Ninomiya Sontoku - Economics

Economics

Ninomiya Sontoku emphasized the importance of compound interest which was not well understood among samurai and peasants. He calculated the maturity of each interest rate for 100 years to show its significance by using the Japanese abacus or soroban. In terms of agriculture, agricultural village life he viewed as communal, where surpluses from one year were invested to develop further land or saved for worse years, and shared by members of the community. He was aware that developed land had lower tax base than established agricultural land and he was adepte at financial management which he applied to his estate. He also encouraged immigrants from other estate and rewarded them if they successfully establish agricultural household. He also started his own financial institutions called gojoukou, (五常講 ごじょうこう), which appear to be a forerunner of credit union. Each member of the village union could borrow fund interest free for 100 days, while the entire membership shared the cost in case of default. Combination of land development, immigration and communal finance all managed under diligent utilisation of abacus was a success and became the standard methodology of economic development in feudal Japan.