Mark Metzler's Lever of empire is a truly excellent book that describes Japan's involvement in the international gold standard between the Sino-Japanese War of 1894–5 and the collapse of the system in the 1930s. As an international monetary device, the gold standard and later its Bretton Woods variant sat at the centre of international financial and economic relations, underpinning the hegemony of Britain before the First World War, of the US after the Second World War, with an intermediate period of informal financial hegemony exercised by the US but contested by Britain between the two wars. As Metzler points out, Japan was an industrializing country in this period, and sat at the periphery of this system dominated by New York and London. Yet, participation in the system was key to first-class nation status both politically and financially, and in this period we see ‘liberal’ Japan being steered into adopting a system that ultimately worked to its disadvantage, in a way not dissimilar to interwar Germany.

Metzler's central argument is that understanding Japan's relationship with the international monetary and financial system provides the key to understanding Japanese politics and foreign relations in this period. Japan's policy was driven primarily by the ‘logic of Japan's international position’ (p. xiv), which demanded that Japan join the gold standard – a sign of first-class nationhood; yet, as a country at the periphery of that order Japan was most vulnerable to the adverse effects of an inflexible international monetary system, most importantly deflation. The case for joining the gold standard was sound initially, as it provided Japan with access to London money markets vital to Japan's victory in the 1904–5 war against Russia. But crucially for Japan, unlike its war with China, the Treaty of Portsmouth of 1905 provided no indemnity. This proved to be the turning point, as it placed Japan irreversibly in debt.

Here Metzler points out that the Hobson-Lenin theory, which argues that modern imperialism was driven by surplus capital seeking foreign outlets, has no relevance to Japanese imperialism. Newly industrializing Japan experienced capital shortage persistently, and throughout the interwar period its international borrowing came second only to reparations-bound Weimar Germany, and its mode of ‘dependent imperialism’ (p. 51) drew it into debt at the same time that it sought to build a European-style empire in Asia. Although the First World War allowed a temporary boom as Japan replaced Britain in Asian markets, overall it created an imbalanced economy dependent on cheap credit for growth.

Japan's story is part of the failure of post-First World War stabilization worldwide. From Japan's angle, it also provides the background for Japan's later radical turn against the West. Successive Japanese cabinets in the 1920s tried and failed to restore the yen to a gold basis, as domestic economic policy lurched back and forth between austerity and expansionism, in the form of ‘positive’ or active policy (sekkyoku seisaku) in a period when liberalism and militarism co-existed. Unlike post-Second World War Japan, the more ‘liberal’ interwar system practically surrendered control over inflow and outflows of capital to the international financial system dominated by New York and London, whereas in post-Second World War Japan dollar holdings did not govern the volume of yen circulation. Despite extensive cultural changes, Metzler concludes, interwar Japan experienced no ‘Roaring Twenties’. With economic growth averaging around 2 per cent per annum and population growth around 1·5 per cent, Japan experienced negligible increase in income per capita. Agriculture still employed 50 per cent of the population, making Japan highly vulnerable to the global farm crisis, and produced what contemporaries described as a ‘deadlock’ (ikizumari, p. 115).

As one of the first studies of the gold standard system from outside the Western ‘core’, this book is a ground-breaking effort, demonstrating a firm grasp of the technicalities of the system backed up with painstaking research in the archives and personal papers of contemporary participants in the US and Japan, as well as the secondary works of Japanese historians. Given that no other major work has opened up studies of the gold standard to include an Asian power, and one that was uniquely placed between the Great Power centres of New York and London and the colonial world, this book is of immense value to Western students of interwar economic history, of international political economy, and of historical studies within the discipline of economics. It is also one of those rare books in Asian studies that tell us something quite profound about the West itself, demonstrating with model clarity how the Western system functioned both as a whole and on the periphery.

It is difficult to find much to criticize in a work as strong as Metzler's, but one thing that can be said is that he does not directly study the impact of disciplinary economics on the training of the key personnel, or its impact on contemporary decision makers, except for Keynes. Although Metzler strongly suggests that figures such as Junnosuke Inouye were blindly following the accepted Western orthodox course of action and policy recommendation, he does not fully disclose the alternative structures of thinking that were available either in Japan or the West. Similarly, one can note that the theoretical foundations in this book are stronger when it concerns the West, where the field is already strong and well developed, than when dealing with non-Western countries. It would be interesting to hear the author's views as to how one may use the empirical evidence he has garnered to construct a more theoretical framework for understanding a second-rate power's role in shaping the international system, and in particular to hear more about the connection between Japan's ‘industrializing’ economic structure and participation in international politics, which, amongst other features, mirrors China and other developing countries' involvement in global discussions today.