I am grateful to Professor Henry Rosovsky who provided valuable comment and criticism. Also, Professor Hugh T. Patrick was kind enough to make available to me his “Banking in the Early Stages of Industrialization: Japan, 1868–1914’ (mimeo). While I was collecting the necessary sources in Tokyo, Professors Keiichiro Nakagawa and Tsunehiko Yui were extremely cooperative, as was the Economics Library of the University of Tokyo. A Research Professorship granted by The Brookings Institution made possible my stay in Japan, the purchase of source materials, and the research needed for this paper. I also wish to express my appreciation for the opportunity to participate in stimulating and helpful discussions on the substance of this article with Professors R. Hidy, A. Johnson, F. Redlich, J. Baughman, and M. Klein.

¹ Hirschmeier, Johannes, The Origins of Entrepreneurship in Meiji Japan (Cambridge: Harvard University Press, 1964), p. 44.CrossRefGoogle Scholar

² Professor Yasuzo Horie expressed this view articulately in his “An Outline of the Rise of Capitalism in Japan”, Kyoto University Economic Review (July 1936). Its date and the fact that it was written in English seem to account for its influence, as repeated quotations from his article indicate.More recently, the widely used Buchanan, N. S. and Ellis, H. S., Approaches to Economic Development (New York: The Twentieth Century Fund, 1955), p.118Google Scholar, offers a typical presentation of this view.

³ This is a phrase coined by Gustav Ranis. See his “The Community-Centered Entrepreneur in Japanese Development,” Explorations in Entrepreneurial History, VIII (Dec. 1955).

⁴ Professor Tsuchiya, Takeo, who has written many volumes on Japanese economic history, exemplifies this thinking. His view is best summarized in his Nippon Shihonshugi no Keieishi-teki Kenkyū (a business history study of Japanese capitalism), (Tokyo: Mimizu-Shobō, 1954), p. 189Google Scholar. For what I consider an overrated assessment of Shibusawa's role, see Hirschmeier, Entrepreneurship in Japan, pp. 167–75.

⁵ Kazoku was the newly created nobility composed of kuge (the former court members) and high-ranking samurai. Samurai and bushi are identical. Japanese historians seem to prefer bushi to samurai in their writings.

⁶ Heimin means commoners. This class consisted of former chonin (merchant), nomin (peasant), and artisan classes, i.e., all nonsamurai.

⁷ Takagaki, Torajiro, Kindai Nippon Kinyū-shi (a history of banking in modern Japan), Local Banking Association Monograph No. 20 (All Japan Banking Association, Tokyo, 1955), p. 28.Google Scholar

⁸ Akira Sawada in his “Dajōkan-satsu Hakkō no Shushi to Shokusankogyō” (the intent of the issuance of dajōkan-satsu and industry promotion)Shakai Keizaipaku Shigaku (journal of social and economic history), III (Oct. 1937). This excellent article on dajokan-satsu shows how the initial intent was subverted by the needs of the time.

⁹ Katō, Toshihiko, Hompo Ginkō-shiron (a historical treatise on Japanese banking), (Tokyo: Tokyo University Press, 1957), p. 10.Google Scholar

¹⁰ Meiji Zaisei-shi hensankai (editorial association of Meiji financial history), Meiji zaisei-shi (Meiji financial history) (1905), XII, 328. Hereafter MZS.Google Scholar

¹¹ Katō, Hompo Ginko-shiron, p. 19.

¹² , Takagaki, Kindai Nippon Kinyū;-shi, p. 37.Google Scholar

¹³ , Sawada, Dajokan-satsu Hakko, p. 24.Google Scholar

¹⁴ Matsunari, Y., Miwa, T., and Chō, Y., Nippon ni okeru Ginkō no Hattatsu (the development of banks in Japan) (Tokyo: Aoki-shoten, 1959), p. 28.Google Scholar

¹⁵ MZS, XII, 331.

