Rice brokers, which rose to power and significance in Osaka

Osaka

is a city in the Kansai region of Japan's main island of Honshu, a designated city under the Local Autonomy Law, the capital city of Osaka Prefecture and also the biggest part of Keihanshin area, which is represented by three major cities of Japan, Kyoto, Osaka and Kobe...

 and Edo

Edo

, also romanized as Yedo or Yeddo, is the former name of the Japanese capital Tokyo, and was the seat of power for the Tokugawa shogunate which ruled Japan from 1603 to 1868...

 in the Edo period

Edo period

The , or , is a division of Japanese history which was ruled by the shoguns of the Tokugawa family, running from 1603 to 1868. The political entity of this period was the Tokugawa shogunate....

 (1603-1867) of Japanese history, were the forerunners to Japan's banking system

Bank of Japan

is the central bank of Japan. The Bank is often called for short. It has its headquarters in Chuo, Tokyo.-History:Like most modern Japanese institutions, the Bank of Japan was founded after the Meiji Restoration...

. The concept actually originally arose in Kyoto

Kyoto

is a city in the central part of the island of Honshū, Japan. It has a population close to 1.5 million. Formerly the imperial capital of Japan, it is now the capital of Kyoto Prefecture, as well as a major part of the Osaka-Kobe-Kyoto metropolitan area.-History:...

 several hundred years earlier; the early rice brokers of Kyoto, however, operated somewhat differently, and were ultimately not nearly as powerful or economically influential as the later Osaka system would be.

Daimyo

Daimyo

is a generic term referring to the powerful territorial lords in pre-modern Japan who ruled most of the country from their vast, hereditary land holdings...

 (feudal lords) received most of their income in the form of rice. Merchants

Chonin

was a social class that emerged in Japan during the early years of the Tokugawa period. The majority of chōnin were merchants, but some were craftsmen, as well. Nōmin were not considered chōnin...

 in Osaka and Edo thus began to organize storehouses where they would store a daimyo's rice in exchange for a fee, trading it for either coin or a form of receipt; essentially a precursor to paper money

Paper Money

Paper Money is the second album by the band Montrose. It was released in 1974 and was the band's last album to feature Sammy Hagar as lead vocalist.-History:...

. Many if not all of these rice brokers also made loan

Loan

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....

s, and would actually become quite wealthy and powerful. As the Edo period wore on, daimyo grew poorer and began taking out more loans, increasing the social position of the rice brokers.

Rice brokers also managed, to a great extent, the transportation of rice around the country, organizing the income and wealth of many daimyo and paying taxes on behalf of the daimyo out of their storehouses.

Kyoto

As urbanization and other economic shifts became significantly widespread and powerful in the 14th century, the growth of towns created a growth in demand for the transport of produce, particularly rice, into the towns, from increasingly larger and further rural areas. As a result, a system of material transport and warehousing in Kyoto

Kyoto

is a city in the central part of the island of Honshū, Japan. It has a population close to 1.5 million. Formerly the imperial capital of Japan, it is now the capital of Kyoto Prefecture, as well as a major part of the Osaka-Kobe-Kyoto metropolitan area.-History:...

 emerged. This process was much the same as the one which would catapult Japan into the modern era in the Edo period

Edo period

The , or , is a division of Japanese history which was ruled by the shoguns of the Tokugawa family, running from 1603 to 1868. The political entity of this period was the Tokugawa shogunate....

, but on a smaller scale, more localized around the Kinai

Kinai

is a Japanese term denoting an ancient division of the country. Kinai is a name for the ancient provinces around the capital Nara and Heian-kyō. The five provinces were called go-kinai after 1760....

 area, and centered at Kyoto instead of Osaka

Osaka

is a city in the Kansai region of Japan's main island of Honshu, a designated city under the Local Autonomy Law, the capital city of Osaka Prefecture and also the biggest part of Keihanshin area, which is represented by three major cities of Japan, Kyoto, Osaka and Kobe...

, which would become the commercial center of a nationwide trade system three hundred years later.

Rice dealers in Kyoto gained business very quickly, and became increasingly organized over the course of the 14th century; by 1400, the need for a central rice market was felt. Established sometime around that year, the Kyoto central rice market set rice prices by an auctioning system, determining, powerfully but indirectly, prices across the country. This effect was enhanced by the tight monopolistic control of the merchants of this central market over the rice trade across the entire city; nowhere else was wholesale trade in rice permitted. As the business grew, the rice dealers developed among their membership transporters and guards who tightly controlled the flow of rice into the city. These jobs would become more specialized and organized as the 15th century went on, developing into distinctly separate branches of the guild.

