Unleashing the Sun is an anthology of essays that examine the history of Japan through the lens of liberty. Featuring works by Lawrence W. Reed, Stephen Davies, Tyler Curtis, Toshio Murata, and Hiroshi Yoshida, the book highlights how Japan’s triumphs and struggles throughout its history have been intimately connected with its respect for private property, individual liberty, and free markets.
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Preface
By Lawrence W. Reed
To the memory of the late Japanese economist Toshio Mura- ta, this anthology is lovingly dedicated. He died at the age of 97 in 2021, leaving behind decades of scholarly work and legions of students and admirers the world over.
Shortly after I became President of the Foundation for Economic Education in 2008, Toshio sent me a surprise gift I will cherish forever— a signed copy of his Japanese translation of Ludwig von Mises’s seminal work, Human Action. In 2017, we honored him with FEE’s “Blinking Lights Award,” noting his long championship of freedom and free markets.
After Japan’s defeat and devastation in World War II, Toshio yearned for answers. A brief experience in government economic planning cured him of any illusions that politics and politicians would produce peace or prosperity. An encounter with acolytes of the Austrian School of Eco- nomics proved to be life-changing for him.
In the late 1950s, Toshio met Leonard Read, FEE’s founder, and stayed in a room at the Foundation in Irvington, New York, while studying at nearby New York University. He translated many FEE monographs and articles into Japanese and put them to good use in the various class- rooms in which he taught in the subsequent decades.
This humble and studious teacher, who would have celebrated his 100th birthday in 2023, did more than anyone else to bring the wis- dom of Ludwig von Mises and the Austrian economists to Japan. In Human Action, Toshio found so many of the answers he was looking for. Knowing war firsthand, he agreed completely with this observation of Mises from 1944:
Re great idol of our time is the State. Re State is a necessary social institution, but it should not be deified. It is not a god; it is a device of mortal men. If we make it an idol, we must sacrifice to it the flower of our youth in coming wars.
For the last 50 years of his life, Toshio was the leading libertarian light in Japan. He was a revered sensei (teacher and mentor) to many. One of them, Hiroshi Yoshida, is the author of a chapter in this e-book. Another one, the American Ken Schoolland, authored a 2016 article for Liberty International titled “Japanese Libertarian Heritage,” which I strongly recommend for anyone wanting to know more about Toshio Murata.
Toshio’s many friends miss him dearly, but we honor him here with this collection of essays (including one of his) on Japanese history. I know he would deeply appreciate the many liberty-related insights herein.
I knew little of Japanese political and economic history at the early stages of this project. Having authored most of its chapters, published one at a time on FEE.org, I now know a few things. But I wish I could sit down at Toshio’s feet and learn so much more.
In addition to chapters by Toshio, Hiroshi, and myself, I am proud to include others by friends Stephen Davies and Tyler Curtis. All chapters in this anthology originally appeared as articles for FEE.org.
Consider this collection as an introduction. It’s nowhere near a “final word” on the fascinating story of Japan. Here you will learn about the origins of the Japanese state; periods of enlightenment as well as periods of darkness and conflict; colorful characters from samurai war- riors to emperors to entrepreneurs; and even a man I call “the Japanese Tocqueville.” If it sparks your interest to dig deeper, Toshio himself would applaud you.
Lawrence W. Reed President Emeritus, FEE Atlanta, Georgia
March 26, 2024
Were Japan’s ‘Taika Reforms’ A Good Idea?
By Lawrence W. Reed
Japan’s history over the past 1,500 years is not much different from that of the rest of the world—warfare, civil strife, and needless poverty so long as the mystique of the omnipotent state kept people in thrall.
By the time of the Taika Era, the royal seat of the Japanese state was 1,200 years old—dating back to the legendary first emperor, Jimmu, in the 7th century BC. Records are sparse and little is known of the first fifteen or so emperors. Nonetheless, Japan’s fabled Chrysanthemum Throne is recognized today as the seat of the oldest continuous hereditary monarchy on the planet. The present Emperor of Japan, Naruhito, became the country’s 126th when he acceded to the throne in 2019.
“Tumult” describes the year 645 AD in Japan. The Soga family which controlled the imperial government for 50 years was overthrown in a coup d’etat that brought Emperor Kōtoku to power. His nine-year rule is best remembered for the “Taika Reforms” which his administration announced on New Year’s Day in 646. Historians R.H.P. Mason and J.G. Caiger, in A History of Japan, describe the purpose of these edicts as
the creation of a centralized imperial state, which would be ruled directly by the emperor in accordance with a system of written law and with the help of bureaucratic officials whom he himself had appointed to office and could dismiss whenever he pleased.
To strengthen the emperor’s economic and political power, four “articles” comprised the Taika Reforms: 1) all land in the country belongs to the emperor; 2) political power is centered in the emperor’s choice of a capital city; 3) a national census of the population every six years would provide the basis for taxation and land usage; 4) land would be assigned to farmers, who would then be taxed in the form of goods and services.
Emperor Kōtoku chose Nara as Japan’s capital city. Over the centuries thence, it would move to Kyoto and then ultimately to Tokyo.
The so-called “reforms” were far-reaching, to be sure, but they were also quintessentially authoritarian. Traditional local authorities (typically clan leaders) were made into vassals of a centralized state. They and the people were declared subjects of the supreme authority, the emperor. Rather than recognizing private property rights, the new edicts asserted that farmers were nothing more than renters on the emperor’s land; they could not sell the land to anyone without the big guy’s approval. It gets worse, as Mason and Caiger explain:
Heavy taxes of other kinds were levied on the male population. Labor was required by the provincial and central administrations for public works, but this could be converted into its equivalent value in cloth. Products of the region—cotton cloth, hemp, salt, earthenware vessels, timber, vegetables, or fish—were payable to the government. Military service was also required and seems to have caused great distress. One third of the male inhabitants of each province between the ages of 20 and 59 were supposed to spend one year at the capital and three years on the frontiers. While they were on active service, they were expected to provide their own equipment and provisions. Ris aspect of the reforms was not a great success because its severity encouraged people to desert their land to avoid being conscripted.
The inspiration for all this centralization in Japan was none other than the authoritarian ideas and structures of the Tang Dynasty in neigh- boring China. The Japanese official known as Prince Shōtoku (574–622 AD) had popularized the notion that Japan’s people should emulate the Chinese by embracing a strong, centralized autocracy to ensure social harmony. A generation after Shōtoku’s death, the Taika Reforms set about to accomplish just that.
We now know, of course, that authoritarian centralization is the very antithesis of social harmony (though plenty of people today still do not understand that truism). Twelve centuries later, Lord Acton would survey the world’s painful experience with it and famously conclude, “Pow- er tends to corrupt, and absolute power corrupts absolutely.”
What, after all, constitutes “power”? One word: FORCE. How else can anybody “centralize” the political or economic life of a nation? Heads always roll when power is the name of the game.
Imagine for a moment that you are appointed master of a people. Your assignment is “social harmony,” that is, to promote peace, mutual trust, and cooperation. And you then decide to accomplish the objective by nationalizing other people’s property and declaring it your own. You treat other people as though they were born to be subject to your whims. You pretend you know enough to run the lives of others even though it’s a full-time job just to run your own. What could go wrong?
So, readers should not be surprised to learn that Japan’s Taika Reforms of the 600s did not usher in centuries of social harmony. As explained in the subsequent chapters of this e-book, Japan’s history over the past 1,500 years is not much different from that of the rest of the world— warfare, civil strife, and needless poverty so long as the mystique of the omnipotent state kept people in thrall.
The idea that big, arrogant government can be synonymous with social harmony—in Japan as everywhere else—is ナンセンス.
That’s Japanese for “baloney.”
How Japan Went From High Culture to A Samurai Culture
By Lawrence W. Reed
The samurai class appeared late in the Heian Period as war- riors for local clans.
Americans, Europeans, and Africans know a great deal about their own past but likely not much about the history of the consequential, faraway nation of Japan. That’s understandable. Japanese is a difficult language. For much of Japan’s history, the country’s leaders kept foreigners out and their citizens in isolation. The culture is sometimes referred to as “inscrutable.”
But the more I learn about Japan, the more fascinating it is. I visited only once, nearly 40 years ago, when I did not yet know much of its past. Now I’m aware of many true-life stories from Japanese history that make me want to go back and learn more.
Did you know, for instance, that a black East African slave made his way to Japan in the late 16th century and ultimately became a celebrated samurai warrior? His name was Yasuke. He befriended the powerful, unifying warlord Oda Nobunaga, who was initially so shocked by the black man’s color that he ordered it to be scrubbed out. When Yasuke emerged from the “cleaning” as black as before, he earned special re- spect from Nobunaga and the Japanese people. In 2019, Thomas Lock- ley and Geoffrey Girard authored a magnificent biography of him titled African Samurai.
Or have you heard about William Adams, an English sailor shipwrecked in early 17th-century Japan, who rose to high position in the Japanese court? His story was chronicled in Giles Milton’s biography, Samurai William. James Clavell’s 1975 historical fiction novel, Shōgun, was loosely based on the Adams story and made into a popular TV miniseries starring Richard Chamberlain in 1980.
Did you know that an attempted Mongol invasion of Japan in the 13th century was literally blown away by a devastating typhoon? The Mon- gol fleet was demolished by what the locals called a kamikaze, which means “divine wind.” It’s a word that Americans came to know rather painfully during World War II.
Japanese history is conventionally presented as a sequence of eras or “periods.” Here at FEE.org, I’ve recently written about the Warring States (Sengoku) Period, the Muromachi Period, and a famous figure (see Chapters 9, 10, and 11) from the Reform Period of the Meiji Restoration, for example.
For the balance of this essay, I want to introduce readers to the 400-year Heian Period that began in 794 AD. It commenced with a flowering of art and literature and ended in 1185 with the first shogunate, or military dictatorship.
The Heian Period is so named because Emperor Kanmu moved the capital from Nara to Heian-kyō (modern-day Kyoto) in 794. The word for the city translates to “Capital of Peace and Tranquility.” The Heian Period is known as a high-water mark for the emperor and his imperial court. A gradual decentralization reduced power at the nucleus of Japan, which partially explains the cultural reformation that accompanied it.
If there was a Golden Age of Japanese culture, the Heian Period qualifies. Despite a smallpox epidemic thatwiped outhalf the country’s population beginning in 812, new and distinct Japanese art forms appeared and flourished—in poetry, calligraphy, literature, architecture, music, and dance.
The world’s first full-length novel, The Tale of Genji, was penned in this period by a woman in the imperial court, Murasaki Shikibu.
“Heian culture was characterized by a refined sense of aesthetics, with a focus on beauty, elegance, and courtly manners,” writes Ava Sato. “The concept of ‘mono no aware’ (the ephemeral nature of things) became central to the Japanese aesthetic sensibility during this time.”
The Heian Period itself proved ephemeral. By the 11th century, rival clans arose and fought each other to attain control. In a sad story repeated the world over, the lust for power led directly to civil conflict. The Fujiwara family emerged eventually as the real rulers of late Heian Japan, benefiting most the landed, aristocratic elites and alienating the commoners.
The five-year, devastating civil strife of the Genpei War (1180–1185) ended the Heian Period and ushered in the Kamakura Shogunate (1185–1333), a military dictatorship. For its 150 years, it featured two Japanese governments—the imperial court of a largely ceremonial and powerless emperor in Kyoto and the center of real power in the hands of the shogun in the city of Kamakura.
The samurai class appeared late in the Heian Period as warriors for local clans. In the later Kamakura Period, the samurai comprised the armies of the centralized shogunate. They would be prominent in Japan for the next seven centuries until their abolition in 1871. Now you hopefully know a little more about them than you learned from Saturday Night Live sketches such as “Samurai Hotel” and “Samurai Delicatessen.”
Khan Academy, incidentally, offers a short but informative history of the samurai. The Tom Cruise epic 2003 blockbuster The Last Samurai earned critical acclaim even in Japan, though viewers there generally believed the film made the samurai appear more noble and admirable than they really were.
Japanese history can be daunting to a Western newcomer to it, but a good place to start is A History of Japan by R.H.P. Mason and J.G. Caiger.
As “inscrutable” as the Japanese may at first appear, the more one learns about them the more one understands that common themes dominate human history everywhere.
The Rise and Fall of Japan’s First ‘Enlightenment’
By Lawrence W. Reed
What is the takeaway from Japan’s Muromachi Era? A little bit of freedom goes a long way.
In the Western world, we think of feudalism as predominant during the period from (roughly) the reign of Charlemagne to about 1500. That’s 700 years, a long time for serfdom to put down deep roots. Eventually it dissolved into about 300 years of mercantilism, a system which loosened the chains somewhat but was nonetheless mired in growth-choking economic fallacies.
When the ideas of Adam Smith and the Enlightenment gained prominence late in the 18th century in Europe, people and economies were substantially liberated. Private property, entrepreneurship, free enterprise, and limited government became the consensus.
The result?
An explosion in life spans and living standards in the 19th century for which there was no close precedent in human history.
Having developed a recent interest in the history of the Far East, I wondered, “What about Japan?” Did that country experience anything similar at around the same time? The answer is complicated, but fascinating nonetheless.
Though feudalism’s roots in Japan go back further, a system of lords, vassals, and serfs (by other names) was firmly established during what
Japanese historians label as “the Kamakura Period,” from 1185 to 1333. The samurai warrior class emerged during this era. For the masses of Japanese, life offered little upward mobility; they were tied to the land, owned by the elite nobility. That fact, combined with constant warfare, guaranteed economic stagnation until the last of the Kamakura sho- guns (military dictators) was overthrown in 1333.
In Europe, the pro-freedom impulses that produced first the Renaissance and then the Enlightenment were still many decades in the future when the Japanese began moving in similar directions. This is notable because in Japan, there was comparatively little intellectual ferment immediately preceding the loosening of bondage—no indigenous counterparts to giants such as John Locke, David Hume, Adam Smith, Voltaire, etc.