¹⁶ , Katō, Hompo Ginkō-shiron, p. 18.Google Scholar

¹⁷ In ibid., p. 22, article 1 of the Kawase Kaisha Act is cited, which reads in part: “The kawase kaisha were established for the benefit of … enriching the nation and … the government shall exercise its authority when loans are not repaid upon the promised date.” The government directed kawase kaisha to lend for “international trade, tea-growing and purchasing cocoons,” all of which were risky long-term loans.

¹⁸ Kato, in ibid., pp. 22–23, also notes that: “Kawase kaisha, except one in Yokohama, accumulated large debts, and had nowhere to go. They received a large sum of government aid, or were given moratorium on past aids and dissolved themselves.” Also see Takizawa, Naoichi, Kohon Nippōn Yūshi-ron (a monograph on the theory of Japanese finance) (Tokyo: Yūhikaku, 1912), p. 60Google Scholar.

¹⁹ See footnote 23.

²⁰ MZS, XII, 496.

²¹ Ibid., XIII, 18.

²² Allen, G. C., A Short Economic History of Modern Japan (London: George Allen & Unwin Ltd., 1946), p. 38.Google Scholar

²³ A Mitsui source wrote: “for Mitsui which wished to establish a bank of its own … the concurrence to establish the joint bank (with Ono as suggested by the government) was given as it (Mitsui) was unable to cope with the strongest of the government pressure. Mitsui's hope was to make the bank its foundation for its own bank some day.” It is clear that Mitsui resented the facts that it had to take One as its partner and that it was forced into establishing a bank which it considered would be unprofitable. Mitsui Bank, Mitsui Cinkō 80-nen-shi (the history of eighty years of the Mitsui Bank) (Tokyo: Dekoban-Insatsu, 1957), p. 68.Google Scholar In an older history, also published by the Mitsui Bank, the bank expressed its resentment in no uncertain terms. The “course forced upon” it by the government and the virtual government order to use the Mitsui House (the first large Western-type building which was intended to be a headquarters of the Mitsui Bank) for the First National Bank caused “crises” for Mitsui which “necessitated Hachinoemon Mitsui to call all his relatives into a conference as he was concerned with the 200 year tradition of the House of Mitsui.” Mitsui Bank, Mitsui Ginkō 50-nen-shi (the history of 50 years of the Mitsui Bank) (Tokyo: Mitsui Bank, 1927), p. 25.Google Scholar It should not be forgotten that the government had a potent weapon to cow Mitsui–a threat to withdraw its funds from Mitsui's vaults.

²⁴ A best source on a detailed discussion and analyses of the Yokohama kawase kaisha and the Second National Bank is Hara, Shirō, Meiji-zenki Kinuushi (a history of early Meiji finance) (Tokyo: Toyokeizai Shimposha 1965), especially pp. 51–86, and 99-190.Google Scholar

²⁵ On the role played by gono and and for a well-researched work on the Fourth National Bank, see katō, T. and Ōuuchi, T., eds, Kokuritsuginkō no Kenkyū (a study of national banks) (Tokyo: Keisō-Shobō, 1963), pp. 89–141.Google Scholar

²⁶ Allen, Economic History of Japan, p. 38. As to the reasons for the failure of these four banks, T. Akashi has an excellent summary. He ascribes the failure to: (a) the fact that these banks were established under the American model but were required to redeem their notes in gold; (b) the continued issuance of the government notes which caused steady inflation; and (c) the banks and the public which correctly viewed the Banking Act of 1872 as a transitional policy rather than a permanent one. For these reasons “the operation of these banks remained unsuccessful and the banks' existence was barely maintained.” Akashi, Teruo, Meiji Ginkoshi (a history of banking in Meiji Japan) (Tokyo: Kobun-do, 1935), pp. 30–31Google Scholar.

²⁷ MZS, XIII, 297.

