Discussion Papers 2018

CIRJE-F-1079	"Interlinked Transactions under Tenancy System: A Case from Meiji Japan"
Author Name	Kojima, Yohei
Date	March 2018
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Abstract
This study investigates the interlinked transactions conducted by a landlord who had a money lending business in a local community in Meiji Japan. Contrary to the theoretical assumption, interlinked transactions did not have the effect of preventing debt default, mainly due to the existence of fixed-rent tenancy contracts with state-contingent rent reduction. Because landlords needed to enhance their own bargaining power in anticipation of rent reduction requests, even high-risk tenants could receive loans from their landlords and were allowed to repay in arrears, whereas it made it difficult for tenants to discount the rent amount in lean years.

Abstract

This study investigates the interlinked transactions conducted by a landlord who had a money lending business in a local community in Meiji Japan. Contrary to the theoretical assumption, interlinked transactions did not have the effect of preventing debt default, mainly due to the existence of fixed-rent tenancy contracts with state-contingent rent reduction. Because landlords needed to enhance their own bargaining power in anticipation of rent reduction requests, even high-risk tenants could receive loans from their landlords and were allowed to repay in arrears, whereas it made it difficult for tenants to discount the rent amount in lean years.