Reluctant Capitalists: Japanese Railways and Elite Investors in the Late Nineteenth Century

Thomas Schalow University of Marketing and Distribution Sciences, Kobe, Japan

ijinkan@mac.com !!I. Statement of Purpose!!This paper examines the way in which unanticipated changes in individual income affected the investment motives and decisions of a special group of investors - the former daimyo - and the development of private railways in late 19th century Japan. It concludes that at least some of these men were initially motivated by ideas of national mission, but changes in the governments pension system eventually caused considerations of profit and potential investment losses to displace less selfish motives.!!II. Initial Daimyo Involvement with Railroads!!A month after the government completed Japans first rail line between Tokyo and Yokohama in September 1872, Hachisuka Mochiaki, the former daimyo of Tokushima han, submitted a written appeal urging all former daimyo to mobilize their family fortunes and annual pensions in order to further railway development. Over two years later, on 27 March 1875, a group of eleven prominent (former) daimyo and their representatives met at the Peers Club to consider action on Hachisukas proposal. !

!The discussion at this first meeting centered around a plan to create a railway that was eventually to link the city of Aomori in northernmost Honshu with the capital in Tokyo. It was estimated that at least ten years would be required to complete the project, but the daimyo expressed their appreciation of the projects importance to the nation. Although no firm decisions regarding the funding or implementation of the groups yet rather vague objectives were made at this first meeting, the group did agree to meet again in the near future in order to formalize a course of action for what was now known as the Tokyo Railway Association. !!The second meeting of the group was held on 6 April at the home of Ikeda Akimasa, the former daimyo of Okayama. It was at this meeting that the important matter of finances began to be considered and the daimyo formally committed themselves and their incomes to the project. Although this group of eleven prominent daimyo believed they would personally be unable to fund more than twenty-three percent of the estimated 7.5 million yen in costs, it was agreed they would continue to meet, plan, and hopefully attract other members of the former ruling class to their venture. Hachisuka Mochiaki, whose petition had originally prodded the group into action, remained the most important investor, devoting seventy thousand yen per year from his 19,317 koku income to the project. !!

The fourth meeting on 23 April brought the issue of the purpose and direction, quite literally, of the group into question. Takashima Kaemon, a businessman who had been placed in charge of planning for construction, strongly believed the railway ought to traverse the northeastern (Tohoku) region of Japans main island of Honshu. His convictions were based on practical considerations as well as ideological concerns for the nations development. He pointed out that railway construction in the Tohoku region was attractive because it presented few technological obstacles. The area the line was to cover was fairly flat, with no major rivers or mountains to plicate the actual construction work. Moreover, a railway spanning the Tohoku would serve to advance commerce and protect the country from the Russian threat to north. !!Takashima further justified this northern route by asserting it would serve to unify the embryonic Meiji state, which was yet almost as much a confederation of feudal territories as it was a modern, centralized state. At the time, claimed Takashima, the people of Japan were so different in their many customs and languages as to be like foreigners within their own country. A railway through the heart of the former Tokugawa stronghold to the north would reduce the tensions caused by these differences. !!Although no one doubted the validity of Takashimas arguments there were doubts the daimyo were capable of

making the sacrifices necessary to complete the railroad. One person to raise such doubts was Inoue Kaoru, who attended the fourth meeting at the invitation of the groups financial advisor, Shibusawa Eiichi. In a convincing speech Inoue declared that the government, not the daimyo, ought to bear the burden of railway construction. The risks were too high for a private firm and the chances for immediately profit on a line to Aomori were minimal. Moreover, the group had greatly underestimated the costs necessary to complete the project. Inoue asserted that even ten million yen might be insufficient to meet unforeseen problems, and the daimyo had yet to guarantee even the planned 7.5 million yen. !!Takashima had also, claimed Inoue, minimized the technological problems involved in a Tohoku line, particularly in regard to the bridge that would need to be constructed over the Tone River, in modern Ibaraki prefecture. Under these circumstances he advised the daimyo to abandon civic responsibility for profits and negotiate with the government to acquire an existing railway. He suggested the government might be willing to sell the profitable Tokyo-Yokohama railway if the daimyo were interested. !!By the end of the fourth meeting Inoues ideas had won the support of the daimyo investor group. Therefore, at the next meeting Shibusawa submitted his proposal to Dajo daijin Sanjo Sanetomi on 8 May 1875. He suggested the

