The Real Reason Japan Became a World Power — The Meiji Restoration Was Bought on Credit

Japan did not out-fight the Russian Empire in 1905. Japan out-borrowed it. With a shogunate that collected its taxes in rice and therefore could not convert its wealth into a navy. With treaties that fixed Japanese tariffs near 5% and closed off customs revenue for forty years. With a currency arbitrage in 1859 — gold traded against silver at 1:5 inside Japan and 1:15 outside it — that drained the country's gold in a matter of months. And with a land tax, imposed in 1873 at 3% of assessed value and payable in cash whatever the harvest, that moved the entire risk of the weather off the government and onto the farmer. Most accounts of the Meiji Restoration are about willpower: a small island nation that looked at the West, decided to catch up, and compressed three hundred years of development into forty. The discipline was real. But willpower does not buy cruisers. Credit buys cruisers — and in 1876 the Japanese government cancelled the hereditary income of its own aristocracy and handed the samurai class ¥173.9 million in bonds instead, close to half the national income and six times total annual revenue. Within three years those bonds had become the capital base of the banking system. The abolished aristocracy did not get out of the way of Japanese capitalism. It was recapitalised into the foundations of it. In this documentary we follow the money underneath the Meiji Restoration: from the rice ledgers of the Tokugawa state, to the Matsukata deflation that created the Bank of Japan and sold the state's factories into four family conglomerates, to the silk reeled by farm girls in Nagano that paid for British machine tools, to the 230 million taels taken from China in 1895 — more than four times Japan's annual revenue — which Matsukata insisted be paid in pounds sterling in London, and which bought the gold standard Japan adopted on 1 October 1897. Then the bill came. The Russo-Japanese War cost ¥1.7 billion against annual revenue of roughly ¥300 million, and about two thirds of the borrowing was raised abroad. Takahashi Korekiyo sailed to London in February 1904 and could not place £10 million at 6%, secured on Japan's customs revenue, until Jacob Schiff of Kuhn, Loeb in New York took half the issue — for reasons that had nothing to do with Japan. Tsushima was total. The treasury was empty. That is why Portsmouth produced no indemnity, and why Tokyo rioted. Thirty-one years later, army officers killed Takahashi in his bed. Subscribe for more deep dives into the taxes, bonds and foreign loans that actually move history. #MeijiRestoration #EconomicHistory #HiddenHistory #RussoJapaneseWar #DebtOfNations