VOLUME XV SLICE II Jacobites to Japan (part) (continued 10)

Originally the government engaged French officers to assist in organizing the army and elaborating its system of tactics and strategy, and during several years a military mission of French Foreign Assistance. officers resided in Tōkyō and rendered valuable aid to the Japanese. Afterwards German officers were employed, with Jakob Meckel at their head, and they left a perpetually grateful memory. But ultimately the services of foreigners were dispensed with altogether, and Japan now adopts the plan of sending picked men to complete their studies in Europe. Up to 1904 she followed Germany in military matters almost implicitly, but since then, having the experience of her own great war to guide her, she has, instead of modelling herself on any one foreign system, chosen from each whatever seemed most desirable, and also, in many points, taken the initiative herself.

When the power of the sword was nominally restored to the Imperial government in 1868, the latter planned to devote one-fourth of the state’s ordinary revenue to the army and navy. Had the estimated revenue accrued, this would have given Military Finance. a sum of about 3 millions sterling for the two services. But not until 1871, when the troops of the fiefs were finally disbanded, did the government find itself in a position to include in the annual budgets an adequate appropriation on account of armaments. Thenceforth, from 1872 to 1896, the ordinary expenditures of the army varied from three-quarters of a million sterling to 1½ millions, and the extraordinary outlays ranged from a few thousands of pounds to a quarter of a million. Not once in the whole period of 25 years—if 1877 (the year of the Satsuma rebellion) be excepted—did the state’s total expenditures on account of the army exceed 1½ millions sterling, and it redounds to the credit of Japan’s financial management that she was able to organize, equip and maintain such a force at such a small cost. In 1896, as shown above, she virtually doubled her army, and a proportionate increase of expenditure ensued, the outlays for maintenance jumping at once from an average of about 1¼ millions sterling to 2¼ millions, and growing thenceforth with the organization of the new army, until in the year (1903) preceding the outbreak of war with Russia, they reached the figure of 4 millions. Then again, in 1906, six divisions were added, and additional expenses had to be incurred on account of the new overseas garrisons, so that, in 1909, the ordinary outlays reached a total of 7 millions, or about one-seventh of the ordinary revenue of the state. This takes no account of extraordinary outlays incurred for building forts and barracks, providing new patterns of equipment, &c. In 1909 the latter, owing to the necessity of replacing the weapons used in the Russian War, and in particular the field artillery gun (which was in 1905 only a semi-quickfirer), involved a relatively large outlay.

The Navy.—The traditions of Japan suggest that the art of navigation was not unfamiliar to the inhabitants of a country consisting of hundreds of islands and abounding in bays and inlets. Some interpreters of her cosmography Early Japanese War-vessels. discover a great ship in the “floating bridge of heaven” from which the divine procreators of the islands commenced their work, and construe in a similar sense other poetically named vehicles of that remote age. But though the seas were certainly traversed by the early invaders of Japan, and though there is plenty of proof that in medieval times the Japanese flag floated over merchantmen which voyaged as far as Siam and India, and over piratical craft which harassed the coasts of Korea and China, it is unquestionable that in the matter of naval architecture Japan fell behind even her next-door neighbours. Thus, when a Mongol fleet came to Kiūshiū in the 13th century, Japan had no vessels capable of contending against the invaders, and when, at the close of the 16th century, a Japanese army was fighting in Korea, repeated defeats of Japan’s squadrons by Korean war-junks decided the fate of the campaign on shore as well as on sea. It seems strange that an enterprising nation like the Japanese should not have taken for models the great galleons which visited the Far East in the second half of the 16th century under the flags of Spain, Portugal, Holland and England. With the exception, however, of two ships built by a castaway English pilot to order of Iyeyasu, no effort in that direction appears to have been made, and when an edict vetoing the construction of sea-going vessels was issued in 1636 as part of the Tokugawa policy of isolation, it can scarcely be said to have checked the growth of Japan’s navy, for she possessed nothing worthy of the name. It was to the object lesson furnished by the American ships which visited Yedo bay in 1853 and to the urgent counsels of the Dutch that Japan owed the inception of a naval policy. A seamen’s training station was opened under Dutch instructors in 1855 at Nagasaki, a building-slip was constructed and an iron factory established at the same place, and shortly afterwards a naval school was organized at Tsukiji in Yedo, a war-ship the “Kwanko Maru”20—presented by the Dutch to the shōgun’s government—being used for exercising the cadets. To this vessel two others, purchased from the Dutch, were added in 1857 and 1858, and these, with one given by Queen Victoria, formed the nucleus of Japan’s navy. In 1860, we find the Pacific crossed for the first time by a Japanese war-ship—the “Kwanrin Maru”—and subsequently some young officers were sent to Holland for instruction in naval science. In fact the Tokugawa statesmen had now thoroughly appreciated the imperative need of a navy. Thus, in spite of domestic unrest which menaced the very existence of the Yedo government, a dockyard was established and fully equipped, the place chosen as its site being, by a strange coincidence, the village of Yokosuka where Japan’s first foreign ship-builder, Will Adams, had lived and died 250 years previously. This dockyard was planned and its construction superintended by a Frenchman, M. Bertin. But although the Dutch had been the first to advise Japan’s acquisition of a navy, and although French aid was sought in the case of the important and costly work at Yokosuka, the shōgun’s government turned to England for teachers of the art of maritime warfare. Captain Tracey, R.N., and other British officers and warrant-officers were engaged to organize and superintend the school at Tsukiji. They arrived, however, on the eve of the fall of the Tokugawa shōgunate, and as the new administration was not prepared to utilize their services immediately, they returned to England. It is not to be inferred that the Imperial government underrated the importance of organizing a naval force. One of the earliest Imperial rescripts ranked a navy among “the country’s most urgent needs” and ordered that it should be “at once placed on a firm foundation.” But during the four years immediately subsequent to the restoration, a semi-interregnum existed in military affairs, the power of the sword being partly transferred to the hands of the sovereign and partly retained by the feudal chiefs. Ultimately, not only the vessels which had been in the possession of the shōgunate but also several obtained from Europe by the great feudatories had to be taken over by the Imperial government, which, on reviewing the situation, found itself owner of a motley squadron of 17 war-ships aggregating 13,812 tons displacement, of which two were armoured, one was a composite ship, and the rest were of wood. Steps were now taken to establish and equip a suitable naval college in Tsukiji, and application having been made to the British government for instructors, a second naval mission was sent from England in 1873, consisting of 30 officers and warrant-officers under Commander (afterwards Vice-Admiral Sir) Archibald Douglas. At the very outset occasions for active service afloat presented themselves. In 1868, the year after the fall of the shōgunate, such ships as could be assembled had to be sent to Yezo to attack the main part of the Tokugawa squadron which had raised the flag of revolt and retired to Hakodate under the command of the shōgun’s admiral, Enomoto. Then in 1874 the duty of convoying a fleet of transports to Formosa had to be undertaken; and in 1877 sea power played its part in crushing the formidable rebellion in Satsuma. Meanwhile the work of increasing and organizing the navy went on steadily. The first steam war-ship constructed in Japan had been a gunboat (138 tons) launched in 1866 from a building-yard established at Ishikawajima, an island near the mouth of the Sumida river on which Tōkyō stands. At this yard and at Yokosuka two vessels of 897 tons and 1450 tons, respectively, were launched in 1875 and 1876, and Japan now found herself competent not only to execute all repairs but also to build ships of considerable size. An order was placed in England in 1875, which produced, three years later, the “Fusō,” Japan’s first ironclad (3717 tons) and the “Kongo” and “Hiei,” steel-frame sister-cruisers of 2248 tons. Meanwhile training, practical and theoretical, in seamanship, gunnery, torpedo-practice and naval architecture went on vigorously, and in 1878 the Japanese flag was for the first time seen in European waters, floating over the cruiser “Seiki” (1897 tons) built in Japan and navigated solely by Japanese. The government, constantly solicitous of increasing the fleet, inaugurated, in 1882, a programme of 30 cruisers and 12 torpedo-boats, and in 1886 this was extended, funds being obtained by an issue of naval loan-bonds. But the fleet did not yet include a single battleship. When the diet opened for the first time in 1890, a plan for the construction of two battleships encountered stubborn opposition in the lower house, where the majority attached much less importance to voting money for war-ships than to reducing the land tax. Not until 1892 was this opposition overcome in deference to an order from the throne that thirty thousand pounds sterling should be contributed yearly from the privy purse and that a tithe of all official salaries should be devoted during the same interval to naval needs. Had the house been more prescient, Japan’s position at the outbreak of war with China in 1894 would have been very different. She entered the contest with 28 fighting craft, aggregating 57,600 tons, and 24 torpedo-boats, but among them the most powerful was a belted cruiser of 4300 tons. Not one battleship was included, whereas China had two ironclads of nearly 8000 tons each. Under these conditions the result of the naval conflict was awaited with much anxiety in Japan. But the Chinese suffered signal defeats (see Chino-Japanese War) off the Yalu and at Wei-hai-wei, and the victors took possession of 17 Chinese craft, including one battleship. The resulting addition to Japan’s fighting force was, however, insignificant. But the naval strength of Japan did not depend on prizes. Battleships and cruisers were ordered and launched in Europe one after the other, and when the Russo-Japanese War (q.v.) came, the fleet promptly asserted its physical and moral superiority in the surprise of Port Arthur, the battle of the 10th of August 1904, and the crowning victory of Tsushima.

As to the development of the navy from 1903 onwards, it is not possible to detail with absolute accuracy the plans laid down by the admiralty in Tōkyō, but the actual state of the fleet in the year 1909 will be apparent from the figures given below.

Japan’s naval strength at the outbreak of the war with Russia in 1904 was:—

Number. Displacement. Tons.

