After centuries of isolation, Meiji Japan underwent a significant economic and social transformation. Investing in Japan argues that access to foreign capital was a fundamental driver of this far-reaching change. Major investments like railroad construction depended on a flow of funds from overseas, as did Japan's program of imperial expansion. Because the country committed to the gold standard in 1897 it was able to draw on global capital markets during the first major era of financial market integration. After a post-WW2 hiatus, when growth appears to have been more domestic in origin, the book argues that liberalization policies created a renewed reliance on foreign capital from the late twentieth century. The book challenges the view that Japanese modernization was in any way autonomous.

Investing in Japan is mostly chronologically organized and has three main parts. The first part documents the preconditions for the adoption of the gold standard. Reformers realized that the Tokugawa legacy of barter exchange and a rudimentary monetary system impinged on the country's ability to develop economically and engage in international trade. Following a protracted process of overcoming constraints due to successive currency debasements and specie, bullion and capital shortages, the Meiji government shifted from a de facto silver to a gold standard, established a unified currency and a nascent banking system. Membership of the gold standard facilitated trade and capital flows which promoted domestic industrial expansion. The main implication of this part of the book is that without the adoption of the gold standard, Japanese economic development would not have occurred.

The second part of the book examines how foreign capital induced growth. Anglo-Japanese relations are covered in some detail, given that Britain was a preeminent foreign lender in the late nineteenth and early twentieth centuries. Despite often fractious interactions, the benefit of British diplomatic, political, and financial links meant Japanese government bonds could be effectively floated on overseas markets. Loans financed major enterprise initiatives and the Russo-Japanese War. Municipal governments also relied on London, Paris, and New York issuing markets to make infrastructure investments like harbor improvements, electrification developments, and sewage works. Foreign owned enterprises entered Japan and revolutionized industries such as tobacco, armaments, and petrochemicals.

The third part of the book focuses on the post-WW2 period up to the present, covering the Japanese “economic miracle” of the 1950s and 1960s, financial deregulation under the auspices of the 1996 “Big Bang” program, and Japan's experience around the time of the financial crisis. Consistent with earlier parts of the book, the emphasis on foreign influences continues. Although the promotion of domestic companies in areas of technological advantage limited the scope of foreign subsidiaries or joint ventures up to the late 1960s, this trend reversed a few decades later. With the introduction of a more transparent, market-based financial system, foreign capital and enterprise again started to play a major role in Japan's economy by the mid- 1990s.

Overall, this is a well-written and far-reaching analysis of Japanese economic and financial history. The author has expertly woven together evidence from primary Japanese source material and the descriptive data presented throughout the book helps to illustrate and complement the main points of the argument. In particular, statistics showing Japan utilized ¥3.99 billion yen in foreign capital from 1899 to 1939 reinforce the notion of a large aggregate impact. The book is both compelling and insightful because it provides new archival data to illuminate the financial and monetary regimes that so powerfully influenced Japan's development going back to the middle of the nineteenth century. Based on the historical record the author conjectures that Japan's future growth and development will be predominately contingent on the country's ability to continually absorb foreign capital.

However, there are several notable shortcomings. Investing in Japan does not make any explicit link between the measurement of foreign capital and economic growth, or address important issues such as knowledge spillovers and productivity externalities from foreign business investment in Japan and whether these were higher or lower during different periods of time. The fact that the post-WW2 Japanese “economic miracle” was largely home-grown in terms of a large rise in domestic fixed capital formation militates against the books contention about the persistent preeminence of foreign capital. Additionally, during some periods outflows of capital rather than inflows were more important, such as during the mid-to-late 1980s as Japanese corporations made foreign investments on an unprecedented scale. The book is largely silent on how the reader should think about these major shifts in the capital account in the context of the central argument. In that sense the book's evidence is somewhat one-sided.

Many of these criticisms stem from the fact that Investing in Japan focuses on the more macroeconomic aspects of Japan's financial and monetary history and there is only so much in a long time horizon that can be systematically examined and measured. Thus, although the book does not definitively prove that Japan's growth over the last 150 years was fully a product of foreign influences, it is still deeply rooted in archival material, incredibly informative and more than a worthwhile read.