Part 36

The system of organized trading companies had its origin in the 12th century, when, the number of merchants admitted within the confines of Yedo being restricted, it became necessary for those not obtaining that privilege to establish some mode of co-operation, and there resulted the formation of companies with representatives stationed in the feudal capital and share-holding members in the provinces. The Ashikaga shoguns developed this restriction by selling to the highest bidder the exclusive right of engaging in a particular trade, and the Tokugawa administration had recourse to the same practice. But whereas the monopolies instituted by the Ashikaga had for sole object the enrichment of the exchequer, the Tokugawa regarded it chiefly as a means of obtaining worthy representatives in each branch of trade. The first licences were issued in Yedo to keepers of bath-houses in the middle of the 17th century. As the city grew in dimensions these licences increased in value, so that pawnbrokers willingly accepted them in pledge for loans. Subsequently almanack-sellers were obliged to take out licences, and the system was afterwards extended to money-changers.

It was to the fishmongers, however, that the advantages of commercial organization first presented themselves vividly. The greatest fish-market in Japan is at Nihon-bashi in Tokyo (formerly Yedo). It had its origin in the needs of the Tokugawa court. When Iyeyasu (founder of the Tokugawa dynasty) entered Yedo in 1590, his train was followed by some fishermen of Settsu, to whom he granted the privilege of plying their trade in the adjacent seas, on condition that they furnished a supply of their best fish for the use of the garrison. The remainder they offered for sale at Nihon-bashi. Early in the 17th century one Sukegoro of Yamato province (hence called Yamato-ya) went to Yedo and organized the fishmongers into a great gild. Nothing is recorded about this man's antecedents, though his mercantile genius entitles him to historical notice. He contracted for the sale of all the fish obtained in the neighbouring seas, advanced money to the fishermen on the security of their catch, constructed preserves for keeping the fish alive until they were exposed in the market, and enrolled all the dealers in a confederation which ultimately consisted of 391 wholesale merchants and 246 brokers. The main purpose of Sukegoro's system was to prevent the consumer from dealing direct with the producer. Thus in return for the pecuniary accommodation granted to fishermen to buy boats and nets they were required to give every fish they caught to the wholesale merchant from whom they had received the advance; and the latter, on his side, had to sell in the open market at prices fixed by the confederation. A somewhat similar system applied to vegetables, though in this case the monopoly was never so close.

It will be observed that this federation of fishmongers approximated closely to a trust, as the term is now understood; that is to say, an association of merchants engaged in the same branch of trade and pledged to observe certain rules in the conduct of their business as well as to adhere to fixed rates. The idea was extended to nearly every trade, 10 monster confederations being organized in Yedo and 24 in Osaka. These received official recognition, and contributed a sum to the exchequer under the euphonious name of "benefit money," amounting to nearly £20,000 annually. They attained a high state of prosperity, the whole of the cities' supplies passing through their hands.[8] No member of a confederation was permitted to dispose of his licence except to a near relative, and if anyone not on the roll of a confederation engaged in the same business he became liable to punishment at the hands of the officials. In spite of the limits thus imposed on the transfer of licences, one of these documents commanded from £80 to £6,400, and in the beginning of the 19th century the confederations, or gilds, had increased to 68 in Yedo, comprising 1195 merchants. The gild system extended to maritime enterprise also. In the beginning of the 17th century a merchant of Sakai (near Osaka) established a junk service between Osaka and Yedo, but this kind of business did not attain any considerable development until the close of that century, when 10 gilds of Yedo and 24 of Osaka combined to organize a marine-transport company for the purpose of conveying their own merchandise. Here also the principle of monopoly was strictly observed, no goods being shipped for unaffiliated merchants. This carrying trade rapidly assumed large dimensions. The number of junks entering Yedo rose to over 1500 yearly. They raced from port to port, just as tea-clippers from China to Europe used to race in recent times, and troubles incidental to their rivalry became so serious that it was found necessary to enact stringent rules. Each junk-master had to subscribe a written oath that he would comply strictly with the regulations and observe the sequence of sailing as determined by lot. The junks had to call _en route_ at Uraga for the purpose of undergoing official examination. The order of their arrival there was duly registered, and the master making the best record throughout the year received a present in money as well as a complimentary garment, and became the shippers' favourite next season.

