Before the middle of the nineteenth century, Japan was an isolated feudal society. Commodore Perry, with his powerful fleet, arrived and opened up Japan in 1853 and limited trade with other nations began thereafter. During the period of the Tokugawa regime, a hereditary military dictatorship ( 1603-1868), transactions in silver and gold were conducted mainly with the coast cities of China. At that time, Confucianism, extolling the virtues of discipline, propriety and knowledge, was promoted. To keep the other feudal nobles (the daimyo) under control, the Tokugawa nobles (about 300) introduced the system of double residence. The households and professional warriors, used as personal armies of samurai (another ruling class), were kept at the imperial capital as residents for alternate years. An efficient network of transportation and communications and capitalistic institutions was developed as a result of the required movements of retinues and retainers from the countryside to the capital and vice versa. This was the early stage of capitalism as an advancement from feudalism.
After the overthrow of the military dictatorship and the restoration of the Meiji monarchy ( 1869), the Japanese government removed the power of the daimyo, taxed merchants passing through their lands, and removed export restrictions. A similar phenomenon occurred in the German Zollverein (customs union), which helped the unification of Germany at that time. At the same time, pensions were granted to the two ruling classes (daimyo and samurai) mainly in government bonds with diminishing value because of inflation. This in turn reduced the influence of these old powerful classes.
An island nation, Japan was isolated during the period of seventeenth to nineteenth centuries. Present-day hierarchical structure in the system of production has its roots in the feudal period, particularly in the institutional changes