railway be sold for no more than three million yen, and payments be allowed over a seven year period. Negotiations with the government were carried out over the next year, during which time various points pertaining to the method of payment were debated. A contract was finally achieved on 5 August 1876. The contract between the government and the daimyo investment group established a sinking fund into which the group members were required to pay 428,000 yen per year for the next six and one-half years. Payments were to be made biannually until June of 1882, and the government was to pay the group six percent annual interest on this money until the daimyo assumed control over the railway. The government was also to be responsible for running and maintaining the railroad until the final payment had been made. After that time the daimyo would gain title to the railroad and would be responsible for its operations. No guarantees of profitability were provided by the government but the members of the Tokyo Railway Association had no reason to assume they would be unable to achieve anything but a handsome return on their investment. !!As we have already seen, the project initially proposed by Takashima fell far short of the financial support needed to bring it to a successful conclusion. Inoues promises of profit on the Tokyo-Yokohama line, on the other hand, managed to raise the level of interest in railway investment and elicited promises of monetary contributions from eight more daimyo. After Inoues speech in the Peers Club the

men involved with the Tokyo Railway Association had firmly committed themselves to total annual contributions of 353,000 yen over a ten year period. The terms finally agreed to by the government for the sale of the Tokyo-Yokohama railway, however, required them to meet 428,000 yen in annual payments over a six and one-half year period. The difference between the two payment periods, and thus the annual financial responsibility, was not small, but after some difficult negotiations a few prominent investors agreed to raise the level of their contributions to meet the governments terms. !!Even the almost certain prospect of profits, however, could not guarantee the project would never lack for cash. Hachisuka Mochiaki remained the largest investor and his 777,000 yen contribution was critical for the success of the venture. Unfortunately, his support, as well as that of his partners in the railway venture, waned when the terms of the governments pension commutation became public knowledge and incomes were revised downward. In the next section we shall focus on the way in which Hachisukas income was adversely affected by changes in the governments pension scheme.!!III. The Kinroku Kosai & Daimyo Funds!!The funds the daimyo had committed to their railway project were not drawn from savings or accumulated wealth. Although the daimyo had formerly controlled vast

territories and claimed rights to the tax revenues of these areas, following the Meiji Restoration their rights to this feudal income and the wealth of their domains were gradually invalidated. By the time they began to consider investment in the railway venture their assets were reduced to the income collected from an annual pension payment from the government. During the short lifetime of the Tokyo Railway Association a number of changes to the governments ensign system caused drastic reductions in annual incomes and forced the group to reconsider investment motives and commitments. The changes to that pension system are generally referred to as the chitsuroku shobun, and occurred in three general stages. !!The first stage, precipitated by the return of feudal domains under hanseki hokan regulations, converted feudal tax privileges to annual salaries. In regulations issued on 2 August 1869 the daimyo were ordered to allocate no more than ten percent of domain revenue for their personal use. This amount became the karoku of the daimyo. The income the daimyo received as a result of this legislation ranged from Shichinoe daimyo Nanbu Nobutakas one hundred and seventy koku to the 636,880 koku received by Maeda Yoshiyasu of Kaga. Hachisuka Mochiaki, as daimyo of Tokushima, received a sum of 19,317 koku on an annual basis. He also received an additional award (shotenroku) for service in the Boshin Civil War of 1868-69 of two thousand ryo. !!