The Japanese seem instead to have stumbled toward freedom more for practical reasons than for ideological ones. Individuals began to exert their personal independence not because they attended the salons and tea houses of enlightened thinkers, but because central control was weakened with the fall of the last Kamakura Shogunate. People then just did more of what they tend to do naturally when politicians get out of their way—they start businesses and engage in trade.
That brings us to the Muromachi Era, the period beginning with the fall of the Kamakura regime and persisting for almost 250 years—until 1573. In some limited ways, it was Japan’s first Enlightenment, appearing and then disappearing before one ever got underway in Europe.
The one intellectual who enjoyed prominence in the Muromachi Period was the ancient Chinese scholar Confucius (551–479 BC), whose nearly two-thousand-year-old writings staged a comeback. Confucianism during this time became an essential focus of learning in Japan. The philosopher’s essentially peaceful, self-improvement- and virtue-based teachings likely contributed to the growth of commerce.
He articulated the “Golden Rule” a half millennia before Christ when he wrote, “What you do not want done to yourself, do not do to others.”
Confucius encouraged wealth-creating entrepreneurs and believed that a good government should get out of their way. “When a country is well governed, poverty and a mean condition are things to be ashamed of,” he wrote. “When a country is ill governed, riches and honor are things to be ashamed of.”
In their chapter, “The Growth of Commerce and the Trades,” in the anthology titled Japan in the Muromachi Age, scholars Toyoda Takeshi and Sugiyama Hiroshi write:
Re Muromachi period saw a steady growth in the quantity of trade and commercial production and in their freedom from proprietary control. Rose aspects of the economy which had been limited in production and distribution, but which had been stimulated by the patronage of the aristocratic class, grew in importance and scope. Eventually merchants freed themselves from the control of their patrons and found new markets and new independence of enterprise. Complete freedom of trade was as yet many centuries off. But commerce as a separate component of the economy was coming into its own.
Small businessmen and artisans organized trade associations for the first time in Japanese history, especially in the central part of the country where government control was weakest. Merchants during the Muromachi Period, write professors Toyoda and Sugiyama, “sought economic and political independence, and we find among them… patterns of group association for self-protection.” Class distinctions even began to erode. Toyoda and Sugiyama reveal a “willingness to recognize able men of even the lowest orders of society and to allow them to exercise their talents.”
Austrian economist F.A. Hayek observed in the 20th century that as shackles on freedom are removed in a society, it is not chaos that ensues but rather a “spontaneous order” that is ultimately more rational and beneficial than any state-run regimen. Signs of this very thing are apparent in the early Muromachi Period in Japan.
Trade with China greatly increased during this time. “Japanese wood, sulfur, copper ore, swords, and folding fans,” write R.H.P. Mason and J.G. Caiger in A History of Japan, “were traded for Chinese silk, porcelain, books, and coins, in what the Chinese considered tribute but the Japanese saw as profitable trade.”
Art and culture flourished as well, evidenced by such developments as Japanese ink painting, the indigenous stage drama known as Noh, and the famous tea ceremony.
Late in the Muromachi Period, Christianity debuted in Japan with the arrival of the Spanish Jesuit Francis Xavier in 1549. He led the first ever Christian mission to the country. Three decades later, Japanese Christians numbered about 150,000 and attended some 200 churches.
Historian Martin Collcutt notes the progress of the era:
Overall, the economic gains made during the Muromachi period probably outweighed the losses and dislocations. Re disintegration of shōen created new opportunities for some merchants and farmers. Local merchants benefited from the relaxation of guild privileges and greater access to markets. A nascent merchant class emerged. Although coinage was not being minted in Japan, the use of money, bills of exchange, and pledges, were all accepted.
Alas, this Japanese Enlightenment ended late in the 16th century when a warlord by the name of Oda Nobunaga seized power. His aim was to “unify” Japan by centralizing political, economic, and cultural influences. He suppressed opposition with brutal force. Though he reduced taxes on trade and further restricted the power of guilds over the labor market, Nobunaga’s centralization nonetheless signaled a shift away from liberalization.
That shift became complete in 1603 with the start of the Tokugawa Shogunate, a military dictatorship that lasted for more than 250 years. It enforced a rigid class system, a return to the feudal economy, and a radically isolationist foreign policy. It even banned Christianity. Not until the Meiji Restoration of 1868 would Japan see liberalization again (see Chapters 9, 10, and 11, “Mori Arinori: The Japanese Tocqueville”).
What are the takeaways from our understanding of Japan’s Muromachi Period? A little bit of freedom goes a long way, even without a large body of supporting literature. But it’s also fragile, subject to the same toxic motivation that has reared its ugly head time after time the world over—the lust for power.
War Is Not Just a Western Notion
By Lawrence W. Reed
Japanese history illustrates the fact that, when it comes to war, the Far East is no different from the Middle East or whatever is either east or west from wherever you are.
“It is well that war is so terrible; otherwise, we should grow too fond of it.” – Robert E. Lee
“Wars and rumors of wars,” to borrow a well-known Biblical phrase from Matthew 24, seem all too commonplace these days. Is that because more wars are going on now than in the past, or because mass media brings us word of them ‘round the clock? It’s a debatable point.
This much is eminently clear: War dates back as far as the day when Cain slew Abel. It’s doubtful that there ever was a time on Earth when nobody was at war with anybody. It’s a depressingly familiar curse.
Scholars repeatedly attempt to illuminate our understanding of it. Randolph Bourne famously advised us on the institution that often gains the most from it when he wrote over a century ago, “War is the health of the state.” Austrian economist Ludwig von Mises traced its sociology to the toxic myth that “the gain of one man is the damage of another; no man profits but by the loss of others.” FEE’s Dan Sanchez explored those views of Bourne and Mises in penetrating analyses.
Until recently, consensus held that war was less frequent and deadly in prehistoric times than it is today. Likewise, the notion of “the noble and peaceful savage” colored the views of Native American history. Both perspectives were decisively debunked in such works as archeologist Lawrence H. Keeley’s 1997 book War Before Civilization: The Myth of the Peaceful Savage and the 2013 anthology edited by Richard J. Chacon and Reuben G. Mendoza, North American Indigenous Warfare and Ritual Violence.
Europe in the last several hundred years knew at least as much war as it did peace. That’s where we got such cataclysms as the “Hundred Years’ War,” the “Thirty Years’ War,” the “Napoleonic Wars,” and World Wars I & II.
The major Asian nations of China and Japan have fought countless wars internally, against each other, and against nearby peoples. Indeed, the history of each country includes an era known as a “Warring States Period” in which armed conflict was widespread, intense, and con- stant. In China, it covered a quarter-millennium—from 475 to 221 BC. In Japan, it lasted from 1467 to 1603 AD. “Unification” was the main issue in each instance, meaning that the armies of regional warlords butchered each other to create one big state to replace numerous smaller, decentralized ones.
For the balance of this essay, allow me to focus your attention on Japan. Its Warring States (or “Sengoku”) Period ranks as one of the most prolonged conflicts in military history, featuring 2,889 distinct battles over 13 decades. That works out to an average of 21 battles every year, or about one every two and a half weeks over five generations and across virtually all of what constitutes the nation of Japan today. (It overlaps part of the Muromachi Period, which I recently wrote about.)
Contrast that with one of the more peaceful nations, Switzerland, which hasn’t been involved in a war of any kind in the last 175 years. The very few countries to experience no war at all in their entire histories are tiny ones like Vanuatu, Iceland, and San Marino.
Japan’s Sengoku Period began with a ten-year civil conflict known as the Onin War (1467–1477). The main protagonists were local, land-own- ing warlords (the daimyo) who threw their militias of samurai warriors into endless battle for control of the nation. Two families, the Hosokawa and Yamana, each obsessed with implacable hostility to the other, played central roles. The capital at the time, Kyoto, was left in nearly total ruin.
Historian Mark Cartwright reveals:
Even when the war ended in 1477 CE there was no victor and no resolution to the inherent militarism that fractured Japan for the next century as warlords fought each other with no one in particular ever achieving any dominance. In addition, the fighting destroyed most of Heian-kyō Kyoto and was brutal in the extreme, as here summarized by the historian J.L. Huffman:
Most of the leading samurai families took part in what can only be described as an orgy of violence, burning of temples, ransacking shops, massacring hostages, and defiling the dead. By the war’s end in 1477 CE, the fighting had moved to the countryside because all vestiges of central control had been destroyed and Kyoto had been wiped out. “For blocks on end,” said the conflict’s leading chronicler, “birds are the sole sign of life.”
One anonymous poem, composed c. 1500 CE, captures the general mood of the times—that Japan was hurtling down a road that led only to destruction:
A bird with One body but Two beaks, Pecking itself To death.
Throughout the Sengoku Period, Japan did have an Emperor, at least on paper. But he was powerless and marginalized, relegated to a ceremonial role which remained static until the Meiji Restoration of 1868. Real power rested with the warring warlords.
By the late 16th century, power began to crystallize around a single man. The first was Oda Nobunaga, followed by Toyotomi Hideyoshi, and finally Tokugawa Ieyasu. It was the latter who succeeded in unifying the country and inaugurating the Tokugawa Shogunate (dictator- ship). He ushered in two centuries of relative peace, though often at the expense of individual liberty.
Japan’s experience ultimately proved to be yet another rendition of an age-old phenomenon: A lust for power begets war, which begets disorder and destruction, which begets the “strong man” who then knocks heads together to bring order from the chaos. Tokugawa Ieyasu was Japan’s Napoleon and Caesar rolled into one.
The American novelist Tom Clancy once opined, “There’s nothing more pornographic than glorifying war.” How right he was. And how sad that even justifiable wars for the purposes of self-defense usually leave behind a bigger state and fewer liberties.
Japanese history illustrates the fact that, when it comes to war, the Far East is no different from the Middle East or whatever is either east or west from wherever you are.
Samurai Who Weren’t Japanese
By Lawrence W. Reed
Did you know that two of the most famous samurai in history were not Japanese?
Many Americans owe their knowledge of Japanese samurai to filmmakers. Renowned for their discipline and courage, the samurai were the military nobility from the 12th century until the abolition of their class by Emperor Meiji in the 1870s. The armored, sword-wielding warriors figured prominently in James Clavell’s 1975 best-selling novel, Shōgun, and its adaptation into a blockbuster TV mini-series in 1980; the current re-make by the same title on the FX network; and even a few hilarious John Belushi sketches in the early years of Saturday Night Live.
But did you know that at least two of the more famous samurai were not ethnically Japanese at all? One, named Yasuke, was most likely born in Mozambique in southern Africa; the other, William Adams, hailed from Gillingham in the County of Kent, England. In a couple of nut- shells, I’ll share their stories here, but first, a little more background.
Samurai origins go back more than a thousand years, but their emergence as the ruling military class dates to the 13th century. By the time they decisively defeated invading Mongols in the 1280s, they dominated the Japanese government and were widely viewed as model citizens and consummate, professional soldiers.
When Japan invaded the Korean peninsula in the 1590s, some samurai were sent there to fight, though Korea successfully repelled Japanese forces. The high-water mark for the samurai was during a civil war shortly thereafter, particularly the pivotal Battle of Sekigahara in 1600.
That’s when Tokugawa Ieyasu unified Japan by defeating rival clans, ushering in a period of military dictatorship and domestic peace that lasted until 1868.
Peace, however, meant that there were no wars in which the samurai could fight and win glory. They gradually melted into the Tokugawa bureaucracy and other professions until Emperor Meiji formally dissolved them as a privileged class in the 1870s.
The two samurai I introduce you to now were both anomalies for a rather exceptional reason: Neither was Japanese.
One of them, Yasuke, was a black man from Mozambique. Yasuke’s story is shrouded in legend, but historians know a few things about him with certainty. Clubbed and kidnapped along with many others by members of a rival tribe, he was sold into slavery at the hands of a Portuguese ship captain.
From there he passed into the service of the Italian Jesuit priest and missionary Alessandro Valignano. Acting as a bodyguard, Yasuke accompanied Valignano on his voyage to Japan in 1579. Both men befriended the powerful warlord Oda Nobunaga, who was initially so shocked by the black man’s color (assuming he was “painted” in ink) that he ordered it to be scrubbed out.
When Yasuke emerged from the “cleaning” as black as ever, he earned special respect from Nobunaga and the Japanese people. It surely helped that Yasuke was highly muscled and, with a height of 6′ 2″, towered over the average Japanese. One account of him stated he was built “like a bull” and possessed “the strength of ten men.”
It is believed that Yasuke spent only three years in Japan. But we know that he learned the ways of a samurai warrior quickly and fought alongside Nobunaga at the Battle of Tenmokuzan in 1582.
No one knows for sure when Yasuke died or how, but he seems to have disappeared in that same year.
In 2019, Thomas Lockley and Geoffrey Girard authored a remarkable biography of him titled African Samurai: The True Story of Yasuke, a Legendary Black Warrior in Feudal Japan. Several YouTube videos feature Yasuke’s story as well.
The English navigator William Adams (1564–1620) never met Yasuke but may well have heard about him. Adams was one of the few survivors of a five-ship expedition that left Rotterdam for Japan and arrived in 1600, near starvation after 19 months at sea. For the record books, Adams is known in history as the first Englishman to reach Japan. During the next ten years the Japanese would not allow him and his second mate, Jan Joosten, to leave the country, but the two men made good use of their time there.
Both Adams and Joosten acclimated themselves to the culture and worked their way into the confidence of the Japanese, despite the language barrier that hindered communication with their captors at first. When Adams was taken to meet the warlord Tokugawa Ieyasu at Osaka Castle, Ieyasu was immediately impressed with the Englishman’s knowledge of ships, shipbuilding, and navigation. Four years later, Ieyasu chose Adams to supervise the building of Japan’s first Western-style sailing vessel.
