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How Japan remained on the Gold Standard despite unsustainable external debt

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  • Pittaluga, Giovanni B.
  • Seghezza, Elena

Abstract

In the period of the classic gold standard, most peripheral countries were frequently affected by so-called sudden stops as well as by financial and currency crises. Yet pre-War Japan was an outlier. Though its level of external debt was not sustainable, Japan issued many government foreign loans to cover its current account deficits, was never affected by currency crises, and was never forced to suspend convertibility. We argue that, from the late nineteenth century until just before World War I, Japan and Britain engaged in a politico-economic exchange: Japan offered to protect Britain's economic and political interests in the Far East provided that Britain gave the rising Asian power access to financial markets—namely, in the City of London.

Suggested Citation

  • Pittaluga, Giovanni B. & Seghezza, Elena, 2016. "How Japan remained on the Gold Standard despite unsustainable external debt," Explorations in Economic History, Elsevier, vol. 59(C), pages 40-54.
  • Handle: RePEc:eee:exehis:v:59:y:2016:i:c:p:40-54
    DOI: 10.1016/j.eeh.2015.09.004
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    Cited by:

    1. Kramer, Bert S. & Milionis, Petros, 2018. "Democratic Constraints and Adherence to the Classical Gold Standard," GGDC Research Memorandum GD-175, Groningen Growth and Development Centre, University of Groningen.

    More about this item

    Keywords

    Gold standard; Japanese debt; Pre-WWI economies; Anglo-Japanese alliance; Financial crises;

    JEL classification:

    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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