Operations relating to the currency also were brought under the control of gilds. The business of money-changing seems to have been taken up as a profession from the beginning of the 15th century, but it was then in the hands of pedlars who carried strings of copper cash which they exchanged for gold or silver coins, then in rare circulation, or for parcels of gold dust. From the early part of the 17th century exchanges were opened in Yedo, and in 1718 the men engaged in this business formed a gild after the fashion of the time. Six hundred of these received licences, and no unlicensed person was permitted to purchase the avocation. Four representatives of the chief exchange met daily and fixed the ratio between gold and silver, the figure being then communicated to the various exchanges and to the shogun's officials. As for the prices of gold or silver in terms of copper or bank-notes, 24 representatives of the exchanges met every evening, and, in the presence of an official censor, settled the figure for the following day and recorded the amount of transactions during the past 24 hours, full information on these points being at once sent to the city governors and the street elders.

The exchanges in their ultimate form approximated very closely to the Occidental idea of banks. They not only bought gold, silver and copper coins, but they also received money on deposit, made loans and issued vouchers which played a very important part in commercial transactions. The voucher seems to have come into existence in Japan in the 14th century. It originated in the Yoshino market of Yamato province, where the hilly nature of the district rendered the carriage of copper money so arduous that rich merchants began to substitute written receipts and engagements which quickly became current. Among these documents there was a "joint voucher" (_kumiai-fuda_), signed by several persons, any one of whom might be held responsible for its redemption. This had large vogue, but it did not obtain official recognition until 1636, when the third Tokugawa shogun selected 30 substantial merchants and divided them into 3 gilds, each authorized to issue vouchers, provided that a certain sum was deposited by way of security. Such vouchers were obviously a form of bank-note. Their circulation by the exchange came about in a similar manner. During many years the treasure of the shogun and of the feudal chiefs was carried to Yedo by pack-horses and coolies of the regular postal service. But the costliness of such a method led to the selection in 1691 of 10 exchange agents who were appointed bankers to the Tokugawa government and were required to furnish money within 30 days of the date of an order drawn on them. These agents went by the name of the "ten-men gild." Subsequently the firm of Mitsui was added, but it enjoyed the special privilege of being allowed 150 days to collect a specified amount. The gild received moneys on account of the Tokugawa or the feudal chiefs at provincial centres, and then made its own arrangements for cashing the cheques drawn upon it by the shogun or the daimyo in Yedo. If coin happened to be immediately available, it was employed to cash the cheques; otherwise the vouchers of the gild served instead. It was in Osaka, however, that the functions of the exchanges acquired fullest development. That city has exhibited, in all eras, a remarkable aptitude for trade. Its merchants, as already shown, were not only entrusted with the duty of selling the rice and other products of the surrounding fiefs, but also they became depositories of the proceeds, which they paid out on account of the owners in whatever sums the latter desired. Such an evidence of official confidence greatly strengthened their credit, and they received further encouragement from the second Tokugawa shogun (1605-1623)and from Ishimaru Sadatsugu, governor of the city in 1661. He fostered wholesale transactions, sought to introduce a large element of credit into commerce by instituting a system of credit sales; took measures to promote the circulation of cheques; inaugurated market sales of gold and silver and appointed ten chiefs of exchange who were empowered to oversee the business of money-exchanging in general. These ten received exemption from municipal taxation and were permitted to wear swords. Under them were 22 exchanges forming a gild, whose members agreed to honour one another's vouchers and mutually to facilitate business. Gradually they elaborated a regular system of banking, so that, in the middle of the 18th century, they issued various descriptions of paper-orders for fixed sums payable at certain places within fixed periods; deposit notes redeemable on the demand of an indicated person or his order; bills of exchange drawn by _A_ upon _B_ in favour of _C_ (a common form for use in monthly or annual settlements); promissory notes to be paid at a future time, or cheques payable at sight, for goods purchased; and storage orders engaging to deliver goods on account of which earnest money had been paid. These last, much employed in transactions relating to rice and sugar, were generally valid for a period of 3 years and 3 months, were signed by a confederation of exchanges or merchants on joint responsibility, and guaranteed the delivery of the indicated merchandise independently of all accidents. They passed current as readily as coin, and advances could always be obtained against them from pawnbrokers.