Adams’s friendship with the warlord paid off big-time when Ieyasu bestowed the stipend and privileges of “samurai” on the Englishman. He was even granted a fine estate and, eventually, permission to leave Japan freely and return as he pleased. He took on a Japanese name as a high official in the ruling shogun’s court and helped attract foreign traders to Japan by serving as an advisor and interpreter. Reflecting on his years among the Japanese, he wrote:
Re people of this Land of Japan are good of nature, courteous above measure, and valiant in war: their justice is severely executed without any partiality upon transgressors of the law. Rey are governed in great civility. I mean, not a land better governed in the world by civil policy.
Adams spent the final years of his life engaging in many trading expeditions in Asia and the Pacific, finally dying in 1620 near Nagasaki, where his grave marker can be seen to this day. The acclaimed American actor Richard Chamberlain played John Blackthorne in the 1980 mini-series Shōgun, and the Blackthorne character was loosely based on the life of Adams. Historian Giles Milton wrote a fine biography of him in 2002, titled Samurai William: The Englishman Who Opened Japan.
Fifteen years after Adams’s death, Japan’s military dictator, Tokugawa Iemitsu, issued the Sakoku Edict which officially closed off the coun- try from the world for the next two centuries. The trade that Adams helped develop would not reappear until Commodore Perry forced Ja- pan to open itself up in 1853.
When you next think of the fabled samurai, remember that they were not all native Japanese. Yasuke and Adams were two very notable such exceptions.
The Virtues of Commerce: Lessons from Japan
By Stephen Davies
One of the great questions of historical inquiry, which I have addressed in these pages and elsewhere, is exactly how the modern world came to be so different from what went before. Since about 1750 there has been a 16- fold increase in real wealth per capita on a global scale, something completely unprecedented that has transformed the lives of everyone on the planet much for the better.
In her latest work, Bourgeois Dignity: Why Economics Can’t Explain the Modern World, Deirdre McCloskey argues that the critical factor was a change in how productive activities such as trade were regarded. Instead of being seen as menial, morally disreputable, and lacking in honor, they came to be regarded as respectable, dignified, and above all virtuous. This gave trade, merchants, and manufacturers (those who worked with their hands) the crucial respect formerly given only to aristocrats, priests, and even peasants. I think McCloskey gives too much weight to this explanation, but the phenomenon she identifies was undoubtedly real and important.
McCloskey identifies the Dutch Republic as the place where the cultural shift started in the early 17th century. In the European case this is undoubtedly true. However, it was not unique. Another later but independent shift was even more self-conscious and deliberate. It hap- pened in one of the most fascinating of premodern societies, Tokugawa Japan. (McCloskey discusses the striking similarities between Europe and Japan at this time.)
From 1467 to roughly 1570, Japan went through what became known as the Sengoku, or “Warring States,” period of its history. The central authority was weak to nonexistent and warfare was almost constant. Between 1568 and 1603 there was the Momoyama, or unification, period in which Japan was unified by several astute leaders. The last of these, Tokugawa Ieyasu, defeated his rivals at the Battle of Sekigahara in 1600 and established the Tokugawa Shogunate, which would rule Japan until 1868. Tokugawa Japan was simultaneously deeply conservative and yet dynamic. The Tokugawa Shoguns, particularly after the 1630s, banned almost all contact with the outside world (the losing side at Sekigahara had generally favored greater links). Internally they sought to encourage and enforce a strict conservatism. One aspect of this was a firm insistence on traditional social hierarchies of esteem and status: emperor, shogun, daimyo, samurai, peasant, artisan, merchant. In general, the countryside was seen as morally superior to the city. Another aspect was a revival of interest in Confucianism, particularly by the samurai, with development of an elaborate moral code and philosophy known as bushido—the way of the warrior.
The other side of Tokugawa Japan, however, was rapid economic development. Population grew swiftly after the 1690s, and this went along with dramatic urbanization: By the late 18th century the capital Edo (now Tokyo) and other centers such as Osaka and Kyoto were among the largest cities on the planet. There was also a great growth of internal trade and manufacture, as well as some trade with the outside world via a small colony of Dutch merchants on an artificial island in Nagasaki Harbor. This also went along with interesting cultural developments. The merchant class in Japan did not simply concern themselves with business and physical pleasure, accepting their lowly status, as is often supposed. Instead, they also explored Confucian and other ideas. In doing so they developed their own philosophy and culture, that of chōnindō—the way of the townsfolk.
The essence of chōnindō was developed and articulated by a series of thinkers from the later 17th century onward in the mercantile centers of Japan and particularly in Osaka. (Osaka had been the center of the Toyotomi clan, the rivals of the Tokugawa and the losing side at Sekigahara.)
The crucial event in many ways was the founding of the Kaitokudō academy in Osaka in 1726 by Miyake Sekian and Nakai Shuan. This was a private educational institution, funded by the great merchant and trading houses of Osaka, for the exploration of Confucian ideals and in particular the establishment of the connection between productive work, trade, and virtue. The founders and teachers of the Kaitokudō argued that hard work, skill, craftsmanship, and physical labor were virtuous and forms of human excellence. More dramatically, given the traditional hostility toward it in much Confucian thought, they argued that profit was itself virtuous and that its pursuit was not only compatible with a moral life but moral in itself. The deeper argument was that there was no contradiction between the traditional virtues of restraint, loyalty, honor, and magnanimity and the life of labor and commerce. Instead, all these virtues were both necessary for success in that kind of life and embodied in the successful living of such a life. What was wrong was dishonest and predatory behavior in any way of life.
Another aspect of the urban life of Tokugawa Japan that had a close relationship to all this was the notion of the “floating world” as rep- resented in the artistic genre of Ukiyo-E, the well-known woodblock prints of urban life. In its physical sense the “floating world” referred to the pleasure and entertainment sectors of the new cities of Japan. As such it is often thought of as a cult of hedonism and something opposed to both bushido and chōnindō. Sometimes this was true but more of- ten there was a connection between the ideals of the floating world and those of chōnindō. The common element was the belief, also found in Enlightenment Europe, that this physical world was good, not cursed, and that physical pleasure and well-being were admirable and worth seeking rather than barriers to virtue. The connection with chōnindō was through the idea that in fact greater comfort and physical pleasures encouraged virtue (while discouraging predatory or vindictive behavior) and were the outcome of following the virtues of the merchant or townsman.
We may think that today the arguments of people like Adam Smith in Europe or the teachers of the Kaitokudō in Japan are unimportant because they are so obviously true and uncontroversial. Nothing could be further from the truth. Rather they are now as unfashionable and deprecated as when those Japanese merchants got together and set up their academy in Osaka almost 200 years ago. Because they faced such a hostile culture, they were in many ways more explicit and systematic in their arguments than their European counterparts were. (Arguably they also had a more congenial intellectual tradition to work with in many ways.) Today too many of the arguments for a free economy and society are made on the basis of efficiency. Such arguments may be true but they butter no parsnips when faced with a moral rejection of the idea of profit and commerce. The argument that a free economy is a moral economy is one that needs to be made and won more than ever. We should read people like Ito Jinsai, Nishikawa Joken, Miyake Sekian, Nakai Shuan, Tominaga Nakamoto, Goi Ranju, Nakai Chikuzan, Nakai Riken, Kusama Naokata, and Yamagata Bantō as much as we do Adam Smith, David Hume, Lord Kames, and Milton Friedman.
How Commodore Perry Liberated Japan With Trade
By Tyler Curtis
Japan’s isolation was not “self-imposed” at all; rather, isolation was imposed upon it by an authoritarian government.
During a post-World War II International Military Tribunal, Japanese General Ishiwara Kanji conjured up an interesting apology for his coun- try’s destructive imperialism. It all started in 1853 when Commodore Matthew Perry sailed into Edo Bay and demanded that Japan open itself up to the world. The general said:
Tokugawa Japan believed in isolation; it didn’t want anything to do with other countries, and had its doors locked tightly. Ren along came Perry from your country in his black ships to open those doors; he aimed his big guns at Japan and warned, “If you don’t deal with us, look out for these; open your doors, and negotiate with other countries too.” And then when Japan did open its doors and tried dealing with other countries, it learned that all those countries were a fearfully aggressive lot. And so, for its own defense it took your own country as its teacher and set about learning how to be aggressive. You might say we became your disciples. Why don’t you subpoena Perry from the other world and try him as a war criminal?
In Ishiwara’s mind, Perry was an insidious invader who used the overwhelming power of the United States Navy to bully Japan into allowing foreigners into their country. It was Perry who brought imperialism and commercialism to Japan, compelling the island nation to participate in the corrupt world of international trade, he claimed.
Gunboat Diplomacy
To a certain extent, Ishiwara was correct. The 1840s and ’50s saw Manifest Destiny at its zenith, with the burgeoning American republic aggressively pushing its way West, conquering vast swaths of land from Mexico and native tribes. Just five years after the United States stretched itself to the Pacific Ocean, imperialists and speculators looked to Asia for more opportunities. In 1853, President Millard Fillmore commissioned Commodore Matthew Perry to hand-deliver a letter to the Japanese emperor, strongly suggesting that he open his country up to international trade. (At this time, however, the emperor was essentially powerless. The government was controlled by the military, and so it fell to them to decide how to respond to President Fillmore’s letter.)
Though he and his military entourage never fired a shot, Commodore Perry’s expedition carried a clear threat of violence. It was no accident that he was chosen to go rather than an unarmed group of diplomats. President Millard Fillmore knew that only a show of force, nowadays referred to as “gunboat diplomacy,” would convince the Japanese to consider his terms.
The terms were hardly unreasonable. In his letter, President Fillmore requested that damaged American ships be protected and their crews treated with kindness; that American sailors be permitted to purchase provisions in Japan; and the big one, that Americans be allowed to buy and sell freely with Japanese citizens. The president ended his letter with the ominous reminder that Perry possessed “a powerful squadron.”
And indeed, it was. Among Perry’s squadron were large, steam-powered ships bristling with heavy cannon. The hulls were painted black to make them appear even more menacing. Observing these giant “dragons” was “enough to make us lose sleep at night,” as one poet later wrote. After delivering President Fillmore’s message, Perry departed, promising to return the following year “with a much larger force” should he deem it necessary.
Isolated by Military Force, Not by Choice
While it cannot be denied that Commodore Perry’s actions were brutish, they pale in comparison to the repressive rule of the bakufu, Japan’s military government. Concerned that foreign influences would corrupt their society, the bakufu prevented any outsiders from entering their country. Many Japanese intellectuals, however, hungered for the scientific knowledge and culture introduced to Japan by Dutch merchants. Though the Dutch were confined to a small island in Nagasaki Harbor, eventually their books were allowed to circulate throughout Japan, bringing about the rise of Rangaku, or Dutch Studies.
Traditional Japanese officials, including the shōgun, leader of the bakufu, became worried that “barbarian” influences were contaminating their sacred homeland and fought against the spread of Western ideas. In 1825, the shōgun issued the “edict to repel foreign vessels,” allow- ing the Japanese to fire on ships approaching their shores. International backlash persuaded the shōgun to rescind this order in 1842, but the country remained unequivocally closed.
What did the Japanese people think of this policy? Listening to General Ishiwara’s testimony, one would think the entire nation supported its self-imposed isolation. This is plainly false.
As already noted, Japanese scholars were greatly interested in Dutch learning, and Japanese citizens traded frequently with Dutch merchants in Nagasaki. When Commodore Perry landed in Japan, he brought an abundance of American goods to show off, much to the delight of the Japanese observers. One such item was a model train, which the Americans set up on a circular track and offered rides. For the most part, it seems the Japanese people welcomed the Americans and were eager to trade with them.
The reality is that Japan’s isolation was not “self-imposed” at all; rather, isolation was imposed upon it by an authoritarian government. Arrogating to themselves the power to prevent Japanese citizens from engaging in peaceful transactions with non-Japanese, the government robbed individuals of their personal sovereignty.
Knowing war with the United States would probably end in defeat and possibly regime change, the bakufu agreed to not only the terms outlined in President Fillmore’s letter but also other, more specific stipulations. Notoriously referred to as the “unequal treaties,” Japan’s government eventually relinquished the power to set its own tariffs and granted extraterritoriality to Americans accused of committing crimes on Japanese soil.
Commodore Perry’s Mixed Legacy
So, was Commodore Perry a hero, or, as General Ishiwara asserted, was he a villain? On the one hand, Commodore Perry’s expedition established a dangerous precedent for diplomatic relations in Asia. Just over twenty years after America forced Japanese concessions, Japan strong-armed Korea into revoking its indefinite moratorium on international trade. In a historical episode closely mirroring Commodore Perry’s mission, Japan sent a warship commanded by Captain Inoue Yoshika into Korean waters hoping to intimidate them into signing a treaty with provisions similar to those forced upon Japan by the United States. After a short conflict, Korea capitulated and went on to sign several unequal treaties over the following decades before being officially annexed by the nascent Japanese Empire in 1910.
It is therefore arguable that the actions taken by the United States and other imperialist Western powers created an environment in which trade was treated as a valuable strategic prize that had to be “captured” before other nations had the chance. The East Asian power struggles of the late 19th and early 20th centuries were indicative of this dangerous geopolitical ideology.
Laying the blame for Japanese imperialism at the feet of Matthew Perry, however, would be dubious. While Western nations, including the United States, certainly played a role in further destabilizing the region, the mere destruction of trade barriers was not a contributing factor. Commodore Perry’s expedition was about allowing people to conduct transactions freely. Japan’s imperial expansions, by contrast, were about subjugation, with the ultimate goal of achieving national “self-sufficiency.”
