Part 19

--'Let us assume that the feudal system had already been abolished,' said another, 'the winding-up of the affairs of the different feudal governments, and the consolidation under a uniform system of central government must have been a very difficult and delicate matter.'

--'Yes, it was so,' I answered. 'To begin with, most of those governments had debts of all kinds which had to be liquidated, above all, their obligations for paper money floated by them. The coinage of gold and silver was the monopoly of the central government, but all the feudal lords had the privilege of circulating paper money under different forms in different clans. The actual value of this paper money in gold and silver varied according to the financial condition of the feudal government by whom it was issued, and that money was legal only in the districts which were under the jurisdiction of the lords by whose governments they were issued. You can therefore easily imagine how troublesome and inconvenient the matter must have been to travellers and traders in localities where those feudal governments stood in close proximity to each other. Then again, the lords and their retainers could not be made penniless immediately on the abolition of the feudal system. To them, therefore, certain means of support were given, in proportion to their former rank and income; that support was ultimately converted into the form of government bonds. The income thus given was not enough for many of the Samurai to support themselves and their families, and they, therefore, had to seek some new occupation to which they were not accustomed. A large number of them even lost the bonds thus given, through their incautious or incompetent management. The government had to prevent things getting into a worse condition, and to make the transition state a smooth one, if possible. For that purpose the government often had to organise for them some kind of common work, for which sometimes some special funds were given. Somehow or other, we have got through those trying times. The credit of winding-up the affairs of the feudal governments is chiefly due to Count Inouyé, who was the acting Minister of Finance at the time.

--'How did matters stand at the time with regard to the system of taxation?' asked one.

--'It was also one of the most difficult problems which the Imperial government had to solve,' I answered. 'Perhaps you know that the economical theory of the Far East had always been essentially physiocratic. Agriculture was the foundation of national existence. Commerce and industry were very little considered. Curiously enough, on that account the land had to bear public expenses almost entirely, and commerce and industry contributed almost nothing; in other words, taxes on land were the main source of public revenue. People engaged in industry and commerce paid no tax, except perhaps some trifling amount in the form of licences occasionally, and except that they were often ordered by their lords to contribute irregular sums of money to relieve their financial difficulty. The land taxes were paid, as a rule, in kind, namely, rice, but the burden of the tax-payers was by no means uniform throughout the country. There was a vague measurement expressed by the words "four public, six private," that is to say, four tenth parts of the produce was to go to the government, and the remaining six, together with any supplementary produce, was to remain in the hands of the producers. But this was by no means uniformly practised. Roughly speaking, the burden of the lands under the direct control of the Shogunate was lighter than that on the lands under the different lords. But there was much difference in the burden on the lands held by the different lords. As a matter of fact, all sorts of additional burdens, besides the pure land taxes, were instituted and levied on most lands. It was necessary for the Imperial government to unify these burdens and equalise them, as much as possible, throughout the whole country. It was also desirable to change the whole system of paying taxes in kind into a uniform system of money payment, because, in the case of the former, revenue is subject to variation on account of the condition of the harvest and the market price, besides, that system is more liable to abuse. The Imperial government undertook this tremendous work of reform. The valuation of all lands was carried out, and the system of payment in money was effected. I may here mention that, under the ancient Imperial régime, no proprietary rights were recognised in lands. The tillers of land obtained the allotments of them for life, and new allotments were made from time to time. That system, however, was not strictly enforced in the case of newly reclaimed lands, especially so in the far-off provinces. As time went on, the system entirely fell through, and hereditary proprietorship of the tillers came tacitly into existence. Nevertheless, the idea of the supreme domain of the sovereign from the points of public law and proprietary rights of the possessors from points of private law had not been brought into a very distinct light, and the vague notion had still remained that the possessors held the lands only by favour of the sovereign. As a matter of fact, in most parts of the country no rights of sale of lands were legally recognised, though the matter was widely affected by some fictitious means, such as long mortgages or long leases. This state of things was entirely changed by the reform made when the nature of the land tax was changed, as I have just described, because by that reform the full proprietary rights from the point of private law were completely recognised. I said that industrial and commercial people contributed almost nothing to the public expenses, and yet the denominations under which they had to pay something were various. Add to this numerous other miscellaneous contributions; there were several hundred different kinds of contributions, but each of these separately amounted to a very small sum, and was not worth the trouble it involved. These, therefore, were altogether abolished. Of course the government had, as time went on, to introduce some new taxes, such as the business tax, the income tax, etc., but these are the results of the progress made in our economical and financial conditions, and based on broader and more universal lines, so as to fit the altered state of the country. The annual budget, which amounted to seventy or eighty million yen before the Sino-Japanese war, amounted to some five or six hundred million yen before the Russo-Japanese war: that will perhaps show the expansion of the financial system of the country.'

