The Satsuma Rebellion: The Fiscal Revolution

Introduction

Nine years into the Meiji Era, the Samurai, stripped of their status and honour, made their last stand against the Japanese Imperial Government. The last and worst of the series of armed Samurai revolts, the Satsuma Rebellion, began in the January of 1877. It's end, in September of the same year, marked the end of the Samurai class when its leader, Saigo Takamori, on the brink of defeat, took his own life.

The rapid and massive changes to the Japanese culture was taken as an insult to the Samurai. They would not stand to see the old order of feudal Japan, along with its culture, come to its end for the sake of modernization. Not without one last cry of defiance. The Samurai would sooner die with their honour than yield to the new government. Their last stand proved to be a difficult challenge for the Japanese Imperial Government.

The Satsuma Rebellion, ironically, may have benefited the Japanese Imperial Government over the course of the Meiji Restoration by giving it the chance it needed to prove itself.

The Fiscal Reform

The Satsuma Rebellion ultimately did not cause a financial collapse. Instead, while costly, it has caused the introduction of new monetary and fiscal policies that led Japan to become a more modern and independent state thanks to Finance Minister Matsukata Masayoshi.

To combat the deficit caused by the Satsuma Rebellion, Matsukata Masayoshi sold many unprofitable government holdings, cut spending, and returned Japan to a silver-backed currency, where every banknote could theoretically be exchanged for silver. In 18 months, he deflated the national money supply by 14 percent, in turn causing agricultural land prices to fall by 50 percent. The sharp drop in prices and contraction of the Japanese economy was referred to as the Matsukata