In merchanting, shipping and the financing of foreign trade the Westerners performed functions essential to the growth of the Japanese economy. Until the end of the nineteenth century they retained preeminence in those spheres, and it was not until after the First World War that their rôle became a subordinate one. In manufacturing industry, however, the history of Western enterprise was quite different. Although in the decades that immediately followed the opening of the country, Western advisers and experts had an important influence on the country's industrial evolution, and although the commercial intercourse which the foreign merchants made possible had profound indirect effects on industrial production, instances of Western industrial enterprise as such were very few. Indeed, direct participation by Western firms in Japan's industrial expansion, though always limited to a small number of industries, was considerably more important in the twentieth century, especially after the First World War, than at any time during the nineteenth century. It might have been thought that Western industrial entrepreneurship would have found ample scope in a country where the Government was deliberately fostering industrialisation, but where the business classes had at first but small acquaintance with modern methods of organisation. That this was not so needs explanation.
The legal restrictions on the foreigners' rights of acquiring land and of residing in the interior cannot be regarded as a major cause of their failure to set up manufacturing industry during the later decades of the nineteenth century; for they had extra-territorial privileges and special rights in the 'open ports', and they could in any case have operated through Japanese agents. The chief reasons are probably to be found in the attitude of the Japanese Government towards the economic activities of foreigners and in the economic prospects of Japan as these were viewed by the early Western residents. The Japanese were fearful lest their country should be reduced to a colonial status, and for this reason, while they were intent upon introducing modern industrialism, they were equally determined that the control of such undertakings should rest in Japanese hands. The Government, therefore, as already shown, took the lead in founding new manufactures and later gave