An incident in 1431 illustrates the power of the Kyoto rice merchants; they conspired to cut down on the supply of rice to the market, in order to drive prices up. Ordered by the Imperial Court to resume selling rice at a fair rate, they did so for one day and then stopped selling rice altogether. When the Deputy-Governor of the Samurai-dokoro

Samurai-dokoro

The Samurai-dokoro was an office of the Kamakura and Muromachi shogunates....

 was sent to arrest and punish the ringleaders, little was done, as the Deputy-Governor was party to the conspiracy. The merchants continued to abuse their power, encouraged by the ease of doing so and the rampant corruption which spread as high up as the wife of Shogun Ashikaga Yoshimasa

Ashikaga Yoshimasa

was the 8th shogun of the Ashikaga shogunate who reigned from 1449 to 1473 during the Muromachi period of Japan. Yoshimasa was the son of the sixth shogun Ashikaga Yoshinori....

.

Cattle brokers, and merchants of marine products such as salt and fish saw significant growth and development in this period as well. Kyoto also saw the continuing emergence and development of a monetary economy. Rice would not be fully replaced by coin, however, until the late Edo or early Meiji periods.

The economy of Kyoto, at least in the eyes (and coffers) of the merchants, flourished in the first two-thirds of the 15th century. The outbreak of the Ōnin War

Onin War

The ' was a civil war that lasted 10 years during the Muromachi period in Japan. A dispute between Hosokawa Katsumoto and Yamana Sōzen escalated into a nationwide war involving the Ashikaga shogunate and a number of daimyo in many regions of Japan....

, however, in 1467, brought these developments, and the merchants behind them to an abrupt halt. The various shops and warehouses that made up the central rice market were quickly sold for very low prices, and the city saw terrible violence and destruction in the ensuing years.

Osaka

By 1700 or so, Osaka had become the mercantile center of Japan. Osaka merchants had organized themselves into a national clearinghouse system. A major obstacle to the development of a modern capitalistic system in Japan at this time was the problem of transportation. While some commodities, such as woven silk and sake could be transported easily in a cart, most crops were harvested in such volume that a caravan of packhorses or carts across the rough and dangerous roads, transported by the individual farmers, simply could not work out. Thus, a number of towns served as waystations where merchants would act as middlemen, storing farmers’ goods and transporting them to major trade centers such as Osaka, for a price. However, increasing supply and demand towards the end of the 17th century necessitated a better method of transporting goods in large amounts. Merchants in Sakai

Sakai, Osaka

is a city in Osaka Prefecture, Japan. It has been one of the largest and most important seaports of Japan since the Medieval era.Following the February 2005 annexation of the town of Mihara, from Minamikawachi District, the city has grown further and is now the fourteenth most populous city in...

, Osaka, and a number of other ports addressed this problem, testing the use of large ships to transport goods along the coasts. By the end of the 17th century, Osaka was home to at least 24 freight shippers to Edo, and a complex system of guilds

Za (guilds)

The ' were one of the primary types of trade guilds in feudal Japan.- Origins and purpose:They grew out of protective cooperation between merchants and temples and shrines; merchants would travel and transport goods in groups, for protection from bandits and the vacillating whims of samurai and...

, both in Osaka proper and in the surrounding area, dealing in cotton, sugar, paper, and the produce of particular regions.

Daimyo income at this time was in the form of koku

Koku

The is a Japanese unit of volume, equal to ten cubic shaku. In this definition, 3.5937 koku equal one cubic metre, i.e. 1 koku is approximately 278.3 litres. The koku was originally defined as a quantity of rice, historically defined as enough rice to feed one person for one year...

of rice, an amount equal to the amount of rice a man eats in a year. Though there was a unified national system of coinage, every feudal domain was free to mint its own coinage as well. Thus, paying for hotels, inns, and food were complicated and difficult affairs for daimyo traveling to or from Edo as mandated by the shogunate's sankin kōtai

Sankin kotai

was a policy of the shogunate during most of the Edo period of Japanese history. The purpose was to control the daimyo. In adopting the policy, the shogunate was continuing and refining similar policies of Toyotomi Hideyoshi. In 1635, a law required sankin kōtai, which was already an established...

(alternate attendance) system.

Thus, a system of rice warehouses arose, evolving naturally out of the rice storehouses which formed a part of this trade network. Centered in Osaka, the rice brokers bought the daimyo's rice and issued paper bills, representations of value, in exchange. This was probably the first paper money in Japan, but the concept was picked up quickly, and the credit of the brokers was good enough to warrant the kind of trust that such a system relies upon. Many merchants throughout the country were willing to exchange the paper bills for metal coins or bars, recognizing that the Osaka brokers would take back the bills, as payment for rice.