Battleships 6 84,652

Armoured cruisers 8 73,982

Other cruisers 44 111,470

Destroyers 19 6,519

Torpedo-boats 80 7,119

— ———

Totals 157 283,742

Losses during the war were:—

Battleships 2 27,300

Cruisers (second and smaller classes) 8 18,009

Destroyers 2 705

Torpedo-boats 7 557

— ———

Totals 19 46,571

The captured vessels repaired and added to the fleet were:—

Battleships 5 62,524

Cruisers 11 71,276

Destroyers 5 1,740

— ———

Totals 21 135,530

The vessels built or purchased after the war and up to the close of 1908 were:—

Battleships 4 71,500

Armoured cruisers 4 56,700

Other cruisers 5 7,000

Destroyers 33 12,573

Torpedo-boats 5 760

— ———

Totals 51 148,533

Some of the above have been superannuated, and the serviceable fleet in 1909 was:—

Battleships 13 191,380

Armoured cruisers 12 130,683

Other cruisers, coast-defence ships and gun-boats 47 165,253

Destroyers 55 20,508

Torpedo-boats 77 7,258

— ———

Totals 204 515,082

To the foregoing must be added two armoured cruisers—the “Kurama” (14,000) launched at Yokosuka in October 1907, and the “Ibuki” (14,700) launched at Kure in November 1907, but no other battleships or cruisers were laid down in Japan or ordered abroad up to the close of 1908.

There are four naval dockyards, namely, at Yokosuka, Kure, Sasebo and Maizuru. Twenty-one vessels built at Yokosuka since 1876 included a battleship (19,000 tons) and an armoured cruiser (14,000 tons); seven built at Kure Naval Dockyards. since 1898 included a battleship (19,000 tons) and an armoured cruiser (14,000 tons). The yards at Sasebo and Maizuru had not yet been used in 1909 for constructing large vessels. Two private yards—the Mitsubishi at Nagasaki and Kobe, and the Kawasaki at the latter place—have built several cruisers, gun-boats and torpedo craft, and are competent to undertake more important work. Nevertheless in 1909 Japan did not yet possess complete independence in this matter, for she was obliged to have recourse to foreign countries for a part of the steel used in ship-building. Kure manufactures practically all the steel it requires, and there is a government steel-foundry at Wakamatsu on which more than 3 millions sterling had been spent in 1909, but it did not yet keep pace with the country’s needs. When this independence has been attained, it is hoped to effect an economy of about 18% on the outlay for naval construction, owing to the cheapness of manual labour and the disappearance both of the manufacturer’s profit and of the expenses of transfer from Europe to Japan.

There are five admiralties—Yokosuka, Kure, Sasebo, Maizuru and Port Arthur; and four naval stations—Takeshiki (in Tsushima), Mekong (in the Pescadores), Ominato and Chinhai (in southern Korea).

The navy is manned partly by conscripts and partly by volunteers. Personnel. About 5500 are taken every year, and the ratio is, approximately, 55% of volunteers and 45% of conscripts. The period of active service is 4 years and that of service with the reserve 7 years. On the average 200 cadets are admitted yearly, of whom 50 are engineers, and in 1906 the personnel of the navy consisted of the following:—

Admirals, combative and non-combative 77

Officers, combative and non-combative, below the rank of admiral 2,867

Warrant officers 9,075

Bluejackets 29,667

Cadets 721

———

Total 42,407

The highest educational institution for the navy is the naval staff college, in which there are five courses for officers alone. The gunnery and torpedo schools are attended by officers, Naval Education. and also by selected warrant-officers and bluejackets, who consent to extend their service. There is also a mechanical school for junior engineers, warrant-officers and ordinary artificers.

At the naval cadet academy—originally situated in Tōkyō but now at Etajima near Kure—aspirants for service as naval officers receive a 3 years’ academical course and 1 year’s training at sea; and, finally, there is a naval engineering college collateral to the naval cadet academy.

Since 1882, foreign instruction has been wholly dispensed with in the Japanese navy; since 1886 she has manufactured her own prismatic powder; since 1891 she has been able to make quick-firing guns and Schwartzkopf torpedoes, and in 1892 one of her officers invented a particularly potent explosive, called (after its inventor) Shimose powder.

Finance.—Under the feudal system of the Tokugawa (1603-1871), all land in Japan was regarded as state property, and parcelled out into 276 fiefs, great and small, which were assigned to as many feudatories. These were empowered The Feudal Period. to raise revenue for the support of their households, for administrative purposes, and for the maintenance of troops. The basis of taxation varied greatly in different districts, but, at the time of the Restoration in 1867, the general principle was that four-tenths of the gross produce should go to the feudatory, six-tenths to the farmer. In practice this rule was applied to the rice crop only, the assessments for other kinds of produce being levied partly in money and partly in manufactured goods. Forced labour also was exacted, and artisans and tradesmen were subjected to pecuniary levies. The yield of rice in 1867 was about 154 million bushels,21 of which the market value at prices then ruling was £24,000,000, or 240,000,000 yen.22 Hence the grain tax represented, at the lowest calculation, 96,000,000 yen. When the administration reverted to the emperor in 1867 the central treasury was empty, and the funds hitherto employed for governmental purposes in the fiefs continued to be devoted to the support of the feudatories, to the payment of the samurai, and to defraying the expenses of local administration, the central treasury receiving only whatever might remain after these various outlays.

The shōgun himself, whose income amounted to about £3,500,000, did not, on abdicating, hand over to the sovereign either the contents of his treasury or the lands from which he derived his revenues. He contended that funds for the government of the nation as a whole should be levied from the people at large. Not until 1871 did the feudal system cease to exist. The fiefs being then converted into prefectures, their revenues became an asset of the central treasury, less 10% allotted for the support of the former feudatories.23

But during the interval between 1867 and 1871, the men on whom had devolved the direction of national affairs saw no relief from crippling impecuniosity except an issue of paper money. This was not a novelty in Japan. Paper Paper Money. money had been known to the people since the middle of the 17th century, and in the era of which we are now writing no less than 1694 varieties of notes were in circulation. There were gold notes, silver notes, cash-notes, rice-notes, umbrella-notes, ribbon-notes, lathe-article-notes, and so on through an interminable list, the circulation of each kind being limited to the issuing fief. Many of these notes had almost ceased to have any purchasing power, and nearly all were regarded by the people as evidences of official greed. The first duty of a centralized progressive administration should have been to reform the currency. The political leaders of the time appreciated that duty, but saw themselves compelled by stress of circumstances to adopt the very device which in the hands of the feudal chiefs had produced such deplorable results. The ordinary revenue amounted to only 3,000,000 yen, while the extraordinary aggregated 29,000,000, and was derived wholly from issues of paper money or other equally unsound sources.

Even on the abolition of feudalism in 1871 the situation was not immediately relieved. The land tax, which constituted nine-tenths of the feudal revenues, had been assessed by varying methods and at various rates by Land Tax. the different feudatories, and re-assessment of all the land became a preliminary essential to establishing a uniform system. Such a task, on the basis of accurate surveys, would have involved years of work, whereas the financial needs of the state had to be met immediately. Under the pressure of this imperative necessity a re-assessment was roughly made in two years, and being continued thereafter with greater accuracy, was completed in 1881. This survey, eminently liberal to the agriculturists, assigned a value of 1,200,000,000 yen to the whole of the arable land, and the treasury fixed the tax at 3% of the assessed value of the land, which was about one-half of the real market value. Moreover, the government contemplated a gradual reduction of this already low impost until it should ultimately fall to 1%. Circumstances prevented the consummation of that purpose. The rate underwent only one reduction of ½%, and thereafter had to be raised on account of war expenditures. On the whole, however, no class benefited more conspicuously from the change of administration than the peasants, since not only was their burden of taxation light, but also they were converted from mere tenants into actual proprietors. In brief, they acquired the fee-simple of their farms in consideration of paying an annual rent equal to about one sixty-sixth of the market value of the land.

In 1873, when these changes were effected, the ordinary revenue of the state rose from 24,500,000 yen to 70,500,000 yen. But seven millions sterling is a small income for a country confronted by such problems as Japan had to solve. State Revenue. She had to build railways; to create an army and a navy; to organize posts, telegraphs, prisons, police and education; to construct roads, improve harbours, light and buoy the coasts; to create a mercantile marine; to start under official auspices numerous industrial enterprises which should serve as object lessons to the people, as well as to lend to private persons large sums in aid of similar projects. Thus, living of necessity beyond its income, the government had recourse to further issues of fiduciary notes, and in proportion as the volume of the latter exceeded actual currency requirements their specie value depreciated.

