The rise of capitalism in Japan can be traced back to the later half of the nineteenth century. This comparative delayed rise of capitalism in Japan was partly due to the existence of a strong feudalistic society in the country and the existence of a number of commercial treaties with coun­tries like USA, England, France and Holland.

The Japanese society in the later half of the nineteenth century was divided into a number of classes and the members of the lower classes were treated arbitrarily by the members of the higher classes. The people did not enjoy any freedom of occupation and movement. As a result, only a small fraction of the popu­lation engaged in the economic activities and the country could not make adequate economic progress.

Similarly, under the treaties concluded by Japan with the foreign powers, she was denied autonomy in matters of tariff and forced to concede to the foreign powers the right of fixing low customs tariff. What is still worst, these treaties were of an indefinite term and did not contain any provision for revision or termination.

With the assumption of power by the Meiji in 1868, the things under­went a change. Emperor Meiji, during his tenure (which lasted upto 1911), took a number of steps which went a long way in improving the social and economic conditions of the people and ultimately paved the way for the growth of capitalism in Japan. One of the first tasks which Meiji under­took was to abolish feudalism.


He accomplished this with remarkable speed and without causing any large-scale bloodshed. He granted freedom of movement and occupation and threw open the trade and industry which had so far been closely guarded by the guilds. However, as the country was primarily an agricultural country, and had not undergone any commercial revolution, it lacked the necessary capital for industrialization. In short, Japan lacked both the necessary capital and the industrial tradition. Under the circumstances the government decided to take a lead and started indus­trial and transport enterprises.

It raised necessary funds from foreign countries and started railways, telegraphs, and telephones, the silk reeling, cotton spinning, woollen and glass factories. For the erection of these factories it requisitioned the services of the foreign technicians. These technicians mainly hailed from Holland, Germany, France and England.

These industries were subsequently transferred to private enterprise. Prof. Allen says, “Although the state itself established and for some time controlled the majority of the industries and commercial services which now exist, it did not retain the ownership or administration of them once they were firmly rooted.”

However, even thereafter the government continued to help in industrial progress. In 1882 the Bank of Japan was established and given the monopoly of note-issue.


In 1894 Japan was involved in a war with China, which provided a new fillip to the development of capitalism in the country. Japan not only won this war against China but also claimed an indemnity of 200 million taels.

This enabled Japan to bring her currency in line with other foreign currencies. Thereafter, the altitude of the foreign powers towards Japan underwent a change. They replaced the one-sided treaties concluded with Japan, which greatly restricted Japan’s freedom of tarrifs, by new treaties under which Japan was given the freedom to improve duties. New indus­tries like ship-building and chemical industries were also set up towards the close of the century.

A further stimulus to the growth of capitalism of Japan was provided by the Russo-Japanese War of 1904-05. The war not only resulted in increased industrial production of Japan but also increased Japan’s credit in the world’s money market. Taking advantage of this Japan increased her borrowings. This increase was indeed stupendous. As against the foreign loans of Pound 13 million two years before the war, the amount increased to Pound 107 million two years after the war.

This money was invested in the metal, electrical, rubber and ship-building industries. As a result, Japan laid the foundations of the industrialism on the western lines and freed herself from the domination of foreign countries in the commer­cial sphere. In course of time, Japanese exports started posing a serious challenge to the western capitalists.


Though Japan came to acquire an industrial power comparable with the western countries but her industrial structure was quite different from them. It differed from the western countries in four respects. Firstly, the industry enjoyed a second place in the economy of the country.

Secondly, the industrial structure of Japan was dominated by small and medium sized industries. Unlike in western countries the industrialization in Japan did not lead to the elimination of the small units. One of the major factors which contributed to the pre-dominance of small-scale industries was the existence of chronic depression arid a state of overproduction in the rural areas.

Thirdly, the industrial and financial oligarchy occupied a dominant position in the industrial structure. Most of the industrialists came from the families of former feudal lords such as Mitsui Mitsubishi, Sumitomo and Yasuda, Fourthly, the defect of lop-sided development of industries had to a large extent been rectified.

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