“Poor Peasant, Poor Country”?

This chapter discusses the Matsukata deflation and its impact on domestic agriculture and industry and on foreign trade. Regardless of whether scholars hold negative or positive views of the Matsukata reform, they have tended to overstate both the short- and long-term impact of the deflation-induced depression as well as the role of the reform itself in bringing about the “Matsukata deflation” in the first place. If Matsukata had strictly followed an orthodox program of financial stabilization, the depression would likely have been as severe as most accounts claim. But his deviations from orthodoxy—boosting government spending, promoting exports of commodities from the rural sector, and the like—helped to buffer the economy and abridge the downturn. In short, the chapter asserts that one needs to qualify the commonly held view that the Matsukata reform was “a devastating experience for millions of people.”