This question of paper currency inaugurates the story of banking; a story on almost every page of which are to be found inscribed the names of Prince Itō, Marquis Inouye, Marquis Matsukata, Count Okuma and Baron Banks. Shibusawa, the fathers of their country’s economic and financial progress in modern times. The only substitutes for banks in feudal days were a few private firms—“households” would, perhaps, be a more correct expression—which received local taxes in kind, converted them into money, paid the proceeds to the central government or to the feudatories, gave accommodation to officials, did some exchange business, and occasionally extended accommodation to private individuals. They were not banks in the Occidental sense, for they neither collected funds by receiving deposits nor distributed capital by making loans. The various fiefs were so isolated that neither social nor financial intercourse was possible, and moreover the mercantile and manufacturing classes were regarded with some disdain by the gentry. The people had never been familiarized with combinations of capital for productive purposes, and such a thing as a joint-stock company was unknown. In these circumstances, when the administration of state affairs fell into the hands of the men who had made the restoration, they not only lacked the first essential of rule, money, but were also without means of obtaining any, for they could not collect taxes in the fiefs, these being still under the control of the feudal barons; and in the absence of widely organized commerce or finance, no access to funds presented itself. Doubtless the minds of these men were sharpened by the necessities confronting them, yet it speaks eloquently for their discernment that, samurai as they were, without any business training whatever, one of their first essays was to establish organizations which should take charge of the national revenue, encourage industry and promote trade and production by lending money at comparatively low rates of interest. The tentative character of these attempts is evidenced by frequent changes. There was first a business bureau, then a trade bureau, then commercial companies, and then exchange companies, these last being established in the principal cities and at the open ports, their personnel consisting of the three great families—Mitsui, Shimada and Ono—houses of ancient repute, as well as other wealthy merchants in Kiōto, Osaka and elsewhere. These exchange companies were partnerships, though not strictly of the joint-stock kind. They formed the nucleus of banks in Japan, and their functions included, for the first time, the receiving of deposits and the lending of money to merchants and manufacturers. They had power to issue notes, and, at the same time, the government issued notes on its own account. Indeed, in this latter fact is to be found one of the motives for organizing the exchange companies, the idea being that if the state’s notes were lent to the companies, the people would become familiarized with the use of such currency, and the companies would find them convenient capital. But this system was essentially unsound: the notes, alike of the treasury and of the companies, though nominally convertible, were not secured by any fixed stock of specie. Four years sufficed to prove the unpracticality of such an arrangement, and in 1872 the exchange companies were swept away, to be succeeded in July 1873 by the establishment of national banks on a system which combined some of the features of English banking with the general bases of American. Each bank had to pay into the treasury 60% of its capital in government notes. It was credited in return with interest-bearing bonds, which bonds were to be left in the treasury as security for the issue of bank-notes to an equal amount, the banks being required to keep in gold the remaining 40% of their capital as a fund for converting the notes, which conversion must always be effected on application. The elaborators of this programme were Ito, Inouye, Okuma and Shibusawa. They added a provision designed to prevent the establishment of too small banks, namely, that the capital of each bank must bear a fixed ratio to the population of its place of business. Evidently the main object of the treasury was gradually to replace its own fiat paper with convertible bank-notes. But experience quickly proved that the scheme was unworkable. The treasury notes had been issued in such large volume that sharp depreciation had ensued; gold could not be procured except at a heavy cost, and the balance of foreign trade being against Japan, some 300,000,000 yen in specie flowed out of the country between 1872 and 1874.

It should be noted that at this time foreign trade was still invested with a perilous character in Japanese eyes. In early days, while the Dutch had free access to her ports, they sold her so much and bought so little in return that an immense quantity of the precious metals flowed out of her coffers. Again, when over-sea trade was renewed in modern times, Japan’s exceptional financial condition presented to foreigners an opportunity of which they did not fail to take full advantage. For, during her long centuries of seclusion, gold had come to hold to silver in her coinage a ratio of 1 to 8, so that gold cost, in terms of silver, only one-half of what it cost in the West. On the other hand, the treaty gave foreign traders the right to exchange their own silver coins against Japanese, weight for weight, and thus it fell out that the foreigner, going to Japan with a supply of Mexican dollars, could buy with them twice as much gold as they had cost in Mexico. Japan lost very heavily by this system, and its effects accentuated the dread with which her medieval experience had invested foreign commerce. Thus, when the balance of trade swayed heavily in the wrong direction between 1872 and 1874, the fact created undue consternation, and moreover there can be no doubt that the drafters of the bank regulations had over-estimated the quantity of available gold in the country.

All these things made it impossible to keep the bank-notes long in circulation. They were speedily returned for conversion; no deposits came to the aid of the banks, nor did the public make any use of them. Disaster became inevitable. The two great firms of Ono and Shimada, which had stood high in the nation’s estimation alike in feudal and in imperial days, closed their doors in 1874; a panic ensued, and the circulation of money ceased almost entirely.

Evidently the banking system must be changed. The government bowed to necessity. They issued a revised code of banking regulations which substituted treasury notes in the place of specie. Each bank was thenceforth required to invest Change of the Banking System. 80% of its capital in 6% state bonds, and these being lodged with the treasury, the bank became competent to issue an equal quantity of its own notes, forming with the remainder of its capital a reserve of treasury notes for purposes of redemption. This was a complete subversion of the government’s original scheme. But no alternative offered. Besides, the situation presented a new feature. The hereditary pensions of the feudatories had been commuted with bonds aggregating 174,000,000 yen. Were this large volume of bonds issued at once, their heavy depreciation would be likely to follow, and moreover their holders, unaccustomed to dealing with financial problems, might dispose of the bonds and invest the proceeds in hazardous enterprises. To devise some opportunity for the safe and profitable employment of these bonds seemed, therefore, a pressing necessity, and the newly organized national banks offered such an opportunity. For bond-holders, combining to form a bank, continued to draw from the treasury 6% on their bonds, while they acquired power to issue a corresponding amount of notes which could be lent at profitable rates. The programme worked well. Whereas, up to 1876, only five banks were established under the original regulations, the number under the new rule was 151 in 1879, their aggregate capital having grown in the same interval from 2,000,000 yen to 40,000,000 yen, and their note issues from less than 1,000,000 to over 34,000,000. Here, then, was a rapidly growing system resting wholly on state credit. Something like a mania for bank-organizing declared itself, and in 1878 the government deemed it necessary to legislate against the establishment of any more national banks, and to limit to 34,000,000 yen the aggregate note issues of those already in existence.

It is possible that the conditions which prevailed immediately after the establishment of the national banks might have developed some permanency had not the Satsuma rebellion broken out in 1877. Increased taxation to meet military outlay being impossible in such circumstances, nothing offered except recourse to further note issues. The result was that by 1881, fourteen years after the Restoration, notes whose face value aggregated 164,000,000 yen had been put into circulation; the treasury possessed specie amounting to only 8,000,000 yen, and 18 paper yen could be purchased with 10 silver ones.

Up to 1881 fitful efforts had been made to strengthen the specie value of fiat paper by throwing quantities of gold and silver upon the market from time to time, and 23,000,000 yen had been devoted to the promotion of industries whose Resumption of Specie Payments. products, it was hoped, would go to swell the list of exports, and thus draw specie to the country. But these devices were now finally abandoned, and the government applied itself steadfastly to reducing the volume of the fiduciary currency on the one hand, and accumulating a specie reserve on the other. The steps of the programme were simple. By cutting down administrative expenditure; by transferring certain charges from the treasury to the local communes; by suspending all grants in aid of provincial public works and private enterprises, and by a moderate increase of the tax on alcohol, an annual surplus of revenue, totalling 7,500,000 yen, was secured. This was applied to reducing the volume of the notes in circulation. At the same time, it was resolved that all officially conducted industrial and agricultural works should be sold—since their purpose of instruction and example seemed now to have been sufficiently achieved—and the proceeds, together with various securities (aggregating 26,000,000 yen in face value) held by the treasury, were applied to the purchase of specie. Had the government entered the market openly as a seller of its own fiduciary notes, its credit must have suffered. There were also ample reasons to doubt whether any available stores of precious metal remained in the country. In obedience to elementary economical laws, the cheap money had steadily driven out the dear, and although the government mint at Osaka, founded in 1871, had struck gold and silver coins worth 80,000,000 yen between that date and 1881, the customs returns showed that a great part of this metallic currency had flowed out of the country. In these circumstances Japanese financiers decided that only one course remained: the treasury must play the part of national banker. Produce and manufactures destined for export must be purchased by the state with fiduciary notes, and the metallic proceeds of their sales abroad must be collected and stored in the treasury. This programme required the establishment of consulates in the chief marts of the Occident, and the organization of a great central bank—the present Bank of Japan—as well as of a secondary bank—the present Specie Bank of Yokohama—the former to conduct transactions with native producers and manufacturers, the latter to finance the business of exportation. The outcome of these various arrangements was that, by the middle of 1885, the volume of fiduciary notes had been reduced to 119,000,000 yen, their depreciation had fallen to 3%, and the metallic reserve of the treasury had increased to 45,000,000 yen. The resumption of specie payments was then announced, and became, in the autumn of that year, an accomplished fact. From the time when this programme began to be effective, Japan entered a period of favourable balance of trade. According to accepted economic theories, the influence of an appreciating currency should be to encourage imports; but the converse was seen in Japan’s case, for from 1882 her exports annually exceeded her imports, the maximum excess being reached in 1886, the very year after the resumption of specie payments.

The above facts deserve to figure largely in a retrospect of Japanese finance, not merely because they set forth a fine economic feat, indicating clear insight, good organizing capacity, and courageous energy, but also because volumes of adverse foreign criticism were written in the margin of the story during the course of the incidents it embodies. Now Japan was charged with robbing her own people because she bought their goods with paper money and sold them for specie; again, she was accused of an official conspiracy to ruin the foreign local banks because she purchased exporters’ bills on Europe and America at rates that defied ordinary competition; and while some declared that she was plainly without any understanding of her own doings, others predicted that her heroic method of dealing with the problem would paralyze industry, interrupt trade and produce widespread suffering. Undoubtedly, to carry the currency of a nation from a discount of 70 or 80% to par in the course of four years, reducing its volume at the same time from 160 to 119 million yen, was a financial enterprise violent and daring almost to rashness. The gentler expedient of a foreign loan would have commended itself to the majority of economists. But it may be here stated, once for all, that until her final adoption of a gold standard in 1897, the foreign money market was practically closed to Japan. Had she borrowed abroad it must have been on a sterling basis. Receiving a fixed sum in silver, she would have had to discharge her debt in rapidly appreciating gold. Twice, indeed, she had recourse to London for small sums, but when she came to cast up her accounts the cost of the accommodation stood out in deterrent proportions. A 9% loan, placed in England in 1868 and paid off in 1889, produced 3,750,000 yen, and cost altogether 11,750,000 yen in round figures; and a 7% loan, made in 1872 and paid off in 1897, produced 10,750,000 yen, and cost 36,000,000 yen. These considerations were supplemented by a strong aversion from incurring pecuniary obligations to Western states before the latter had consented to restore Japan’s judicial and tariff autonomy. The example of Egypt showed what kind of fate might overtake a semi-independent state falling into the clutches of foreign bond-holders. Japan did not wish to fetter herself with foreign debts while struggling to emerge from the rank of Oriental powers.

