Taxes in Rice, Debts in Family Honor

In the dim morning twilight of Edo, when the scent of freshly brewed tea rose from the Nihonbashi Bridge and the bell of Zōjō-ji Temple struck Ushi-no-koku (丑の刻 – “the Hour of the Ox”), marking the end of night, the city was already alive with trade. In the alleys of Kanda, carts creaked under sacks of rice, merchant boats glittered on the Sumida canals, and women in blue yukata counted copper mon, the clinking of which marked the start of every day.

Have you ever wondered how money circulated under the shogunate? How property and value were exchanged in such a way that the whole system remained in harmony?
Japan during the Tokugawa shogunate was isolated from the world like an island shrouded in mist, and yet it created a financial system so stable that it endured for two and a half centuries — without banks, without a stock exchange, and without wars.

While Europe revolved around capital and debt, Japan built an economy based on rhythm and trust. The fundamental measure of value was not gold, but grains of rice. The unit of tax and wealth was the koku — the amount of rice that could feed one person for a year.

Samurai received their stipends in rice, which they exchanged at ryōgae-ya exchange shops for silver or copper so they could pay for clothing, tea, or paper. Merchants in Osaka traded not with cash but with trust: a single piece of paper bearing a seal could transfer the equivalent of hundreds of koku from Dōjima to Edo. In markets and workshops, Kan’ei tsūhō copper coins circulated daily, while larger transactions were settled in silver by weight — the hakairyō system, where value was determined by mass, not by minted denomination.

Trust — shin’yō (信用) — was the foundation of everything. Debt was enforced not through force, but through honor and shame. There were no banks; credit itself was a form of relationship. A merchant’s word carried more weight than his signature — failure to keep a promise meant the definitive end of his entire family’s standing in trade.

The Edo period was one of the most remarkable economic experiments in world history — a society that chose stability over growth. This is the story of a world where trade was an art, economics a form of morality, and wealth a state of harmony with the order of all things. And though it would be naïve to wish such a system to last forever, it is worth examining how the shoguns’ financial structure worked — for it was a truly exceptional experiment.

Scene I

 In Hachirōbei’s Exchange Shop

Morning in Edo smelled of damp wood and fresh rice. Mist rose over Nihonbashi Bridge, from where one could see the first stalls opening with the soft creak of bamboo blinds. Merchants stretched as they hung up indigo noren curtains bearing the white crests of their trading houses — symbols of reputation, more valuable here than silver.

Beneath the eaves of one such shop — a small ryōgae-ya (両替屋, literally “money exchange house”) on Honchō Street — sat Master Hachirōbei, a grey-bearded proprietor known for being able to recognize the weight of silver by the sound a coin made as it struck the table. Before him, on a lacquered counter, lay oval golden koban, gleaming like autumn leaves, beside silver lumps of mameita-gin and a handful of dark brown Kan’ei tsūhō coins — the same that passed daily through the hands of townspeople, peasants, and artisans alike.

A young man entered the shop, dressed in a modest indigo kasuri kimono, holding a bundle of rice in his hands. He was the son of a minor samurai from Asakusa, come to exchange part of his father’s annual stipend. The rice, paid from a daimyō’s granary, became currency here — to pay for wood, paper, oil, and sake, without which no household could function.

“Twenty koku, you say?” Hachirōbei muttered, pulling a measure toward himself. “Pure Musashino, good quality. I’ll exchange it for silver at the Dōjima rate” (堂島 – a district in Osaka, home to the main rice exchange). “But remember, young sir — rice is life, silver is but its shadow.”

The young man nodded, and the shopkeeper began to weigh the rice. In wooden bowls, the grains slid softly against each other — the sound of Edo’s everyday economy. Behind a screen, the apprentice recorded the date, the amount of rice, the client’s name, and the sum in silver — all by hand, in ink and brush. No account here was merely a number; each had a face, a story, and defended a reputation.

When Hachirōbei handed over the silver, he wrapped the coins in thin paper bearing his seal. “If you wish, I can issue you a tegata,” he said. “Then you won’t have to carry the weight. In Osaka, they’ll exchange it for cash without any deductions.”