The second stage in the process of converting feudal privileges to annual income substituted cash payments for allotments of rice. The cash payments were known as kinroku amounts, and were dispensed according to legislation of 7 September 1875. The governments cash payment system was based on a simple formula that multiplied the original stipend of the recipient by the average local rice price, computed over the preceding three years. Rice prices varied greatly, from less than 3 yen per koku in certain Tohoku domains, to over six yen per koku in various parts of the Kanto. This meant that two daimyo whose tax incomes in the Tokugawa period, expressed in koku of rice, were rather similar might now have found their cash incomes quite different due to regional rice price variations. !!The rather high rice prices common to Tokushima worked in Hachisukas favor when calculating the cash payment he was to receive by the terms of the September 1875 legislation. The established Tokushima pice of 5.27 yen per koku was on the upper end of the price scale, and Hachisukas income was thereby set at slightly over one hundred thousand yen per year. Even based on this favorable figure, however, it was clear the 770,000 yen Hachisuka had promised to contribute to the railway project over a six and one-half year period exceeded his total income for the same period by approximately one hundred thousand yen. !!

The final stage in the process of adjusting pensions to accommodate the governments fiscal difficulties converted cash payments into bond obligations, and caused further deterioration in Hachisukas own financial position. The new legislation went into effect on 5 August 1876, once again using a simple formula that multiplied the cash stiped by a stipulated, fixed number of years. By the new legislation Hachisukas cash payment was converted to five hundred thousand yen, face value, in bonds, known as kinroku kosai, paying five percent interest per annum. Interest payments on the bonds would amount to only 250,000 yen per year, and an attempt to sell the bonds at the discounted prices that prevailed on the financial markets at the time might have cut Hachisukas one-time gain from the government pension scheme to less than 350,000 yen. Given these facts, one can begin to understand the difficulty Hachisuka and the other daimyo believed they would experience in meeting planned investment commitments. !!Of course, the sum Hachisuka obtained from the Meiji government in return for his feudal rights as daimyo of Tokushima was not insubstantial. In the mid 1870s even the Dajo daijin commanded a salary no higher than 800 yen per year. Moreover, it is important to remember that the bonds could truly be called a git from the Meiji government, as it was not compelled to honor the obligations inherited from the Tokugawa regime. Once feudal rights to tax collection had been converted into

salaries paid to daimyo in their new capacity as domain governors. One can perhaps better understand the sense of mission perceived by the daimyo after these considerations. !!Nonetheless, when the extent of the burden to which Hachisuka and the other daimyo had committed themselves to became apparent it also became obvious to most members of the Tokyo Railway Association that they would need to reduce financial commitments to the railway venture. There may have been a place for a sense of mission when that mission could be funded by money provided by someone else as a gift. It was more difficult to commit ones self to a mission that might need to be financed by borrowed money.!!IV. Faltering Daimyo Support for Railways!!The issue of finances dominated the tenth meeting of the daimyo investment group the month after the September 1875 pension reform was announced. It was clear the daimyo had been overly optimistic in their assessment of the groups financial power, and unless other persons could be brought into the group it was clearly overextended. An impending crisis was momentarily averted, however, when Shibusawa offered the group financial assistance from his own 1st National Bank in order to meet the governments required payment schedule. To the extent that the daimyo adversely affected

by the pension reform were unable to make payments, he would advance the necessary capital with a mere ten percent interest charge. (The daimyo, it will be remembered, received only six percent interest from the government on these payments, resulting in a net loss for them but a tidy business for Shibusawa.) !!Most daimyo were momentarily reassured by Shibusawas commitment to the project and his willingness to loan necessary funds to the group. The 1st National bank was thereupon placed in charge of collecting all payments and holding the interest paid by the government for the sinking fund. It assumed the role of lead bank for the Tokyo Railway Association and seemed prepared to guarantee the success of the groups venture. !!Unfortunately, the last phase of the pension reforms made an already bad situation even worse. The daimyo slowly began to realize they were not only in danger of losing the financial gift the Meiji government had originally offered to them, they were also in danger of becoming personally responsible for the repayment of the ever-larger loans needed to keep the Tokyo Railway Association in operation. The business meetings of the group began to be dominated by expressions of concern, if not actual fear, for the financial difficulties of individual members. When Yamanouchi toyonori indicated he might be able to make his first semi-annual payment for 1876, but would have difficulty meeting the second payment, he was certainly

