Daimyogashi (大名貸)

The term "daimyogashi" refers to a loan for a daimyo (Japanese feudal lords) or a domain in financial droughts arranged by influential merchants in Osaka, Kyoto, Edo, and so on. Meanwhile, financing from merchants in their own domain was not categorized as Daimyogashi, as it was done under the name of goyokin (the money the Edo bakufu charged temporarily on farmers and merchants).


Even though the economy of a domain during the Edo period was ostensibly operated by subsistence economy system (the Han Autarkies) which was based on the principle of heinobunri (separation of the warrior class from the soil) and the Kokudaka system (tax system based on rice), it was impossible for any domains to be self-sufficient in all supplies. In addition, it was essential to procure national currency issued by the Edo bakufu (feudal government headed by a shogun) and to depend on the central market, in order to accomplish projects ordered by the bakufu such as Sankinkotai (a system under which daimyo were required to spend every other year in residence in Edo) and Goyofushin (civil engineering works ordered by the bakufu). Therefore, a domain sold their annual rice tax and their local special products in Edo and Osaka to earn national currency issued by the bakufu, or they sometimes purchased necessary goods with the earned money, and they sent such money or those goods to their hometown or their residence in Edo to set aside for their expenses. As the timing of inflow and outflow of specie money did not always match although this business was done every year cyclically and continuously, when expense was needed before attaining the current money, it was unavoidable to borrow gold and silver from powerful merchants (especially kuramoto [sake brewer] or kakeya [merchants dealing in finance]), putting up their annual rice tax or local special products which were to be sold later as security, and they paid back when such rice tax or products were actually delivered. Daimyogashi can be explained as a system which complemented discrepancy between the annual revenue system that was based on the system of Kokudaka (tax system based on rice) and Confucian physiocracy, and annual expenditure system that was even experiencing occurrence of credit economy as a result of the development of commodity economy and monetary economy.

Many loans were arranged by merchants in Kyoto as there were traditionally a large number of powerful merchants there in the early Edo period, but the connection of Daimyo and Kyoto became weaker as the position of Kyoto in economy declined. There were some examples of Edo merchants who did daimyogashi mainly to domains in the Kanto and the Tohoku regions, but Edo did not become a stable financial source for domains because annual rice tax and special products of the Edo bakufu or hatamoto (direct retainers of the bakufu) who lived in Edo to guard the bakufu were sold in Edo, and sometimes the bakufu ordered restriction of rice delivery out of Edo for rice-price keeping operation for the bakufu's fiscal stability (as a result most of rice that were dealt in Edo were from the bakufu, hatamoto, and some merchants, and only partial amount of rice from domains in the Kanto region and the Tohoku region were dealt). As a result, domains sought for financial sources in Osaka, where most domains held their kurayashiki (warehouse-residence) and there were fewer restrictions from the bakufu than Edo, and therefore, kuramoto, kakeya, and ryogaeshou (merchants in banking business) in Osaka became powerful in the Daimyogashi business. Also, money outflow from Osaka to Edo due to daimyogashi and Edo merchants buying goods from Osaka became remote causes of creating a sophisticated system of currency exchange between Edo, a consumer city of samurai and people in trade and manufacture who supported lives of samurai, and Osaka, a city called "the kitchen of Japan."

It was not unusual that daimyogashi was arranged without interests because the finance of a domain was secure as its economy was in relatively small scale. However, in the middle of the Edo period, financial spending of domains expanded because there were more formal and special expenses required (for example, receptions of imperial messengers and envoys from Korea, or attendance on the shogun's visit to Nikko to recognize their great ancestor), and their financial difficulty was accelerated because of the declining of rice price in and after 1718. Finally domains started to borrow money constantly, and sometimes their debt could not be paid back when enough sales money was not earned from annual rice tax and local products because of poor harvest in the domain. Even so, it was thought that the debt was more or less repaid when calling the balance due "Shomongashi" (a bond loan) and its principal and interests were paid by installments in multi-year. However, every domain's financial difficulty got worse and worse and some domains started to repudiate their debt by dismissing their kuramoto or kakeya or abandoning their bonds, which made merchants bankrupt. On the other hand, some small or medium sized domains received a notice of deal termination from merchants. In addition, in 1761, the Edo bakufu started loaning bakufu goyokin (special tax imposed on merchants for the bakufu) to domains and ordering merchants to arrange loaning to domains that were related to the Tokugawa clan in order to save Daimyo and control merchants. There were some extreme cases such as an example that domains who were in fear of termination of loaning collected rice from farmers forcibly and sent the rice to their kurayasiki to arrange finance loans from several merchants by putting the rice as security, or another example that domains who were giving priority on repaying sent a large amount of rice to their kurayashiki even though people were dying from starvation in their territories, which created a bad circulation of more need of arranging daimyogashi because of worsened financial inflow caused by less farmers on farmland after starvation. The risk of daimyogashi became higher and higher although its profit rate became lower. However, it was very difficult for merchants to walk away from daimyogashi because they already arranged large amount of loans, and it was also hard for domains who were suffering from chronic financial difficulty. Therefore, domains, the borrower, gave merchants special treatments, such as paying Fuchimai (salary rice) and giving the same treatment as hanshi (the feudal retainers of a domain) to avoid dissociation with merchants, and merchants, the lender, also tried to scatter the risk by setting limit of credit or issuing sprit bills and raising investors. There were merchants such as Naokata KUSAMA and Takaoki ISHITA (Shoemon ONEYA) tried to avoid their bonds repudiated by cooperating for reconstruction of the finance of domains by advising for the reformation of a domain's governance. Besides, there was another way to borrow money on rice-check from merchants called "hamakata" who were rice brokers in the Osaka Dojima Rice Exchange House, but it was an option for domains who could not arrange loans by a usual procedure of daimyogashi.

After the Haihan-chiken (abolition of feudal domains and establishment of prefectures) the Meiji Government dealt with the disposal of debt of domains, but the government only accepted 3,486 ryo (currency denomination at that period) out of 7,413 ryo, and the approved debt were decided to be repaid by long period of installment plan with public bond (this was called Hansai Shobun, the Policy to Measure Debts of Feudal Clans). This gave great damage to management of Osaka merchants, which became a heavy burden for shifting towards modern financial capital.