The End of Japanese Isolationism Led to Prosperity
In the end, what matters most is how Perry’s arrival affected ordinary Japanese citizens. Opening the nation to international trade was an enormous boon to the vast majority of the Japanese people. Trade introduced Japan to Western scientific knowledge, new technologies, and innovative production techniques. In just a few short decades, Japan became one of the most industrialized nations in Asia. Living standards increased exponentially. For those toiling under the feudal bakufu regime, Commodore Perry’s arrival was considered a liberation. To this day, Japanese citizens in Shimoda City honor Perry during the annual Blackship (Kurofune) Festival, an event celebrating the end of Japanese isolation.
Why The Meiji Restoration Was Pivotal for Japan
By Lawrence W. Reed
Meiji Japan was not a liberal paradise. But the country in 1900 was notably freer, more industrialized and prosperous, and substantially more modern than it had been just three decades earlier.
Isolation, feudalism, and military dictatorship governed the Asian nation of Japan from 1603 until 1868. Known as the period of the Tokugawa Shogunate, its dissolution was hastened by the stunning appearance of Commodore Matthew Perry’s flotilla of American warships in 1853. He demanded that the Japanese government in Tokyo allow its citizens to trade with Western merchants.
Perry, a native of Rhode Island, is often presented in textbooks as the Pacific vanguard of American imperialism, a disturber of the peace who threatened the Japanese way of life. There is some truth to that, but it’s not as negative as it appears on the surface. Many Japanese welcomed contact with America and other Western trading nations. They saw Perry’s arrival as liberating. Every year, the event is celebrated at festivals in both Newport, Rhode Island, and in Shimoda, Japan, as the beginning of a long friendship interrupted only by the tragedy of World War II.
Traditionalists and nationalists in Japan, of course, resented Western intrusion. Their views would later justify a military build-up to ensure the country’s sovereignty and to thwart the “unequal treaties” Westerners imposed on the country. That build-up would eventually fuel Japanese ambitions for imperialist adventures abroad.
In the 15 years that followed Perry’s venture, the grip of the military dictatorship in Tokyo declined. Civil war erupted. When the smoke cleared in the first few days of January 1868, the shogunate was gone and a coup d’etat ushered in a new era of dramatic change. We call it the Reform Period, or the era of the Meiji Restoration.
That seminal event brought 14-year-old Mutsuhito to the throne, known as Emperor Meiji (a term meaning “enlightened rule”). He reigned for the next 44 years. His tenure proved to be perhaps the most consequential of Japan’s 122 emperors to that time. The country transformed itself from feudal isolation to a freer economy, engaged with the world and more tolerant at home.
In 1867, Japan was a closed country with both feet firmly planted in the past. A half-century later, it was a major world power. This remarkable transition begins with the Meiji Restoration. Let’s look at its reforms that remade the nation.
For centuries, Japan’s emperor possessed little power. His was a largely ceremonial post, with real authority resting in the hands of a shogun or, before that, multiple warlords. The immediate effect of the Meiji Restoration was to put the emperor back on the throne as the nation’s supreme governor.
In April 1868, the new regime issued the “Charter Oath,” outlining the ways Japan’s political and economic life would be reformed. It called for representative assemblies, an end to “evil” practices of the past such as class discrimination and restrictions on choice of employment, and an openness to foreign cultures and technologies.
After mopping up the rebellious remnants of the old shogunate, Emperor Meiji settled into his role as supreme spiritual leader of the Japanese, leaving his ministers to govern the country in his name. One of them, Mori Arinori (see Chapters 9, 10, and 11), played a key role in liberalizing Japan. I regard Arinori as “the Tocqueville of Japan” for his extensive travels and keen observations about America.
The Meiji administration inherited the immediate challenge of a raging price inflation brought on by the previous government’s debasement of coinage. The oval-shaped koban, once almost pure gold, was so debauched that merchants preferred to use old counterfeits of it instead of the newer, debased issues. In 1871, the New Currency Act was passed which introduced the yen as the country’s medium of exchange and tied it firmly to gold. Silver served as subsidiary coinage.
A sounder currency brought stability to the monetary system and helped build the foundation for remarkable economic progress. Other important reforms also boosted growth and confidence in a new Japan. Bureaucratic barriers to commerce were streamlined, and an independent judiciary established. Citizens were granted freedom of movement within the country.
The new openness to the world resulted in Japanese studying abroad and foreigners investing in Japan. British capital, for instance, helped the Japanese build important railway lines between Tokyo and Kyoto and from those cities to major ports in the 1870s. The new environment encouraged the Japanese people themselves to save and invest as well.
For centuries, the warrior class (the samurai) were renowned for their skill, discipline, and courage in battle. They could also be brutal and loyal to powerful, local landowners. Numbering nearly two million by the late 1860s, the samurai represented competing power centers to the Meiji government. To ensure that the country wouldn’t disintegrate into chaos or military rule, the emperor took the extraordinary step of abolishing the samurai by edict. Some were incorporated into the new national army, while others found employment in business and various professions. Carrying a samurai sword was officially banned in 1876.
In 1889, the Meiji Constitution took effect. It created a legislature called the Imperial Diet, consisting of a House of Representatives and a House of Peers (similar to Britain’s House of Lords). Political parties emerged, though the ultimate supremacy of the emperor, at least on paper, was not seriously questioned. This nonetheless was Japan’s first experience with popularly elected representatives. The Constitution lasted until 1947, when American occupation led to a new one devised under the supervision of General Douglas MacArthur.
Modernization in this era of reform produced Western-style laws governing taxation, banking, and commerce. The old feudal order dis- solved into a largely market economy, private property, and the rise of Japanese entrepreneurship. Communications throughout Japan were updated. Stock exchanges materialized. By century’s end, Japan was a unified powerhouse—able to decisively defeat powerful adversaries like China (1894) and Russia (1905) in war.
Meiji Japan was not a liberal paradise. The government tolerated only token criticism. What the Imperial Diet could actually enact was restricted by the Emperor and his ministers. Education, though far more widely available, was controlled by the government. Compulsory military service was introduced. Voting for public offices was limited to a tiny portion of the population, mostly the wealthy. Taxes were high, in part because the government spent heavily on infrastructure and the military.
But the country in 1900 was notably freer, more industrialized and prosperous, and substantially more modern than it had been just three decades earlier. Even a little freedom goes a long way to unleash the creative energies of people.
Emperor Meiji died in 1912, ending the era named for him. His successor, Emperor Taisho, presided over an increasingly expansionist foreign policy. With the European powers busy at war from 1914 to 1918, Japan began making resource and territorial demands on China and the Pacific. In that regard, the Japanese emulated some of the imperialist practices of Germany and Britain in the region—a policy that would eventually lead to war with America.
With ominous implications, the Meiji Period’s nascent measures toward democratic institutions were nipped in the bud as the military’s influence grew in the 1930s. You know what happened next.
In his definitive volume on the era, W.G. Beasley describes the Meiji Restoration as “the historical starting point for the modernization of Japan.” Underscoring the rapidity of the change, Beasley notes that “Japan was able within a generation to claim a place among the powerful and ‘enlightened’ countries of the world.”
To understand modern Japan, one cannot ignore the era that made modernization possible: the Meiji Restoration of 1868–1912.
Mori Arinori: The Japanese Tocqueville, Part 1
By Lawrence W. Reed
By any measure, Mori Arinori’s short life was remarkable.
In the early 1830s, the French political philosopher and historian Alexis de Tocqueville toured America. He compiled his observations in Democracy in America, widely recognized as a classic study of the cultural and political milieu of a country then only half a century old.
Tocqueville admired the decentralized framework of American government, and the vibrant civil society it helped to generate. He applauded the diminution of class rigidities that characterized the social stratification of the Old World. But he knew that egalitarian impulses, if carried to extremes, carry the seeds of destruction. In his words:
Here is in fact a manly and legitimate passion for equality that spurs all men to wish to be strong and esteemed. His passion tends to elevate the lesser to the rank of the greater. But one also finds in the human heart a depraved taste for equality, which impels the weak to want to bring the strong down to their level, and which reduces men to preferring equality in servitude to inequality in freedom.
So powerful were Tocqueville’s insights that Democracy in America ranks as a must-read if one wants to understand what life was like here in the 1830s.
Far less known is another author who studied America three and a half decades later (the post-Civil War Reconstruction Era of the late 1860s and early 1870s). He hailed from half a world away—Japan—and his name was Mori Arinori. His book, appearing in 1871, resonates with penetrating discernment about America from a unique foreign perspective. Titled Life and Resources in America, it deserves much more attention and appreciation than it ever received.
This article is the first of a three-part series exploring Mori Arinori, his thought, and his observations about the United States. I will rely heavily on his own words from Life and Resources in America, particularly the 2004 edition as edited, annotated, and introduced by John E. Van Sant, an eminent historian at the University of Alabama-Birmingham. It is a superb starting point for understanding the man and his times.
Additional sources I will cite and strongly recommend to the interested reader are: Alistair Swale’s indispensable The Political Thought of Mori Arinori: A Study of Meiji Conservatism, Donald Keene’s exhaustive Emperor of Japan: Meiji and His World, 1852–1912, and Ivan Parker Hall’s majestic biography, Mori Arinori.
Japan: A Brief History
Americans are a Euro-centric people, for understandable reasons. Most of us trace our ancestry to European countries. Our interests in nearby Latin America are rising in part due to immigration, though we are still sadly deficient in comprehending the history and culture of that part of the world. Our general knowledge of the Far East is even more limited, akin to what I suspect Japanese understanding of Africa might be. So a little background is probably in order.
Ask any random American what he knows about pre-20th-century Japan and you may not hear more than this: Japan had figuratively walled itself off from the world until a US naval officer, Commodore Matthew Perry, showed up with a fleet of ships in 1853 and forced the country to open up. His mission: Get the Japanese to embrace diplomatic and trade relations with the world. The result was indeed an opening, but one that was often marked by “unequal treaties” to the disadvantage of Japan.
That’s a basically accurate but simplified interpretation of a pivotal event in Japanese history. When Perry banged on Japan’s door, its government was already on its last legs. Known as the Tokugawa Shogunate, it was a military regime that since 1603 had enforced a rigid, internal class system, a feudal economy, and a radically isolationist foreign policy. It even banned Christianity. It would survive only fifteen more years after Perry’s expedition, its demise hastened by Japanese resentment of its illiberal mandates and a widespread desire to restore the role of the emperor.
The Tokugawa Shogunate was overthrown and the last shogun dispatched from power (after only a year in the job), ushering in the Meiji Restoration of 1868. That seminal event brought 14-year-old Mutsuhito to the throne, known to history as Emperor Meiji (a term meaning “enlightened rule”). He reigned until his death in 1912. His tenure proved to be perhaps the most consequential of any of Japan’s 122 emperors to that time. The country transformed itself from feudal isolation to a largely market economy, engaged with the world and more tolerant at home.
A young Mori Arinori was a key leader in these profound developments.
Mori Arinori: A Remarkable Man
Who exactly was this fascinating man? By any measure, his short life was remarkable. Born in August 1847 into a samurai family (the hereditary military nobility), he enrolled at the age of 18 at University College London in Great Britain. There, he studied naval surveying, physics and mathematics, and was exposed for the first time to classical liberal ideas and Victorian social values. Both influenced him greatly for the rest of his life. The Meiji Restoration brought him back to Japan with an eagerness to advance in his home country much of what he learned in Britain.
While in London, he visited a school for the blind that was privately run by a Christian organization. It impressed him deeply, prompting him to praise Christianity for helping to create an “extraordinary degree of enlightenment” in the countries where it prevailed. He also wrote approvingly of the separation of church and state, suggesting once that Russia would greatly benefit if people stopped worshiping the czar and if politics and religion steered clear of each other. He staunchly defended secular government and complete freedom of religion at the same time.
Biographer Hall notes that Mori was “impressed with the civilizing aspects of Christianity as a social force and with the personal rectitude of individual Christians who lived up to their profession of the faith.”
Mori’s growing appreciation of both liberal and Christian values would prompt him to take aim at Confucianism, which had been imported to Japan from China. The most important disciple and interpreter of Confucius, Mencius, supported the same free trade, low taxes, and laissez-faire economy that Mori favored 2,000 years later, but Mori took issue with the more statist elements of Confucianism:
Re doctrine of obedience, the leading feature in the Confucian school of morals, was one of the most important levers of the central authority. Its evil effect upon society was seen in the manner in which it retarded the development of the vital spirit of self-reliance, destroyed the happiness of domestic life, and cultivated the feeling of subjection.
Mori took time out from his London experience to visit the US in August 1867. He was just 20. Four years later, he would be named Japan’s first Ambassador to America, a post he held for two years.
Alistair Swale, author of The Political Thought of Mori Arinori: A Study of Meiji Conservatism, reveals that at age 24, Arinori thought “his youth made him a particularly inappropriate emissary of the Emperor.” He certainly had his critics in the government back home, but he nonetheless strengthened the good relations between the two countries while impressing Americans with his intellectual depth and innate curiosity.
I cannot verify that Mori was the youngest person in history appointed as ambassador from one country to another, but if he wasn’t, he certainly was one of the youngest ever. His resume thereafter is just as impressive:
- Ambassador to China, 1875.
- Founder, in 1875, of Japan’s first commercial college, the precursor to what is Hitotsubashi University in Tokyo today.
- Ambassador to Britain, 1879–1884.
- Minister of Education in Japan, 1885–1889.
Unfortunately, his incredible career was cut short in 1889. At the age of only 41, he was assassinated. (More on that tragedy in Part 3 of this series.)
A Japanese Tocqueville?
Amongst the books in Mori’s personal collection was a copy of Tocqueville’s Democracy in America. A voracious reader, it’s quite likely that he knew it from cover to cover. Certainly, more than a few of his observations about America sound positively Tocquevillian, such as these:
Re secret of the unparalleled growth and the daily increasing power of the United States is that the Government, in its practical working, is confined to the narrowest limits; that it is the agent, not the master, of the people.
A prosperous, happy and permanent republican government can only be secured when the people who live under it are virtuous and well educated.