After the revision of the national bank regulations, semi-official banking enterprise won such favour in public eyes that the government found it necessary to impose limits. This conservative policy proved an incentive to private Closing of the National Banks. banks and banking companies, so that, by the year 1883, no less than 1093 banking institutions were in existence throughout Japan with an aggregate capital of 900,000,000 yen. But these were entirely lacking in arrangements for combination or for equalizing rates of interest, and to correct such defects, no less than ultimately to constitute the sole note-issuing institution, a central bank (the Bank of Japan) was organized on the model of the Bank of Belgium, with due regard to corresponding institutions in other Western countries and to the conditions existing in Japan. Established in 1882 with a capital of 4,000,000 yen, this bank has now a capital of 30 millions, a security reserve of 206 millions, a note-issue of 266 millions, a specie reserve of 160 millions, and loans of 525 millions.

The banking machinery of the country being now complete, in a general sense, steps were taken in 1883 for converting the national banks into ordinary joint-stock concerns and for the redemption of all their note-issues. Each national bank was required to deposit with the treasury the government paper kept in its strong room as security for its own notes, and further to take from its annual profits and hand to the treasury a sum equal to 2½% of its notes in circulation. With these funds the central bank was to purchase state bonds, devoting the interest to redeeming the notes of the national banks. Formed with the object of disturbing the money market as little as possible, this programme encountered two obstacles. The first was that, in view of the Bank of Japan’s purchases, the market price of state bonds rose rapidly, so that, whereas official financiers had not expected them to reach par before 1897, they were quoted at a considerable premium in 1886. The second was that the treasury having in 1886 initiated the policy of converting its 6% bonds into 5% consols, the former no longer produced interest at the rate estimated for the purposes of the banking scheme. The national banks thus found themselves in an embarrassing situation and began to clamour for a revision of the programme. But the government, seeing compensations for them in other directions, adhered firmly to its scheme. Few problems have caused greater controversy in modern Japan than this question of the ultimate fate of the national banks. Not until 1896 could the diet be induced to pass a bill providing for their dissolution at the close of their charter terms, or their conversion into ordinary joint-stock concerns without any note-issuing power, and not until 1899 did their notes cease to be legal tender. Out of a total of 153 of these banks, 132 continued business as private institutions, and the rest were absorbed or dissolved. Already (1890 and 1893) minute regulations had been enacted bringing all the banks and banking institutions—except the special banks to be presently described—within one system of semi-annual balance-sheets and official auditing, while in the case of savings banks the directors’ responsibility was declared unlimited and these banks were required to lodge security with the treasury for the protection of their depositors.

Just as the ordinary banks were all centred on the Bank of Japan24 and more or less connected with it, so in 1895, a group of special institutions, called agricultural and commercial banks, were organized and centred on a hypothec bank, the Special Banks. object of this system being to supply cheap capital to farmers and manufacturers on the security of real estate. The hypothec bank had its head office in Tōkyō and was authorized to obtain funds by issuing premium-bearing bonds, while an agricultural and industrial bank was established in each prefecture and received assistance from the hypothec bank. Two years later (1900), an industrial bank—sometimes spoken of as the crédit mobilier of Japan—was brought into existence under official auspices, its purpose being to lend money against bonds, debentures and shares as well as to public corporations. These various institutions, together with clearing houses, bankers’ associations, the Hokkaidō colonial bank, the bank of Formosa, savings banks (including a post-office savings bank), and a mint complete the financial machinery of modern Japan.

Reviewing this chapter of Japan’s material development, we find that whereas, at the beginning of the Meiji era (1867), the nation did not possess so much as one banking institution worthy of the name, forty years later it Review of Banking Development. had 2211 banks, with a paid-up capital of £40,000,000, reserves of £12,000,000, and deposits of £147,000,000; and whereas there was not one savings bank in 1867, there were 487 in 1906 with deposits of over £50,000,000. The average yearly dividends of these banks in the ten years ending 1906 varied between 9.1 and 9.9%.

Necessarily the movement of industrial expansion was accompanied by a development of insurance business. The beginnings of this kind of enterprise did not become visible, however, until 1881, and even at that comparatively Insurance. recent date no Japanese laws had yet been enacted for the control of such operations. The commercial code, published in March 1890, was the earliest legislation which met the need, and from that time the number of insurance companies and the volume of their transactions grew rapidly. In 1897, there were 35 companies with a total paid-up capital of 7,000,000 yen and policies aggregating 971,000,000 yen, and in 1906 the corresponding figures were 65 companies, 22,000,000 yen paid up and policies of 4,149,000,000 yen. The premium reserves grew in the same period from 7,000,000 to 108,000,000. The net profits of these companies in 1906 were (in round numbers) 10,000,000 yen.

The origin of clearing houses preceded that of insurance companies in Japan by only two years (1879). Osaka set the example, which Clearing Houses. was quickly followed by Tōkyō, Kobe, Yokohama, Kiōto and Nagoya. In 1898 the bills handled at these institutions amounted to 1,186,000,000 yen, and in 1907 to 7,484,000,000 yen. Japanese clearing houses are modelled after those of London and New York.

Exchanges existed in Japan as far back as the close of the 17th century. At that time the income of the feudal chiefs consisted almost entirely of rice, and as this was sold to brokers, the latter found it convenient to meet at fixed times Bourses. and places for conducting their business. Originally their transactions were all for cash, but afterwards they devised time bargains which ultimately developed into a definite form of exchange. The reform of abuses incidental to this system attracted the early attention of the Meiji government, and in 1893 a law was promulgated for the control of exchanges, which then numbered 146. Under this law the minimum share capital of a bourse constituted as a joint-stock company was fixed at 100,000 yen, and the whole of its property became liable for failure on the part of its brokers to implement their contracts. There were 51 bourses in 1908.

Not less remarkable than this economic development was the large part acted in it by officialdom. There were two reasons for this. One was that a majority of the men gifted with originality and foresight were drawn into the ranks of The Government and Economic Development. the administration by the great current of the revolution; the other, that the feudal system had tended to check rather than to encourage material development, since the limits of each fief were also the limits of economical and industrial enterprise. Ideas for combination and co-operation had been confined to a few families, and there was nothing to suggest the organization of companies nor any law to protect them if organized. Thus the opening of the Meiji era found the Japanese nation wholly unqualified for the commercial and manufacturing competition in which it was thenceforth required to engage, and therefore upon those who had brought the country out of its isolation there devolved the responsibility of speedily preparing their fellow countrymen for the new situation. To these leaders banking facilities seemed to be the first need, and steps were accordingly taken in the manner already described. But how to educate men of affairs at a moment’s notice? How to replace by a spirit of intelligent progress the ignorance and conservatism of the hitherto despised traders and artisans? When the first bank was organized, its two founders—men who had been urged, nay almost compelled, by officialdom to make the essay—were obliged to raise four-fifths of the capital themselves, the general public not being willing to subscribe more than one-fifth—a petty sum of 500,000 yen—and when its staff commenced their duties, they had not the most shadowy conception of what to do. That was a faithful reflection of the condition of the business world at large. If the initiative of the people themselves had been awaited, Japan’s career must have been slow indeed.

Only one course offered, namely, that the government itself should organize a number of productive enterprises on modern lines, so that they might serve as schools and also as models. Such, as already noted under Industries, was the programme adopted. It provoked much hostile criticism from foreign onlookers, who had learned to decry all official incursions into trade and industry, but had not properly appreciated the special conditions existing in Japan. The end justified the means. At the outset of its administration we find the Meiji government not only forming plans for the circulation of money, building railways and organizing posts and telegraphs, but also establishing dockyards, spinning mills, printing-houses, silk-reeling filatures, paper-making factories and so forth, thus by example encouraging these kinds of enterprise and by legislation providing for their safe prosecution. Yet progress was slow. One by one and at long intervals joint-stock companies came into existence, nor was it until the resumption of specie payments in 1886 that a really effective spirit of enterprise manifested itself among the people. Railways, harbours, mines, spinning, weaving, paper-making, oil-refining, brick-making, leather-tanning, glass-making and other industries attracted eager attention, and whereas the capital subscribed for such works aggregated only 50,000,000 yen in 1886, it exceeded 1,000,000,000 yen in 1906.

When specie payments were resumed in 1885, the notes issued by the Bank of Japan were convertible into silver on demand, the silver standard being thus definitely adopted, a complete reversal of the system inaugurated at the Adoption of the Gold Standard. establishment of the national banks on Prince Ito’s return from the United States. Japanese financiers believed from the outset in gold monometallism. But, in the first place, the country’s stock of gold was soon driven out by her depreciated fiat currency; and, in the second, not only were all other Oriental nations silver-using, but also the Mexican silver dollar had long been the unit of account in Far-Eastern trade. Thus Japan ultimately drifted into silver monometallism, the silver yen becoming her unit of currency. So soon, however, as the indemnity that she received from China after the war of 1894-95 had placed her in possession of a stock of gold, she determined to revert to the gold standard. Mechanically speaking, the operation was very easy. Gold having appreciated so that its value in terms of silver had exactly doubled during the first 30 years of the Meiji era, nothing was necessary except to double the denominations of the gold coins in terms of yen, leaving the silver subsidiary coins unchanged. Thus the old 5-yen gold piece, weighing 2.22221 momme of 900 fineness, became a 10-yen piece in the new currency, and a new 5-yen piece of half the weight was coined. No change whatever was required in the reckonings of the people. The yen continued to be their coin of account, with a fixed sterling value of a small fraction over two shillings, and the denominations of the gold coins were doubled. Gold, however, is little seen in Japan; the whole duty of currency is done by notes.