A tegata — a paper certificate of deposit, trust written in ink. Osaka merchants accepted it as real money because they knew that Hachirōbei had never tarnished his family name in three generations. Thus was born the proto-banking of Edo — trust instead of interest, honor instead of contract.

Outside, the city was awakening. Women carried buckets of water, a botefuri (wandering fish seller) shouted about fresh mackerel, and the sound of a fūrin wind bell drifted from a nearby shop. The air was a mingling of coal smoke and incense.

At the end of the street, children played at being Osaka merchants — building small stalls from pebbles and paying each other with mon coins made from seashells. In their play, like in a mirror, the order of the Edo world was reflected — a world in which rice, silver, and copper circulated like the three breaths of a single organism, and money was not merely a medium of exchange but a rhythm of everyday life: calm, balanced, predictable.

Over Nihonbashi Bridge, the sun rose. A city of one million souls began to pulse like a living mechanism — every gear, from samurai to the young chōnin boy on the street, moving in the rhythm set by the shōgun and recorded in the soft rustling of rice being measured in the exchange shops.

The Principle of Balance in the Closed World of Sakoku

When Tokugawa Ieyasu established his government in Edo in 1603, Japan began to breathe at a different rhythm — slow, measured, without the haste and chaos that had accompanied it through centuries of war. With the advent of peace (sometimes referred to by historians, in analogy to Roman history, as the “Pax Tokugawa”), the country turned away from the outside world, not toward stagnation, but toward perfect internal balance. The financial system that took shape at that time was unique — not based on banks, paper money, or speculation, but on the rhythm of rice, silver, and trust — and this made it one of the most stable in history.

Japan of the Edo period was a closed country, cut off from external influences, yet far from stagnant. Sakoku — the isolation policy implemented between 1630 and 1639 — did not mean complete severance from the world, but its carefully controlled filtration. Dutch merchants in Nagasaki, Koreans in Tsushima, Ryukyuans in Satsuma, and the Ainu in the north — the four “open mouths” of Japan — allowed goods, knowledge, and money to circulate in a limited way. But the rest of the archipelago functioned like a precisely designed clockwork mechanism, in which every region, social class, and currency had its place and purpose.

This was an economy based on stability, not growth (something we are no longer accustomed to — today, GDP must rise at all costs, no matter what the price). Instead of the dynamic capitalism known from contemporary Europe, Japan operated under a model that could be called an “economy of ritual.” The goal was not to multiply wealth but to maintain harmony — both among people and between classes, between commerce and nature. Samurai were paid stipends in rice, not in coins; merchants exchanged rice for silver, silver for gold, and gold for copper; peasants paid taxes in kind, and money was merely a reflection of harvests and weather.

In a world without banks, without a stock exchange, and without paper currency in the modern sense, trust was the highest form of capital. A merchant did not need a notary’s signature — only the good name of his family, which was worth more than any document. When a ryōgae-ya issued a tegata — a paper check for a specified amount of silver or rice — it was guaranteed not by any institution, but by the reputation of the house, built over generations of honest dealings.

The Tokugawa created a system in which money was meant to serve order, not desire (which does not mean, of course, that this ideal was ever perfectly realized — human nature cannot be deceived). The economy of Edo was an economy of seasons, balance, and duty. Profits grew slowly, like rice in the field — under the watch of sun, rain, and shōgun. Rice prices were set at the Dōjima exchange in Osaka, and the rates of gold, silver, and copper remained relatively stable for decades. In this stillness — in this long peace without wars or inflation — Japan developed not through conquest, but through the domestication of wealth, transforming trade into ritual and exchange into a form of social harmony.

Western economists might call it a non-market system, perhaps even archaic. But in reality, it was a closed world, almost perfectly balanced, in which every flow — of rice, silver, copper, debt, or gratitude — was part of a greater cycle.

