The Edo shogunate (1603-1868) protected the property rights of farmers, which provided farmers with loans at low interest rates with pledging their property. Meanwhile, the shogunate attempted to prevent the ownership concentration of farmland to maintain social stability. The trade-off between the functional market that helped farmers borrow and the social stability required the shogunate to elaborate legislation. While protecting the property rights of farmers, the shogunate did not enforce foreclosure of loan contracts made by lenders who did not fully pay the land tax and public dues. Since the shogunate delegated the tax collection to the village office, absent lenders preferred payment of a fixed amount to cover the tax and public dues to actual expenses of the tax and public dues to avoid moral hazard by debtors. Such a contract, however, violated the condition for the shogunate to enforce foreclosure. Thus, regulation in effect hindered loan market expansion and concentration of land ownership beyond village borders.