It is not to be supposed that all this economic and financial development was unchequered by periods of depression and severe panic. There were in fact six such seasons: in 1874, 1881, 1889, 1897, 1900 and 1907. But no year throughout the whole period failed to witness an increase in the number of Japan’s industrial and commercial companies, and in the amount of capital thus invested.

To State Revenue. obtain a comprehensive idea of Japan’s state finance, the simplest method is to set down the annual revenue at quinquennial periods, commencing with the year 1878-1879, because it was not until 1876 that the system of duly compiled and published budgets came into existence.

Revenue (omitting fractions)

Year.* Ordinary Revenue (millions of yen). Extraordinary Revenue (millions of yen). Total Revenue (millions of yen).

1878-9 53 9 62

1883-4 76 7 83

1888-9 74 18 92

1893-4 86 28 114

1898-9 133 87 220

1903-4 224 36 260

1908-9 476 144 620

* The Japanese fiscal year is from April 1 to March 31.

The most striking feature of the above table is the rapid growth of revenue during the last three periods. So signal was the growth that the revenue may be said to have sextupled in the 15 years ended 1909. This was the result of the two great wars in which Japan was involved, that with China in 1894-95 and that with Russia in 1904-5. The details will be presently shown.

Turning now to the expenditure and pursuing the same plan, we have the following figures:—

Expenditure (omitting fractions)

Year. Ordinary Expenditures (millions of yen). Extraordinary Expenditures (millions of yen). Total Expenditures (millions of yen).

1878-9 56 5 61

1883-4 68 15 83

1888-9 66 15 81

1893-4 64 20 84

1898-9 119 101 220

1903-4 170 80 250

1908-9 427 193 620

It may be here stated that, with three exceptions, the working of the budget showed a surplus in every one of the 41 years between 1867 and 1908.

The sources from which revenue is obtained are as follow:—

Ordinary Revenue

1894-5. 1898-9. 1903-4. 1908-9.

millions of yen. millions of yen. millions of yen. millions of yen.

Taxes 70.50 96.20 146.10 299.61

Receipts from stamps and Public Undertakings 14.75 33.00 96.87 164.66

Various Receipts 4.58 3.67 8.15 11.48

It appears from the above that during 15 years the weight of taxation increased fourfold. But a correction has to be applied, first, on account of the tax on alcoholic liquors and, secondly, on account of customs dues, neither of which can properly be called general imposts. The former grew from 16 millions in 1894-1895 to 72 millions in 1908-1909, and the latter from 5¼ millions to 41½ millions. If these increases be deducted, it is found that taxes, properly so called, grew from 70.5 millions in 1894-1895 to 207.86 millions in 1908-1909, an increase of somewhat less than three-fold. Otherwise stated, the burden per unit of population in 1894-1895 was 3s. 6d., whereas in 1908-1909 it was 8s. 4d. To understand the principle of Japanese taxation and the manner in which the above development took place, it is necessary to glance briefly at the chief taxes separately.

The land tax is the principal source of revenue. It was originally fixed at 3% of the assessed value of the land, but in 1877 this ratio was reduced to 2½%, on which basis the tax yielded from 37 to 38 million yen annually. After the war with Land Tax. China (1894-1895) the government proposed to increase this impost in order to obtain funds for an extensive programme of useful public works and expanded armaments (known subsequently as the “first post bellum programme”). By that time the market value of agricultural land had largely appreciated owing to improved communications, and urban land commanded greatly enhanced prices. But the lower house of the diet, considering itself guardian of the farmers’ interests, refused to endorse any increase of the tax. Not until 1889 could this resistance be overcome, and then only on condition that the change should not be operative for more than 5 years. The amended rates were 3.3% on rural lands and 5% on urban building sites. Thus altered, the tax produced 46,000,000 yen, but at the end of the five-year period it would have reverted to its old figure, had not war with Russia broken out. An increase was then made so that the impost varied from 3% to 17½% according to the class of land, and under this new system the tax yielded 85 millions. Thus the exigencies of two wars had augmented it from 38 millions in 1889 to 85 millions in 1907.

The income tax was introduced in 1887. It was on a graduated scale, varying from 1% on incomes of not less than 300 yen, to 3% on incomes of 30,000 yen and upwards. At these rates the tax yielded an insignificant revenue of about Income Tax. 2,000,000 yen. In 1899, a revision was effected for the purposes of the first post bellum programme. This revision increased the number of classes from five to ten, incomes of 300 yen standing at the bottom and incomes of 100,000yen or upwards at the top, the minimum and maximum rates being 1% and 5½%. The tax now produced approximately 8,000,000 yen. Finally in 1904, when war broke out with Russia, these rates were again revised, the minimum now becoming 2%, and the maximum 8.2%. Thus revised, the tax yields a revenue of 27,000,000 yen.

The business tax was instituted in 1896, after the war with China, and the rates have remained unchanged. For the purposes of the Business Tax. tax all kinds of business are divided into nine classes, and the tax is levied on the amounts of sales (wholesale and retail), on rental value of buildings, on number of employees and on amount of capital. The yield from the tax grows steadily. It was only 4,500,000 yen in 1897, but it figured at 22,000,000 yen in the budget for 1908-1909.

The above three imposts constitute the only direct taxes in Japan. Among indirect taxes the most important is that upon alcoholic Tax on Alcoholic Liquors. liquors. It was inaugurated in 1871; doubled, roughly speaking, in 1878; still further increased thenceforth at intervals of about 3 years, until it is now approximately twenty times as heavy as it was originally. The liquor taxed is mainly sake; the rate is about 50 sen (one shilling) per gallon, and the annual yield is 72,000,000 yen.

In 1859, when Japan re-opened her ports to foreign commerce, the customs dues were fixed on a basis of 10% ad valorem, but this was almost immediately changed to a nominal 5% and a real 3%. The customs then yielded a very Customs Duties. petty return—not more than three or four million yen—and the Japanese government had no discretionary power to alter the rates. Strenuous efforts to change this system were at length successful, and, in 1899, the tariff was divided into two sections, conventional and statutory; the rates in the former being governed by a treaty valid for 12 years; those in the latter being fixed at Japan’s will. Things remained thus until the war with Russia compelled a revision of the statutory tariff. Under this system the ratio of the duties to the value of the dutiable goods was about 15.65%. The customs yield a revenue of about 42,000,000 yen.

In Other Taxes. addition to the above there are eleven taxes, some in existence before the war of 1904-5, and some created for the purpose of carrying on the war or to meet the expenses of a post bellum programme.

Taxes in existence before 1904-1905:—

Name. Yield (millions of yen).

Tax on soy 4

Tax on sugar 16¼

Mining tax 2

Tax on bourses 2

Tax on issue of bank-notes 1

Tonnage dues ½

Taxes created on account of the war (1904-5) or in its immediate sequel:—

Name. Yield (millions of yen).

Consumption tax on textile fabrics 19½

Tax on dealers in patent medicines ¼

Tax on communications 21⁄3

Consumption tax on kerosene 1½

Succession tax 1½

Also, as shown above, the land tax was increased by 39 millions; the income tax by 19 millions; the business tax by 15 millions; and the tax on alcoholic liquors by 15 millions. On the whole, if taxes of general incidence and those of special incidence be lumped together, it appears that the burden swelled from 160,000,000 yen before the war to 320,000,000 after it.

The government of Japan carries on many manufacturing undertakings for purposes of military and naval equipment, for ship-building, for the construction of railway rolling stock, for the manufacture of telegraph and light-house State Monopolies and Manufactures. materials, for iron-founding and steel-making, for printing, for paper-making and so forth. There are 48 of these institutions, giving employment to 108,000 male operatives and 23,000 female, together with 63,000 labourers. But the financial results do not appear independently in the general budget. Three other government undertakings, however, constitute important budgetary items: they are, the profits derived from the postal and telegraph services, 39,000,000 yen; secondly, from forests, 13,000,000 yen; and thirdly, from railways, 37,000,000 yen. The government further exercises a monopoly of three important staples, tobacco, salt and camphor. In each case the crude article is produced by private individuals from whom it is taken over at a fair price by the government, and, having been manufactured (if necessary), it is resold by government agents at fixed prices. The tobacco monopoly yields a profit of some 33,000,000 yen; the salt monopoly a profit of 12,000,000 yen, and the camphor monopoly a profit of 1,000,000 yen. Thus the ordinary revenue of the state consisted in 1908-1909 of:—

Yen.

Proceeds of taxes 320,000,000

Proceeds of state enterprises (posts and telegraphs, forests and railways) 89,000,000

Proceeds of monopolies 56,000,000

Sundries 11,000,000

—————

Total 476,000,000

The ordinary expenditures of the nine departments of state aggregated—in 1908-1909—427,000,000 yen, so that there was a surplus revenue of 49,000,000 yen.

Japanese budgets have long included an extraordinary section, so called because it embodies outlays of a special and terminable character as distinguished from ordinary and perpetually recurring expenditures. The items in this extraordinary Extraordinary Expenditures. section possessed deep interest in the years 1896 and 1907, because they disclosed the special programmes mapped out by Japanese financiers and statesmen after the wars with China and Russia. Both programmes had the same bases—expansion of armaments and development of the country’s material resources. After her war with China, Japan received a plain intimation that she must either fight again after a few years or resign herself to a career of insignificance on the confines of the Far East. No other interpretation could be assigned to the action of Russia, Germany and France in requiring her to retrocede the territory which she had acquired by right of conquest. Japan therefore made provision for the doubling of her army and her navy, for the growth of a mercantile marine qualified to supply a sufficiency of troop-ships, and for the development of resources which should lighten the burden of these outlays.

