The Industrial Revolution in Japan
Japan's industrial revolution began to take shape in the 1870s. As in Germany and Russia, railroad building both symbolized and caused a more general pattern of rapid industrial growth. The story of early Japanese railroads also suggests some of the patterns involved in larger industrialization, including the immense constraints of early initiatives.
The Meiji government launched a major railroad development plan in 1870, only two years after the regime had consolidated its hold and abolished feudalism. Railroads were considered necessary for the overall economic unification of Japan and as a basis for further modernization. The state initially hoped to rely on private capital, guaranteeing a dividend rate of 7 percent on any capital invested and asking the Mitsui firm to raise funds for a line between Osaka and Kyoto. But when few capitalists stepped forward, and the company did not materialize, the government acted directly, establishing an important precedent for state involvement in the industrialization process as a whole. Between 1870 and 1874 railroad building accounted for nearly a third of all state investments in modern industry. Foreign loans added to the mix. An initial line between Tokyo and Yokohama, completed by 1872, was built with a million-pound loan from the British Oriental Bank. The government initially hoped to use U.S. contractors, but British pressure forced ultimate reliance on the Oriental Bank (after a further delay in which Americans successfully revoked an interim British deal).
Whatever the birth pains, government lines proved to be immediately profitable, and after 1874 subsidies were sufficient to attract private investment. By 1892 Japan had a total of 1,870 miles of track, 550 miles of it government-owned and 1,320 in private hands. An early private company formed by a group of nobles had problems completing plans but opened a line between Tokyo and Aomori in 1881; capitalized with 20 million yen, their company was the largest enterprise in Japan. The government guaranteed 10 percent dividends and employed 256 engineers (under the Ministry of Industry) to provide necessary