Okuma Finance (大隈財政)

Okuma finance refers to the financial policy promoted by Shigenobu OKUMA, the Minister of the Treasury (concurrently filled a post of Councilor) in early Meiji Period. The term is used as a comparison to 'Matsukata finance' promoted by Masayoshi MATSUKATA, who was an actual successor of Okuma.

Okuma served as the Minister of the Treasury from October 25, 1873 to February 28, 1880, but he had effectively been the highest officer of the Ministry of Treasury since he assumed the post of senior assistant minister of the Ministry of Treasury upon the launch of the modern Ministry of Treasury on August 15, 1869, therefore he continued to be in charge of the Ministry of Treasury and the Japanese financial policy until he was dismissed as the councilor during a conference in the presence of the Emperor on October 11, 1881 (Political Change of 1881), however his resignation as the Minister of the Treasury was because an agreement to serve exclusively as a councilor was reached by 'Proposal to Separate Councilor and Minister' promoted by Hirobumi ITO (a successor Minister of the Treasury was Tsunetami SANO, Okuma's direct subordinate).

Okuma, who was from Hizen Province and used to work for Office of Foreign Affairs (later Ministry of Foreign Affairs), started to handle financial matters, as a revelation of a mass issuance of bad money (false currency) by the Edo Shogunate, the Meiji government and various domains triggered a flood of protests from foreign countries, and thus diplomatic negotiation suddenly became necessary for the currency reform of the Meiji government (Takanawa negotiation). Okuma initially made efforts toward the enactment of the New Currency Regulation, introduction of budget system, construction of Mint Bureau (Japan) and Printing Bureau, implementation of Haihan-chiken (abolition of feudal domains and establishment of prefectures) and land-tax reform with support from a councilor Takayoshi KIDO and by employing Hirobumi ITO and Kaoru INOUE, who were from the same Choshu Domain as Kido, and Eichi SHIBUSAWA, a former retainer of shogun. Toshimichi OKUBO got so alarmed by the radical line of Kido and Okuma, therefore he brought Ryosuke TOKUNO and Masayoshi MATSUKATA into the Ministry of Treasury in attempted to put a brake on Okuma. However he later made a compromise with Kido and Okuma line; Okuma concurrently filled post of a councilor in 1870 and succeed to the post of Minister of Treasury from Okubo in 1873.

Okuma's policies were to stabilize the Meiji Government's financial base by Haihan-chiken, land-tax reform and Chitsuroku-shobun (Abolition Measure of Hereditary Stipend), to promote a modern trade and craft industry (encouragement of new industry) by building government-owned factories, and to develop private entrepreneurs by injecting government funds through National Bank (Meiji). He aimed at modernizing Japanese financial, economic and industrial sectors as well as improving the balance of international payments through these policies.

But these policies required a large amount of funds, which forced him to temporarily rely on government bonds, foreign government bonds and large-scale issuance of inconvertible paper currency. Moreover, he had to face inflation from 1878 because revolts by family or person with samurai ancestors, such as Saga War and Seinan War, caused unexpected financial spending. By a curious coincidence, Okubo was assassinated in the same year, which led Okuma, who became the head Councilor, to run the government in cooperation with Hirobumi ITO, who succeeded the post of Secretary of Interior from Okubo, with Tomomi IWAKURA as the Minister of the Right.

Okuma was pressed to trim public bonds and paper money in order to deal with the inflation, so he drew up 'Estimate of redemption of public bond and paper money' in 1878 to stipulate a redemption plan which would be completed by 1905, but he revised it the very next year to create 'Measures to redeem government bonds and paper money' ('Measures to reduce bond') and committed himself in saving government funds by curbing spending on local issues, increasing indirect tax and establishing Yokohama Specie Bank. At the same time, he announced to transfer the control of government-owned factories to private sector as part of disposition of government property, but he did not abandon the encouragement of new industry policy itself which was aligned with high officers from Satsuma Domain, who believed the encouragement of new industry was the wish of Okubo, and the young bureaucrats (including Yasuyo ISHIMARU and Shigetomo ISHIBASHI) from Hizen Domain, who entered the Ministry of the Treasury under the leadership of Okuma.

In February 1880, the posts of Councilor and Minister were separated at the proposal of Ito, which Okuma showed his approval by appointing Tsunetami SANO as his successor and assigning himself to 'Kaikeibu Bunsho (a officer of accounting section)' (administrator of fiscal policy). In the meantime, Masayoshi MATSUKATA, from Satsuma Domain, discontent with Okuma who would not carry out a radical financial reform, left the Ministry of the Treasury to take the position of Minister of Interior to replace Ito at the occasion of Sano's assumption of Minister of the Treasury. On May 14, Okuma proposed a radical paper money consolidation plan which he had drawn in his Minister of the Treasury age. This proposed administration and financial adjustment as well as to raise loan of 50-million-yen worth foreign government bonds to redeem all the inconvertible paper money at once. Dajokan (Grand Council of state) meeting got tangled with this proposal. Hirobumi ITO opposed it saying that 50 million yen corresponded to the 80% of the financial revenue at the time and 1.3 times the land tax income, and Matsukata too, who had made transition to the Minister of Interior, opposed it by calling it inappropriate as a measure to consolidate paper money. Unexpectedly, Sano, the Minister of the Treasury who was in direct line from Okuma, expressed objection, besides Takayuki SASAKI, close advisor to the Emperor Meiji embracing the will of the Emperor, lodged a protest that the proposal contradicted with the 'Emperor's Thoughts on Diligence and Thriftiness' announced by the Emperor Meiji the year before. Implying to warn against Councilors (Ito and Okuma), who carried out policies without consulting him, Tomomi IWAKURA denied Okuma proposal by winning Emperor Meiji's instructions on June 3, taking advantage of Sasaki's move even though Iwakura opposed to Sasaki's way of directly exploiting Emperor's will. But Iwakura's alternative plan too was rejected, which gained only a little support from Kiyotaka KURODA and a few others because it suggested to pay land tax by rice which means a return to nengu (annual tribute, land tax) system of Edo Period, so Okuma and Ito ended up drawing another alternative plan.

However Iwakura stiffened his attitude when he heard of Okuma's secret report to Imperial Prince Arisugawanomiya Taruhito, Minister of the Left, concerning the introduction of constitutional monarchy and of Okuma's proposal for the introduction of parliamentary cabinet system. Iwakura also took the proposal by Yasuyo ISHIMARU and Shigetomo ISHIBASHI to call off the disposal of Hokkaido Development Commissioner's property for its 'unjustifiably low price' as Okuma's conspiracy with the Freedom and People's Rights Movement, so a conference in the presence of the Emperor was convened by request from Iwakura where the dismissal of Okuma as Councilor, removal of Sano as Minister of the Treasury, and transference of Matsukata as Secretary of Interior were decided. This marked the end of Okuma finance.