Chapter 16 Japan Takes Control of the Financial High Frontier

The "Meiji Oligarch" power group with the four domains of Changzhou, Satsuma, Hizen, and Tosa as the core controlled the power of the Meiji government.Although the treatment of Emperor Meiji has improved significantly compared with that of the Tokugawa shogunate, he is still a nominal "Son of Zhou".The Meiji oligarchs held the Emperor as a god and worshiped it there, but the real power was firmly in their own hands.Although they overthrew the Tokugawa shogunate, there are still more than 300 small vassals in the country. If they are not completely eradicated, there may be another Tokugawa family one day.At the same time, in order to be on an equal footing with the Western powers, the feudal separatism undoubtedly seriously hindered the process of Japan's modernization.

But how to cut down the feudal clan?There are countless wars caused by this in history. The Meiji oligarchs finally discussed the method of "abolishing feudal vassals and setting up counties", which is a bit like Song Taizu's idea of ​​"drinking wine to release military power".The central government paid for the support of the vassal princes and their subordinates, as well as the huge warrior class.Once the princes settled the accounts, it was very cost-effective.In the past, their annual nominal income was 100,000 shi of rice, equivalent to about 64,000 pounds. After the feudal clan was abolished and the county was established, the government gave them an annual salary of 50,000 shi.This is quite a generous treatment. You must know that the income of the princes is not stable, and the grain harvest is left to fate. If there is another war and riot, they will have to pay money and people to suppress it, and they may even lose money.At the same time, they no longer have to bear the livelihood of the samurai class who lost their land. The state will support these people, and they are happy to be light.So, the work went very smoothly.A British reporter couldn't help but lamented that it took Japan only three months to abolish the feudal lordship system that took hundreds of years in Europe.

In fact, the situation is far from optimistic. The vassals and towns were abolished, and the hidden dangers of the Tokugawa shogunate style were completely eliminated, but the price was that the country was burdened with a huge financial burden of supporting 2 million vassal lords who were similar to the "children of the Eight Banners".The salaries of princes and samurai accounted for almost one-third of the central government's finances, and the huge vassal debt of 78 million taels greatly exacerbated the financial crisis of the new Meiji government. When the Meiji oligarchs first came to power, money was needed to deal with internal and external troubles, and the new government had no money, and fiscal and taxation could not be effective in a short time, so the only way to deal with emergencies was by printing money.This is exactly the same as when the American colonies rebelled against the British Empire, they frantically printed colonial paper money.

Beginning in 1868, during the first two years of the new government’s administration, the government issued a total of 48 million yen in banknotes, more than half of which were used to maintain the government’s operations, 12.7 million yen was lent to princes who supported the new government, and the rest Nearly 10 million yen was used to develop industry and commerce, including banking.From the third year onwards, three more banknotes were added, one was 7.5 million worth of sub-notes issued by the Ministry of Internal Affairs to back government bonds, and the second was 6.8 million yen issued by the Ministry of Finance to fill The third is the 2.5 million yen "layoff resettlement coupons" used to resettle the laid-off samurai class and help them go to Hokkaido for re-employment. [9] With such a large-scale printing of money, coupled with the proliferation of counterfeit money, Japanese society has entered a state of hyperinflation, the credit of government paper money has declined sharply, and the regime is in jeopardy.

The new government is short of money, and printing money is only an emergency solution. The long-term solution is to increase fiscal revenue.So the new government started the reform of land rent monetization.At that time, all kinds of taxes in Japan were paid in kind, and farmers had to bear corvee.This is exactly the problem that was solved 300 years ago by Zhang Juzheng, the chief assistant of the cabinet of the Ming Dynasty, with the "one-whip method".The success of the land rent reform has greatly increased the stable income of the government. When the economy gradually stabilized, the salaries of the princes and warriors became a very troublesome matter for the Meiji oligarchs.The bosses discussed repeatedly, and finally came up with a method called "Jinlu Public Bonds".Rather than handing out huge amounts of cash every year to distribute salaries to princes and warriors, the government might as well buy out their future salaries at once, just like "buying out seniority", but instead of paying cash, they pay Jinlu public bonds.If the salary is high, the total income of 6 to 7 years will be paid in one lump sum, and the interest rate will be 5%; if the salary is low, the total income of 10 to 12 years will be paid in one lump sum, and the interest will be higher.In the future, the government will only pay interest every year, and the financial burden will be greatly reduced.The principal of public bonds shall be repaid by lottery starting from the 6th year after the issuance, and shall be repaid within 30 years.This move is far more clever than when Emperor Yongzheng of the Qing Dynasty carried out financial reforms and forced the Eight Banners to cultivate land in the suburbs of Beijing. The level of fiscal and financial management in Japan's Meiji era is really surprising.

