We begin with an overview of the general Japanese history from the mid-nineteenth century to World War II. This overview merely purports to provide background knowledge. A more detailed discussion of its economic development will be given in the next two sections, so those familiar with modern Japanese history could skip this section. 1
In 1868, young samurai and court nobles overthrew the Tokugawa Shogunate which had ruled Japan for two and a half centuries. Their central cause was to restore the imperial rule, but the real power was in the hands of these young lower-ranking samurai and court nobles. They were the leaders of the new Meiji government. Several years prior to the Restoration, European countries and the United States had threatened Japan with their overwhelming military power in order to open its ports and start trade. Japan had to accept Unequal Treaties, as they are called there, which allowed the USA, the UK, The Netherlands, France, and Russia extraterritorial privileges and deprived Japan of the right to set its tariffs. These treaties were similar to the one they forced upon China, a country that had been practically reduced to semi-colonial status by the West. The leaders of the Meiji government were keenly aware of this appalling situation in China and, hence, fervently started a modernization effort.
The government started building up military forces; investing in social and economic infrastructures such as roads, railroads, ports, a postal system, and a banking system; building and running factories, and developing mines; and investing heavily in developing the national school system. All of these efforts necessitated the learning of Western systems and technology.