As the bulk of a feudal chief’s income was paid in rice, arrangements had to be made for sending the grain to market and transmitting its proceeds. This was effected originally by establishing in Osaka stores (kura-yashiki), under the charge of samurai, who received the rice, sold it to merchants in that city and remitted the proceeds by official carriers. But from the middle of the 17th century these stores were placed in the charge of tradesmen to whom was given the name of kake-ya (agent). They disposed of the products entrusted to them by a fief and held the money, sending it by monthly instalments to an appointed place, rendering yearly accounts and receiving commission at the rate of from 2 to 4%. They had no special licence, but they were honourably regarded and often distinguished by an official title or an hereditary pension. In fact a kake-ya, of such standing as the Mitsui and the Konoike families, was, in effect, a banker charged with the finances of several fiefs. In Osaka the method of sale was uniform. Tenders were invited, and these having been opened in the presence of all the store officials and kake-ya, the successful tenderers had to deposit bargain-money, paying the remainder within ten days, and thereafter becoming entitled to take delivery of the rice in whole or by instalments within a certain time, no fee being charged for storage. A similar system existed in Yedo, the shōgun’s capital. Out of the custom of deferred delivery developed the establishment of exchanges where advances were made against sale certificates, and purely speculative transactions came into vogue. There followed an experience common enough in the West at one time: public opinion rebelled against these transactions in margins on the ground that they tended to enhance the price of rice. Several of the brokers were arrested and brought to trial; marginal dealings were thenceforth forbidden, and a system of licences was inaugurated in Yedo, the number of licensed dealers[7] being restricted to 108.
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 shōguns 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 Tōkyō (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 shōgun’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 shōgun 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 shōgun 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 shōgun or the daimyō 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 shōgun (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 shōgun’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.