The war with Russia ensued nine years after these preparations had begun, and Japan emerged victorious. It then seemed to the onlooking nations that she would rest from her warlike efforts. On the contrary, just as she had behaved after her war with China, so she now behaved after her war with Russia—made arrangements to double her army and navy and to develop her material resources. The government drafted for the year 1907-1908 a budget with three salient features. First, instead of proceeding to deal in a leisurely manner with the greatly increased national debt, Japan’s financiers made dispositions to pay it off completely in the space of 30 years. Secondly, a total outlay of 422,000,000 yen was set down for improving and expanding the army and the navy. Thirdly, expenditures aggregating 304,000,000 yen were estimated for productive purposes. All these outlays, included in the extraordinary section of the budget, were spread over a series of years commencing in 1907 and ending in 1913, so that the disbursements would reach their maximum in the fiscal year 1908-1909 and would thenceforth decline with growing rapidity. To finance this programme three constant sources of annual revenue were provided, namely, increased taxation, yielding some 30 millions yearly; domestic loans, varying from 30 to 40 millions each year; and surpluses of ordinary revenue amounting to from 45 to 75 millions. There were also some exceptional and temporary assets: such as 100,000,000 yen remaining over from the war fund; 50 millions paid by Russia for the maintenance of her officers and soldiers during their imprisonment in Japan; occasional sales of state properties and so forth. But the backbone of the scheme was the continuing revenue detailed above.

The house of representatives unanimously approved this programme. By the bulk of the nation, however, it was regarded with something like consternation, and a very short time sufficed to demonstrate its impracticability. From the beginning of 1907 a cloud of commercial and industrial depression settled down upon Japan, partly because of so colossal a programme of taxes and expenditures, and partly owing to excessive speculation during the year 1906 and to unfavourable financial conditions abroad. To float domestic loans became a hopeless task, and thus one of the three sources of extraordinary revenue ceased to be available. There remained no alternative but to modify the programme, and this was accomplished by extending the original period of years so as correspondingly to reduce the annual outlays. The nation, however, as represented by its leading men of affairs, clamoured for still more drastic measures, and it became evident that the government must study retrenchment, not expansion, eschewing above all things any increase of the country’s indebtedness. A change of ministry took place, and the new cabinet drafted a programme on five bases: first, that all expenditures should be brought within the margin of actual visible revenue, loans being wholly abstained from; secondly, that the estimates should not include any anticipated surpluses of yearly revenue; thirdly, that appropriations of at least 50,000,000 yen should be annually set aside to form a sinking fund, the whole of the foreign debt being thus extinguished in 27 years; fourthly, that the state railways should be placed in a separate account, all their profits being devoted to extensions and repairs; and fifthly, that the period for completing the post bellum programme should be extended from 6 years to 11. This scheme had the effect of restoring confidence in the soundness of the national finances.

National Debt.—When the fiefs were surrendered to the sovereign at the beginning of the Meiji era, it was decided to provide for the feudal nobles and the samurai by the payment of lump sums in commutation, or by handing to them public bonds, the interest on which should constitute a source of income. The result of this transaction was that bonds having a total face value of 191,500,000 yen were issued, and ready-money payments were made aggregating 21,250,000 yen.25 This was the foundation of Japan’s national debt. Indeed, these public bonds may be said to have represented the bulk of the state’s liabilities during the first 25 years of the Meiji period. The government had also to take over the debts of the fiefs, amounting to 41,000,000 yen, of which 21,500,000 yen were paid with interest-bearing bonds, the remainder with ready money. If to the above figures be added two foreign loans aggregating 16,500,000 yen (completely repaid by the year 1897); a loan of 15,000,000 yen incurred on account of the Satsuma revolt of 1877; loans of 33,000,000 yen for public works, 13,000,000 yen for naval construction, and 14,500,000 yen26 in connexion with the fiat currency, we have a total of 305,000,000 yen, being the whole national debt of Japan during the first 28 years of her new era under Imperial administration.

The second epoch dates from the war with China in 1894-95. The direct expenditures on account of the war aggregated 200,000,000 yen, of which 135,000,000 yen were added to the national debt, the remainder being defrayed with accumulations of surplus revenue, with a part of the indemnity received from China, and with voluntary contributions from patriotic subjects. As the immediate sequel of the war, the government elaborated a large programme of armaments and public works. The expenditure for these unproductive purposes, as well as for coast fortifications, dockyards, and so on, came to 314,000,000 yen, and the total of the productive expenditures included in the programme was 190,000,000 yen—namely, 120 millions for railways, telegraphs and telephones; 20 millions for riparian improvements; 20 millions in aid of industrial and agricultural banks and so forth—the whole programme thus involving an outlay of 504,000,000 yen. To meet this large figure, the Chinese indemnity, surpluses of annual revenue and other assets, furnished 300 millions; and it was decided that the remaining 204 millions should be obtained by domestic loans, the programme to be carried completely into operation—with trifling exceptions—by the year 1905. In practice, however, it was found impossible to obtain money at home without paying a high rate of interest. The government, therefore, had recourse to the London market in 1899, raising a loan of £10,000,000 at 4%, and selling the £100 bonds at 90. In 1902, it was not expected that Japan would need any further immediate recourse to foreign borrowing. According to her financiers’ forecast at that time, her national indebtedness would reach its maximum, namely, 575,000,000 yen, in the year 1903, and would thenceforward diminish steadily. All Japan’s domestic loans were by that time placed on a uniform basis. They carried 5% interest, ran for a period of 5 years without redemption, and were then to be redeemed within 50 years at latest. The treasury had power to expedite the operation of redemption according to financial convenience, but the sum expended on amortization each year must receive the previous consent of the diet. Within the limit of that sum redemption was effected either by purchasing the stock of the loans in the open market or by drawing lots to determine the bonds to be paid off. During the first two periods (1867 to 1897) of the Meiji era, owing to the processes of conversion, consolidation, &c., and to the various requirements of the state’s progress, twenty-two different kinds of national bonds were issued; they aggregated 673,215,500 yen; 269,042,198 yen of that total had been paid off at the close of 1897, and the remainder was to be redeemed by 1946, according to these programmes.

But at this point the empire became involved in war with Russia, and the enormous resulting outlays caused a signal change in the financial situation. Before peace was restored in the autumn of 1905, Japan had been obliged to borrow 405,000,000 yen at home and 1,054,000,000 abroad, so that she found herself in 1908 with a total debt of 2,276,000,000 yen, of which aggregate her domestic indebtedness stood for 1,110,000,000 and her foreign borrowings amounted to 1,166,000,000. This meant that her debt had grown from 561,000,000 yen in 1904 to 2,276,000,000 yen27 in 1908; or from 11.3 yen to 43.8 yen per head of the population. Further, out of the grand total, the sum actually spent on account of war and armaments represented 1,357,000,000 yen. The debt carried interest varying from 4 to 5%.

It will be observed that the country’s indebtedness grew by 1,700,000,000 yen, in round numbers, owing to the war with Russia. This added obligation the government resolved to discharge within the space of 30 years, for which purpose the diet was asked to approve the establishment of a national debt consolidation fund, which should be kept distinct from the general accounts of revenue and expenditure, and specially applied to payment of interest and redemption of principal. The amount of this fund was never to fall below 110,000,000 yen annually. Immediately after the war, the diet approved a cabinet proposal for the nationalization of 17 private railways, at a cost of 500,000,000 yen, and this brought the state’s debts to 2,776,000,000 yen in all. The people becoming impatient of this large burden, a scheme was finally adopted in 1908 for appropriating a sum of at least 50,000,000 yen annually to the purpose of redemption.

Local Finance.—Between 1878 and 1888 a system of local autonomy in matters of finance was fully established. Under this system the total expenditures of the various corporations in the last year of each quinquennial period commencing from the fiscal year 1889-1890 were as follow:—

Year. Total Expenditure (millions of yen).

1889-1890 22

1893-1894 52

1898-1899 97

1903-190428 158

1907-1908 167

In the same years the total indebtedness of the corporations was:—

Year. Debts (millions of yen).

1890 ¾

1894 10

1899 32

1904 65

1907 8929

The chief purposes to which the proceeds of these loans were applied are as follow:—

Millions of yen.

Education 5

Sanitation 12

Industries 13

Public works 52

Local corporations are not competent to incur unrestricted indebtedness. The endorsement of the local assembly must be secured; redemption must commence within 3 years after the date of issue and be completed within 30 years; and, except in the case of very small loans, the sanction of the minister of home affairs must be obtained.

Wealth of Japan.—With reference to the wealth of Japan, there is no official census. So far as can be estimated from statistics for the year 1904-1905, the wealth of Japan proper, excluding Formosa, Sakhalin and some rights in Manchuria, amounts to about 19,896,000,000 yen, the items of which are as follow:—

Yen (10 yen = £1).

Lands 12,301,000,000

Buildings 2,331,000,000

Furniture and fittings 1,080,000,000

Live stock 109,000,000

Railways, telegraphs and telephones 707,000,000

Shipping 376,000,000

Merchandise 873,000,000

Specie and bullion 310,000,000

Miscellaneous 1,809,000,000

———————

Grand total 19,896,000,000

Education.—There is no room to doubt that the literature and learning of China and Korea were transported to Japan in very ancient times, but tradition is the sole authority for current statements that in the 3rd century a Early Education. Korean immigrant was appointed historiographer to the Imperial court of Japan and another learned man from the same country introduced the Japanese to the treasures of Chinese literature. About the end of the 6th century the Japanese court began to send civilians and religionists direct to China, there to study Confucianism and Buddhism, and among these travellers there were some who passed as much as 25 or 30 years beyond the sea. The knowledge acquired by these students was crystallized into a body of laws and ordinances based on the administrative and legal systems of the Sui dynasty in China, and in the middle of the 7th century the first Japanese school seems to have been established by the emperor Tenchi, followed some 50 years later by the first university. Nara was the site of the latter, and the subjects of study were ethics, law, history and mathematics.