--'It is very interesting,' said one; 'but let us have a cup of tea, and then continue the discussion.'

VIII

Commerce and industry--Old methods of communication--Roads and ships--How they have been improved--Railways, post, telegraphs, and telephones--Progress of the financial system--The Satsuma war--The Bank of Japan--The National banks--The monetary system one of the causes of Japan's success--Further remarks on the military reforms--Evolution of the mode of fighting--All reforms at much cost of blood and money--The cause of the Satsuma war--Saigo the Elder--Social condition of Japan to-day--Evolution of legislation--Chinese jurisprudence--The Japanese are not good correspondents--My future--An operatic singer--Japanese stages--Danjiuro and Irving--The old school and the new one--Kawakami and Sada Yakko--The opera _Maritana_--The end of the dream

I was still in the same incongruous group of people, and carrying on a conversation on the same lines. Though the subjects were rather technical, they seemed to have interested the people who took part in the discussion, because they relate to the important part of our history, wherein the foundation-stone, so to say, of Modern Japan was laid.

--'I suppose, 'said one of the group, 'your country had to take much pains in encouraging commerce and industry to attain the stage you have reached.'

'Well,' I replied, 'we could not do anything which resembled a protective system if we wished, because we were bound by the treaties forced upon us, whereby our custom-house duties, all prefixed, could not exceed five per cent. _ad valorem_; but as far as it lay in the competence of our Government and people, we did all in our power. You cannot imagine what money, what time, and what labour we have had to waste in many ways, because there were many things which we tried and in which we failed. What we have achieved is insignificant, but it is the result of all those exertions. By the bye, the question of the revision of the old treaties was a long protracted subject of our diplomacy and politics through which we had to struggle. It wrecked several ministries. One minister for foreign affairs, Count Okuma, lost one of his legs and only miraculously escaped death, in consequence of having been inclined to accept terms of revision which the people considered insufficient and irreconcilable with national dignity. The aim of the revision was to regain the tariff as well as judicial autonomy. America had shown very early its inclination to accede to our demand. Italy also showed a similar inclination. But on the whole the matter proved very difficult. About ten years ago Great Britain took the lead in recognising the justice of our demand, other powers followed England's example, and thus the revision was at last effected. That revision restored to us our judicial autonomy completely. You must, however, remember that the tariff autonomy has not yet been entirely restored to us, for we are still bound by one-sided conventional tariffs. But I must now return to the original thread of my discourse. You have already seen that we were hampered by the treaties, but in spite of that we have taken every pains to promote our commerce and industry, without falling into the error of over-interfering or being officious.'

--'And you have made wonderful progress in your commerce in a comparatively short time,' said another.

--'Well, not wonderful,' I answered; 'but it is a fact that our commerce has increased from a few million yen to some six hundred million yen. That is something. I will add a word more. It is a mistake to suppose that the stage we have attained is the mere result of natural growth. We must venture to ask for sympathetic appreciation of our endeavour. Some Western people appear to entertain a sort of apprehension in regard to the growth of our commerce and industry, and even show a desire to check our progress. It would be very hard lines for us, for our conviction is that the growth of our commerce and industry can only be beneficial reciprocally to others as well as to ourselves; and, moreover, what is after all our commerce and industry when compared with that of the Western peoples?'