expressing a sentiment that was already troubling most other members of the group. !!It can therefore be said that changes in the governments pension scheme were a key factor in dimming whatever enthusiasm the daimyo investment group may have once had for the railway project. Date Munenari spoke for the group when he expressed the opinion that the pension changes had made it virtually impossible to continue planning, and it was thus imperative the government be asked to revoke the contract and return money already paid into the sinking fund. The members of the Tokyo Railway Association continued to meet until 18 March 1878, but there was little discussion of national mission and the railway project at the latter meetings. By the time of the groups demise after the fortieth business meeting considerations of potential investment losses can truly be said to have displaced concerns for national welfare.!!V. A Final Attempt & Failure!!The daimyo were to make one more attempt, as an elite group, to promote railway construction before they decided to devote themselves wholeheartedly to the democratic enterprise known as the Japan Railway Company. In August 1881 another group of daimyo submitted a petition to the Tokyo municipal authorities seeking permission to form the Tohoku Railway Company. This group planned to lay railway lines from Yanagase (in

Shiga prefecture) to Toyama and from Nagahama (also in Shiga) to Ise. All those involved with the project had personal interests in the area under development, usually due to the fact that they had previously served as daimyo or chili (governor) for a portion of the area. The company was to be initially capitalized at 4.5 million yen, with contributions from the Maeda, Doi, Ogasawara, Arima, Manabe, and Matsudaira (of Echizen han) families. !!This venture, however, like the Tokyo Railway Association, was ale undercapitalized and subject to adverse government interference. The noble plans of the Tohoku Railway Company came to naught when the government forced it to change one of its lines, eliminating the Fukui portion of the track. The affected daimyo indicated they would not fund a railway that did not traverse the territory of their former domains, and withdrew their monetary support. In July 1884 the group chose to disband after having failed to either attract new capital or agree on a method to reallocate previous commitments.!!VI. The Daimyo as Investors!!Although the Meiji government certainly did not make it easy for the daimyo to plan their investments, or implement those plans, I believe the failure of groups such as the Tokyo Railway Association and Tohoku Railway Company was as much a result of the character of the daimyo as investors as it was of government interference.

if we were to attempt to classify our group of daimyo investors we might place them in Marilyn MacGruder Barnewells passive investor group. According to the Barnewell Two-Way Model, passive investors are defined as those investors who have become wealthy passively - for example, by inheritance. !!Although the daimyo had received their wealth from the Meiji government, rather than from their forefathers, they were in many ways similar to inheritors. Ronald Kaiser noter that those who have inherited money, or received it as a gift, often exhibit a tendency toward low self esteem, which can exhibit itself in a fear of failure and lack of motivation. Fear of failure can cause the inheritor to be indecisive, feeling that no decision or action is better than making a mistake. Moreover, Inheritors can be very risk adverse because, not having earned the wealth themselves, they may be very fearful about what they would do without it. !!The fear felt by the daimyo resulted from the fact that changes in the government pension system had made it difficult to anticipate future income flow. We have already seen the way in which the September 1875 reform degraded income expectations, and how the August 1876 reform further reduced those incomes. The daimyo were certainly wise to re-evaluate their ability to undertake substantial investment projects in the face of such uncertainty. !

!Yet, in the final analysis, we must ascribe the failure of the investment groups to a lack of will, an extreme adversity to risk. After all, no investor enjoys the luxury of planning in an environment in which there are no risks or uncertainty concerning the future. No individual is able to project future income flow, or probable expenses, with any degree of certainty. The daimyo at leas enjoyed the advantage of knowing their government bonds were likely to continue yielding a 5% interest payment, and thus a rather stable income. Moreover, the difficult problems of capital inadequacy experienced by both the Tokyo Railway Association and Tohoku Railway Company could have been met by asking other daimyo to join the investment groups. The amount of government bonds (over thirty million yen) given to members to the former ruling class as a result of the pension reforms was not small, and even at the deep discounts that prevailed on the financial markets of the time the total of those bonds was more than sufficient to capitalize both the projects we have looked at. !!As passive investors the daimyo were also, to use the terminology of the Bailard, Biehl & Kaiser Five-Way Model, guardians. The daimyo were simply people who were cautiously trying to preserve their wealth, rather than increase it. They were basically satisfied with what they had, and believed investments were potentially more dangerous than profitable. Again, it was better to do

