The “Matsukata Deflation” Reconsidered: Financial Stabilization and Japanese Exports in a Global Depression, 1881–85

Abstract

This article reexamines the causes, effects, and duration of the Matsukata deflation of the early 1880s, one of the most severe contractions in modern Japanese history, together with the policies Minister of Finance Matsukata Masayoshi pursued. It also investigates the understudied relationship between Japan’s deflationary crisis and the contemporaneous global depression. Contrary to the standard narrative, Matsukata eventually succeeded at financial stabilization not primarily through retrenchment and taxation but through export promotion and bond issuance. Meanwhile, oversupply and deflation in Japan’s export markets put pressure on prices at home, intensifying a domestic deflation that was already underway when Matsukata became finance minister.