Financial Stabilization in Meiji Japan

With a new look at the 1880s financial reforms in Japan, Steven J. Ericson's Financial Stabilization in Meiji Japan overturns widely held views of the program carried out by Finance Minister Matsukata Masayoshi. As Ericson 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 Ericson sets the record straight. He 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, Financial Stabilization in Meiji Japan 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. Ericson shows that Matsukata Masayoshi was far from a rigid adherent of classical economic liberalism.

Steven J. Ericson is Associate Professor in the Department of History at Dartmouth College. He is author of The Sound of the Whistle and co-editor of The Treaty of Portsmouth and Its Legacies. Follow him on X @ericson_steven.

Ericson's thorough analysis of its content and context reveals Matsukata as, above all, a politician and statesman navigating his way through the interlocking worlds of late nineteenth-century Japanese and international financial politics, achieving his goals with considerable success and thereby placing Japan on a firmer footing to face the challenges of industrialization. [A] better guide [than] Ericson's clear, immaculately presented, and indeed relatively short text is hard to imagine.

[T]his book is a must-read for students and scholars of modern Japanese financial history and a precious case study for contemporary economists in the fields of development and monetary policy. Its biggest contribution is to set a new stage for future study by evaluating existing works.

As a work of Japanese history, Ericson gives us the most complete study to date of Matsukata's policies. It will certainly become the standard reference... This is a first-rate work that should be required reading for historians and economists working on Japan...

This book is one of the most important contributions to understanding the history of financial modernization in Japan in recent scholarship.

Laura Hein, Harold H. and Virginia Anderson Professor of History, Northwestern University:

Integrating a newly consolidated national economy into the global one while feeding the insatiable military and funding other desperately needed initiatives is just plain hard, especially when doing so sparks political unrest, as Ericson shows.

Mark Metzler, author of Capital as Will and Imagination:

Steven Ericson's study of Matsukata Masayoshi—"Japan's Hamilton"—is a work of fundamental importance for understanding the history of modern Japan as well as for understanding the history of modern capitalism. It is the kind of deeply grounded history that scholars will continue to refer to for generations.