Financial Stabilization in Meiji Japan: the Impact of the Matsukata Reform'

H-Japan Ferber on Ericson, 'Financial Stabilization in Meiji Japan: The Impact of the Matsukata Reform'

Review published on Tuesday, September 8, 2020

Steven J. Ericson. Financial Stabilization in Meiji Japan: The Impact of the Matsukata Reform. Ithaca: Cornell University Press, 2019. x + 198 pp. $49.95 (cloth), ISBN 978-1-5017-4691-8.

Reviewed by Katalin Ferber (Independent Scholar)Published on H-Japan (September, 2020) Commissioned by Martha Chaiklin

Printable Version: http://www.h-net.org/reviews/showpdf.php?id=55469

In the last two decades there has been a body of groundbreaking, often pioneering, research in Western languages (mainly in English) on monetary, financial, and fiscal development of modern (nineteenth to twentieth century) Japan. Japanese scholars made systemic and systematic research in these fields much earlier, but now researchers, students, and other interested people can put together the whole picture of the methods and practice of financial modernization in Japan.

Matsukata Masayoshi (1835-1924) was a man of flexible pragmatism, a monetary and financial “policymaker” who, perhaps better than any of his contemporaries, successfully combined political influence with professional knowledge. As such, his “defuree” (deflation) policy coupled together with his name has survived for more than a century. However, the picture of his achievement, until recently, was incomplete. Among some scholars there was even an assumption that Matsukata had never been a financial professional. Rather, they saw his activities as relying mainly on using the knowledge of anonymous but professional bureaucrats that Matsukata was simply a politically affluent and efficient member of various Japanese cabinets. In other words, Matsukata knew how to lobby for the sake of successful policymaking.

This incomplete, and somewhat assumptious, view of Matsukata Masayoshi now can be relegated to the historiographic section of libraries thanks to this volume. Steve Ericson’s research challenges this myth, redefining the ideas and concepts that Matsukata adopted (or rejected) and establishing a firm and clear picture not only of Matsukata’s actions, but his thinking behind his actions as well. This process offers an in-depth view of the course of financial modernization in Meiji Japan.

The “story” behind the Matsukata Deflation is relatively simple. After several years of inflation, partly as a consequence of state-financed industrialization and partly as the result of the growing burden on the budget caused by the need to fight against various samurai rebellions, Matsukata Masayoshi as minister of finance was tasked with a triple goal: creating a balanced budget, withdrawing the nonconvertible paper notes, and stabilizing the yen currency. His policies were successful, but severe deflation followed that put a heavy burden on the majority of the society, especially the agrarian populace.

As this book thoroughly demonstrates, as minister of finance Matsukata used a wide variety of methods to deal with the crisis. He was far from an orthodox stabilizer, yet he was equally not merely executing a neoliberal “shock therapy.” Additionally, he relied heavily on the ideas, concepts, and

Citation: H-Net Reviews. Ferber on Ericson, 'Financial Stabilization in Meiji Japan: The Impact of the Matsukata Reform'. H-Japan. 09-08-2020. https://networks.h-net.org/node/20904/reviews/6413621/ferber-ericson-financial-stabilization-meiji-japan-impact-matsukata Licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. 1 H-Japan initiatives of his colleagues and predecessors, such as Okuma Shigenobu. Moreover, foreign ideas like British liberalism did play a role in the stabilization scheme, but not exclusively or dominantly.

Interested readers can discover how profoundly different Matsukata’s financial policy was from the way most scholars have interpreted it. As a matter of fact, Matsukata was neither a follower of orthodox liberalism nor a statist, although he relied on both concepts. Ericson elegantly characterizes Matsukata’s views as those of a liberal nationalist who successfully combined foreign ideas and practices with the needs of time, adjusting his suggestions to specifically Japanese constraints (such as the unequal treaties imposed on the country) and advantages.

To someone reading this strong research-based and elegantly composed monograph, the question arises: how and why did Matsukata gain such a false reputation as an orthodox liberal financier among his contemporaries, one that has persisted for generations until today? The answer, according to Ericson’s book, is almost banal: Matsukata Masayoshi was primarily an excellent politician, almost always “sensing the vibes” (kuki ga yomu), who relied on his colleagues’ foreign or domestic knowledge while combining foreign practices (and failures) with his flexible pragmatism.

In other words, this monograph on monetary, financial, and fiscal stabilization sheds light on the state of cross-border knowledge, as Matsukata adapted various ideas from the United States, from France, from England, from Belgium, and from Germany but applied these various philosophies (and practices) according to Japanese reality. No foreign ideas arrived at the Japanese archipelago without the directed intervention of Japanese statesmen, and they could only be implemented with the existing knowledge and experience of these bureaucrats. Therefore, “selective emulation” and flexible pragmatism might be considered the two most important elements in the process of modernizing Japanese finances.

Finally, one of the most valuable pioneering elements of Ericson’s work is the detailed account of the collective efforts that greatly helped Matsukata. Invisible and forgotten “public men” behind or near the minister of finance made indispensable contributions to the speedy, efficient, and successful execution of this financial modernization. Instead of the “rich country, strong army” (fukoku kyohei) paradigm, a slogan which often seemed contradictory from a financial point of view between 1879 and 1895, it is perhaps better to remember Matsukata Masayoshi and his colleagues as offering “rich knowledge and strong flexibility” in the application of foreign knowledge to their own domestic experience to create something new and unprecedented. This book is one of the most important contributions to understanding the history of financial modernization in Japan in recent scholarship.

Citation: Katalin Ferber. Review of Ericson, Steven J.,Financial Stabilization in Meiji Japan: The Impact of the Matsukata Reform. H-Japan, H-Net Reviews. September, 2020.URL: http://www.h-net.org/reviews/showrev.php?id=55469

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.