--'I quite sympathise with you on that point,' said one.

--'Thank you!' I said, and continued. 'Some foreigners speak of our commercial probity very disparagingly. I admit there were some shortcomings, but I deny that the faults were wholly ours. You know that the greater bulk of our Japanese commerce is done in Japan itself by the Western merchants who come out there. If we were always cheating them, and they were always blameless, why should they continue to trade with us and make such great increase of commerce in a comparatively short space of time? It is my opinion that the blame attached to the commercial probity of the Japanese merchant has far less foundation than the reality warrants. A good deal of the blame, I think, is a hearsay, originally circulated by interested persons and innocently magnified by others. Time was when our merchants wellnigh revolted against oppressive dealings of foreign merchants out there, and tried to export direct to foreign countries, but then want of capital and experience stood in their way as a barrier. On the whole, I am satisfied with the progress our commerce has made, as well as with the fact that its volume has increased in spite of the war, though we must endeavour to still further it.'

--'That your country will have to do,' said another; 'but will you tell me the condition of the communications of the country at the time of the abolition of the feudal system, and the improvements you have made since then?'

--'The means of communication,' I replied, 'were not good in those days. We are surrounded by seas on all sides, but we were unable to make the fullest use of the water, because the building of large ships was prohibited for centuries, and therefore our ships had much difficulty in navigating the eastern coasts, as well as the Japan Sea, especially in winter. They often had to remain several months in some port on their route. On the land, roads were not good, they were often badly made on purpose by the different lords for the defence of their territories. Thus, even where a straight road could be made on flat land, it was purposely made high up on the hills in a winding way. Rivers were often left bridgeless where bridges could easily have been constructed. Foreign visitors may think our roads even now bad when compared with those of the Western civilised countries; but in our eyes our present roads are beyond any comparison with those of some thirty or forty years ago. This also means that our central Government, as well as our local governments, had to take much pains and spend much money in the matter. We had also to encourage the building of large ships, both steam and sailing vessels. We have built many lighthouses round the country for the benefit of the navigation of foreign ships as well as for our own.'

--'What of the railways, telegraph, and telephone lines?' asked one.

'Not many years after the restoration we began the construction of the railways. The line between Yokohama and Tokio was the first and most expensive of any of the railways constructed in Japan, for, owing to the lack of experience, we had to pay whatever price we were asked by foreigners for the materials. The next line was one between Kobe and Osaka, and the system has been gradually extended as the finances of the Government have allowed. But finding that the rapid extension to every part of the country was beyond the financial expediency of the Government, private enterprises were encouraged, and many private railway companies were established one after another. Thus we have two kinds of railways, one belonging to the Government, the other belonging to private companies. When I was Minister of Communications eight years ago, the whole length of the railways, state and private, reached three thousand miles. There was some talk of celebrating the occasion, but both Matsumoto, Director of the Board of Railways, and I discountenanced the idea, because three thousand miles of railway were nothing compared with other advanced countries. The extension at present is between four and five thousand miles, I think. The length is not much, but because the country is narrow, every part of it is within easy reach of the train. The telegraph lines belong to the Government entirely, and are managed in conjunction with the general postal system. Soon after the inauguration of the Imperial Government, we began to remodel the postal system which had existed previously, and it has been gradually expanded and improved on the European method. I can say without much diffidence that our postal and telegraph systems may be compared in efficiency with any country, even the most advanced in those matters. The telephone system is comparatively new, but most of the populous towns have it, and large towns are connected by distant telephones. Needless to say that we have managed from the beginning to maintain the system in the hands of the Government.'

--'The Imperial Government seems to have required much money,' said one, 'for winding up the feudal Governments, and for introducing, side by side, many reforms. You also mentioned that the Government had to issue paper money. I should like to know more about how you got through it all.'