nothing than to accept the uncertain opportunity to gain (or lose) more. !!There was probably little that could be done to change the basic character of the daimyo as investors. They were extremely cautious and not comfortable with the risk that would be undertaken if it were necessary to actually borrow money top finance the railway projects we have spoken of. This does not mean, however, that they were incapable of making contributions to the economic development of the nation. In fact, as the wealthiest group of potential capitalists it was impossible to merely accept their risk-adverse nature and plan investment projects without them. The solution to the problem of how to satisfy the need for security felt by the daimyo, while at the same time promoting the development of an important transportation infrastructure, was simply to enlarge the investment groups. !!The amount of individual financial risk on a given project declines in proportion to the number of people committed to that project. A ten million yen project, as originally conceived by the daimyo when planning the Tokyo-Aomori railway, might present unacceptable risk and financial responsibility for a group of eleven men. A group of five hundred persons, however, might find the level of risk and financial responsibility for that same ten million yen project to be quite reasonable, even if these persons were all, basically, extremely cautious investors. The chances for

the projects success would, moreover, be enhanced considerably by accepting investments from a diverse group of individuals, rather than from a uniform group os guardians or passive investors. !!The objectives of preserving the wealth of the daimyo and advancing the development of railways were, quite fortunately, goals which many important members of the government were committed to. The most outspoken and energetic advocate for these two causes was perhaps Iwakura Tomomi, who assisted in the planning for the next railway venture we will consider.!!VII. Success & Its Conditions: The Lessons of Failure!!By 1880 new plans were under consideration that would allow the daimyo to achieve their professed desire to contribute to railway development. When a group of forty-six men led by Ikeda Akimasa submitted a petition in May of 1881 to forma company with capital subscribed to by both daimyo and the provincial elite they found the government extremely receptive to the planned project. !!One reason for renewed government interest in railway development was that Japan had once again experienced a surge in imports in the late 1870s, leading to a dramatic decline in foreign currency reserves. A railway to link producers in the Tohoku region with Yokihama merchants, thus encouraging exports, was seen as a necessary first

step toward the solution of this problem. The railway, which was also expected to improve the living standards of the farmers close to the line, might additionally help the blunt the political opposition, expressed through the jiyu-minken movement, that had become such a problem. !!The Kobusho, which was to oversee construction on the new railway, granted its approval for the project in November and blessed the group with a number of special privileges, about which we will be speaking momentarily. Out of gratitude, and to guarantee the government would continue tits support for the project, the group elected Yoshii Tomozane of the Kobusho as its first president at the stockholders meeting held the following month. !!The new venture known as the Japan Railway Company, unlike the Tokyo Railway Association, was authorized to sell stock to anyone who wished to purchase that stock, regardless of social standing. It was expected that the former daimyo would make a major contribution, and Iwakura devoted much time to meeting with these men to assure this, but it was realized that the company would be successful only if it were able to mobilize the funds of daimyo, samurai, farmer, craftsmen, and merchant - rich and poor alike. !!The twenty million yen of stock offered to the public was to be the largest public offering since two million yen of Yokohama Specie Bank stock was sold in 1879, and the

venture was therefore undertaken with more than a little trepidation. Finance Minister Matsukata Masayoshi suggested the initial stock issue might meet with more success if the government offered profit subsidies for the company, and he arranged for money from postal revenues to be diverted for this purpose. !!Profit subsidies guaranteed an eight percent operating profit for each section of track for a fixed number of years after it was completed. The entire Tokyo-Aomori line was not completed until September 1891 but individual set ions were opened for business earlier. Although there were five distinct set ions of track (section one was from Tokyo to Maebashi, section two from Omiya to Shirakawa, section three from Shirakawa to Sendai, section four from Sendai to Morioka, and section five form Morioka to Aomori) the government agreed to a general ten year guarantee on profits for the Tokyo-Sendai line and a fifteen year quarantee of the Sendai-Aomori line. profit subsidies were thus due to expire on the final portion of the track in 1906. !!The line from Tokyo to Maebashi proved to be highly profitable as soon as the track was completed and it needed and received no government subsidies. Section two managed to show a profit within a few years after completion of the line and received no subsidies after 1887. Section three required a longer period of time to begin to show a profit, but it was also able to end government subsidies by 1894. Section four, however,