The Tri-Metallic Harmony – Gold, Silver, and Copper

In the world of Edo, money had three faces. These were gold (金, kin), silver (銀, gin), and copper (銅, dō) — three metals that did not replace one another but coexisted like three instruments in the same orchestra. This system, known as the “tri-metallic monetary system” (金銀銅三貨制度), was one of the most remarkable economic experiments in world history. Each metal had its own sphere of circulation, its own dominant region, and its own logic of use. They were not units linked by a simple ratio — like today’s dollars and cents — but rather three parallel financial worlds that functioned together through a network of merchants, exchange houses (ryōgae-ya), and trust.

金 (Kin)

Gold – The Currency of Prestige and Power

In Edo, the seat of the shōgun, gold gleamed with the brilliance of authority. Coins such as the koban (小判) — oval, smooth, struck from pure metal — served as prestigious and ceremonial units. The standard was the Keichō koban, minted in 1601, weighing about 18 grams of gold and valued at one ryō (両). It was the ryō that became the main accounting unit throughout the Tokugawa system, especially in transactions among samurai, daimyō, and the shogunate.

Gold was divided into four denominations:

1 ryō = 4 bu (分) = 16 shu (朱)

In practice, one ryō corresponded roughly to several thousand modern dollars — though the exact value depended on the period and region. In the 18th century, one ryō could buy around 1–1.2 koku of rice — enough to feed one person for a year. For comparison: a night’s stay at a decent inn in Edo cost 50–100 mon, a simple cotton kimono 500–800 mon, and a meal with sake at a good tavern 20–30 mon. This means that one koban, worth a ryō, was a small treasure — a bright, compact symbol of status that rarely changed hands without reason.
The value of one ryō in mon was as follows:

1 ryō = 4 bu = 16 shu = 4,000 mon (文).

銀 (Gin)

Silver – The Currency of Trade and Agreement

If gold was the money of prestige, silver was the money of circulation. In Osaka and Kyoto — cities of merchants and manufacturers — silver reigned supreme. Unlike gold, silver had no fixed denomination. It was used by weight, according to the hakairyō seidō system (秤量制度 – literally “system of standardized weights”).

Silver coins — such as chōgin (丁銀) and mameita-gin (豆板銀) — had irregular shapes, resembling pieces of metal, and were often cut, weighed, and measured with every transaction.

The unit of weight was the monme (匁), equivalent to about 3.75 grams of silver.
The official exchange rate set by the shogunate was:

1 ryō of gold = 50 monme of silver = 4,000 mon (of copper)

In Osaka operated the Dōjima Rice Exchange (Dōjima kome ichiba, 堂島米市場), which was not only a commodity market but also Japan’s financial center. It was there that rice futures were traded and exchange rates between rice, silver, and gold were determined. Over time, to simplify transactions, nominal silver coins were introduced — such as the Meiwa Nanryō Nishu-gin (明和南両二朱銀) of 1772 — an attempt to “monetize” silver, which until then had functioned almost as a commodity rather than a currency.

Merchants in Osaka used precise silver scales, bronze weights, and parchment notes confirming exchanges. In their world, the ryō (gold) could be a symbol of wealth, but it was silver that enabled trade, travel, and enterprise.

銅 (Dō)

Copper – The Money of Everyday Life

The lowest, yet the most colorful and dynamic circle of this economic triad was copper. From it were struck the famous Kan’ei tsūhō (寛永通宝) coins, first minted in 1636. Their simple round shape with a square hole in the center became an icon of the era. They were worn strung on cords in bundles of a thousand, called kanmon (貫文) — hence the saying “four thousand mon = one ryō.”

Copper was the currency of ordinary people — peasants, artisans, women at the markets, and apprentices. In the great cities of Edo, Kyoto, and Osaka, hundreds of millions of these coins circulated, exchanged daily in thousands of small transactions. Thanks to them, the entire financial machinery of the country could function: they connected the wealth of merchants with the everyday lives of townspeople, forming the bloodstream of money in a society without banks.

Harmony Instead of Uniformity

The system of gold, silver, and copper was seemingly chaotic, but in reality brilliantly balanced. Each metal represented a different social stratum, a different region, and a different economic function:

• gold — Edo, samurai, prestige,
• silver — Osaka and Kyoto, merchants, trade,
• copper — the people, daily life, the life of the streets.

