INTRODUCTION

Scholars of pre-war Japan routinely trumpet the bureaucrats' developmental, nation-building prowess. A close examination of pre-war policy, however, reveals a different picture. In Chapters 9 and 10 we examine government policy in the railroad and cotton textile industries. In this chapter, we consider financial policy. We find that at least in the 1920s when the political parties controlled the cabinets, financial policy took on a distinctively partisan quality. Financial regulation was more a weapon in the electoral battle for a legislative majority than a means to achieve any economic supremacy.

That the two main parties had distinct constituencies, as we discussed in Chapter 4, shaped their financial policy choices. The Kenseikai and Minseito favored big banks and international firms, whereas the Seiyukai cultivated ties to farmers, small firms and small banks, and domestically oriented manufacturers. This chapter recounts the financial policy shifts that accompanied changes in cabinet control.

Section 2 provides a broad historical sketch of pre-war financial regulation, noting that the Meiji oligarchs never achieved bank consolidation. Section 3 focuses on the Banking Act of 1927. Once in control of the cabinet, the Kenseikai drafted banking regulations that favored the largest banks, undermining the Seiyūkai's support base among the small banks.

In banking regulation, as with any area of policy governed by statute, control of the cabinet alone was not enough. However loyal and clever the bureaucrats, an obstreperous Diet could thwart legislative plans.