was not able to sustain profits at the eight percent level until the time of the Russo-Japanese War, and section five was never weaned from profit subsidies. !!Even with tax breaks and profit subsidies the success of the companys first public stock offering in March 1881 could not be assured. As feared, the response from the public was less than enthusiastic. it had initially been hoped the company would be able to raise twenty million yen (the proposed capitalization) in the initial subscription and that the entire amount could be paid in within two years. However, the amount of stock actually subscribed to in the initial offering was less than one-third of the twenty million yen total. !!A total of five hundred and sixteen persons pledged to purchase at least five thousand yen of stock when the company applied for permission to incorporate in 1881. Only seventy-one of these persons were members of the former feudal ruling class, but they contributed forty-five percent of the 5.72 million yen total achieved by the initial public offering. The fact that almost half of the companys initial capital was derived from the former daimyo and court aristocracy shows that this group was prepared to assume a major role in railway development if risks could be minimized. The daimyo were passive and extremely risk-adverse, but with proper direction and supervision provided by the government they could be mobilized to action. !

!Fortunately, by January 1884 the company was able to offer its first dividend, thanks in part to the subsidies provided by the government, and this pushed up prices and demand for the stock on the Tokyo stock exchange. This development made another stock offering possible in 1885, which nearly doubled the capital available to the company. Stock was tendered to the public again every other year from 1888 to 1896 and a final, eighth offering was made in 1897. By 1905 the capital of the company exceeded fifty million yen. Daimyo investments continued to provide a major source of capital during this time. !!With the government guarantee of profits investment in railway construction proved to be a safe and sound investment for the daimyo for almost two decades following the establishment of the Japan Railway Company. By the end of the nineteenth century, however, new developments in the railway industry made investing less attractive than it had once been. The reason for the declining daimyo interest in railways may be found in the profit statements of the Japan Railway Company. By the end of the nineteenth century the railways had quite simply ceased to be a good investment, even with the profit subsidies provided by the government. In 1898 the dividend ratio on Japan Railway stock fell from a fairly constant ten percent rate to a mere 5.5 percent. The fall in the dividend rate precipitated a sharp decline in the price of the stock from a high of 125.5 yen per share in 1896 to

a low of 59.5 in 1898. Many people began to fear that the Japanese railroads were destined to follow the path of the English railway system into declining profits and stock prices. The daimyo were once again faced with the choice of continuing to invest in railways, perhaps at the risk of loss of investment capital, or reverting to character and accepting their role as guardian of wealth. it should surprise no one that they chose the latter course of action.!!VIII. Conclusions!!Although the daimyo may not have lacked a certain sense of mission, the history surrounding their investment in railways indicates they were primarily concerned with loss of capital, and only secondarily with either personal or national profit. It was much more important for these people to preserve what they had been given than to enhance their wealth or prestige. They were, to return to the distinction provided by Shibusawa Eiichi and mentioned in the first footnote of this paper, shonin rather than jitsugyoka. Their concern, as merchants, for more trivial matters of profit and loss made it difficult for them to act as entrepreneurs, concerned for the economic and technological advancement of society. As such, they proved ineffective in small groups, though the aggregate of their wealth was an extremely important factor in the development of Japans railway infrastructure.!!

1)See Hirschmeier, Johannes. The Or ig ins of Entrepreneurship in Meiji Japan. Cambridge: Harvard University Press, 1964, page 209 for discussion of the concept of national mission versus profits, and the distinction between what Shibusawa Eiichi referred to as the shonin and jitsugyoka types of investors.!

!2) Iwakura ko kyuseki hozonkai. Iwakura ko jikki. Tokyo,

1927, volume 3, page 480-482. (Hereafter this source, volume 3, will be referred to as Iwakura.)!

!3)Shibusawa Shoen kinen zaidan tatsumonsha.