The balance among them was maintained for more than two and a half centuries — despite the absence of a central bank, despite the absence of paper money, and despite isolation from global markets.

It was an organic system in which value did not rest on abstraction, but on the physical presence of metal, rice, and a person’s reputation.

Thus functioned the financial harmony of Edo — not capitalist, not feudal, but ritual. Three metals, three social classes, three worlds, interwoven into a single web of interdependence that allowed Japan to remain for 250 years in a state of equilibrium — without wars, without inflation, with an economy so stable that even its stagnation became a form of wealth.

Rice — The Heart of the Economy

In Japan of the Edo period, everything had its rhythm and measure, and the unit of that measure was not money — but rice.

It was not gold that shone brightest in the eyes of the shōguns, but the grains born from the earth. They formed the basis of taxes, stipends, wealth, and power — in both a literal and symbolic sense. The “rice-based economy” (kokudaka seido) was not only an economic system, but also the ideological backbone of the entire Tokugawa order.

The basic unit was the koku (石) — the amount of rice needed to feed one person for a year, about 180 liters (approx. 150 kg). In the era when Japan closed itself off from the world, the koku became the measure of everything:

• the power of the daimyō (feudal lords),
• the revenues of domains (han),
• samurai stipends,
• and even social position.

A daimyō whose lands produced more than 10,000 koku had the right to an audience with the shōgun and to bear his own crest. The shogunate, in turn, assessed each domain’s income in a system called kokudaka (石高) — literally “height in koku.”

Land was not counted in hectares but in its capacity to yield rice — for loyalty flowed from rice.

A samurai did not receive a salary in coins, but in sacks of rice collected from state granaries. The annual remuneration of an ordinary samurai ranged from 100 to 300 koku, though in practice he rarely laid eyes on the grains themselves. The rice was stored in his lord’s warehouses, and the samurai received a special document certifying his due.

With this document he went to a rice exchange office (両替所 — ryōgae-sho) — where he could exchange rice for silver, gold, or copper, and sometimes… take out a loan secured against his future stipend.

Rice as Currency and Credit

Over time, documents certifying rice deposits — tegata (手形) — began to function like bills of exchange. They could be transferred, used for payments, or pledged as collateral for loans.

The great merchants of Osaka and Edo thus created a proto-banking financial system in which paper — or rather washi and ink — acquired real value.

At Dōjima, under the watch of shogunate officials, not only rice was traded, but also the right to future rice — futures contracts that can be considered the world’s first derivative instruments.

When the price of rice rose, those who had previously bought a delivery contract profited — when it fell, they lost. Even though Japan had no banks, no stock exchange, and no contact with the West, its rice market operated on principles reminiscent of Wall Street — only in a version with wooden scales and the aroma of steaming grain.

Thanks to this, rice became not only food but the axis of the entire financial system. It determined economic liquidity, exchange rates, wealth and poverty.

Samurai, though theoretically at the top of the hierarchy, were increasingly dependent on merchants who held ready cash. The latter, in the shadow of their exchange houses, became the quiet pillars of Edo’s financial world — not through control of land, but through control of trust.

Paper Promises — Hansatsu and Substitute Money

In a world where gold, silver, and copper had real weight, and rice was the foundation of the economy, Edo-period Japan managed to create something resembling modern money — a paper promise of value. Not in banks, for none yet existed, but in feudal domains, temples, and rice warehouses. Money in this era was as much metal as it was trust — and trust, as it turned out, could be written on paper.

Hansatsu — Domainal Banknotes

The word hansatsu (藩札) literally means “domain money” — and that is precisely what it was: a local banknote issued by each of the more than three hundred feudal domains (han) that made up Tokugawa Japan. Every daimyō — a local ruler — could issue his own money to facilitate economic circulation within his lands, especially where bullion was scarce. Thus we have here the birth of fiat currency in Edo Japan — which rulers could manage as they pleased, diluting it by printing more when necessary.

