Economic changes and
economic policy in Japan
1900-1930
In the 1870’s the Meiji oligarchs were focused on establishing
boundaries—particularly in Hokkaido. This was to make it into a
flourishing city, as well as to prevent Russian troops from ever
interfering in the area. Soon, much migration took place in the
north and fishing industries began to grow exponentially. The
establishment of Sapporo Agricultural College was established—
soon employing foreign teachers and advocating further western
education. 1880’s was championed as the height industrialization,
transportation and marketing.
 Ever since the 1900’s, the Meiji Empire continued to strive all the
more for successful Japanese Modernization. Encouraged by the
results of the Russo-Japanese War, Japanese representatives
signed the Treaty of Portsmouth with pride.
 New York Times dubbed Japan as a nation with “Boundless
opportunities of industrial growth and national development.”
(1905)
 By this time, Japan was considered “no longer a foreigner” to the
west, after demonstrating itself in both the Sino-Japanese War
and the Russo-Japanese war.
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Background
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In 1903, Saionji Kinmochi replaced Ito and became the minister of foreign affairs,
education and finance. Taxes were imposed, as it was a rich source of local income. It was
supervised by the prefectural police who harassed anyone who didn’t pay.
In 1904 the Japanese began further economic expansion. Japanese firms imported Korean
foodstuffs and raw materials while selling to Koreans cotton cloth, ceramics, watches,
perfume, buttons, eyeglasses, etc. Fishing grounds were also extended to Korean waters.
Japanese had also set up small enterprises of leather goods and ceramics. Although large
Japanese businesses were reluctant to be based in Korea, in essence, Korea opened up
new markets and brought down the cost of transporting goods (especially in rice and
soybean). Some Koreans welcomed modernization while others saw it as a take over of the
government and economy.
The government also stopped imports of inexpensive rice from Korea and Taiwan.
Economist Kawakami jolted the economy and by 1908 he had began to question the early
enthusiasm for industrialization. He was more focused on eliminating poverty. He
gravitated towards the Marxist theory had concluded that people should produce according
to their abilities. Marxism nevertheless entered the school of thought and not surprisingly
raised the social voice in Japan. This sparked off a debate about Japans economic future.
By 1920’s business conglomerates (combination of two or more corporations engaged in
different businesses together into one corporate structure), zaibatsu in Japanese, gained
importance in Japan. The wartime ‘boom’ allowed them to build up large capital reserves
which were what enabled them to weather the economic decline of the post-war time.
Structure of the zaibatsu placed enormous wealth in of zaibatsu owner families and
enormous economic power. Affiliates were often forced to sell their products at a loss to
other affiliates or to buy supplies from them at inflated prices that contributed to the
zaibatsu ‘s overall interests. In the long run, this financial power paid off in stability and
security for these large firms. And since zaibatsu affiliates could fall back on the resources
of the whole conglomerate, during economic crisis, they had greater survival power than
other firms. Employees were better protected then those in ordinary firms.
Economic policy
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In 1907 Japan began to impose and reform Koreas currency and tax structure
and modernize its telegraph, telephone and postal services.
Total net revenue jumped from two million yen to fifteen million yen in 10
years (1907-1917)
1920’s Japan took up development projects as they were already a part of the
League of Nations. School, roads, harbors, health improvement and sanitation
were all part of this.
By the 1920’s output and technology were advancing on every front, especially
in heavy industry. Between 1912-1932 real national income per capita more
than doubled, living standards rose, economic growth brought visible changes
to Japan.  Tokyo had transformed into a modern metropolis.
Big companies continued to emerge such as the South Seas Development
Company which became the monopoly for phosphate mining and coconut
production—the commercial power in Micronesia.
New oil, timber and coal findings in colonies; by 1925 Karafuto was supplying
the home lands with more than 10% of their oil.
Economic development took place in other territories; Kwantung territory
became the most industrialized region in continental Asia.
Huge number of women workers by 1922
Economic changes
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Merchant marine fleet doubled in size to handle this
expanded volume of export and trade. Heavy industry grew
due to increase in demand for producer capital goods such
as iron, steel, coal and heavy machinery.
Development of hydro-electric power increased growth of
the electrical goods industry and led to rising employment,
wages created domestic demand for consumer goods.
With the outbreak of the Second World War, Japan’s
economy turned around and made a dramatic change. The
war created new opportunities for Japanese trade. Britain
and its allies all turned to Japan for supplies of munitions
etc. WWII also made European powers withdrew from
many Asian markets such as India and China and so
Japanese exports took the place of European products.
Economic changes
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The economy suffered greatly in the wake of the Russo-Japanese war. Inflation, fall in
exports, huge public debt.
Rice riots rose between 1914 and 1919 and wartime inflation drove up retail prices of most
consumer goods while the earnings of many lower and middle income people inched
upward. When rice prices rose too high, consumers took matters into their own hands and
by 1918 the riots were in full play.
By this time, the government responded by donating 3 million yen to establish national
relief fund, continuing to make contributions even after that. (total 15 million yen)
WW1 brought good economic times to Japan; the retreat of the British in china and India
gave the Japanese the chance to get involved in their markets. There was a boom in
companies of raw materials such as Kobe steel, Mitsui mining and Sumitomo electric
industries. However there was an underlying problem. Manufactured goods accounted for
90 percent of all exports. This made their economic performance like a roller-coaster—so
recession followed the wartime boom.
The great Kanto earthquake of 1923 brought new strains on the economy. Kanto was the
region’s major commercial and industrial as well as financial center. The earthquake did
serious damage to the country’s economic infrastructure.
Agricultural sector had contributed to overall economic growth in the Meiji period, by the
1920’s the countryside was falling behind rapidly. Post-war economic depression affected
the rural areas as much as the urban.
In the spring of 1927 rumors spread that banks holding the loans were in danger of
collapse and so panic stuck, and Japanese began to withdraw their savings. This was finally
heightened by the 1929 world depression.
Japan was greatly suffering however the key feature to Japans economy at this time was
that firms with four or fewer employees produced some 20 percent of all manufactures,
and those with five to ninety nine employees turned out an additional 40 percent. The
economy was of great diversity thus it was only the companies with a large workforce that
suffered.
Problems