Not until 794, the date of the transfer of the capital to Kiōto, however, is there any evidence of educational organization on a considerable scale. A university was then opened in the capital, with affiliated colleges; and local schools were built and endowed by noble families, to whose scions admittance was restricted, but for general education one institution only appears to have been provided. In this Kiōto university the curriculum included the Chinese classics, calligraphy, history, law, etiquette, arithmetic and composition; while in the affiliated colleges special subjects were taught, as medicine, herbalism, acupuncture, shampooing, divination, the almanac and languages. Admission was limited to youths of high social grade; the students aggregated some 400, from 13 to 16 years of age; the faculty included professors and teachers, who were known by the same titles (hakase and shi) as those applied to their successors to-day; and the government supplied food and clothing as well as books. The family schools numbered five, and their patrons were the Wage, the Fujiwara, the Tachibana (one school each) and the Minamoto (two). At the one institution—opened in 828—where youths in general might receive instruction, the course embraced only calligraphy and the precepts of Buddhism and Confucianism.

The above retrospect suggests that Japan, in those early days, borrowed her educational system and its subjects of study entirely from China. But closer scrutiny shows that the national factor was carefully preserved. Combination of Native and Foreign Element. The ethics of administration required a combination of two elements, wakon, or the soul of Japan, and kwansai, or the ability of China; so that, while adopting from Confucianism the doctrine of filial piety, the Japanese grafted on it a spirit of unswerving loyalty and patriotism; and while accepting Buddha’s teaching as to three states of existence, they supplemented it by a belief that in the life beyond the grave the duty of guarding his country would devolve on every man. Great academic importance attached to proficiency in literary composition, which demanded close study of the ideographic script, endlessly perplexing in form and infinitely delicate in sense. To be able to compose and indite graceful couplets constituted a passport to high office as well as to the favour of great ladies, for women vied with men in this accomplishment. The early years of the 11th century saw, grouped about the empress Aki, a galaxy of female authors whose writings are still accounted their country’s classics—Murasaki no Shikibu, Akazome Emon, Izumi Shikibu, Ise Taiyu and several lesser lights. To the first two Japan owes the Genji monogatari and the Eiga monogatari, respectively, and from the Imperial court of those remote ages she inherited admirable models of painting, calligraphy, poetry, music, song and dance. But it is to be observed that all this refinement was limited virtually to the noble families residing in Kiōto, and that the first object of education in that era was to fit men for office and for society.

Meanwhile, beyond the precincts of the capital there were rapidly growing to maturity numerous powerful military magnates who despised every form of learning that did not contribute to martial excellence. An illiterate era Education in the Middle Ages. ensued which reached its climax with the establishment of feudalism at the close of the 12th century. It is recorded that, about that time, only one man out of a force of five thousand could decipher an Imperial mandate addressed to them. Kamakura, then the seat of feudal government, was at first distinguished for absence of all intellectual training, but subsequently the course of political events brought thither from Kiōto a number of court nobles whose erudition and refinement acted as a potent leaven. Buddhism, too, had been from the outset a strong educating influence. Under its auspices the first great public library was established (1270) at the temple Shōmyo-ji in Kanazawa. It is said to have contained practically all the Chinese and Japanese books then existing, and they were open for perusal by every class of reader. To Buddhist priests, also, Japan owed during many years all the machinery she possessed for popular education. They organized schools at the temples scattered about in almost every part of the empire, and at these tera-koya, as they were called, lessons in ethics, calligraphy, reading and etiquette were given to the sons of samurai and even to youths of the mercantile and manufacturing classes.

When, at the beginning of the 17th century, administrative supremacy fell into the hands of the Tokugawa, the illustrious founder of that dynasty of shōguns, Iyeyasu, showed himself an earnest promoter of erudition. Education in the pre-Meiji Era. He employed a number of priests to make copies of Chinese and Japanese books; he patronized men of learning and he endowed schools. It does not appear to have occurred to him, however, that the spread of knowledge was hampered by a restriction which, emanating originally from the Imperial court in Kiōto, forbade any one outside the ranks of the Buddhist priesthood to become a public teacher. To his fifth successor Tsunayoshi (1680-1709) was reserved the honour of abolishing this veto. Tsunayoshi, whatever his faults, was profoundly attached to literature. By his command a pocket edition of the Chinese classics was prepared, and the example he himself set in reading and expounding rare books to audiences of feudatories and their vassals produced something like a mania for erudition, so that feudal chiefs competed in engaging teachers and founding schools. The eighth shōgun, Yoshimunē (1716-1749), was an even more enlightened ruler. He caused a geography to be compiled and an astronomical observatory to be constructed; he revoked the veto on the study of foreign books; he conceived and carried out the idea of imparting moral education through the medium of calligraphy by preparing ethical primers whose precepts were embodied in the head-lines of copy-books, and he encouraged private schools. Iyenari (1787-1838), the eleventh shōgun, and his immediate successor, Iyeyoshi (1838-1853), patronized learning no less ardently, and it was under the auspices of the latter that Japan acquired her five classics, the primers of True Words, of Great Learning, of Lesser Learning, of Female Ethics and of Women’s Filial Piety.

Thus it may be said that the system of education progressed steadily throughout the Tokugawa era. From the days of Tsunayoshi the number of fief schools steadily increased, and as students were admitted free of all charges, a duty of grateful fealty as well as the impulse of interfief competition drew thither the sons of all samurai. Ultimately the number of such schools rose to over 240, and being supported entirely at the expense of the feudal chiefs, they did no little honour to the spirit of the era. From 7 to 15 years of age lads attended as day scholars, being thereafter admitted as boarders, and twice a year examinations were held in the presence of high officials of the fief. There were also several private schools where the curriculum consisted chiefly of moral philosophy, and there were many temple schools, where ethics, calligraphy, arithmetic, etiquette and, sometimes, commercial matters were taught. A prominent feature of the system was the bond of reverential affection uniting teacher and student. Before entering school a boy was conducted by his father or elder brother to the home of his future teacher, and there the visitors, kneeling before the teacher, pledged themselves to obey him in all things and to submit unquestioningly to any discipline he might impose. Thus the teacher came to be regarded as a parent, and the veneration paid to him was embodied in a precept: “Let not a pupil tread within three feet of his teacher’s shadow.” In the case of the temple schools the priestly instructor had full cognisance of each student’s domestic circumstances and was guided by that knowledge in shaping the course of instruction. The universally underlying principle was, “serve the country and be diligent in your respective avocations.” Sons of samurai were trained in military arts, and on attaining proficiency many of them travelled about the country, inuring their bodies to every kind of hardship and challenging all experts of local fame.

Unfortunately, however, the policy of national seclusion prevented for a long time all access to the stores of European knowledge. Not until the beginning of the 18th century did any authorized account of the great world of the West pass into the hands of the people. A celebrated scholar (Arai Hakuseki) then compiled two works—Saiyō kibun (Record of Occidental Hearsay), and Sairan igen (Renderings of Foreign Languages)—which embodied much information, obtained from Dutch sources, about Europe, its conditions and its customs. But of course the light thus furnished had very restricted influence. It was not extinguished, however. Thenceforth men’s interest centred more and more on the astronomical, geographical and medical sciences of the West, though such subjects were not included in academical studies until the renewal of foreign intercourse in modern times. Then (1857), almost immediately, the nation turned to Western learning, as it had turned to Chinese thirteen centuries earlier. The Tokugawa government established in Yedo an institution called Bansho-shirabe-dokoro (place for studying foreign books), where Occidental languages were learned and Occidental works translated. Simultaneously a school for acquiring foreign medical art (Seiyo igaku-sho) was opened, and, a little later (1862), the Kaisei-jo (place of liberal culture), a college for studying European sciences, was added to the list of new institutions. Thus the eve of the Restoration saw the Japanese people already appreciative of the stores of learning rendered accessible to them by contact with the Occident.

Commercial education was comparatively neglected in the schools. Sons of merchants occasionally attended the tera-koya, but the instruction they received there had seldom any bearing upon the conduct of trade. Mercantile Commercial Education in Tokugawa Times. knowledge had to be acquired by a system of apprenticeship. A boy of 9 or 10 was apprenticed for a period of 8 or 9 years to a merchant, who undertook to support him and teach him a trade. Generally this young apprentice could not even read or write. He passed through all the stages of shop menial, errand boy, petty clerk, salesman and senior clerk, and in the evenings he received instruction from a teacher, who used for textbooks the manual of letter-writing (Shosoku orai) and the manual of commerce (Shōbai orai). The latter contained much useful information, and a youth thoroughly versed in its contents was competent to discharge responsible duties. When an apprentice, having attained the position of senior clerk, had given proof of practical ability, he was often assisted by his master to start business independently, but under the same firm-name, for which purpose a sum of capital was given to him or a section of his master’s customers were assigned.

When the government of the Restoration came into power, the emperor solemnly announced that the administration should be conducted on the principle of employing men of capacity wherever they could be found. This amounted Education in Modern Japan. to a declaration that in choosing officials scholastic acquirements would thenceforth take precedence of the claims of birth, and thus unprecedented importance was seen to attach to education. But so long as the feudal system survived, even in part, no general scheme of education could be thoroughly enforced, and thus it was not until the conversion of the fiefs into prefectures in 1871 that the government saw itself in a position to take drastic steps. A commission of investigation was sent to Europe and America, and on its return a very elaborate and extensive plan was drawn up in accordance with French models, which the commissioners had found conspicuously complete and symmetrical. This plan subsequently underwent great modifications. It will be sufficient to say that in consideration of the free education hitherto provided by the feudatories in their various fiefs, the government of the restoration resolved not only that the state should henceforth shoulder the main part of this burden, but also that the benefits of the system should be extended equally to all classes of the population, and that the attendance at primary schools should be compulsory. At the outset the sum to be paid by the treasury was fixed at 2,000,000 yen, that having been approximately the expenditure incurred by the feudatories. But the financial arrangements suffered many changes from time to time, and finally, in 1877, the cost of maintaining the schools became a charge on the local taxes, the central treasury granting only sums in aid.