²⁸ For an excellent discussion of the Japanese economy during the early Meiji period see Rosovsky, Henry, “Japan's Transition to Economic Growth, 1868-1885,” in Rosovsky, H., ed., Industrialization in Two Systems (New York: Wiley, 1966). This essay includes a good discussion of the background and economic reasons for the samurai commutation bonds, pp. 125-31. Also see:Google ScholarHarootunian, Harry D., “The Economic Rehabilitation of the Samurai in the Early Meiji Period,” Journal of Asian Studies, XIX (Aug. 1960)Google Scholar.

²⁹ MZS, XIII, 112.

³⁰ , Kato, Hompō Ginkō-shiron, pp. 30–31.Google Scholar

³¹ , Hirschmeier, Entrepreneurship in Japan, p. 58.Google Scholar

³² For example this figure has been quoted by , Katō, Hompo Ginko-shiron, p. 33Google Scholar and in Tsuchiya's, TakeoChihōginkō Shōshi (a small history of local banks) (Tokyo: Hosokawa Kappansho, 1961), p. 27.Google Scholar The original source is Ministry of Finance, Ginkō-kyoku dai niji hōhoku (the second report on the Banking Bureau) (Tokyo: Okura-sho, 1880), p. 129Google Scholar.

³³ Due to rounding, these figures do not add up to 100 exactly.

³⁴ In collecting sources, T. Kato‘s “Ginkōshi shōkai” (introduction to bank histories) Shakai-kagaku Kenkyū (research in social science), Vol. 6, No. 4, October 1955; Shiga University‘s “Hompo Shashi Mokuroku” (listings of Japan's company histories) Hikone Ronso (annals of Hikone), Vol. 33, 1956; and University of Tokyo's Shashi, Jitsugyokadenki Mokuroku (listings of company histories and businessmen's biographies), November 1964, were used to trace the available publications. But these were found to be incomplete, as nearly thirty bank histories have been published since the end of World War II and especially during the past several years. For those interested in these sixty-two cases and an equally large number of histories on Zaifcateu-connected banks and special banks (Tokushu Ginkō), the writer can furnish pertinent information upon request.

³⁵ In this connection see , Katō and Ōuchi, Kokuritsuginkō no Kenkyū; Matsunari, Miwa, and Chō, Nippon ni Okeru Ginku no Hattatsu; Hara, Meiji-zenki Kinyushi; Tohata, S. and Takahashi, T., eds., Meijizenki no Ginkoseido (the banking system in early Meiji Japan) (Tokyo: Toyōkeizai Shimpōsha 1965Google Scholar); and Asakura, K., Meijizenki Nippon Kinyu Kōzō-shi (a history of financial structure, early Meiji Japan) (Tokyo: Iwanami, 1961Google Scholar) are valuable. Asakura's work is most comprehensive and directly pertinent to this paper. He examined sixty-nine banks, some very sketchily and some in detail, but seven more than I was able to examine. See footnotes 38, 40, and 46 for my comments and criticisms on Asakura's method.

³⁶ , Hara, Meiji-zenki Kinyūshi, p. 119.Google Scholar Observations on this bank are based on the source cited in note (a) of Table 1 and , Hara, Meip-zenki Kinyūshi, pp. 111–13Google Scholar.

³⁷ Based on Nanafunananen-shi (the 77-year history) (1954), and , Katō and Ōuchi, Kokuritsuginkō no Kenkyū, pp. 217–66.Google Scholar The former is by far the best history of a bank. This 724-page volume is in effect a good economic history of Miyagi prefecture as a part of the rapidly changing Japanese economy, and detailed examinations of industries, banks, and other financial institutions during the period between 1868 and 1952 provide many valuable analyses of the local economy.

³⁸ Tsuchiya's work on local banks, Chikōginko Shōshi, p. 28, classified this bank as a samurai bank. Asakura, Meipzenki Nippon Kinyū Kōzō-shi, does not reach a conclusion on this bank. He observes: “Here again we could say that the largeness and strength of merchants' capital were shown” (p. 118). This is one example of numerous uses of nonconclusive phrases found in Asakura's work. Subjunctives and suggestive but unanswered questions are replete in his book.