Soon afterwards, these rice brokers took the next natural, logical, step towards becoming true financial institutions. They began to loan the paper money to daimyo and samurai, who promised to pay it back with the tax revenue of future seasons. For a time, this worked quite well for both samurai and brokers, whose system developed into something much more akin to a modern bank; transactions began to be done entirely in paper, with the rice only nominally serving as reserve backing. This, however, quickly led to the problem of samurai living beyond their means, spending more in order to maintain the kind of lifestyle expected of their status than they could hope to repay. The rice brokers, more often than not, found it easiest to simply allow samurai and daimyo to postpone repayment of the loans, or to default on them entirely. The last decade or so of the 17th century, the Genroku

Genroku

was a after Jōkyō and before Hōei. This period spanned the years from September 1688 through March 1704. The reigning emperor was .The years of Genroku are generally considered to be the Golden Age of the Edo Period. The previous hundred years of peace and seclusion in Japan had created relative...

 period, is today widely considered to have been the peak of Edo period extravagance; daimyo and samurai spent beyond their means, and merchants, who on the whole enjoyed immense profits, spent frivolously as well.

This inflated economy came crashing down at the end of Genroku, in the first decade of the 18th century. By this point, many samurai and daimyo were so indebted to the brokers that they could never hope to be able to pay them back; this was a huge problem for the brokers. A new shogun came to power at this time, motivated by Confucian

Confucianism

Confucianism is a Chinese ethical and philosophical system developed from the teachings of the Chinese philosopher Confucius . Confucianism originated as an "ethical-sociopolitical teaching" during the Spring and Autumn Period, but later developed metaphysical and cosmological elements in the Han...

 ideals and seeking reform. Thus, the shogunate stepped in, and sought to control the country's economic development, and the growing wealth and power of the merchant class, by organizing and regulating a series of guilds, and by passing strict sumptuary laws forbidding merchants from behaving like higher-class citizens (i.e. samurai, nobles). Sanctioned and encouraged by the shogunate, the Dōjima Rice Exchange

Dojima Rice Exchange

The Dōjima Rice Exchange , located in Osaka, was the center of Japan's system of rice brokers, which developed independently and privately in the Edo period and would be seen as the forerunners to a modern banking system...

 was born, incorporating and organizing the rice brokers in the north of Osaka. The system became formally backed by the shogunate, who acted through the Rice Exchange to effect monetary policy

Monetary policy

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

.

Over the course of the 17th and 18th centuries, these Osaka-based institutions grew more solidly into what can legitimately be called banks, focusing their efforts largely on loans to the daimyo. However, as the peace and stability caused the feudal system to break down, daimyo became less and less able to pay back the loans, and an incredible volume of debts were simply rolled over or ignored. The money supply the banks had created also grew out of control, becoming an essential aspect of the nation’s economy, causing serious economic consequences whenever it was altered. The shogunate tried to repair and regulate the economy, in particular the monetary supply and monetary value of rice, but to no avail. Seemingly, if anyone understood the economic developments incurred by the rice-brokers, it was the rice-brokers alone. Since the samurai’s income was in fixed amounts of rice, not monetary value, the debasement of the value of rice affected their wealth drastically, and the inflation created by governmental attempts to control the supply of metal coinage had similar effects. In all of this turmoil, it is fair to say that the rice-brokers were nearly the only ones to profit.

At the beginning of the 19th century, in response to growing inflation, and to the power of the rice brokers, and the merchant class in general, the shogunate once again imposed a series of heavy regulations and restrictions. Easily one of the most damaging was a proscription against receiving loan payments from daimyo. By the 1860s, which saw the end of the Tokugawa shogunate, the Osaka rice brokers had also disappeared, replaced by other merchant institutions.

Edo

The rice brokers in Edo were called fudasashi (札差, "note/bill exchange"), and were located in the kuramae (蔵前, "before the storehouses") section of Asakusa

Asakusa

is a district in Taitō, Tokyo, Japan, most famous for the Sensō-ji, a Buddhist temple dedicated to the bodhisattva Kannon. There are several other temples in Asakusa, as well as various festivals.- History :...

. A very profitable business, fudasashi acted both as usurers

Usury

Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...

 and as middlemen organizing the logistics of daimyo tax payments to the shogunate. The rice brokers, like other elements of the chōnin (townspeople) society in Edo, were frequent patrons of the kabuki

Kabuki

is classical Japanese dance-drama. Kabuki theatre is known for the stylization of its drama and for the elaborate make-up worn by some of its performers.The individual kanji characters, from left to right, mean sing , dance , and skill...

 theatre, Yoshiwara

Yoshiwara

Yoshiwara was a famous Akasen district in Edo, present-day Tōkyō, Japan.In the early 17th century, there was widespread male and female prostitution throughout the cities of Kyoto, Edo, and Osaka. To counter this, an order of Tokugawa Hidetada of the Tokugawa shogunate restricted prostitution to...

pleasure district, and other aspects of the urban culture of the time.