On his way home to Japan after his ambassadorship, he stopped in England and visited Herbert Spencer, a leading philosopher and sociologist of the day. Author of Social Statics and The Man Versus the State, Spencer generally espoused classical liberal ideas. It would seem from both men’s writings that Spencer’s influence on his young Japanese friend was considerable.
Spencer cautioned Mori not to push his people too far too fast, lest liberal reforms generate a backlash. Soon after his time with the English intellectual, Mori dropped his longstanding call to abolish use of the Japanese language and replace it with English. He embraced a more gradualist reform agenda, though his time back in Japan was brief. He was made Ambassador to Great Britain in 1879, at age 32, and served there for nearly five years.
In the interim years between ambassadorships, Mori established the Meiroku Society in Japan and became its first president. Swale notes that it was “one of the most significant institutions within the Japanese Enlightenment.” Though the views of its members were punctuated by notable differences, the Society generally sought to promote moderate liberal reforms within the Japanese cultural context, moral teaching and self-discipline, religious tolerance, rejection of superstition and embrace of reason, private property, and an openness to connections with the rest of the world.
With the insular Tokugawa Shogunate gone and the Meiji Restoration in place, these once-unthinkable notions could take root in Japan. Mori championed this new direction, though not without the occasional statist baggage that would seem contradictory. For instance, because he thought the Japanese people were far behind the West in what they knew and thought, he supported a more activist role for government in education. He believed that certain moral and intellectual preconditions must take root before sweeping political reforms could be enacted and sustained, though the question of who was best capable of accomplishing that (government or private institutions) was more than a little debatable.
Context is important here. The society that Mori and his Meiroku associates sought to change had only recently emerged from a kind of moral, social, economic, and political darkness. Women in Japan, for instance, were traditionally subordinate to men in every respect; reformers wanted to move toward more equal rights and conditions for both sexes but knew that wasn’t likely to happen overnight. In another arena, foreign policy, Japan within Mori’s lifetime transitioned from a closed society to an open one. Birthing a new economy of global economic connections, the reformers knew, would be a bumpy process requiring a popular consensus that businesses once insulated and protected would now have to compete or disappear.
Mori was, in the words of Swale, “a reformer with radical and, in most regards, liberal objectives” but one who nonetheless argued for mostly incremental policy changes that respected Japanese history and culture. Political reforms, he believed, should be achieved as often as possible by broad consent rather than imposed suddenly from the top down. Influenced in this regard by Herbert Spencer, he believed that changes in law and governance would founder unless the necessary social and cultural transformations to support them were cultivated first. Consequently, he was attacked from two directions at the same time—from Japanese liberals impatient with his moderation and from anti-reform elements who saw him as too radical.
So now you know who Mori Arinori was and a little of what he believed. In Parts 2 and 3 of this series, we will explore his view of the United States as presented in his Life and Resources in America. But first, allow me to tantalize you with this:
Mori was so negatively impressed by American politics in the 1860s and ’70s that one can safely assume he would be mortified by the level of its degeneracy today. Back then, he thought Congress was composed largely of “mere time-serving politicians.” He wrote, “This class of citizens has greatly multiplied… and it is safe to say that nearly all the troubles which befall the country are the result of their petty schemes and selfish intrigues.”
Mori Arinori: The Japanese Tocqueville, Part 2
By Lawrence W. Reed
Mori Arinori saw America’s grasping political class as its greatest liability. He was far more sanguine about America’s immigrants, farmers, artisans, entrepreneurs, and housewives.
By the time Commodore Matthew Perry sailed his fleet of American gunboats into the Harbor of Edo (now Tokyo) in July 1853, the days of the 250-year-old Japanese military regime were already numbered. “Japanese society was unraveling from within,” writes Historian John E. Van Sant.
The weakness of the Tokugawa Shogunate was laid bare for all Japanese to see when it quickly caved to Perry’s demands that Japan open trade and diplomatic relations with the world. Since the early 17th century, it had straight-jacketed Japan with a rigid class system, hereditary privileges, a feudal economy, and near-total isolation from the world. Among the disaffected were rice farmers, who labored under an oppressive rice tax that claimed half of their harvests. For the objectives the American government of President Millard Fillmore sought in the Perry expedition, the timing couldn’t have been better.
In an interview for the Pall Mall Gazette in Britain, Mori Arinori distilled the dramatic transformation underway in mid-19th century Japan:
Three hundred years ago a change was introduced. The feudal system was established, and Japan for three centuries ceased to display her national characteristic and remained stationary and shut up within herself. But at the close of that period, she shook herself free from the burden of feudalism and assumed her old national role.
This is the second in a three-part series focusing on Mori Arinori. He played a key role in liberalizing Japanese society after the Shogunate was abolished by the Meiji Restoration of 1868. See Chapter 9 (Part 1) to learn more about this man who became Japan’s first Ambassador to the United States at the age of 24 and wrote a Tocqueville-style book of observations about America.
Here in Part 2, I share some of the insights and remarks from Mori’s Life and Resources in America. From the unique perspective of a young Japanese visitor, America in the years following the Civil War comes alive. Published in 1871, the book recalls the earlier and more famous survey of America in the 1830s, Democracy in America, by the Frenchman Alexis de Tocqueville.
Though Mori deeply appreciated the principles which animated America’s founding, he expressed a general dismay toward its public officials. Americans seemed to care more about the quality of their local and state politicians, he believed, than they did those at the federal level.
Perhaps it’s inevitable that an idealist will be disappointed by human reality. Mori set a high standard for government that none in history has ever perfectly achieved:
Since it is the primary business of the State to uphold justice, and thereby to protect all the legal rights of every person, especially those related to property and liberty of conscience, it may be concluded that every legislative act ought to be so conceived so as to effectually achieve such results.
His visit to America in the late 1860s, several years before he became Ambassador, introduced him to the shortcomings of democratic gover- nance. He noted, for example, that
when a young man has determined to lead a political life, his first desire is to be elected to the State Legislature, then to become Governor of the State, and from that position he thinks himself entitled to go into the United States Senate… Generally speaking, the career of public men in this country is measured more by their cunning or success at managing the people who have votes, rather than their abilities.
If your response to that citation is something like “the more things change, the more they remain the same,” you’re sadly right. I see that fact as a good reason to keep government small, and I think Mori would agree. He saw a centralizing undercurrent in American political life and an unseemly rise in power-seeking that he believed “beyond all question to be great disadvantages to the Republic”:
They naturally interfere with the proper and regular working of the machinery of the Government and are the primary cause of the bitter political dissensions which have long prevailed, and continue to prevail, among the American people. And what is more, they lead to all kinds of corruption; and at the very time of our writing these lines, the people of New York are greatly convulsed over the discovery that the Treasury of the City and State have been robbed to the extent of many millions of dollars, growing directly out of the evils of office-seeking.
Mori was far more sanguine about America’s immigrants, farmers, artisans, entrepreneurs and housewives than he was about the country’s political class. “The secret of the unparalleled growth and the daily increasing power of the United States,” he wrote, “is that the Govern- ment… is confined to the narrowest limits.” Moreover, he continued:
It is the agent, not the master of the people… It is, therefore, the condition of the success of a settlement that the immigrant relies on his own strength and responsibility, and seeks by his own efforts the prosperity which he is sure to find if undisturbed. Despite obstacles and disappointment, he will make his way and ultimately attain his objects.
With approval, Mori devotes several pages to the plethora of “amusements and festivals” in American farming communities—including “sugar-making frolics” in New England, “corn huskings” in the Midwest, “clam-bakes” along the Atlantic, “barbecues” in the South, and others common to all parts of the country, such as “ball-playing,” “sleigh-riding,” “house-raising,” “shooting matches,” and, as he puts it, “to the discredit of the participants, cock-fighting.” He saw private life and civil society in America as remarkably cheerful and robust, reserving special praise for a particular day:
The crowning custom, and the one most universally recognized by the American people is the celebration of what is known as Thanksgiving Day… Of all places to enjoy it, none can be compared to the house of a successful farmer. The primary objective of this festival is to recognize the goodness of the Almighty in crowning the labors of the field with prosperity, and the occasion is made especially joyous by the gathering together, under one roof, all the scattered members of the family in the old home.
“The business of America is business,” President Calvin Coolidge famously said in the 1920s. Mori Arinori would have agreed. Moreover, while allowing for the occasional shyster, Mori believed that “permanent success in business is chiefly dependent upon character.” The “average American merchant,” he wrote, “is a man who deserves and receives universal respect.” Furthermore:
He considers his word as good as his bond and, to protect his credit, will make the greatest sacrifice of property. He is liberal in his feelings and gives freely to all objects which have the sanction of his good opinion… When overcome by reverses he takes a new start, changes the character of his business, perhaps, and will not acknowledge himself as overwhelmed, and proves his mettle by attaining final success. Perhaps there is no feature in the character of the Americans which is so remarkable as their spirit of enterprise. (emphasis mine)
The philanthropic generosity of Americans dazzled Tocqueville 40 years earlier. It also impressed Mori. Of merchants in particular, he wrote: “They devote themselves to business with ceaseless activity and are the men who generally take pleasure in expending their surplus capital upon all sorts of benevolent, religious, and educational institutions.”
The abundance of private, charitable, and usually faith-based activities, noted Mori, was a remarkable credit to America:
To give an account of the hospitals, the homes for the orphan and widow and other charitable institutions of the country would occupy more space than can be afforded in this work, but we can state that they are very numerous, liberally endowed, and as efficiently conducted as any in the world. When necessary, people from every clime can find a convenient place where they may be cared for, whether their troubles are the result of poverty, of accidents, of sickness, or any other misfortunes.
In Part 3, the final portion of this series, we’ll uncover more of Mori Arinori’s impressions of America. We’ll also touch on his untimely death at the age of 41.
Mori Arinori: The Japanese Tocqueville, Part 3
By Lawrence W. Reed
At the age of 41, Mori Arinori’s life was claimed by an assassin angered over his opposition to teaching religion in schools.
Mori Arinori of Japan (1847–1889) began his service as Japan’s first ambassador to the United States when he was just 24 years of age. Over the next 15 years until his death, he would also serve as the country’s ambassador to China and Great Britain and its Minister of Education.
Parts 1 and 2 of this series (Chapters 9 and 10) painted a portrait of Mori as a remarkable figure of the Japanese Enlightenment under the country’s Meiji Restoration, as well as a keen observer of the United States in the late 1860s and early 1870s. His book, Life and Resources in America, can be thought of as a Japanese version of Alexis de Tocqueville’s Democracy in America. This concluding segment offers a few more of his interesting perceptions of America.
In previous installments, I explained the unraveling of the ancien régime—known as the Tokugawa Shogunate—that ruled Japan from 1603 until the Meiji Restoration of 1868. Its economic policies kept Japan shrouded in feudalism and largely isolated from the world. In its final decades, the Shogunate destabilized Japanese society with a deliberate policy of monetary debasement as well, by repeatedly reducing the gold content of the principal monetary unit, the koban.
It eventually abandoned gold in favor of a copper-based system so it could inflate even further.
After the Shogunate’s overthrow, the Meiji government inherited the immediate challenge of a raging price inflation. In 1871, the New Cur- rency Act was passed which introduced the yen as the country’s medium of exchange and tied it firmly to gold. Silver served as subsidiary coinage. The word yen, by the way, means “round object.”
Mori Arinori played a role in the transition to sound money, according to my friend Hiroshi Yoshida, Professor of Chiba University of Com- merce and Chair of the Institute of Public Sector Accounting in Tokyo:
The Meiji era began with inflation caused by the previous government’s excessive spending and currency debasement. Mori founded the Institute for Business Training specifically to nurture a new class of businesspeople who could build a free, noninflationary economy. Production of consumer goods and services, double-entry bookkeeping and honesty in both money and business, he believed, would modernize Japan’s economy faster and better than government planning.
A matter still in contention among historians today concerns the extent to which Mori Arinori personally embraced Christianity. He came to teach and practice a system of ethics that prompted more than a few of his countrymen to ask him if he was a Christian. Ivan Parker Hall, in his biography of Mori, cites his typical answer as “I endeavor to live so that men may think that I am a Christian,” which suggests he embraced the ethics but perhaps not the divinity of Christ. By all accounts, Mori lived a life of upstanding personal character, one that was at least deeply influenced by the way the most faithful Christians lived their lives.
Mori was born into a feudal and isolated Japan. However, the more he traveled and learned, the more passionate he became about what we today identify as the principles of “classical liberalism”—limited government, the rule of law, private property, free markets, and individualism. He came to admire private entrepreneurship as an engine of progress and innovation. Consider this observation he made based on his experience in America:
In none of the public schools of America are the foundation principles of commerce taught, and hence there have been established by private individuals what is called a “chain of commercial colleges.” These number not less than forty and extend from Maine to Louisiana. Their course of instruction is very complete and covers all that is necessary for a commercial life. And because this association is under one head, the regulations are such that a student, after completing a course of studies in one, may again take them up and pursue them at another school of the chain without additional expense.
Those American commercial colleges so impressed Mori that upon his return to the US, he founded Japan’s very first one. Today it is known as Hitotsubashi University. It is widely regarded as the best place in the country to study economics and one of the finest universities in the world. He also founded Meirokusha (Meiji 6 Society), Japan’s first intellectual society. It was an informal “think tank” which published a journal of opinion to promote “civilization and enlightenment.”
The general understanding that most Americans have today of American education in the 19th century is that it was deficient until government arrived on the scene with its compulsory and publicly-funded schools. In reality, something close to the precise opposite is true. Education was surprisingly and increasingly strong in our first century, but over the last hundred years, government’s involvement in it has produced a national education crisis. (See my April 2020 article, “The Myth that Americans Were Poorly Educated Before Mass Government Schooling.”)