Shibusawa Eiichi denki shiryo. Tokyo: Shibusawa iichi denki shiryo kankokai, 1956, volume 8, page 359. (Hereafter this source, volume 8, will be referred to as Shibusawa.)!

!4)Hachisukas 19,317 koku of r ice was worth

approximately 140,000 yen at the prevailing price of 7.28 yen/koku of rice. See Kajinishi Mitsuhaya, ed. Nihon ni okeru shihonshugi no hattatsu-nenpyo. Tokyo: Tokyo daigaku shuppankai, 1953, page 14.!

!5)Shibusawa, page 371.!!6)Okubo Toshiaki, ed. Kazoku kaikanshi. Tokyo:

Yoshikawa kobunkan, 1986, volume 1, pahge 58, 16 July 1874.!

!

7)Shibusawa, page 373.!!8)Shibusawa, pages 378-384.!!9)Naikaku kanpokyoku. Horei zensho. Tokyo: Hara shobo,

1975, volume 2, pages 237-238. (Hereafter this source will be referred to as Horei zensho.)!

!10)Ouchi Hyoe, ed. Meiji zenki zaisei keizai shiryo shusei.

Tokyo: Kaizosha, 1933, volume 8, pages 449-461. (Herefter this source, volume 8, will be referred to as Meiji zenki zaisei.)!

!11)Meiji zenki zaisei, page 450.!!12)Okubo Toshiaki, ed. Kazoku seido shiryoshu. Tokyo:

Yoshikawa kobunkan, 1985, page 42.!!13)Horei zensho, volume 8, page 171.!!14)Meiji zenki zaisei, pages 480-489.!!15)Horei zensho, volume 9, pages 147-151.!!16)Meiji zenki zaisei, page 405. In Hachisukas case this

was five years, thus yielding slightly over five hundred thousand yen in bonds.!

17)Jones, hazel L. Live Machines: Hired Foreigners and Meiji Japan. Vancouver: University of british Columbia Press, 1980, page 11.!

!18)Shibusawa, pages 403 and 452.!!19)Shibusawa, page 476.!!20)Shibusawa, page 534.!!21)Noda Masaho. Meijiki ni okeru shiyu tetsudo no

hattatsu to kabushiki hakko shijo no tenkai, Keizai shirin 32 (January 1964), pages 127-128.!

!22)Kaiser, Ronald W. Individual Investors, in Managing

Investment Portfolios: A Dynamic Process. 2nd edition. John L. Maginn and Donald L. Tuttle, eds. Boston: Warren, Gorham & Lamont, 1990, section 3-6. (Hereafter this source will be referred to as Managing Investment.)!

!23)Managing Investment, section 3-15.!!24)Managing Investment, section 3-10.!!25)Iwakura, page 782.!!26)Iwakura, page 797.!!

27)Noda, Keizai shirin, page 124. Government subsidies were common on railway projects throughout the world. See Macpherson, W.J. Investment in Indian Railways, 1845-1875, Economic History Review 8 (1955), 177-186 for a succinct discussion of the need for subsidies.!

!28)Hoshino Takao. Nihon tetsudo kaisha to dai jugo

kokuritsu ginko, Musashi daigaku ronshu 19 (March 1972), pages 124-125. The Tokyo-Maebashi section of track was through Omiya, and branched off to Shirawaka from Omiya for the second section.!

!29)The total amount of stock sold as a result of this initial

offering was 119,314 shares, which provided 5,965,700 yen of capital at fifty yen per share. See Nihon tetsudo kabushiki kaisha. Meiji 38 nen-nenpyo. Tokyo, 1906, pages 3-4. (Hereafter this source will be known as Meiji 38 nen.)!

!30)The stock of the Japan Railway Company was,

incidentally, first traded on the Tokyo stock exchange on 24 April 1884. The primary focus of Nodas article in Keizai shirin is to show how the stock market gradually changed from a market for government bonds to one dealing in stocks - primarily railway stocks.!

!31)Meiji 38 nen, pages 3-4.!

32) Hoshino. Musashi daigaku ronshu 19 (August 1971), page 19.!

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