An Analysis of the Interest Rate for Loans to Direct Retainers of the Shogun in Early Modern Japan

Shuntaro Washizaki, Kyushu University

The purpose of this report is to analyze the transition of the interest rate for loans to direct retainers of the Shogun in early modern Japan, taking the case of Edo (now Tokyo) in 1825-66. A financial institution that provided loans to a direct retainer in Edo was called the “Fudasashi”. In this report, I will use 73 borrowing certificates in the Sumitomo Family documents. The direct retainers who received the funds transfer from the Sumitomo family as a “Fudasashi” were classified into the following two groups. The first group was in debt at an annual interest rate of 10-12%, while the second group was in debt at an interest rate of 1-3% a year. It is speculated that the Sumitomo family was forced to lend funds to the small retainer class with low interest, but lending with a slightly higher interest rate to the relatively high paid retainer class. The Sumitomo family did not change for 40 years, though the Shogunate issued a decree to reduce the annual interest rate of general public loans from 15% to 12% in 1842. In other words, the government's policy of intervention in the financial markets did not affect the “Fudasashi” loan for direct retainers. It is thought that the profit of “Fudasashi” fell considerably after the opening of ports in 1859. The reason is that the real loan interest rate was lowered by the sustained inflation rather than the legal pressure of the Shogunate that ordered the interest rate reduction. Furthermore, no arbitrage relationships were seen between regions or between lenders in the early modern financial markets. The fact seems to be a great motivation to establish banking business after the Meiji Restoration, because the development of correspondent contracts was essential to carry out lending and remittance operations at the national level.

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 Presented in Session 211. Rise and Trajectories of Financial Capital