Coming from a country where the State historically monopolized education, Mori saw America’s much freer institutions as a model of accomplishment. “The most striking feature connected with the literature of America is the circulation of newspapers and magazines, which are read by all classes of the people.” In 1860, notes Mori, “it was estimated that the circulation of the newspapers alone amounted to 100,000,000.” The total population of America in 1860 was just 32 million. America, he observed, was a nation of readers:
The custom of reading books among the people of America is almost universal, far more so, it is said, than is the case in England or France. In every home, from that of the rich merchant down to the poorest farmer, may generally be found such collections of books as they desire or can afford to buy. And for those who cannot afford to purchase all they may wish to read, in the cities and towns everywhere they have circulating libraries where, for a small consideration, books may be read, or borrowed, to be read at home… In 1860, there were 27,730 libraries in the country, in which were collected nearly 14,000,000 volumes.
University of Alabama historian John E. Van Sant explains that Mori’s perspectives on American government were not as positive as were his estimations of its private sector.
“He had seen in 19th century America how ‘direct’ democracy led to a spoils system where unqualified, incompetent, and uncultured people received government appointments simply because they supported a winning candidate for elective office,” writes Van Sant. “Individual liberties and rights were all well and good, but unqualified people of questionable character should not be running the government.”
Moreover, Mori was singularly unimpressed with lawyers in government. In his words:
The lawyers of the United States… have much to do with the making of the national laws, and the affairs of the general government. A competent American critic has said, how few of them have been students of political economy, of civil polity, and of universal history. This is painfully manifest from the legislative discussions they hold and the laws they enact.
Mori’s overall view of America was arguably as complimentary as that of Alexis de Tocqueville 40 years earlier. Our young nation, he wrote, was
one of the wonders of the century and of the world. The extent of its domain and its unbounded resources, the peaceful blending of its many nationalities, the well-nigh unlimited diffusion of intelligence and knowledge, and the free, cosmopolitan character of its people, combine to give it a conspicuous position among the nations.
After his last ambassadorship (to Britain, 1879–1884), Mori returned to Japan and later became Minister of Education in the Meiji Cabinet. There, he advanced modern teaching methods, business education, and religious toleration. Mori steadfastly objected when other government ministers tried to push religious ideas such as Shintoism in the schools. “He had consistently believed,” writes Van Sant, “that religious beliefs were an individual matter and should not be promoted or hindered by the government.”
On February 11, 1889, Emperor Meiji announced the introduction of the Meiji Constitution. Inaugurating “modern Japan,” it was a public event of huge importance to the nation. Unfortunately, Mori did not live to see it.
Earlier that day, as Mori prepared to depart for the ceremonies at the Imperial Palace, a young man named Nishino Buntaro was granted his wish to see Mori to express his views on issues of the day. Seizing the moment, Nishino pulled a knife from his kimono sleeve and stabbed the education minister twice in the abdomen. Mori died within hours.
The assassin’s motive was revenge for what he perceived as Mori’s dismissiveness toward traditional Shintoism.
The irony of Mori’s untimely death at age 41 was not lost on the Japanese. A man who had done so much to bring his country out of the shadows of feudalism to the light of modern freedom had fallen victim to those very shadows.
What Caused Japan’s Post-War Economic Miracle?
By Lawrence W. Reed
In barely more than one generation, Japan transformed itself from a poor country to a rich one—a feat widely seen as “miraculous.”
For a century after his death in 1856, statues of the philosopher and economist Kinjirō Ninomiya adorned public places, especially schools, all over his native Japan. Most of them depicted him as a boy reading a book while walking with a load of firewood strapped on his back.
Though he is credited with introducing the concept of compound interest to the peas- antry, the statues pay tribute to a broader counsel he championed in Japanese culture: Read, study, and work hard as if your life depended on it, because it often does. He also urged his countrymen: “Save, waste not; otherwise, Heaven will punish you.”
Ninomiya’s sage and timeless advice surely helped Japan recover from the ravages of World War II. For a full explanation of the remarkable pace and magnitude of the recovery, however, we must identify other factors. How did a nation which had sunk so low undergo such a stu- pendous economic rebound?
From the Doolittle Raid on Tokyo in April 1942 to the atomic bombs dropped in August 1945, nearly four years of American bombing wiped out a huge swath of Japan’s industrial capacity. In his book Ashes to Awesome: Japan’s 6,000-Day Economic Miracle, Yoshikawa Hiroshi tells us that 93 percent of Japan’s steel production was obliterated. The country’s GNP in 1946 stood at just under half its peak before the war. Astronomical hyperinflation nearly destroyed the currency. Living conditions were “wretched,” and the caloric intake of the average person was just two-thirds of its pre-war level.
Japan at war’s end was a nation defeated, demoralized, devastated, and, until 1952, occupied by almost a million American soldiers. Its major cities, including Tokyo (and of course, Hiroshima and Nagasaki), lay in ashes.
Thirty years later, the Japanese economy ranked second in the world, behind only that of the United States. From 1950 to 1973, it grew at twice the rate of Western Europe’s and more than two and a half times faster than that of the US. During the 1960s, it doubled in size in only seven years. In barely more than one generation, Japan transformed itself from a poor country to a rich one—a feat widely seen as “miraculous.” How does such a historically rare development occur?
Did Japan decide to adopt a socialist path to recovery? Silly question. Nobody outside of academia or who understands either economics or history would ever prescribe compulsory wealth redistribution, central planning, massive tax hikes, or burdensome bureaucracy as a cure for anything, let alone a half-dead economy. That would simply kill the remaining half. The fact is that Japan’s post-war progress owes more to the ideas of Adam Smith and Milton Friedman than to those of John Kenneth Galbraith or Paul Krugman.
The Japanese Economic Miracle is explained by six major factors. Here they are:
- The Korean War
From 1950 to 1953, the US and allied nations fought the North Koreans and Chinese to a standstill. America bought huge quantities of food and war materials from nearby Japan. This represented a sizable transfer of wealth from American taxpayers to the Japanese economy. This “procurement boom,” along with other American aid after 1945, helps explain some Japanese growth early in the country’s recovery, but those transfers mostly evaporated when the Korean War ended. - Punishment to Growth
US policy in the early months of the Occupation of Japan tended to be punitive, designed to keep the country down and out. But in 1947, as the Cold War with the Soviet Union and Red China worsened, the Truman administration decided that a stronger, freer Japan would help stave off communist advances in Asia and the Pacific.
Among the harsh measures imposed on Japan, based largely on advice from left-wing academics, were monstrously high personal income tax rates that ranged to a high of 86 percent. Alan Reynolds of the Cato Institute writes:
This was a central part of a severe austerity program, not a plan to promote economic growth. As Edwin Reischauer pointed out at the time, “Steeply graduated income taxes and inheritance taxes have been adopted to prevent in the future the accumulation of… concentrations of wealth.” But taxes designed to punish additions to income must also punish additions to output—economic growth.
Sky-high taxes kicked in at relatively low-income levels, and exemptions were few. Corporate income and “excess profits” were likewise confiscated at high rates. A vast expansion (and higher rates) of excise taxes and a hike in already-high inheritance taxes punished Japanese citizens at all income levels. “Brutal” describes the punitive tax regime imposed on Japan by Americans in the immediate aftermath of the war.
Before economic growth could take off, Japan had to stop punishing its wealth-creating entrepreneurs. As General Douglas MacArthur steered American Occupation toward leniency, that’s exactly what Japan did (as you’ll read in a moment).
Japan seemed destined to pay heavy reparations to the nations it damaged in the war until America in the late ’40s pressed those other nations to back off. Unlike the massive payments the Versailles Treaty obligated Germany to fork over after World War I, and which contributed greatly to another war 20 years later, what Japan was required to pay proved minimal in the end.
By 1949, America was actively encouraging the integration of a depressed and insular Japanese economy into world commerce. Markets opened for the country’s exports, which in turn spurred its purchase of imports. In 1955, Japan became a member of the tariff-cutting General Agreement on Trade and Tariffs (GATT).
- Tax Cuts
Fortunately, the heyday of the left-wing American academics in Japan was short-lived. The changing perspective in Washington from punishment to growth opened the door for tax cuts. To quote Reynolds again:
In late 1950, following a similar policy coup in Germany, Japan’s highest individual income tax rate was slashed to 55 percent, from 86 percent. From 1950 to 1974, Japan cut taxes every year (except 1960) often by greatly increasing the income thresholds at which the higher tax rates applied, or by enlarging deductions and exemptions. The taxable income needed to fall into a 60 percent tax bracket was raised to 3 million yen by 1953, for example, compared with only 300,000 in 1949. The Shoup Commission’s net worth tax was also abolished in 1953. The sting of high tax rates was further neutralized by exemptions for interest income and capital gains, deductions from corporate and individual taxes on dividends, a deduction for earnings, and various other holes in the tax base, legitimate and otherwise.
Some deductions were far from neutral, and therefore less desirable than lower tax rates would have been. Yet the continual tax reductions from 1950 to 1974 accomplished two things. First, they greatly reduced effective marginal tax rates. Second, they moved the system a long way toward what is sometimes called a “consumed income tax” or “expenditure tax”—that is, a system that taxes income only once, regardless of whether the income is saved or devoted to immediate consumption.
Tax cuts accelerated after the end of American Occupation in 1952. Reductions in levies on savings and investment were especially stimulative. With the baleful influence of left-wing American academics gone, public policy focused on boosting production instead of leveling and equalizing incomes. Success in the marketplace became a virtue instead of a vice. To his credit, Carl Shoup of Columbia University helped immensely to simplify the tax code so that Japanese people could see it as fair and understandable.
Japan also steadily reduced its tariffs (taxes on the purchase of foreign goods). For example: By 1975, Reynolds notes, “the effective tariff on autos fell from 40 percent to 10 percent, and the tariff on televisions from 30 percent to 5 percent.”
- Economic Freedom
Japan’s tax reductions were an important element of a broader liberalization of its economy. Even the World Bank, in a comprehensive 1993 study of the Japanese Economic Miracle, admitted that liberalization was an indispensable factor. It concluded that “the rapid growth was primarily due to the application of a set of common, market-friendly economic policies, leading to both higher accumulation and better allocation of resources.”
In explaining the Japanese Economic Miracle, some people suggest that government “industrial policy” agencies such as the Ministry of International Trade and Industry (MITI) were its main architects. But that is belied by the fact that MITI’s interventions were neither huge nor effective. They produced more than a few failures. The World Bank’s 1993 report dismissed its “contributions” as one of many attempts around the world “to guide resource allocation with nonmarket mechanisms that have generally failed to improve economic performance.”
At a time when much of the Western world embraced Keynesian economics of higher taxes, spending, budget deficits and debt, Japan’s recovery was fueled by lower taxes, less spending, more saving, increasingly secure property rights, and conservative fiscal policies. Education, always highly prized in Japan, was kept local with an emphasis on high-quality K-12. Even today, most Japanese people will tell you they studied harder in grade schools than in universities. The result was an explosion in both human and physical capital.
Toshio Murata, a long-time friend of the Foundation for Economic Education (FEE) in America, was a Japanese economist of the “Austrian School.” He translated Human Action by Ludwig von Mises into Japanese. In 2017, FEE bestowed its “Blinking Lights Award” upon him before his death in 2021 at the age of 97. In an article for FEE in 1994 (see Chapter 13), he explained why the World Bank was correct
in its assessment, noting that the favorable tax treatment of savings played a key role in generating a robust capital market for business start- ups and investment:
The true explanation of Japan’s successful post-war economic development rests… on good old-fashioned virtues—saving, hard work, reduced government spending, and innovative entrepreneurship— combined with ingenious marketing techniques and relatively free world trade… On the basis of 1971–1991 figures, the average gross saving rate in Japan was twice that in the United States; the saving rate per household in Japan was 2.7 times that in the States.
Industries that had been run or heavily regulated by the old imperial government or by American occupiers were set free. Many of the monopolies (zaibatsu) that held sway for generations in Japan, thanks usually to government-granted privileges, were broken up, sold off, or deregulated to compete on a more level playing field.
Considerable credit for the advance of economic freedom in Japan goes to Shigeru Yoshida, who served as Prime Minister for most of the period from 1946 to 1954. He spearheaded economic liberalization and, at the same time, successfully resisted American pressure for Japan to spend heavily on the military. At the San Francisco Peace Conference in 1951, he pronounced the treaty formally ending the war as “fair and generous” and “not a treaty of vengeance but an instrument of reconciliation.” The following year, Japan once again became an independent nation.
During the four years of Prime Minister Hayato Ikeda (1960–1964), economic growth and the entrepreneurs who generated it were embraced as keystones of a new and optimistic Japan. Even Ikeda’s modest welfare state measures couldn’t slow things down (that would happen later as the bills came due).
The spirit of liberalization continued into the 1980s. Under Prime Minister Yasuhiro Nakasone, Japan’s national government privatized tele- communications and railways and diminished the influence of MITI in the economy. When the country turned toward bigger government in the 1990s, the growth momentum stopped, as partially explained by economist Hiroshi Yoshida in this recent article for FEE.
Japan never became the libertarian paradise that was Hong Kong (before recent subjugation by Beijing), but it did become far freer economically during the decades of economic liberalization than it perhaps had ever been before. Today, it still ranks an impressive 35th in economic freedom among the world’s nearly 200 nations, according to the Heritage Foundation’s Index of Economic Freedom.
- Dodge and Deming
While it was fashionable for many governments around the world in the 1940s and 1950s to seek advice from “whiz kids” and “planner” types in the ivory tower, Japan to its credit didn’t pay them much attention when it was free to look elsewhere. In fact, by taking advice from two notable men from the entrepreneurial private sector, Japan avoided the stagnation that left-wing academicians usually produced. Their names were Joseph Dodge and W. Edwards Deming.
President Harry Truman dispatched Joe Dodge to Japan from his perch as Chairman of Detroit Bank in 1949. He was to be financial advisor to the Supreme Commander, General Douglas MacArthur, and help the nation emerge from the economic doldrums.
