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Matsukata deflation

In 1881 Finance Minister Matsukata Masayoshi, one of the surviving Satsuma activists of the 1860s and among the most important Meiji leaders, launched draconian fiscal and monetary policies. Seeking to halt the inflation, he cut state expenses sharply. By 1880 the government had already fired most of the foreign advisors hired in the 1870s. It now sold off the unprofitable government industries that these advisors helped build. Matsukata also shrunk the money supply by shutting down the printing presses that had produced cheap paper money in the late 1870s and returning to a silver-backed currency. Agricultural commodity prices crashed by as much as 50 percent by 1884. To survive, small-scale landholders took new loans from moneylenders who were often nearby wealthy landlords. Thousands defaulted and lost their fields to these neighbors. One response was the wave of rebellion led by the Debtors or Poor Farmers parties in places such as Chichibu. A related result of the great deflation was a dramatic shift in landownership. Like the rise in agricultural production, the precise increase in the number of tenant farmers is still subject to debate. A conservative estimate holds that the proportion of agricultural land worked by tenants rose from 30 percent in the late 1870s to 40 percent in the late 1880s. Even by this account, at least one-tenth of the arable land of Japan changed hands in one decade. The financial program of shock therapy indeed stabilized Japan’s economy by the end of the 1880s. It was also a devastating experience for millions of people.

Gordon, Andrew. A Modern History of Japan From Tokugawa Times to the Present. Oxford University Press, 2003, p. 96 Kitaoka, Shinichi. The Political History of Modern Japan. Routledge, 2018, Sims, Richard. Japanese Political History since the Meiji Renovation 1868-2000, 2001,