Trajectory and Tempo of Institutional Development in a Context of Multiplicity: The Centralization of Public Finance in the Meiji Restoration Re-examined

Abstract

By the early 1890s, the Japanese government had built centralized institutions to collect indirect taxes on alcohol and manage government finance. This institutional development helped the Japanese government safeguard the convertibility of the banknotes issued by the Bank of Japan and raise long-term domestic borrowings. The new centralizing institutions greatly enhanced the capacity of the Japanese state and paved its way to become a rising power in Asia after defeating China in 1894 and Russia in 1905. How shall we account for this institutional achievement which contrasted sharply with the fiscal decentralization and low creditworthiness of government borrowing only two decades earlier?