What became known as “The Dodge Line” did the trick. By implementing a balanced national budget and shutting down the printing presses, it ended hyperinflation. It stabilized the exchange rate between the yen and the dollar. It drastically reduced government economic intervention across the board. Dodge’s intention was not to “plan” the Japanese economy but rather, to finally leave it alone. He killed every subsidy and price control he could get his hands on, and MacArthur cheered him as he did it. (Truman would later make Dodge his Director of the Budget, and in barely a year, he cut the US federal deficit in half.)
W. Edwards Deming was another private sector genius with both feet planted firmly on solid ground. He was an engineer, statistician, and management consultant who introduced quality control techniques to Japanese manufacturing—techniques that achieved previously unheard-of levels of productivity. Toshio Murata writes:
Japanese exports in prewar days were regarded as “cheap, but of poor quality.” W.E. Deming, a US professor, played a major role in improving the quality of Japanese goods. A prize established in his honor is awarded to individuals and companies making important contributions to quality control. Today, thanks no doubt to lessons learned from Professor Deming and from taking consumer wishes to heart, Japanese appliances and automobiles are rated among the best in the world.
The Japanese owe these two men a great debt for their important contributions. If the country had followed the prevailing wisdom of left-leaning academics at the time, recovery would likely have been stalled or reversed.
(If my remarks strike you as uncharitable toward leftist academia, please allow me to cite two illuminating comments from economist Thomas Sowell, himself an academic. In 1997 he wrote, “The most fundamental fact about the ideas of the political left is that they do not work. Therefore, we should not be surprised to find the left concentrated in institutions where ideas do not have to work in order to survive.” In 2011, Sowell opined, “Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”)
- General MacArthur’s Constitution
The sixth factor in Japan’s Economic Miracle was by no means the least important. Without the vision and personality of Douglas MacArthur, it’s difficult to imagine that either an economic recovery or Japanese-American relations would have emerged as robust.
MacArthur worked so amiably with Japanese leaders, including Emperor Hirohito, that most people in Japan mourned his departure in 1951 as American Occupation neared its end. He personally supervised the writing of a new Constitution that included provisions to ensure a limited, representative government, free and fair elections, private property, and individual liberties. It took effect in May 1947. For seven and a half decades, that Constitution has governed Japan, as one commentator put it, “without the change of a comma.”
In April 1951, the general who proved as indispensable to the new, peaceful Japan as he was to winning the war in the Pacific, was able to tell Congress, in person, this good news:
The Japanese people since the war have undergone the greatest reformation recorded in modern history. With a commendable will, eagerness to learn, and marked capacity to understand, they have from the ashes left in war’s wake erected in Japan an edifice dedicated to the supremacy of individual liberty and personal dignity, and in the ensuing process there has been created a truly representative government committed to the advance of political morality, freedom of economic enterprise, and social justice.
In 1960, Japan honored General MacArthur with its highest honor, the Grand Cordon of the Order of the Rising Sun. You can see a short video of the official presentation here.
Fortunately for Germany, a similar economic miracle took shape at the same time as Japan’s. There, as I’ve written before, it was largely due to similar free market policies of economist and statesman Ludwig Erhard. Ironic, isn’t it, that two of the nations most responsible for World War II emerged from it as economic miracles because of freedom and free markets. Kinjirō Ninomiya would be most proud.
Freedom works. It’s a lesson that needs to be told, re-told, and told again.
How Japan Realized Her ‘Impossible Dream’
By Toshio Murata
Eight months after the end of World War II, in the spring of 1946, I brought my men of the Army Field Hospital in Hangzhou, China, back to Japan. When we got off the train at their home station, we found the whole city destroyed, devastated by some powerful bomb or incendiaries. No buildings, houses, or trees were to be seen. Only new shacks here and there.
Ichiro Watanabe of our group, who had lived there with his family and had had a store near the railroad station, was so shocked by the hellish scene that he suddenly started singing a lullaby, a requiem to his beloved children.
The name of the city was Hiroshima.
Fortunately, my home in Kochi on the island of Shikoku was intact, although the main part of the city had been seriously damaged by bombing on July 4, 1945. As a result, we had an unobstructed view of the whole city from our house. The reconstruction of Japan had to begin, so to speak, from “Ground Zero.”
Post-World War II Hardships and Inflation (1945-1949)
The soldiers and civilians who returned from the war aggravated the food and unemployment situation. Production nationwide was in disarray. Of Japan’s 80 million or so people, close to 10 million were non-producers, either in the military or on some other government payroll. Land reform, abolition of the peerage system, and the liquidation of big financial combinations had overturned the entire prewar social structure. Bank deposits had been frozen; depositors could withdraw only a limited amount each month.
The prewar privileged were hard-pressed to survive, while some who had experienced hyperinflation and other calamities abroad had learned how to make a fast buck. There was a serious shortage of food. Farmers were more fortunate than most as they were able to trade their rice for jewels, furniture, kimonos, wedding costumes, or whatever, with those who were trying to supplement their insufficient rations.
In those post-war days, the Japanese could “escape” for a few hours by watching American movies. Beautiful American houses and appetizing food on the screen were the envy of the Japanese. “Catch up and pass America” became their goal. But at that time, it seemed an “impossible dream.”
The government tried to cope with the shortages by printing money, i.e., inflating. When prices rose because of the demands for commodities by the new money recipients, the government attempted to fix prices, at least of the major staples. The government’s Price Control Board had to hire more clerks to keep pace with the increased applications from businessmen for price increases. But government controls and government employment could not bring economic development to Japan. That would take the energy and genius of entrepreneurs who were freed to compete on world markets. Eventually Japanese business produced steel, refined oil, built ships, manufactured automobiles, and developed a wide range of consumer electronics goods. Honda, Toyota, Nintendo, Sony, and Canon became household words throughout the world.
Recovery Begins
The Reconstruction Finance Bank (RFB), founded in January 1947, floated bonds, most of which were underwritten by the Bank of Japan, and loaned money to producers of priority goods—food, coal, steel, ships, electricity, etc. The RFB’s loans increased the production of coal, iron, steel, and rice, but at a high price: accelerated inflation.
An American adviser, Dr. Joseph M. Dodge, visited Japan in February 1949; his aim was to stop the inflation. The “Dodge Line” he prescribed called for reducing subsidies, discontinuing the RFB bonds, and developing a government surplus. Inflation subsided as a result and production began to revive.
With the intent of encouraging economic development, the govern- ment restructured its Ministry of Commerce and Industry in May 1949, forming a new Ministry of International Trade and Industry (MITI). MITI hoped to shape and direct Japanese production by administrative regulations. It has had an impact on steel, oil, and trade. However, its influence has not been complete, and it has not always been beneficial. MITI’s administrative regulations were not supposed to be binding, but businesses generally felt compelled to go along “voluntarily,” or face possible “bureaucratic harassment” later. Administrative guidelines could also be used as a barrier to deregulation.
Many production facilities had been reduced to ashes during the war. So new plants had to be constructed and the latest technology was imported. The new factories with low labor costs had a competitive edge over American plants; they were able to cut costs and increase productivity. Investment expanded, and economic reconstruction accelerated. However, the quality of Japanese products in those years was often inferior. People used to say that “After the war, only women and nylon stockings were stronger.” But changes were in the offing.
Economic Development Takes Off After 1950
Transportation was difficult in those early years after the war. Many Japanese workers commuted long distances to their jobs by bicycle. Then in 1947, a company with only twelve employees devised a bicycle with a small motor, the Honda Kabu. This little motorcycle met a crying need.
Thanks to the initiative and energy of the company’s management, it expanded production in response to consumer demand. It made not only motorcycles but also began producing automobiles. Its efforts paid off. It went on in time to become the present Honda Group, with thousands of employees, exporting so many cars to America and Europe as to cause international friction. The oil shock of 1973, when OPEC blocked the export of Middle East petroleum, was actually a windfall for the small economical Honda with its high gas mileage. In 1980, the Japanese surpassed the Americans in car production for the first time. Soon Japanese car manufacturers were asked to restrict exports themselves. Later they developed close working relations with US automobile manufacturers and began producing cars in the States.
Steel
MITI sought to balance production, to avoid both surpluses and short- ages. When in 1950 Kawasaki Steel’s president, Yataro Nishiyama, announced plans for building a plant with two new blast furnaces, he encountered strong objections from MITI, the Bank of Japan, and the big-three steel makers. They feared an oversupply of steel and criticized his proposal as wasteful, unnecessary, and a duplication of investment. They pointed out that 19 of the then existing 37 blast furnaces were idle for lack of orders.1 But Nishiyama was not discouraged; a third of the existing furnaces, he said, were over 30 years old; his modern blast furnaces would cut the cost of steel substantially. He went ahead. In February 1953, MITI finally approved the first phase of Kawasaki’s project and the company was able to borrow from the Japan Development Bank and the Bank of Japan. In time Kawasaki became one of the big six, diversifying in 1991 into chemicals, and acquiring in June 1994 a DuPont Chemical England plant making plastic compounds for use in auto parts. While government agencies like MITI look at what is, businessmen who risk their own funds do their best to anticipate what will be, what consumers will want in the future. In this case, Nishiyama was right; if he had acceded to MITI’s administrative guidelines in 1951, his company’s development and expansion would have been checked before it began.
Opinion concerning MITI was thus divided. Government control versus free competition was the issue. During the 1965 recession, MITI sought to curtail steel production; six firms agreed to go along with the plan. However, Sumitomo Metals, with 4.5 percent share of the country’s steel production, clashed with MITI; it considered it unfair to restrict its output, an unnecessary intervention with private enterprise. The company’s president, Hosai Hyuga, had guts. He was a leading businessman of Osaka, a city whose people were known for their free and independent spirits. He refused to accede to MITI’s administrative guidelines requiring a cut in production. The conflict between him and MITI made headlines. At first, Hyuga had the backing of other steel producers, but soon he was standing alone against MITI. Moreover, MITI warned Hyuga that Sumitomo would not be allowed to import more materials than those needed for its quota of the reduced production. Hyuga had to compromise, and Sumitomo reduced its production of steel. Three years later, in 1959, he appointed an ex-MITI bureaucrat to its Board of Directors “voluntarily.”2
The case of Yawata Steel was very different. Originally established as a government enterprise in 1899, it was privatized only after the war. But it retained close links with the government. In October 1969, with MITI approval, it merged with Fuji Steel to form the world’s largest steel producer, New Japan Steel Corp. New Japan Steel became in effect a MITI-protected “cartel,” virtually an “executive organization” of MITI’s Basic Industries Bureau.3 MITI and New Japan Steel together strove to stabilize steel markets and maintain steel prices, to hold them up by preventing what they considered” excessive” competition that might bring prices down.
While this was going on, small producers with open-hearth furnaces were gradually replacing them with electric or revolving furnaces. Twenty-three new electric furnaces were constructed between 1973 and 1978. By 1975–1977, Japan was becoming one of the world’s big three in steel production; its 1976 exports were the highest in its history.
Yet, New Japan Steel’s market share was dropping—from 35.7 percent at the time of the merger in 1970 to 26.86 per cent in 1986.4
Although Japan’s steel exports fell and her balance of trade went down in December 1978, as a result of the oil crisis, MITI persisted in trying to reduce steel production. It designated the open-hearth furnace industry a “depressed industry” and demanded that some production facilities be shut down. Blast-furnace steel makers, protected by MITI and depending on “cost-plus pricing,” along with small- and medium-sized steel makers, joined the “recession cartel.” However, privately operated Tokyo Steel refused to go along. It struggled bravely against MITI and the cartel. Tokyo Steel’s chairman and president, for years strong advocates of free and open competition, remarked: “Regulations imposed by a comprehensive network of administrative guidelines now pervade the steel industry, seriously hindering proper competition… We can survive ourselves without relying on MITI’s guidance.”5
By competing with the large blast-furnace steel producers, Tokyo Steel has become the leading steel producer using electric furnaces. It is very efficiently operated. Its head office occupies only 1,600 square meters of floor space; its Administration Division’s 21 employees administer sales of 200 billion yen; its Marketing Division employs only 29 persons; each staff member has his own personal network-linked computer, reducing paperwork and the time spent on meetings. Contrast Tokyo Steel’s efficiency with that of MITI-supported New Japan Steel with 1,700 employees in its headquarters and, according to its consolidated income statement of March 31, 1994, a deficit of 54 billion yen.6
Petroleum
The Petroleum Industry Law of 1962, originally enacted to strengthen MITI and counteract the future liberalization of imports, provided that
(1) MITI publish a petroleum supply plan as a guideline for producers, (2) oil producers conform to MITI’s production plan, (3) producers modify their production plan if MITI’s and the producers’ figures did not agree,
(4) MITI approve new facilities, and (5) MITI set prices. Refiners resented the regulation of their facilities and, in anticipation of its enactment, expanded operations. MITI had not expected such an expansion and asked refiners to restrict their production themselves; the Petroleum Association was made to coordinate its members’ production.
In October 1970, OPEC began to raise the prices of crude oil, but MITI did not permit a markup in kerosene prices. To compensate producers for losses, MITI, by administrative guidelines, allowed increases in other prices. A virtual “black cartel” emerged as a result of MITI and oil-industry cooperation in controlling the production and prices of oil and kerosene.
On October 6, 1973, the first OPEC-induced oil crisis occurred. Since Japanese industries depended heavily on Middle-East oil, all prices of petrochemicals went up 334 percent, and housewives rushed to buy anything and everything, even toilet paper and detergents. MITI’s re- sponse was to regulate the distribution and consumption of petroleum. The prices of petrochemical goods were frozen. Producers who could not shift their higher costs to customers inevitably suffered losses. However, the efforts of private businesses to cut costs and to innovate led to lower oil consumption and improved productivity.
