ISBN 1–4039–7111–0 1. Japan—Economic conditions—19th century. 2. Japan—Economic policy—19th century. 3. Capitalism—Japan—Religious aspects— Confucianism—History—19th century. I. Title. HC462.6.S234 2005 338.952Ј009Ј034—dc22 2005046296 A catalogue record for this book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: January 2006 10987654321 Printed in the United States of America. 01_Sagers_FM.qxd 21/10/05 2:56 PM Page v For scholars, past, present, and future This page intentionally left blank 01_Sagers_FM.qxd 21/10/05 2:56 PM Page vii Contents List of Illustrations ix Acknowledgments xi Notes on the Text xiii Introduction 1 1 Confucian Statecraft and Ideological Innovation 9 2 Confucian Moralism and Economic Realism in Satsuma 31 3 Shimazu Nariakira and Japan’s First Industrial Policy 53 4 Confucian and Capitalist Values in Conflict 73 5 Satsuma Leaders and Early Meiji Capitalist Institutions 91 6 Establishing a Firm Foundation for Economic Development 115 Conclusion 135 Notes 141 Glossary 157 Bibliography 163 Index 171 This page intentionally left blank 01_Sagers_FM.qxd 21/10/05 2:56 PM Page ix List of Illustrations Figures 1.1 Rice Price Fluctuation in Kumamoto 18 2.1 Output of Satsuma’s Three Sugar Islands 43 2.2 Satsuma’s Skyrocketing Debt 44 Table 2.1 The Shimazu Daimyo of Satsuma 38 This page intentionally left blank 01_Sagers_FM.qxd 21/10/05 2:56 PM Page xi Acknowledgments would like to thank Kenneth Pyle, Kozo Yamamura, James Palais, and Kent Guy whose sage wisdom guided this project as a disserta- Ition at the University of Washington. In Japan, I am indebted to Igarashi Akio, Matsumoto Sannosuke, Mark Caprio, and the faculty and staff of Rikkyo University in Tokyo for their guidance and support. Thanks also to Steven Ericson, Katalin Ferber, Susan Hanley, Chalmers Johnson, Mark Metzler, Luke Roberts, my colleagues at Linfield College, and two anonymous reviewers for helpful comments and encourage- ment, and to Anthony Wahl and the staff at Palgrave Macmillan who expertly shepherded this project to completion. I am also most grateful for generous financial support from the Japan- US Education Commission’s Fulbright Fellowship, the U.S. Department of Education’s Foreign Language and Area Studies Fellowship, a Henry M. Jackson School of International Studies Fellowship, a Sanwa Bank Dissertation Grant, and a Linfield College Student-Faculty Collaborative Research Grant. Finally, my profound appreciation goes to parents Bob and Ann Sagers, parents-in-law Jim and Bonnie Churchwell, wife Wendy, and sons Robert and Thomas for their love, faith, and patience. This page intentionally left blank 01_Sagers_FM.qxd 21/10/05 2:56 PM Page xiii Notes on the Text apanese and Chinese names have been rendered according to East Asian convention with the family name first, except in instances Jwhen an author writing in English uses a different order. The Hepburn system has been used for the Romanization for Japanese and pinyin for Chinese words. Macrons have been used to denote long Japanese vowels, except for well-known terms and places such as shogun and Tokyo. Original characters for important names and terms appear in the glossary. This page intentionally left blank 02_Sagers_Intro.qxd 21/10/05 11:29 AM Page 1 Introduction n 1868, a group of samurai from the domains of Satsuma and Chfsh˚ overthrew the Tokugawa shogun and proclaimed the restoration of the IEmperor Meiji as the head of state. The top priority of the new government was the revision of the humiliating treaties that the shogun had negotiated with the Western powers. To accomplish this and to restore their country’s independence, Japanese government leaders believed that it was imperative for Japan to build its economic and military power. Facing potential Western colonization, the desire for wealth and power was certainly understandable, but what was it that philosophically prepared early Meiji Japanese government leaders to accept capitalist institutions of economic organization? Clearly, Japan’s radical institutional reforms of the 1870s and early 1880s depended on a dramatic shift in political and economic philosophy that was unusual in world history. As historian Thomas Smith once observed, “Communities in danger do not necessarily seek safety in innovation; commonly they reaffirm tradition and cling to it more resolutely.”1 