Japan used the strong foundation for economic changes set in the Tokugawa Period to their advantage. There were already road systems, markets, merchants, small businesses, and banking institutions in place but the leaders believed the country had to be much more industrialized. Although the leaders knew what to do, they were restricted by their unequal treaties with the west. These treaties made it very difficult for domestic industries to survive. Initially, many of the new industrial and manufacturing projects were funded and owned by the government. They felt that this was necessary to jump-start the modernization and to bring industries up to speed with Western nations but since this cost too much money all industries except for the military based industries were sold to private investors. As this happened, Japan began to transform economically into a capitalist society. In a capitalist society, there are 4 key points. Individuals or the government are engaged in business and the focus is on entrepreneurs who establish and operate the companies. The goal is to make profit by producing or obtaining goods and selling them for more money all while people work for wages and purchase goods they need or want with these wages. Since Japan used Western countries as models there were several changes added to Japan. Railroads were built connecting all 4 major islands and the roads and highways were paved. Deep water harbours were created at Yokohama and Kobe and in addition telegraph and telephone systems were built. New technologies and industries were imported and a Ministry of Banking was set up to provide loans and subsidies to new businesses.
How Did Japan Change Its Economic System?