³⁹ This is one of the rare cases in which two good histories on the bank are found. In addition to the one published in 1916, a postwar publication, Ryōu Ginkō 60-nenshi (sixty-year history of the Ryōu Bank), 1956, is an excellent source exceeding 500 pages. Ryōu Bank was established by a merger between the Eighty-First National Bank and the One Hundred Twenty-Fifth National Bank in 1899.

⁴⁰ In addition to those listed in footnote 46, this is another instance of my disagreement with Asakura, Meijisenki Nippon Kinyu Kozo-shi, pp. 102-3. On the basis of the initial shareholding and the fact that “the operating fund was borrowed from Mitsui Bank,” he classifies this bank as “established by merchant.” As noted in the text, the most we could call it is SM-dominated rather than S-dominated. A slim 172-page history of this bank, which became one of the three to form the Chiba Bank in 1933, does not yield sufficient evidence to warrant M or MS classification.

⁴¹ Tonosama is a leader of samurai, usually daimyo but sometimes a high-ranking samurai.

⁴² Katō and Ouchi, Kokuritsuginkō no Kenkyu, p. 268. Although Asakura does not include this bank in his study, the Katō-Ōuchi volume has a chapter on it by Takehisa Hayashi. My classification of this bank is based upon the latter's detailed study.

⁴³ This classification agrees with that of Asakura's, Meijisenki Nippon Kiny-This classification agrees with that of Asakura's, Meijisenki Nippon Kinyu Kōzō-shi, p. 101. Though the One Hundred Thirty-Third Bank was absorbed by Shiga Bank, an excellent 600-page history, Shiga-ginko 20-nen-shi (twenty-year history of Shiga Bank), 1953, provides information which leaves no room for disagreement in classification.; Kōzō-shi, p. 101. Though the One Hundred Thirty-Third Bank was absorbed by Shiga Bank, an excellent 600-page history, Shiga-ginkō 20-nen-shi (twenty-year history of Shiga Bank), 1953, provides information which leaves no room for disagreement in classification.

⁴⁴ Excluding the giant Fifteenth National Bank (see Section IV of this article), the mean capital of all 152 banks is approximately 130,000 yen. The mean capital of Jieimin-dominated banks in our sample was 180,000 yen and the same for samuraidominated banks was 158,000 yen. But, given the smallness of the sample and the observed variability of the data (standard deviation and range), one cannot conclude that the hetmin-dominated banks were larger on the average. In the universe (153 banks), there exists no significant temporal pattern in the size of capital, i.e., small (50,000 yen or about) and relatively large (over 150,000 yen) were found all through the period when charters were granted (1876-1879).

⁴⁵ It is possible that my efforts have failed to unearth existing histories of banks which are not in this category.

⁴⁶ A few examples to show my disagreement with Asakura, Meijisenki Nippon Kinyū Kōzō-shi, illustrate this. Asakura classifies the Seventeenth National Bank as “merchant-samurai, and operated by merchants” (pp. 107-8). Though merchants contributed a larger capital at the beginning (M-55,800 yen vs. S-49,200 yen), this bank was clearly organized under the leadership of Kazuo Kuroda, the chief minister (roshoku) of the Kuroda han (a feudal clan) and the majority of the officers were samurai. In 1871, when the capital was increased, samurai contributed nearly twice the amount supplied by merchants. Neither Fukuoka Ginko soritsu 25-nen-shi (a twenty-five-year history of Fukuoka Bank since its origin), published in 1918 by Fukuoka Bank which was absorbed by the Seventeenth in 1923, nor Kabushiki Kaisha 17 Ginko 60-nen-shi (a sixty-year history of the Seventeenth Bank, Ltd.), published in 1941, provides reasons to change my classification of this bank to SM.