All these documents, indicating a well-developed system of credit, were duly protected by law, severe penalties being inflicted for any failure to implement the pledges they embodied. The merchants of Yedo and Osaka, working on the system of trusts here described, gradually acquired great wealth and fell into habits of marked luxury. It is recorded that they did not hesitate to pay £5 for the first bonito of the season and £11 for the first egg-fruit. Naturally the spectacle of such extravagance excited popular discontent. Men began to grumble against the so-called "official merchants" who, under government auspices, monopolized every branch of trade; and this feeling grew almost uncontrollable in 1836, when rice rose to an unprecedented price owing to crop failure. Men loudly ascribed that state of affairs to regrating on the part of the wholesale companies, and murmurs similar to those raised at the close of the 19th century in America against the trust system began to reach the ears of the authorities perpetually. The celebrated Fujita Toko of Mito took up the question. He argued that the monopoly system, since it included Osaka, exposed the Yedo market to all the vicissitudes of the former city, which had then lost much of its old prosperity.

Finally, in 1841, the shogun's chief minister, Mizuno Echizen-no-Kami, withdrew all trading licences, dissolved the gilds and proclaimed that every person should thenceforth be free to engage in any commerce without let or hindrance. This recklessly drastic measure, vividly illustrating the arbitrariness of feudal officialdom, not only included the commercial gilds, the shipping gilds, the exchange gilds and the land transport gilds, but was also carried to the length of forbidding any company to confine itself to wholesale dealings. The authorities further declared that in times of scarcity wholesale transactions must be abandoned altogether and retail business alone carried on, their purpose being to bring retail and wholesale prices to the same level. The custom of advancing money to fishermen or to producers in the provincial districts was interdicted; even the fuda-sashi might no longer ply their calling, and neither bath-house keepers nor hairdressers were allowed to combine for the purpose of adopting uniform rates of charges. But this ill-judged interference produced evils greater than those it was intended to remedy. The gilds had not really been exacting. Their organization had reduced the cost of distribution, and they had provided facilities of transport which brought produce within quick and cheap reach of central markets.

Ten years' experience showed that a modified form of the old system would conduce to public interests. The gilds were re-established, licence fees, however, being abolished, and no limit set to the number of firms in a gild. Things remained thus until the beginning of the Meiji era (1867), when the gilds shared the cataclysm that overtook all the country's old institutions.

Japanese commercial and industrial life presents another feature which seems to suggest special aptitude for combination. In mercantile or manufacturing families, while the eldest son always succeeded to his father's business, not only the younger sons but also the apprentices and employees, after they had served faithfully for a number of years, expected to be set up as branch houses under the auspices of the principal family, receiving a place of business, a certain amount of capital and the privilege of using the original house-name. Many an old-established firm thus came to have a plexus of branches all serving to extend its business and strengthen its credit, so that the group held a commanding position in the business world. It will be apparent from the above that commercial transactions on a large scale in pre-Meiji days were practically limited to the two great cities of Yedo and Osaka, the people in the provincial fiefs having no direct association with the gild system, confining themselves, for the most part, to domestic industries on a small scale, and not being allowed to extend their business beyond the boundaries of the fief to which they belonged.

_Foreign Commerce during the Meiji Era._--If Japan's industrial development in modern times has been remarkable, the same may be said even more emphatically about the development of her over-sea commerce. This was checked at first not only by the unpopularity attaching to all intercourse with outside nations, but also by embarrassments resulting from the difference between the silver price of gold in Japan and its silver price in Europe, the precious metals being connected in Japan by a ratio of 1 to 8, and in Europe by a ratio of 1 to 15. This latter fact was the cause of a sudden and violent appreciation of values; for the government, seeing the country threatened with loss of all its gold, tried to avert the catastrophe by altering and reducing the weights of the silver coins without altering their denominations, and a corresponding difference exhibited itself, as a matter of course, in the silver quotations of commodities. Another difficulty was the attitude of officialdom. During several centuries Japan's over-sea trade had been under the control of officialdom, to whose coffers it contributed a substantial revenue. But when the foreign exporter entered the field under the conditions created by the new system, he diverted to his own pocket the handsome profit previously accruing to the government; and since the latter could not easily become reconciled to this loss of revenue, or wean itself from its traditional habit of interference in affairs of foreign commerce, and since the foreigner, on his side, not only desired secrecy in order to prevent competition, but was also tormented by inveterate suspicions of Oriental espionage, not a little friction occurred from time to time. Thus the scanty records of that early epoch suggest that trade was beset with great difficulties, and that the foreigner had to contend against most adverse circumstances, though in truth his gains amounted to 40 or 50%.