Hansatsu were printed on washi paper — strong, fibrous, resistant to moisture — and adorned with calligraphy, seals, and security marks. Their value was guaranteed by the ruling domain and held only within its borders. A merchant from Edo could not pay with a Satsuma banknote in a shop in Sendai — there was no common currency, but rather a mosaic of local monies, functioning thanks to mutual trust.

This made the system fragile, yet flexible. When a daimyō fell or died, his money could lose value almost overnight. A famous case occurred in 1701, when, after the death of Asano Naganori, lord of Akō — the same whose fate sparked the legend of the 47 rōnin — the domain’s hansatsu were redeemed at only 60% of face value. The economy reacted like a living organism — instantly and mercilessly.

Thus, even in a world closed to the West, there existed market laws, credit risk, and mechanisms akin to today’s currency fluctuations (and at times, in more unstable periods, perhaps closer to the swings of altcoins in crypto). Hansatsu became the paper reflection of feudal Japan — local and diverse, yet coherent thanks to the shared conviction that a promise written in ink has value if backed by a trustworthy ruler.

The Temple as a Bank – Yamada Hagaki from Ise

Before the hansatsu appeared, already in the 17th century, in the sacred city of Ise, the priests of the Great Shrine created Japan’s first paper money — Yamada Hagaki (山田羽書).

Pilgrims on their journeys often entrusted their silver or rice to temples, which in return issued ornate deposit certificates. Such a document could then be passed on — shopkeepers, innkeepers, or ferrymen accepted it as a means of payment, knowing that the temple in Ise guaranteed its redemption.

In this way, the priests became Japan’s first bankers, and their sacred seals — symbols of absolute trust. Yamada Hagaki circulated throughout the country among pilgrims and merchants, serving as a substitute for a national currency — the only one accepted almost everywhere, for it rested not on political power but on spiritual authority.

Merchants and Paper Rice

Over the years, merchants from Osaka and Edo began developing their own forms of substitute money, based not on temple promises but on commercial practice.

In rice warehouses (kome-dana), thousands of koku of grain were stored, belonging to samurai, merchants, and state offices. The owner of such a deposit could receive a paper receipt — a document certifying the quantity of rice held in storage.

This receipt, much like a bill of exchange, could circulate in trade, be transferred, sold, or used as collateral for a loan.

Thus emerged a system of merchant credit in which paper — not yet a “banknote,” but no longer a mere certificate — became an instrument of payment. Great mercantile families such as Mitsui, Konoike, and Sumitomo began to act as financial institutions: they carried out settlements, extended credit, and guaranteed the redemption of their own notes.

It was a remarkably modern system: functioning without central banks, without money-printing presses, and yet generating financial liquidity in a closed country.

Paper, ink, and seal were enough to keep the market of trade, credit, and trust turning with astonishing precision.

When the Meiji era began in 1868, Japan introduced modern national banks and a unified currency, but it did not start from zero. Its financial system had grown out of Edo-period experience — from hansatsu, Yamada Hagaki, and rice-warehouse certificates.

From these paper promises were born Japan’s first banks — and with them, the realization that the true value of money does not lie in metal, but in the trust that sustains it.

Scene II

At a teahouse

Evening slowly descended over Osaka, and the narrow lanes of the Dōtonbori district glowed with red lanterns reflected in the damp wooden planks of the bridges. From inside a teahouse came the sound of the shamisen, while the aroma of grilled eel mingled with the scent of rice and soy sauce. In a corner, at a low lacquered table, sat two men: one in a simple haori with the faded emblem of the Mitsui trading house, the other in the slightly worn garments of a samurai without a crest.

The merchant, named Tsunekichi, owned a store dealing in goods transported from Sakai to Edo. The samurai, Kawano Mataemon, worked as a scribe for the Wakayama domain and, like many lower-ranking warriors, had more debts than rice. On the table between them lay a cloth pouch, several irregular pieces of chōgin silver, and a neatly folded sheet of paper — a tegata, a promissory note confirming the right to a certain quantity of rice from the Dōjima warehouse.

“Kawano-dono, your paper has value only as long as your lord sits peacefully in his castle,” Tsunekichi said quietly, running his finger over the domain’s seal. “But if the gokōgi (御公儀 – ‘the honorable government authority’ of the shogunate) in Edo decides that silver is too light, its rate will fall like an autumn leaf.”