On the Sixty-Second National Bank, Asakura wrote: “Though it is called a samurai bank, merchants have taken initiative” (p. 105). My classification for this bank is SM because of a 5 to 1 dominance of samurai in the composition of initiators. The fact that one merchant provided the largest amount of initial capital is not sufficient to classify this bank as Asakura did. See: Jyōyo Ginkō 20-nen-shi fu Ibarazi-ken Kinyushi (a twenty-year history of Jyoyo Bank with a financial history of Ibaragi Prefecture), 1955. This is one of the best bank histories, and the Financial History of Ibaragi Prefecture appended is detailed and well-documented.

This list could be lengthened by adding my further disagreements with Asakura, but the documentation would become unduly long, as the two examples above show. This process, in several instances, would also be tedious as Asakura's style is to write, for example, on the Seventy-Seventh National Bank, “I think that this bank cannot necessarily be considered to belong to samurai” (p. 79).

⁴⁷ , Katō and , Ōuchi, Kokuritsuginko no Kenkyū, p. 154.Google Scholar

⁴⁸ Ibid., p. 158.

⁴⁹ Patrick, “Banking in the Early Stages” (mimeo).

⁵⁰ Nippon Zaisei Keizai Kenkyushō (Japan financial economics research center), Nippon Kinyu Zaisei-shi (a history of Japanese finance) (Tokyo: Sakuma-Seihon, 1957), p. 41.Google Scholar

⁵¹ The data he quoted were for 1879-1880, one year previous to the year at which the series in Table 2 begins.

⁵² Rosovsky, “Japan's Transition,” p. 131.

⁵³ , Hirschmeier, Entrepreneurship in Japan, p. 58.Google Scholar

⁵⁴ This remark made by Eiichi Shibusawa was quoted in Tsuchiya's Nippon Shihonshugi, p. 183.

⁵⁵ when the Banking Act of 1876 was decreed amending the Act of 1872, it became possible to establish “private” as opposed to “national” banks. A private bank could be established with a smaller capital than that required for a national bank, but it was not authorized to issue its own notes.

⁵⁶ Patrick, “Banking in the Early Stages” (mimeo).

⁵⁷ See ibid., for the total capital of these quasi-banks and description. Asakura, Meijizenki Nippon Kinyū Kōzō-shi, devotes four chapters on private banks, quasibanks, pawn shops, tnujin (revolving credit association), and similar institutions. He then concludes that: “The strength of these low-level financial institutions and private money-changers could be considered to have exceeded that of banks. In any case one should not underestimate the functions performed by these money-changers and the low-level financial institutions in our economy, especially in finance” (p. 323).

⁵⁸ Patrick, “Banking in the Early Stages” (mimeo).

⁵⁹ Norman, E. H., Japan's Emergence as a Modern State (New York: Institute of Pacific Relations, 1940), pp. 111–12.Google Scholar

⁶⁰ Hatsu Murakami, “Mie Bosekikaisha no Shikinchotatsu” (financing of the Mie Textile Company) Shakai Keizai Shigaku, Vol. 31, No. 1, 1965, pp. 18-38. She found that in the case of this firm bank capital was supplied directly as long and short-term loans and indirectly as loans to large shareholders who used the snares of the firm as collateral. But one notes in her data a sharp increase of accumulated profits which exceeded the direct loans in 1896, p. 23.

⁶¹ Among the active students of Japanese economy, Professor Patrick must be mentioned as one expressing this view explicitly. See footnote 63. One could also discern an emphasis in profit-motivation rather uian the “community-centered entrepreneurship” approach in Hugh Patrick, “Lessons for Underdeveloped Countries from the Japanese Experience of Economic Development,” Indian Economic Journal, IX, (Oct. 1961), pp. 150–66Google Scholar.

⁶² Crawcour, E. S., “Problems of Japanese Economic History,” The Journal of Economic History, XXIII (Dec. 1963), p. 625.Google Scholar

⁶³ Or, to put it positively, Professor Patrick's insight gained by his study of Japanese banking is to the point: “Too much emphasis should not be placed on the role of the government in the establishment and development of Japan's financial system, since it was mainly through the initiative of profit-minded individuals that most Japanese financial institutions were born.” Patrick, “Banking in the Early Stages” (mimeo).