In 1986, Taiji Sato, president of Lions Petroleum, tried to import oil which he expected to sell in Japan below MITI’s rigged price. The im- portation of oil was not then prohibited. But when MITI learned that Lions’s oil tanker was approaching Japan, it had the tanker blocked, prevented Lions’s bank from lending the money needed to finance the shipment, and persuaded the Japanese government to pressure foreign governments to cancel Lions’s contracts for purchases of oil.7 Although the company is no longer in existence, Sato’s efforts have not been in vain. As a result of internal and external pressures, MITI’s powers are being curbed. This past summer the question of liberalizing petroleum imports was finally presented to the Subcommittee on Fundamental Problems of Petroleum Policy of the Petroleum Deliberation Council. Also, MITI now intends to abolish, by the end of 1995, the law regulating the importation of certain petroleum products. And the regulations on the opening of filling stations will be gradually repealed.
Privatization And The Market Economy (1980-1985)
The early 1980s was the era of Prime Minister Thatcher and President Reagan. Japanese Prime Minister Nakasone dreamed of privatization, and in 1981 he began to carry out his dream. Japan Telegraph and Telephone Public Corporation was privatized as the Nippon Telegraph and Telephone Corporation (NTT) in 1985. The Japan Monopoly Corporation was privatized in 1985 as the Japan Tobacco Industry Corporation (JT). And in 1987, the Nippon National Railways (JR) was divided into six passenger companies and one freight company, solving in the process its 37.5 trillion yen accumulated debt problem. These privatizations were not only great achievements for Nakasone and his Cabinet, but for the companies too; their respective financial situations improved.
A fairly recent contender on the Japanese Market is Nintendo, which came into prominence during this period. The company began as a small firm making traditional flower cards, then other playing cards, and still later plastic playing cards with Disney characters on them. Then in 1983, Nintendo created game computers for children that took the world by storm. Children all over the world became Nintendo fanatics. In 1993, Nintendo, with 890 employees, earned 163.7 billion yen. Compare that with Toyota which, that same year, 1993, with 72,000 employees, earned 280 billion yen, its greatest operating profits ever. However, nothing ever stands still on the market. To maintain his position on the market, every entrepreneur must re-earn the support of his customers every day. Nintendo’s position is now being seriously challenged by Sega Enterprises, makers of new electronic games.
It is not possible within this space to trace the ups and downs of the Japanese yen to the US dollar and the effects of these fluctuations on Japan’s exports and imports. At times the Bank of Japan pursued an easy money policy, weakening the yen; at other times it raised interest rates, strengthening the yen. These changes alternately encouraged or discouraged international trade in the short term. Throughout these fluctuations, however, the Japanese saved and invested in stocks, bonds, and real estate, even foreign real estate. It was their energy, hard work, and ingenuity that was to be responsible for Japan’s long-term economic development.
Miti’s Power Reduced
As we have seen, MITI’s attempts to direct Japan’s production have not always been successful. When it tried to maintain steel prices for the benefit of its cartel members by restricting steel output, some of the more energetic steel producers resisted. When it tried to cope with oil shortages by controlling prices and distribution rather than encouraging imports, consumers of petroleum products objected. After 45 years of trying to foster economic development in Japan and coordinate supply and demand, MITI’s powers are now being curbed.
On February 8, 1994, the Hosokawa Cabinet announced a policy of deregulation. The proposed program should wipe out many of the more than 12,000 regulations issued by MITI and the Ministries of Transportation, Agriculture, Forestry and Fishery, Finance, and Health and Welfare. The plan appears excellent on paper and if implemented would increase productivity and reduce price differentials between Japan and the United States. The question remains, however, whether this large-scale deregulation can be carried out without being sabotaged by bureaucrats who want to retain power.
Nobuyoshi Namiki, formerly chief of MITI’s Industrial Structure Section, reveals the truth about the Petroleum Industry Law:
The world attributed the cause of the high-speed growth of Japan after 1985 to Japanese industrial policy. But this is far from the truth. It is true that Japan enjoyed high-speed growth, but that was caused by the efforts of diligent and honest Japanese workers and by the tenacity of executives filled with never-quenching aspiration, working under “excessive” competition.8
The February 26, 1994, issue of The Economist reports on recent research concerning MITI. Professors Richard Beason (University of Alberta) and David Weinstein (Harvard) note four tools of industrial policy which had been offered to 13 sectors of the Japanese economy between 1955 and 1990—cheap loans, net transfers, trade protection, and tax relief. Beason and Weinstein asked “whether the most-helped sectors grew fastest?” and found that “support was given on the whole to slow-growth industries… That the economy succeeded for decades is plain enough,” they said. “But, on this evidence, industrial policy may well have hindered rather than advanced the cause.”9
Beason and Weinstein confirm Nobuyoshi Namiki’s position. MITI is not so mighty as once it was; its power has been considerably reduced. In the world of kaleidoscopic, wide-ranging international trade that has developed, MITI can do little more than offer subsidies to dying industries.
Real Causes of Japanese Economic Development
The true explanation of Japan’s successful post-war economic development rests, not on MITI’s “industrial policy,” but on good old-fashioned virtues—saving, hard work, reduced government spending, and innovative entrepreneurship—combined with ingenious marketing techniques and relatively free world trade.
- SAVING. The Japanese have a tradition of saving and as they struggled to pull themselves up from “Ground Zero” after World War II, most Japanese managed to consume a little less each year than they produced. On the basis of 1971–1991 figures, the average gross saving rate in Japan was twice that in the United States; the saving rate per household in Japan was 2.7 times that in the States.10 As production depends on capital savings and investment, this gave a substantial boost to Japan’s economy.
- DILIGENCE. Japanese workers in general are hard-working, even to the point of being workaholics. This also contributed to the rapid growth of the Japanese economy. In 1992, workers averaged 1,972 hours per year; since then, their hours have been gradually reduced and in 1996, they are expected to work less than 1,800 hours. Public offices, banks, and post offices now have a full five-day work week. Also, there are fewer strikes in Japan and Japanese workers lose fewer days from strikes than in the United States.11
- GOVERNMENT SPENDING FOR DEFENSE. According to the National Defense White Paper, the average ratio of defense expenditures in Japan to GNP for the period 1981–1991 was 0.98 percent, while in the United States, Britain, and West Germany the ratios to GDP were 6.2 percent, 4.8 percent, and 3.0 percent respectively. Thus, taxes in Japan were lower and more funds were available for investment than in other advanced countries.
- INDEPENDENCE AND ENTREPRENEURSHIP. Osaka is a city known for the entrepreneurial spirit of its inhabitants. Osaka was the home of at least two firms that resisted MITI—Kawasaki Steel and Sumitomo Metals. Yujiro Iwai, an Osakaite and former president of Iwai and Co., reflected that “the fundamental philosophy of the citizens in Osaka concerning the economy seems to be free and independent—they try hard not to depend on others, not even on the government.” Iwai finds this spirit ex- pressed in a haiku by Raizan Konishi (1654–1716): “Obugyo no na sae shirazu toshi kurenu.” (“The year has come to an end \ without even knowing the name \ of the magistrate.”)
The world of Osakaites, as described by Iwai, is the very “opposite of that portrayed in George Orwell’s 1984, where the face and voice of the leader penetrated the lives of the people from morning till night through means of mass communication… Is it possible to realize a free world where we can live without even knowing the name of the magistrate? Osakaites believe it is.”12
- INNOVATIVE MANAGEMENT AND MARKETING. Japanese exports in prewar days were regarded as “cheap, but of poor quality.”
W.E. Deming, a US professor, played a major role in improving the quality of Japanese goods. A prize established in his honor is award- ed to individuals and companies making important contributions to quality control. Today, thanks no doubt to lessons learned from Professor Deming and from taking consumer wishes to heart, Japanese appliances and automobiles are rated among the best in the world.
In Japan, consumer sovereignty is recognized in the field of marketing. To sell their products and services and earn profits, producers realize they must satisfy their customers. The success of Japanese exporters has depended largely on their efforts to learn the languages, customs, tastes, and demands of potential purchasers in other countries. Matsushita, a manufacturer of appliances, now sends some of its employees to Frankfurt (Germany) as resident engineers in charge of product development. Their families accompany them. The company believes that their engineers must experience European daily life to develop new washing machines which will satisfy European buyers.13
American producers who want to sell in Japan would do well to try a similar approach; they would then realize that the narrow width of the staircase in a typical Japanese home makes it difficult or im- possible to carry any appliance wider than 25 inches—washing ma- chine or refrigerator, for instance—up the 30-3/4 inches wide steps to the second floor without scratching the walls. Only recently have US automobile manufactures begun producing for export to Japan low-priced cars comparable in quality to those the Japanese make for export. Also, it was not until this past summer (1994) that Ford changed the steering wheels on their cars to accommodate the Japanese who drive on the left side of the road. If American goods were suitably modified to satisfy Japanese consumers, US sales to Japan would surely increase.
- FREE TRADE. Japan’s rapid development was made possible by relatively free trade throughout the world. When I was a boy, world trade was not free; there were conflicts between the “have” and “have-not” nations. With poor natural resources, I feared that Japan, without free world trade to permit Japanese firms to import raw materials, process them, and export their products, could never expect to develop economically. I was greatly encouraged when I learned from Mises’s Human Action, that economic development depends, not on rich natural resources, but on capital accumulation per capita and free trade.
Japanese Tradition
On the campus of the Tanaka Junior High School, Kashiwa City in Chiba Prefecture, there stands a statue of the respected Japanese philoso- pher Kinjirō Ninomiya (1787–1856). He is reading a book while carrying a bundle of firewood on his back.14 Ninomiya’s desire to learn was so intense that he used to read while he walked to work. His message of diligence and saving for the future and for doing good voluntarily was firmly imprinted on all Japanese students from his time until the end of the war. Japanese who are now over sixty years of age continue to admonish their sons and daughters in the words of Ninomiya: “Save, waste not; otherwise, Heaven will punish you.” Thus, by encouraging generations of Japanese to save, Ninomiya played an important part in Japan’s post-World War II economic development. By doing so, he made it possible for the Japanese people to realize their “impossible dream.”
Japan’s Government Looted the Future — And Its Children Are Paying the Price
By Hiroshi Yoshida
Japan’s fiscal mismanagement and massive national debt violate the principles of democratic flscal responsibility.
The years from 1991 to 2001 are known as “The Lost Decade” in Japan. After years of rapid growth in the 1980s, the Japanese economy fell into a prolonged slump marked by persistent, high unemployment, low growth rates, and erratic monetary policy. (See “The Lost Decade” for additional information on this.
In recent years, Japan’s economy has somewhat rebounded, but as economist Hiroshi Yoshida explains below, new issues are now arising that call into question Tokyo’s increasing debt. One of the problems he identifles is present here in the US as well, namely, “Not enough people stand up for future generations when it comes to flscal policy.”
The only transactions that can happen in a market are ones where both parties mutually benefit and can say arigatо (“thank you”) as a result. By using accounting to examine such transactions we know that both parties’ utility increases; both are better off as a result of completing the transaction. On top of that, people are not worse off than they were before should they decline to engage in a given transaction.
Governments are run by taxes. The main concern of public finance, however, has from the beginning been to raise the largest sums with the least resistance. In a nation that advocates democracy, the people, also called the citizens or the taxpayers, are sovereign. Taxes can only be levied with the consent of the governed. Running a deficit and burdening children and the unborn is in direct conflict with the principles underlying democratic fiscal policy. Never shift your deficit onto your children; that is a cornerstone to democratic governance.
Here in Japan, we must also reject the notion that we can rack up the national debt and use it as a source of financing. Yet future generations don’t have a say in what the government does here and now. Not enough people stand up for future generations when it comes to fiscal policy. In 1965, Japanese government bonds (JGBs) were issued to cover a revenue shortfall of 5.3 percent of government spending. Last year in 2021, that increased to cover 40 percent of government spending. The outstanding balance of government bonds issued on an ongoing basis is now twice Japan’s GDP.
When the market is allowed to function it determines interest rates, the rate at which people can borrow capital. If the economy does not grow, it is not possible for a borrower such as the Japanese government to pay back a loan with interest.
The 1492 Summa de arithmetica, written by Italian mathematician Luca Pacioli (1445–1517), contains a mathematical law known as the Rule of 72. This rule states that if you divide a given interest rate by 72, you can find the number of years needed for the principal investment to double. That would mean it takes 10 years for an investment to double at a 7.2 percent interest rate. Let’s try this with an electronic calculator to see if it really works. Enter the number “1” and hit “x” button twice, and input 1.072 (a 7.2 percent interest rate). Hit the “=” button 10 times. The initial value ends up doubling, doesn’t it? When Japan started to stray from a balanced budget (1972–1987) the interest rate on JGBs was around 8 percent.
The interest rate on government bonds has since been lowered to reduce the rapidly growing outstanding debt and the cost of government bonds. It will take 14,400 years to double the principal at the current interest rate of 0.005 percent. To give you an idea of how long 14,400 years is, 14,400 years ago is when mankind finally began rice cultivation in the Yangtze River basin in China. That is prehistory; a time before mankind started keeping written records. It is impossible to double the principal of a sum of money without taking a long time at such an interest rate. Not only has issuing government debt left future generations to foot the bill, but the interest rate of only 0.005 percent on JGBs is a statement of the nation’s inability to grow the economy. Hopefully, Japanese taxpayers will take notice of this.
By lowering interest rates, the government’s interest payments have become smaller, and the future value of money has decreased. The Bank of Japan holds more than half of the JGBs issued by the Japanese government. And now, as both the rate and value of the yen against the US dollar begin to fall, prices have started to rise. The price of iPhones in Japan is going up 20 percent this month.
Where there is good politics, people gather. That is to say, people vote with their feet, as my friends in America know from inter-state migration. Japan’s fiscal mismanagement and massive national debt violate the principles of democratic fiscal responsibility. As a result, Japan is losing its lure and appeal to future generations and the birth rate continues to plummet.