Somehow, these Japanese government leaders departed from their Confucian samurai intellectual heritages (eschewing the pursuit of private gain as morally reprehensible) and embraced industrial capitalism. This book is about the evolution of economic thought in the last decades of the Tokugawa period that prepared Japanese government leaders after 1868 to conceive of market activity as a force that, with proper management, could benefit the national state. Since the 1982 publication of Chalmers Johnson’s MITI and the Japanese Miracle, interest in Japanese industrial policy and developmental institutions has grown dramatically.2 Given a desire to explain the cur- rent state of Japan’s economic system, it is understandable that many social scientists have focused their attention on more recent history. Their analyses of the Japanese government’s response to the crises of The Great Depression and World War II have greatly advanced our knowledge of Japan’s institutional development in the twentieth century. 02_Sagers_Intro.qxd 21/10/05 11:29 AM Page 2 2 ● Origins of Japanese Wealth and Power Between 1925 and 1945, government officials became much more powerful in economic affairs than in previous eras. With bureaucratic leadership, mechanisms such as preferential government financing, state sponsored cartels, and centralized economic planning became important means of promoting industries considered necessary to support Japan’s war effort. Bai Gao’s 1997 book explores the role of economic ideology in policy making from the 1930s but includes only a brief discussion of earlier developments.3 Noguchi Yukio’s Senky˚hyakuyonj˚nen taisei (The 1940 System) has gone as far as to say that Japanese capitalism’s distinc- tive characteristics did not exist before the crises of the Great Depression and World War II.4 However, these scholars miss an important part of the story by begin- ning their study with the mid-1920s. Others have suggested that Japanese developmental thought can be traced to a much earlier period. Richard Samuels’ study of the connection between military and civilian technology in the wartime and postwar periods mentions, in passing, that the government’s role in technological development had its roots early in the modern era.5 William Wray, in his book on the development of the Japanese shipping industry, points out that the government was subsidizing this key industry as early as the 1870s.6 Although historians have understood the importance of the Meiji period to the later evolution of the developmental state, there has been surprisingly little analysis and discussion of the role of economic thought in the government’s industrial policy. There are several reasons for this gap in our understanding. First, the problem falls between disci- plinary boundaries. Economic historians have tended to focus their attention on the role of economic aggregates such as capital accumulation, labor supply, and technology transfer. Their treatment of government policy focuses on what happened and how it affected the economy without analyzing the thought behind the policies. Conversely, intellectual historians have concentrated their attention on the rise of Japanese political nationalism and national consciousness. Nakamura Takafusa’s Economic Growth in Prewar Japan, for example, discusses in detail the changes in economic aggregates such as capital accumulation, labor supply, money supply, and technology levels. Nakamura assigns an important role of initiating Japan’s economic development to state leadership, but he takes the goal of industrializa- tion itself for granted. He writes, “This was the world of power politics. As a neophyte modern state, Japan had no choice but to resist the great powers, as expressed in the popular Meiji era slogan fukoku kyfhei, ‘a rich country and a strong army.’ ”7 02_Sagers_Intro.qxd 21/10/05 11:29 AM Page 3 Introduction ● 3 Henry Rosovsky labels the years between 1868 and 1885 as a crucial “transition period” when the Meiji government laid the institutional foundation to reach its economic development goals. Defending his approach against economists who tend to downplay the importance of government policy in industrial development, Rosovsky argues, “Primary focus on government activity during transition can be justified.

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