--'We had to undergo much financial difficulty. Before the Imperial régime gold and silver constituted practically double standards. At the early stage of the new Government gold was adopted as the standard in theory, but it took a long time before it came into actual operation. The Government had to issue much paper money, and that, too, inconvertible, hence much depreciation of the paper. The strenuous efforts of the Government had been successful in improving the situation when the Satsuma war broke out in 1877. The expense of that war occasioned more issue of paper money, which caused a further depreciation. At one time the difference between silver, which was practically the legal tender at the time, and the paper rose to 100 : 180.

'There was another cause for the depreciation of paper money. It was the issue of notes by the national banks, which were established in all parts of the country after the abolition of the feudal system, and which numbered at one time more than 150. The Government had to meet with these difficulties, and to place the financial and economical condition of the country on a firmer and more satisfactory basis. This the Government began to undertake a few years after the Satsuma war, without hindering the necessary works for the development of the national resources. The Government decided to apply strict economy in all branches of its administration. The money thus saved was partly used for the redemption of the over-issued paper money, and partly to accumulate reserve funds for making the paper currency convertible. The Bank of Japan was established with the view of making it the sole central economical organ of the empire. A scheme was provided for redeeming the notes issued by the so-called national banks, and for converting those banks into strictly private banks in due time.

'The process began in earnest in 1881; it made far quicker progress than was contemplated; thus in 1885 the difference between the silver and the paper money disappeared. From January 1886 the total redemption of the paper money was begun. In 1899 the circulation of the Government paper money and the notes of the national banks altogether ceased to exist, the convertible notes of the Bank of Japan having taken their place. In the same year all national banks ceased to exist, most of them having become private banks, and a few having wound up their business. Two years previously gold had been at last effectively adopted as the Japanese national standard of currency, which was the realisation of the idea cherished by the Imperial Government from the beginning.'

--'What was the nature of the national banks?' asked one; 'and have they proved quite meaningless?'

--'The law for the establishment of those banks was promulgated soon after the abolition of the feudal system. It was modelled after the national banks of America. In the course of time a large number of them came into existence in different parts of the Empire. They were private undertakings, except that they enjoyed the privilege of issuing their own notes, and were subject to Government superintendence. At first the notes were to be convertible into specie, but a modification was introduced in the law by which they could issue notes with Government bonds as security and convertible in Government paper money. Therefore the notes were in reality incontrovertible ones from the point of view of hard money. Previous to that, the Government loan bonds, amounting to one hundred and seventy million yen, were issued for the capitalisation of the feudal lords and their retainers in consideration of their feudal incomes, after the feudal system had been abolished. These bonds were used widely for establishing the banks. The banks enjoyed special privileges of issuing paper money, but in lieu of it they did good service in encouraging and stimulating local industry and commerce, so that we do not regret that those banks were once instituted. Besides, they led to the foundation of the modern monetary system of Japan. You must have observed the efficiency of the monetary system of Japan during the Sino-Japanese war. The success of Japan in great wars is due a great deal to that system. I mean to say that because we have that system, the money possessed by the public could easily be made to serve public purposes in time of emergency. Look at China: as far as individuals are concerned, there is a far greater number of people who are richer than the Japanese, and yet they have no sound banking system in close connection with the state. When the Chinese deposit their money, they prefer to do so with foreign banks. The consequence is that the Government cannot fall back upon the wealth of private individuals. Neither is there much likelihood of home loans being popular in China. Of course there may be some other reasons for this. In Japan nothing but regular taxes and dues regulated by law are levied. No illegal exaction is or could be made. In that respect there exists a perfect understanding between the Government and the people, who know that if they respond to the Government call for loans their dues would be made good in future. No such confidence and usage exist in China, still less in any other part of the East.'

--'You told us that in the beginning of the Imperial Government, the Imperial troops were supported at the expense of the clan governments,' said one. 'Will you tell us a little more about it?'