The samurai nodded with a faint smile, as if he had heard it many times before. “Rice always grows,” he replied. “And your silver? It melts when the government changes its mind. Tell me, who truly takes the risk here?”

The merchant smiled wider. It was an old conversation between two worlds — one that believed in land and duty, and the other that believed in weight, the market, and the news from Dōjima.

In truth, both were right. From the mid-18th century onward, Japan experienced gradual inflation: the metal content of its coins declined, and the Tokugawa government issued successive monetary reforms in an effort to maintain balance among gold, silver, and copper. Merchants like Tsunekichi had to learn to read the markets, to anticipate the prices of rice, silver, and copper, to follow rumors from Edo. In a world without telegraphs, information itself was currency — and a letter bearing news of poor harvests in the province of Mutsu could be worth more than a sack of silver.

The merchant reached for a brush and wrote a few characters on the edge of the sheet: the date, the amount, and the mark of his trading house. In Edo Japan, a signature held no meaning — what mattered was the seal and the reputation. The good name of the ie — the family or firm — was capital greater than any fortune. A house that earned a reputation for reliability could borrow without collateral; one that failed even once vanished from the map of commerce faster than a boat sinking in a storm.

Outside the window, a group of porters passed by, carrying sacks of rice to the port of Naniwa. In the glow of the lanterns, their bare shoulders gleamed with sweat — symbols of the labor that powered this entire financial universe. The rice was bound for Edo, where it would become the samurai’s stipend, the peasant’s tax, an entry in the ledgers, and an object of speculation.

Tsunekichi rolled up the document and handed it to the samurai with a slight bow. “I’ll take your tegata and pay you in silver at the Dōjima rate. But…” he added with a grin, “I’ll keep half a monme as a commission. Let’s call it a fee for silence.”

Kawano spread his hands. “Silence costs less than honor, merchant.”

Both laughed softly, like two players who knew that the game had no end. In Osaka there were no battles, no drums of war — but in the quiet of exchange houses, teahouses, and warehouses, the financial duels of the Edo era unfolded: trust against greed, honor against the price of silver, promise against inflation.

As they stepped out onto the street, the night air smelled of rice, wood, and sake. Over the Nakanoshima River floated the murmur of traders’ voices, and in the distance gleamed the white building of the Dōjima Rice Exchange — the true heart of Japan’s economy, beating to the rhythm of brushes, seals, and human trust.

An Economy Without Banks – How Credit Worked in the Edo Period

In Edo-period Japan, there were no banks in the European sense—no marble buildings, no interest calculated by machines, no multi-page contracts. And yet the entire country—from merchants in Osaka to craftsmen in Edo—lived on credit. But it was a kind of credit without signatures, without interest tables, without paper… and sometimes even without words. Everything rested upon a single foundation: trust.

In this closed world, where the circulation of gold and silver was limited and rice money could not always be exchanged, people took on the role of banks—merchant houses, money exchanges (ryōgae-ya), and rice warehouses (kome-dana). They created Japan’s financial network, through which not only coins but also promises and reputations flowed.

A merchant from Osaka could deposit silver with his ryōgae-ya, who would maintain something akin to an account. On that basis, a paper document was issued—a tegata—resembling a bill of exchange. Such documents could be transferred to others or used as payment. Large merchant houses such as Mitsui, Kawachiya, or Konoike operated entire offices devoted to issuing and redeeming tegata. In some cases, fortunes equivalent to hundreds of koku of rice could circulate on a single sheet of paper—all because the name of the issuer was synonymous with integrity.

It was reputation, not metal, that guaranteed the security of a transaction. In Japan, steeped in Confucian ethics, a merchant’s word was more important than his signature. Breaking a promise meant not only financial loss but also the loss of mien (面)—one’s face, honor, and social existence.

That is why the accounting books of the Edo period contain surprisingly few cases of fraud: a merchant who broke his word even once could never again find a trading partner.