Every child, on attaining the age of six, must attend a common elementary school, where, during a six-years’ course, instruction is given in morals, reading, arithmetic, the rudiments of technical work, gymnastics and poetry. Year by year the attendance at these schools has increased. Thus, whereas in the year 1900, only 81.67% of the school-age children of both sexes received the prescribed elementary instruction, the figure in 1905 was 94.93%. The desire for instruction used to be keener among boys than among girls, as was natural in view of the difference of inducement; but ultimately this discrepancy disappeared almost completely. Thus, whereas the percentage of girls attending school was 75.90 in 1900, it rose to 91.46 in 1905, and the corresponding figures for boys were 90.55 and 97.10 respectively. The tuition fee paid at a common elementary school in the rural districts must not exceed 5s. yearly, and in the urban districts, 10s.; but in practice it is much smaller, for these elementary schools form part of the communal system, and such portion of their expenses as is not covered by tuition fees, income from school property and miscellaneous sources, must be defrayed out of the proceeds of local taxation. In 1909 there were 18,160 common elementary schools, and also 9105 schools classed as elementary but having sections where, subsequently to the completion of the regular curriculum, a special supplementary course of study might be pursued in agriculture, commerce or industry (needle-work in the case of girls). The time devoted to these special courses is two, three or four years, according to the degree of proficiency contemplated, and the maximum fees are 15d. per month in urban districts and one-half of that amount in rural districts.

There are also 294 kindergartens, with an attendance of 26,000 infants, whose parents pay 3d. per month on the average for each child. In general the kindergartens are connected with elementary schools or with normal schools.

If a child, after graduation at a common elementary school, desires to extend its education, it passes into a common middle school, where training is given for practical pursuits or for admission to higher educational institutions. The ordinary curriculum at a common middle school includes moral philosophy, English language, history, geography, mathematics, natural history, natural philosophy, chemistry, drawing and the Japanese language. Five years are required to graduate, and from the fourth year the student may take up a special technical course as well as the main course; or, in accordance with local requirements, technical subjects may be taught conjointly with the regular curriculum throughout the whole time. The law provides that there must be at least one common middle school in each prefecture. The actual number in 1909 was 216.

Great inducements attract attendance at a common middle school. Not only does the graduation certificate carry considerable weight as a general qualification, but it also entitles a young man to volunteer for one year’s service with the colours, thus escaping one of the two years he would have to serve as an ordinary conscript.

The graduate of a common middle school can claim admittance, without examination, to a high school, where he spends three years preparing to pass to a university, or four years studying a special subject, as law, engineering or medicine. By following the course in a high school, a youth obtains exemption from conscription until the age of 28, when one year as a volunteer will free him from all service with the colours. A high-school certificate of graduation entitles its holder to enter a university without examination, and qualifies him for all public posts.

For girls also high schools are provided, the object being to give a general education of higher standard. Candidates for admission must be over 12 years of age, and must have completed the second-year course of a higher elementary school. The regular course of study requires 4 years, and supplementary courses as well as special art courses may be taken.

In addition to the schools already enumerated, which may be said to constitute the machinery of general education, there are special schools, generally private, and technical schools (including a few private), where instruction is given in medicine and surgery, agriculture, commerce, mechanics, applied chemistry, navigation, electrical engineering, art (pictorial and applied), veterinary science, sericulture and various other branches of industry. There are also apprentices’ schools, classed under the heading of elementary, where a course of not less than six months, and not more than four years, may be taken in dyeing and weaving, embroidery, the making of artificial flowers, tobacco manufacture, sericulture, reeling silk, pottery, lacquer, woodwork, metal-work or brewing. There are also schools—nearly all supported by private enterprise—for the blind and the dumb.

Normal schools are maintained for the purpose of training teachers, a class of persons not plentiful in Japan, doubtless because of an exceptionally low scale of emoluments, the yearly pay not exceeding £60 and often falling as low as £15.

There are two Imperial universities, one in Tōkyō and one in Kiōto. In 1909 the former had about 220 professors and instructors and 2880 students. Its colleges number six: law, medicine, engineering, literature, science and agriculture. It has a university hall where post-graduate courses are studied, and it publishes a quarterly journal giving accounts of scientific researches, which indicate not only large erudition, but also original talent. The university of Kiōto is a comparatively new institution and has not given any signs of great vitality. In 1909 its colleges numbered four: law, medicine, literature and science; its faculty consisted of about 60 professors with 70 assistants, and its students aggregated about 1100.

Except in the cases specially indicated, all the figures given above are independent of private educational institutions. The system pursued by the state does not tend to encourage private education, for unless a private school brings its curriculum into exact accord with that prescribed for public institutions of corresponding grade, its students are denied the valuable privilege of partial exemption from conscription, as well as other advantages attaching to state recognition. Thus the quality of the instruction being nominally the same, the rate of fees must also be similar, and no margin offers to tempt private enterprise.

Public education in Japan is strictly secular: no religious teaching of any kind is permitted in the schools. There are about 100 libraries. Progress is marked in this branch, the rate of growth having been from 43 to 100 in the five-year period ended 1905. The largest library is the Imperial, in Tōkyō. It had about half a million volumes in 1909, and the daily average of visitors was about 430.

Apart from the universities, the public educational institutions in Japan involve an annual expenditure of 3½ millions sterling, out of which total a little more than half a million is met by students’ fees; 2¾ millions are paid by the communes, and the remainder is defrayed from various sources, the central government contributing only some £28,000. It is estimated that public school property—in land, buildings, books, furniture, &c., aggregates 11 millions sterling.

VII.—Religion

The primitive religion of Japan is known by the name of Shintō, which signifies “the divine way,” but the Japanese maintain that this term is of comparatively modern application. The term Shintō being Shintō. obviously of Chinese origin, cannot have been used in Japan before she became acquainted with the Chinese language. Now Buddhism did not reach Japan until the 6th century, and a knowledge of the Chinese language had preceded it by only a hundred years. It is therefore reasonable to conclude that the primitive religion of Japan had no name, and that it did not begin to be called Shintō until Buddhism had entered the field. The two creeds remained distinct, though not implacably antagonistic, until the beginning of the 9th century, when they were welded together into a system of doctrine to which the name Ryōbu-Shintō (dual Shintō) was given. In this new creed the Shintō deities were regarded as avatars of Buddhist divinities, and thus it may be said that Shintō was absorbed into Buddhism. Probably that would have been the fate of the indigenous creed in any circumstances, for a religion without a theory as to a future state and without any code of moral duties could scarcely hope to survive contact with a faith so well equipped as Buddhism in these respects. But Shintō, though absorbed, was not obliterated. Its beliefs survived; its shrines survived; its festivals survived, and something of its rites survived also.

Shintō, indeed, may be said to be entwined about the roots of Japan’s national existence. Its scripture—as the Kojiki must be considered—resembles the Bible in that both begin with the cosmogony. But it represents the gods as peopling the newly created earth with their own offspring instead of with human beings expressly made for the purpose. The actual work of creation was done by a male deity, Izanagi, and a female deity, Izanami. From the right eye of the former was born Amaterasu, who became goddess of the sun; from his left eye, the god of the moon; and from his nose, a species of Lucifer. The grandson of the sun goddess was the first sovereign of Japan, and his descendants have ruled the land in unbroken succession ever since, the 121st being on the throne in 1909. Thus it is to Amaterasu (the heaven-illuminating goddess) that the Japanese pay reverence above all other deities, and it is to her shrine at Ise that pilgrims chiefly flock.

The story of creation, as related in the Kojiki, is obviously based on a belief that force is indestructible, and that every exercise of it is productive of some permanent result. Thus by the motions of the creative spirit there spring into existence all the elements that go to make up the universe, and these, being of divine origin, are worshipped and propitiated. Their number becomes immense when we add the deified ghosts of ancestors who were descended from the gods and whose names are associated with great deeds. These ancestors are often regarded as the tutelary deities of districts, where they receive special homage and where shrines are erected to them. The method of worship consists in making offerings and in the recital of rituals (norito). Twenty-seven of these rituals were reduced to writing and embodied in a work called Engishiki (927). Couched in antique language, these liturgies are designed for the dedication of shrines, for propitiating evil, for entreating blessings on the harvest, for purification, for obtaining household security, for bespeaking protection during a journey, and so forth. Nowhere is any reference found to a future state of reward or punishment, to deliverance from evil, to assistance in the path of virtue. One ceremonial only is designed to avert the consequences of sin or crime; namely, the rite of purification, which, by washing with water and by the sacrifice of valuables, removes the pollution resulting from all wrong-doing. Originally performed on behalf of individuals, this ō-barai ultimately came to be a semi-annual ceremony for sweeping away the sins of all the people.

Shintō is thus a mixture of ancestor-worship and of nature-worship without any explicit code of morals. It regards human beings as virtuous by nature; assumes that each man’s conscience is his best guide; and while believing in a continued existence beyond the grave, entertains no theory as to its pleasures or pains. Those that pass away become disembodied spirits, inhabiting the world of darkness (yomi-no-yo) and possessing power to bring sorrow or joy into the lives of their survivors, on which account they are worshipped and propitiated. Purity and simplicity being essential characteristics of the cult, its shrines are built of white wood, absolutely without decorative features of any kind, and fashioned as were the original huts of the first Japanese settlers. There are no graven images—a fact attributed by some critics to ignorance of the glyptic art on the part of the original worshippers—but there is an emblem of the deity, which generally takes the form of a sword, a mirror or a so-called jewel, these being the insignia handed by the sun goddess to her grandson, the first ruler of Japan. This emblem is not exposed to public view: it is enveloped in silk and brocade and enclosed in a box at the back of the shrine. The mirror sometimes prominent is a Buddhist innovation and has nothing to do with the true emblem of the creed.