The Kyoho Reforms: Yoshimune's Edo Economic Revolution

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The Kyoho Reforms: The Edo Economic Revolution Launched by the "Rice Shogun" Yoshimune

This is the first installment of our special feature on the three major reforms of the Edo period.

The True Identity of the "Rice Shogun" Yoshimune

In the first year of the Kyoho era (1716), 32-year-old Tokugawa Yoshimune was appointed as the eighth shogun. Having demonstrated exceptional economic sense since his time as the lord of the Kishu Domain, Yoshimune remained a hands-on leader even after becoming shogun, frequently walking the streets of Edo himself to check the price of rice.

One day, Yoshimune asked at a rice shop in Asakusa, "What is the price of rice today?" The shopkeeper, not knowing he was speaking to the shogun, replied, "It is 120 mon per sho." Yoshimune took notes on the spot and was considering measures to stabilize rice prices by the next day. This sense of being on the ground was the driving force that made the Kyoho Reforms a set of effective policies.

The Shogunate's Financial Crisis

When Yoshimune took office, the shogunate's annual income was about 600,000 ryo, while expenditures were about 800,000 ryo. An annual deficit of 200,000 ryo is equivalent to about 20 billion yen in today's value. The consequences of the profligate spending of the Genroku era were catching up; records show that the cost of Tsunayoshi's New Year's feast alone was equivalent to about 30 million yen today.

Furthermore, chaos caused by currency recoinage and wild fluctuations in rice prices hit the treasury hard. A vicious cycle continued where a good harvest led to a sharp drop in tax revenue, while a poor harvest led to the impoverishment of the common people. The situation was essentially on the verge of bankruptcy.

The Innovation of "Earning" Reform

While previous reforms focused on "reducing expenditures," Yoshimune focused on "increasing income." The suggestion box (meyasubako) established in the sixth year of Kyoho (1721) was not just for collecting opinions, but was an excellent marketing research tool.

In new field development projects, he developed about 30,000 cho of land, realizing an annual increase in revenue of about 150,000 ryo (about 15 billion yen in today's value). Furthermore, he promoted development using PFI-like methods that utilized private capital, becoming a pioneer of modern public-private partnerships.

He also focused on the cultivation of medicinal herbs, achieving import substitution through domestic cultivation of ginseng and licorice. Surplus amounts were exported, contributing to the acquisition of foreign currency.

The Dojima Rice Exchange and Financial Revolution

In the 15th year of Kyoho (1730), one of the world's oldest public futures trading markets was born in Dojima, Osaka: the Dojima Rice Exchange. Its sophisticated mechanism, which clearly separated spot trading from futures trading and adopted a cash settlement system, had the same structure as modern financial derivatives.

At its peak, the annual trading volume was about 100 million koku, roughly three times the national rice production. Due to this success, futures markets for cotton, rapeseed, salt, and other commodities were established in various regions, significantly advancing the efficiency of commodity distribution.

He also built a funding system in partnership with money changers, realizing a mechanism similar to modern local government bond issuance in the first half of the 18th century, where public works in Edo were carried out with funds raised from Osaka merchants.

Economic Effects of the Frugality Boom

Yoshimune himself took the lead in practicing a simple life. He simplified the shogun's meals to one soup and three dishes and favored cotton clothing. His episode of simplifying his lunch during falconry and praising the dumplings at a small teahouse as "the most delicious thing" became the talk of Edo.

Even at the commoner level, "frugality rankings" were created, and a culture emerged where those skilled at frugality were evaluated as yokozuna or ozeki. This frugality boom increased the savings rate, and by channeling those funds into productive investments, the foundation for economic growth was strengthened.

New businesses such as second-hand clothing stores, repair shops, and recycling services emerged, forming the foundation of a circular economy.

Demonstrating True Value During the Great Kyoho Famine

During the Great Famine of 1732 (Kyoho 17), an estimated one million people died of starvation. In response to this unprecedented disaster, Yoshimune implemented price stabilization measures utilizing the Dojima Rice Exchange. The shogunate intervened in the market and deployed sophisticated monetary policies to guide futures prices.

Economic recovery was promoted through large-scale relief projects funded by the fiscal reserves accumulated during the reforms, as well as tax incentives for disaster-stricken areas. This crisis response proved that the reforms were not merely bookkeeping exercises, but were intended to enrich the people.

The Light and Shadow of the Reforms

The results were clear. Twenty years later, the fiscal balance was nearly achieved, and the formation of a unified national market had progressed. However, there were negative aspects: the widening gap between wealthy farmers who benefited from new field development and impoverished small-scale farmers, the stifling of cultural activities due to strict sumptuary laws, and an increase in speculative trading at the Dojima Rice Exchange.

These issues were passed on to the subsequent Kansei and Tenpo reforms, and the balance between rural problems and the development of commerce and industry became a critical theme that persisted until the end of the Edo period.

Implications for the Modern Era

The greatest significance of the Kyoho Reforms was the shift from a 'defensive' to an 'offensive' style of politics. Yoshimune focused not only on reducing expenditures but also on increasing revenue, and he utilized market mechanisms rather than just regulations. This reformist mindset offers many insights into the fiscal problems and economic structural reforms currently faced by Japan.

The philosophy and methods of reform demonstrated by Yoshimune approximately 300 years ago are not merely historical events, but are worth re-evaluating as policy concepts that remain applicable today.