In practice, credit functioned everywhere, even in the daily life of ordinary people.
For example, in the Asakusa district of Edo, a small craftsman—say, a lantern maker—could take paper, bamboo, and paint “on credit” from a wholesaler, with the promise of repayment during the summer Bon festival. This custom was called sekkibarai (節季払い), meaning “end-of-season payment” or literally “settlement of the year.”

The merchant would provide the goods without immediate payment, knowing his client would certainly repay after the season, once he earned money from sales.

In many cases, there were no written accounts at all—only a bow, an exchange of courtesies, and shared tea. Flowing through the economic fabric of Edo was an invisible currency—social trust. For this reason, despite the lack of banks, Japan managed to maintain financial stability for more than two and a half centuries.

On a larger scale, similar mechanisms operated. Merchants financed trading expeditions, supported textile producers from Nishijin, and even lent money to samurai whose rice stipends were insufficient for their upkeep. Over time, entire credit networks arose in which everyone knew everyone else—and honesty was the most precious form of capital.

Stability Through Limitation – The Tokugawa Policy

When Tokugawa Ieyasu took power in 1603, Japan was just emerging from a century and a half of civil war (about the Sengoku era we write, among other things, here: The Real Sengoku – What Was Life Like for the Swordless in the Shadow of Samurai Wars?). The new order was to be based not on expansion, but on balance. The shogunate rejected—consciously or not—the model of a world driven by constant growth and commercial hunger. Its ambition was to create a system that did not need to develop in order to survive—a system that endured because every element had its place and its limits (more on the bakuhan system here: What to Do with a Society of Samurai Who Only Know War and Death in Times of Peace? - The Clever Ideas of the Tokugawa Shoguns).

In this spirit, the policy of isolation, sakoku (鎖国), was born. Japan sealed itself off from the world in 1639 and remained closed for more than two centuries. Only essential goods and information flowed in—from the port of Dejima in Nagasaki, strictly controlled by bakufu officials. The greatest vigilance, however, was reserved for ensuring that precious metals did not flow out. Gold and silver—the foundations of the tri-metallic monetary system—were considered strategic resources, and their export was treated almost as an act of treason. The reformer and thinker Arai Hakuseki, adviser to Shōgun Ienobu, in 1715 brought about an official ban on exporting precious metals, recognizing that trade with the West (whether with the Dutch or the Chinese) was draining Japan’s gold and thereby weakening the entire system.

A closed economy required constant internal adjustment. For that reason, in the 18th and 19th centuries, the shogunate repeatedly carried out monetary reforms (kaichū, 改鋳)—each one an attempt to restore equilibrium between the amount of bullion and the value of money.

The Genroku (1695), Hōei (1706–1711), Kyōhō (1714–1715), Genbun (1736), Bunsei (1818), and Tenpō (1832) reforms altered the composition of coins, their gold and silver content, and their exchange rates relative to copper. Each reform rippled through the price of rice and the daily life of the people: sometimes prices rose as the bullion content declined; other times they fell when the shogunate attempted to “purify” the currency. Gold melted away in these reforms like spring snow, silver depreciated, copper became more expensive—and yet the system endured.

Why was there no crash, as in Europe’s credit bubbles and speculative manias? Because Edo-period Japan knew neither investment banks nor stock exchanges. Its economy was deliberately slowed, rooted in production, craftsmanship, and rice—not in abstraction. Money was not a means to enrich oneself but to maintain the rhythm of social order—like water, which must flow, but must never rise too high.

Behind this stability lay not only policy but also philosophy. The Tokugawa shoguns built their order on Confucian hierarchy: at the top stood the samurai, followed by peasants, craftsmen, and—at the very bottom—merchants. Officially, merchants were seen as morally dubious, for they “profited from the labor of others.” In practice, however, they held Japan’s financial arteries in their hands. Their strength lay not in the sword or in title, but in trust—shin’yō (信用).

In a world without banks, trust itself was the currency of the highest order. A merchant’s word was his signature, and the reputation of a trading house was like a deposit in a vault that could not be forced open. Great merchant families such as Mitsui, Sumitomo, and Kōnoike grew not through speculation, but through the gradual building of networks of trust between Edo, Osaka, and Kyōto. Their ledgers were not merely accounts—they were chronicles of mutual obligations, records of the moral equilibrium between giving and receiving.