In this way, a large amount of funds can be freed to develop industries, and the return on investment from industries can be used to pay the principal and interest of Jinlu bonds.Since then, these 2 million people have been completely pushed into the market by the government. In August 1876, the government began issuing Jinlu bonds with a total amount of 174 million yen.You know, the total amount of money in circulation in Japan was only 112 million yen at that time!At the same time, the government amended the National Bank Law to allow Jinlu public bonds to be used as bank capital as shares.The princes who became rich overnight immediately took the millions of bonds they got at one time to buy shares in the bank.It can be seen that the financial IQs of the Japanese princes were also quite good. They already knew what kind of benefits they would get from investing in commercial banks.The shareholders of the famous Fifteenth National Bank are almost all these nouveau riche. They successfully transformed their salary income into financial capital, and invested this capital in the most prosperous industrial projects, thus obtaining huge returns and becoming the future new aristocrats.Within three years after the issuance of Jinlu bonds, the number of national banks in Japan skyrocketed to 153.The middle and lower class samurai had nothing to do but fight. They couldn't compete with businessmen in the mall. Among the warriors who "went into the sea", except for a few who achieved success, most of them fell into the poor class.

With the advancement of these major national policies, the volume of financial business has increased, and Mitsui has accelerated the progress of applying for a banking license.Despite being previously rejected by the government, Mitsui has not given up.When Kaoru Inoue returned to the Ministry of Finance in 1876, Mitsui's application for a banking license was immediately approved.However, a clause has been added that unlimited liability must be assumed. On July 1, 1876, Mitsui Bank was formally established, the first private bank in Japanese history.Mitsui's dream of issuing banknotes has finally come true.

Mitsui Bank was born out of the traditional bank bank business model. Its 31 branches originally belonged to Mitsui's clothing chain stores. Now they are officially separated from the original business and specialize in financial business. Mitsui Bank immediately has the largest financial network all over Japan. .Regular customers have become customers of Mitsui Bank.The total amount of deposits in the year of opening was as high as 11.37 million yen, and there were 2.28 million US dollars in deposits.The government's abolition of vassals and counties, land rent monetization, and Jinlu public bonds have greatly increased fiscal revenue, and half of the central fiscal revenue has been deposited in Mitsui Bank. 【10】In this way, Mitsui Bank was equivalent to obtaining a huge deposit of interest-free and unsecured funds from the Meiji government.With such strong financial resources, Mitsui began to invest heavily in industries, forming a super chaebol with finance as the core and various industries as the backbone, interdependent and mutual leverage in the railway, textile, paper, shipping, coal mine and other industries .

In 1882, under the plan of Masayoshi Matsukata, Kaoru Inoue and others, the Bank of Japan, the first central bank in Japanese history, was formally established.This is a joint-stock company. The government and private financiers each hold corresponding equity. The Mitsui family, as the main sponsoring shareholder, sends representatives to the central bank's board of directors to participate in decision-making. 【11】Although some of Mitsui's power has been diluted by the chaebol representing the interests of all parties, no one has yet been at the same level as Mitsui in the Japanese financial industry.

Subsequently, the Bank of Japan, as the only statutory note-issuing bank in Japan, gradually took back the note-issuing rights of 153 national banks, completely controlling the strategic commanding heights of Japanese finance. Another important function of the Bank of Japan is to directly provide a large amount of financing to the country's priority industries.The Bank of Japan opened a special discount window to mortgage the stocks and bonds of key enterprises, which is unimaginable in other countries. This is equivalent to directly monetizing the debts and stocks of enterprises, and the whole society will share the development of key enterprises cost.This also created extremely important conditions for the take-off of Japanese industry.

Under the mobilization of the Bank of Japan, the financial resources of the whole country were effectively integrated, the entire banking system went all out to expand credit, and large-scale funds were continuously injected into the industrial system.What needs special attention is that from the Meiji Restoration to the Sino-Japanese War of 1894-1895, Japan did not conduct large-scale foreign debt financing because Japan witnessed the dangerous trend of China and other countries becoming increasingly colonized under the oppression of foreign debt.The main funds of the Meiji Restoration in Japan came from the integration and mobilization of financial resources in the country, and more importantly, the credit creation of the banking system. Under the guardianship of the Bank of Japan, Japan's financial system has achieved unprecedented development.By 1901, the number of various financial institutions in Japan had reached thousands, and there were 1,867 commercial banks alone, with financial networks covering cities and villages in Japan.In the following 10 years, the credit scale of the banking system to industry and commerce tripled, and the total deposit scale quadrupled. Japan's railways, shipping, mining, textiles, military industry, machinery manufacturing, agriculture, trade and other industries experienced huge Stimulated by funds, it soared like a rocket.