Academic literature on the topic 'Matsukata, Masayoshi'

It is established historical knowledge that the Bank of Japan (1882) was modelled upon the Banque Nationale de Belgique (1850). In this article, I point out how Japan's recurrent frustration with foreign dependence nurtured a social Darwinist view of international politics and finance: Japan's capability to survive in the world was believed to be dependent on its capability to assimilate foreign knowledge and institutions. In the field of finance, Matsukata Masayoshi, Japan's most enlightened financial policy maker at the time, turned to Belgium. I explain that Matsukata was dedicated to the emulation of Belgium's financial infrastructure, in which several public institutions would each be responsible for a specific area of the credit system. I indicate how efforts to adopt Belgian institutions and banking ideas proceeded meticuluously; yet, in the end, Japanese and Belgian finance developed along quite distinct pathways.

With a new look at the 1880s financial reforms in Japan, this book overturns widely held views of the program carried out by Finance Minister Matsukata Masayoshi. The book shows, rather than constituting an orthodox financial-stabilization program—a sort of precursor of the “neoliberal” reforms promoted by the IMF in the 1980s and 1990s—Matsukata's policies differed in significant ways from both classical economic liberalism and neoliberal orthodoxy. The Matsukata financial reform has become famous largely for the wrong reasons, and the book sets the record straight. It shows that Matsukata intended to pursue fiscal retrenchment and budget-balancing when he became finance minister in late 1881. Various exigencies, including foreign military crises and a worsening domestic depression, compelled him instead to increase spending by running deficits and floating public bonds. Though he drastically reduced the money supply, he combined the positive and contractionary policies of his immediate predecessors to pull off a program of “expansionary austerity” paralleling state responses to financial crisis elsewhere in the world both then and now. Through a new and much-needed recalibration of this pivotal financial reform, the book demonstrates that, in several ways, ranging from state-led export promotion to the creation of a government-controlled central bank, Matsukata advanced policies that were more in line with a nationalist, developmentalist approach than with a liberal economic one. It shows that Matsukata Masayoshi was far from a rigid adherent of classical economic liberalism.

This concluding chapter returns to the notion that Matsukata merged the positive and negative policies of his predecessors along liberal nationalist lines, pursuing a kind of “expansionary austerity” during the Matsukata deflation. It argues that Matsukata Masayoshi was committed to reform and modernization of Japan's fiscal and monetary systems and to encouragement of private enterprise, but not in a categorical orthodox liberal or neoliberal sense. He certainly set out to create budget surpluses through fiscal austerity. Yet he demonstrated flexibility in response to a series of unexpected developments that compelled the Finance Ministry in fact to increase government spending. As a result, the Finance Ministry was able to accumulate enough specie and money in the reserve fund to redeem a sizable portion of fiat notes, back the issue of convertible paper money by the Bank of Japan, and finance military expansion as well as enable the state to remain actively involved in the economy.

This introductory chapter briefly considers the ways in which the reforms of Finance Minister Matsukata Masayoshi unfolded along the lines of mid-nineteenth-century British-style orthodoxy or the late-twentieth-century International Monetary Fund version. It then goes on to argue that Matsukata was dealing with the challenge, shared by many of his contemporaries, of establishing a modern financial system in a developing state emerging from warfare and aiming to industrialize. At least on monetary policy, his economic nationalism was of the liberal nationalist variety like that of state leaders in other late industrializers. Moreover, Matsukata emerged as a practitioner primarily of unorthodox policies from the standpoint of both nineteenth- and late-twentieth-century versions of financial and economic orthodoxy. He also departed from orthodox mindsets in his pursuit of statist and nationalist priorities, his commitment to made-in-Japan solutions, his reliance on local intellectual tradition, and his willingness to be flexible in response to “the dictates of practical expediency,” as he would proclaim in 1886.