Tea and Silk.

The chief staples of the early trade were tea and silk. It happened that just before Japan's raw silk became available for export, the production of that article in France and Tea and Italy had been largely curtailed owing to a novel disease of the silkworm. Thus, when the first bales of Japanese silk appeared in London, and when it was found to possess qualities entitling it to the highest rank, a keen demand sprang up. Japanese green tea also, differing radically in flavour and bouquet from the black tea of China, appealed quickly to American taste, so that by the year 1907 Japan found herself selling to foreign countries tea to the extent of 1¼ millions sterling, and raw silk to the extent of 12¼ millions. This remarkable development is typical of the general history of Japan's foreign trade in modern times. Omitting the first decade and a half, the statistics for which are imperfect, the volume of the trade grew from 5 millions sterling in 1873--3 shillings per head of the population--to 93 millions in 1907--or 38 shillings per head. It was not a uniform growth. The period of 35 years divides itself conspicuously into two eras: the first, of 15 years (1873-1887), during which the development was from 5 millions to 9.7 millions, a ratio of 1 to 2, approximately; the second, of 20 years (1887-1907), during which the development was from 9.7 millions to 93 millions, a ratio of 1 to 10.

That a commerce which scarcely doubled itself in the first fifteen years should have grown nearly tenfold in the next twenty is a fact inviting attention. There are two principal causes: one general, the other special. The general cause was that several years necessarily elapsed before the nation's material condition began to respond perceptibly to the improvements effected by the Meiji government in matters of administration, taxation and transport facilities. Fiscal burdens had been reduced and security of life and property obtained, but railway building and road-making, harbour construction, the growth of posts, telegraphs, exchanges and banks, and the development of a mercantile marine did not exercise a sensible influence on the nation's prosperity until 1884 or 1885. From that time the country entered a period of steadily growing prosperity, and from that time private enterprise may be said to have finally started upon a career of independent activity. The special cause which, from 1885, contributed to a marked growth of trade was the resumption of specie payments. Up to that time the treasury's fiat notes had suffered such marked fluctuations of specie value that sound or successful commerce became very difficult. Against the importing merchant the currency trouble worked with double potency. Not only did the gold with which he purchased goods appreciate constantly in terms of the silver for which he sold them, but the silver itself appreciated sharply and rapidly in terms of the fiat notes paid by Japanese consumers. Cursory reflection may suggest that these factors should have stimulated exports as much as they depressed imports. But such was not altogether the case in practice. For the exporter's transactions were hampered by the possibility that a delay of a week or even a day might increase the purchasing power of his silver in Japanese markets by bringing about a further depreciation of paper, so that he worked timidly and hesitatingly, dividing his operations as minutely as possible in order to take advantage of the downward tendency of the fiat notes. Not till this element of pernicious disturbance was removed did the trade recover a healthy tone and grow so lustily as to tread closely on the heels of the foreign commerce of China, with her 300 million inhabitants and long-established international relations.

The Foreign Middleman.

Japan's trade with the outer world was built up chiefly by the energy and enterprise of the foreign middleman. He acted the part of an almost ideal agent. As an exporter, his command of cheap capital, his experience, his knowledge of foreign markets, and his connexions enabled him to secure sales such as must have been beyond reach of the Japanese working independently. Moreover, he paid to native consumers ready cash for their staples, taking upon his own shoulders all the risks of finding markets abroad. As an importer, he enjoyed, in centres of supply, credit which the Japanese lacked, and he offered to native consumers foreign produce brought to their doors with a minimum of responsibility on their part. Finally, whether as exporters or importers, foreign middlemen always competed with each other so keenly that their Japanese clients obtained the best possible terms from them. Yet the ambition of the Japanese to oust them cannot be regarded as unnatural. Every nation must desire to carry on its own commerce independently of alien assistance; and moreover, the foreign middleman's residence during many years within Japanese territory, but without the pale of Japanese sovereignty, invested him with an aggressive character which the anti-Oriental exclusiveness of certain Occidental nations helped to accentuate. Thus from the point of view of the average Japanese there are several reasons for wishing to dispense with alien middlemen, and it is plain that these reasons are operative; for whereas, in 1888, native merchants carried on only 12% of the country's over-sea trade without the intervention of the foreign middlemen, their share rose to 35% in 1899 and has since been slowly increasing.

Balance of Trade.