Within such a philosophy, money was an instrument of harmony, not necessarily of greed. Profit had meaning only when it did not disturb the social balance—when it served to sustain one’s family, house, and city. Wealth without moderation was considered impure, and the longevity of a company was regarded as proof of virtue. It was for this reason that Tokugawa Japan endured two and a half centuries without banking disasters—despite inflation, declining bullion, and fluctuating prices.

Past that will not Come Back

When Commodore Perry’s black ships entered Edo Bay in 1853, Japan—once confident in its equilibrium—was forced to open itself to the world. Soon came the “unequal treaties,” which stripped the country of control over foreign trade and currency exchange. Gold, protected from export for centuries, began to flow out at an alarming pace: a single Japanese koban was worth almost three times more abroad than its official value in Edo. Exchange rates were altered, money changers’ shops were closed, and merchants hoarded silver in fear of inflation. The world that for two and a half centuries had rested upon balance began to tremble to the rhythm of Western demands.

With the arrival of the Meiji era, the old system collapsed completely. The tri-metallic harmony gave way to paper currency printed in the Western style. The new banknotes—with the portrait of the Emperor and the inscription Dai Nippon Teikoku—were heirs to the hansatsu and tegata, those old “paper promises” of Tokugawa times, yet devoid of their moral weight. In place of personal trust came signatures, seals, and a central bank. The rice market in Dōjima was transformed into a commodity exchange, and the ryōgae-ya money changers became modern banks. The old copper coins were melted down for raw material, and the oval koban, which once gleamed in a samurai’s hand like the sun over Nihonbashi, ended up in museum display cases—a relic of a world that measured wealth by tranquility, not by profit.

The change was inevitable. To survive among modern powers, Japan had to enter the path of industrialization and capitalism. But in that sudden acceleration, it lost something that for centuries had been its inner strength—the rhythm of balance. In Edo’s economy there was no place for speculation, because every transaction had a moral dimension. Credit meant trust, not risk. Debt was a personal obligation, not an abstract number.

Thus, when in the final years of the shogunate the ringing of mon coins faded into the soft rustle of paper yen, it was not only a political era that ended, but a spiritual one as well. Edo Japan had no banks, yet it had trust; no stock exchange, yet it had harmony. In the Tokugawa world, every thing—rice, rain, trade, labor, prayer—had its rhythm, and money was but one of its chords. Perhaps that is why this economy, enclosed like a garden and restrained like a bonsai, endured for two and a half centuries in a state of balance that the empires of the world could only envy. Though once the borders were opened, let us be honest—it had no chance of survival. It was already a relic of a past that would never return.

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"Strong Japanese Women"

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    未開    ソビエライ

 An enthusiast of Asian culture with a deep appreciation for the diverse philosophies of the world. By education, a psychologist and philologist specializing in Korean studies. At heart, a programmer (primarily for Android) and a passionate technology enthusiast, as well as a practitioner of Zen and mono no aware. In moments of tranquility, adheres to a disciplined lifestyle, firmly believing that perseverance, continuous personal growth, and dedication to one's passions are the wisest paths in life. Author of the book "Strong Women of Japan" (>>see more)

Personal motto:

"The most powerful force in the universe is compound interest." - Albert Einstein (probably)

  Mike Soray

   (aka Michał Sobieraj)

未開    ソビエライ

 An enthusiast of Asian culture with a deep appreciation for the diverse philosophies of the world. By education, a psychologist and philologist specializing in Korean studies. At heart, a programmer (primarily for Android) and a passionate technology enthusiast, as well as a practitioner of Zen and mono no aware. In moments of tranquility, adheres to a disciplined lifestyle, firmly believing that perseverance, continuous personal growth, and dedication to one's passions are the wisest paths in life. Author of the book "Strong Women of Japan" (>>see more)

Personal motto:

"The most powerful force in the universe is compound interest." - Albert Einstein (probably)

Mike Soray

(aka Michał Sobieraj)

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