When we say that Tokugawa Japan was a feudal country, we refer to its two chief characteristics: political decentralization and social stratification. Politically, the Shogun reigned supreme in authority, but under the bakufu was a great number of daimyo who owned their fiefs in which they were petty despots. Decentralization is the key word.Socially, Japanese were divided into classes, ranging from samurai, peasants, artisans to merchants, in a descending order. Both vertical and horizontal mobility were difficult.

Abolition of feudalism -- with the beginning of Meiji Restoration, the ruling oligarchy intended an abolition of feudal heritages to achieve political centralization, social mobility, and economic transformation. Japan had to become a centralized nation to survive in the face of domestic and foreign threat.

Political centralization -- an administrative structure gradually took shape between 1868 arid 1871 after the fall of the bakufu. This central administration at Tokyo (formerly Edo) consisted of the Council of State (Dajokan) which was divided into three chambers: a Left Chamber which in theory determined on legislation; a Right Chamber which was to supervise the various ministries; and a Central Chamber which retained all the actual authority both for legislation and for supervision of the ministries. Key personnel in these bodies included a few Court nobles (Iwakura Tomomi), two former daimyo, and a small group of samurai from Satcho-Hito. (Saigo Takamori, Okubo Toshimichi, Matsukata Masayoshi from Satsuma; Kido Koin, Ito Hirobumi, Yamagata Aritomo from Choshu; Okuma Shigenobu from Hizen; Itagaki Taisuke from Tosa) This group was referred to as the Meiji oligarchy.
A second step was to centralize the whole country under imperial authority at the expense of feudal heritages. The Imperial Court first took over the former domains of the Tokugawas. Next, daimyo of Satcho-Hito, under the persuasion of their samurai retainers, voluntarily submit their fiefs of the Emperor in March 1869. Finally, other daimyo were "advised" to follow the example in the next few months. By 1871 the abolition of feudalism was completed when Emperor Meiji announced that all land was to become imperial territory, and domain armies were to be disbanded.
A compensation scheme followed for both the daimyo and samurai. As we shall see later, each of these two classes suffered different fate. Following the abolition of feudal domains, a system of local administration was structured. In the early 1870s, 72 prefectures were set up, and the number was reduced to 45 by 1890. These were run by a system of local officialdom which rules were codified. The whole system of local administration was subordinated to central control through the Home Affairs Department at Tokyo. By and large, by mid-1870s, the feudal structure of Tokugawa Japan was replaced by a centralized system headed by the Meiji oligarchs.

Effects -- in abolishing the feudal domains, the Meiji leaders had gambled for high stakes and success brought them jurisdiction over the whole country's land, population, and revenue. Thus the central government had at least possessed the basic requirements for the creation of a modern state,h the central and local bureaucracies were refined in the following years. At Tokyo, successive political struggles eliminated dissatisfied elements from the ruling group. For example, Saigo Takamori and Itagaki Taisuke resigned in 1873 because of the Korean crisis. At a lower level, all appointments were determined by ability (selected through civil service examinations), experience and loyalty. All officials depended for their power on the central government at Tokyo. A set of civil service regulations put the entire bureaucracy in acceptable conditions. It was not until the preparation and proclamation of the Meiji Constitution that further institutional changes were made in the 1880s. Political changes of such a scale affected two vested interest groups of the past -- daimyo and samurai. Each had a different story to tell.

Social changes -- mobility -- feudalism implied social stratification. The Meiji leaders changed the situation by first proclaiming that all Japanese were the subjects of the Emperor, and all were equal before law. Thus was ended social hierarchy with its class privileges for a few. For the daimyo who had given up their domains, they were generously compensated. These feudal lords were at first appointed governors (non-hereditary) to their former fiefs, with an annual income equal to one-tenth of their former revenue. Honorable titles were later granted to them and some were accepted in the House of Peers with the proclamation of the Meiji Constitution.
The samurai were much less well treated. Socially, they were no longer a privileged class since class distinctions were abolished in 1872. At the same time, the creation of a new conscription army deprived them of their privilege of warriors in Japan. In 1876, they were prohibited to wear swords, symbol of their dignity. Economically, they were given half of the stipends that they formerly received from their lords. They were given permission to enter farming, commerce, and other occupations. In 1876, their stipends were commuted into interest-bearing government bonds.
The peasants were granted liberty and equality before the law. They were allowed to move into cities in search of new life. In return, all peasants paid taxes to the government according to a new land tax system. In 1873, all land was to be valued, and the owner of it was to pay an annual tax of 3 per cent of its value in cash. Furthermore, they were liable to be conscripted in the army.
The merchant class reaped great benefits with the abolition of feudalism. Socially, they were no longer inferior; indeed superior because status was now commensurate with wealth. Economically, the patronage of commerce and industries by the Meiji leaders gave them opportunities for investment. Many enriched themselves to become entrepreneurs or members of zaibatsu.

Effects -- the abolition of feudalism affected each of the main classes in Japan.
For the daimyo, it was a change for the better. In return for the loss of domains, they were financially rewarded, politically honored and socially dignified. Some joined the capitalist class; some were given titles of the new nobility; some were given positions of advisory capacity; but only a few retained power in the Meiji government.
The samurai were discontented. Their social and financial positions were worsened. While a few took up careers in police, army, politics, business and the like, the majority could not catch up with the rapidly changing reality. Most lived in miserable conditions and grumbled all the day. The more daring ones finally resorted to an uprising in 1877- the Satsuma Rebeffion under Saigo. Unsuccessful, it proved to be the last feudal rising against the Meiji government and demonstrated the success of the peasant conscription army.
The peasants fared little better. No longer paying feudal dues, they paid cash to the government as land tax. The fixed percentage and cash payment caused much hardship to the peasants because they were taken advantage of by the money lenders and rice merchants. Rural unrest continued to be an element of instability during the Meiji era.
Finally, the merchants rose to the top of the society. Many became capitalists in a fast growing Japanese economy. The government patronage of industrialization gave them chances for economic enrichment, social and political influence. They were to become the backbone of the new society.