The relative ease of ending the Tokugawa rule in early 1868 did not pave the way for a smooth transition to the Meiji modernization. Leaders of the Satcho-Hito alliance had to overcome a number of obstacles in the early years before they could implement their modernization programmes.

Search for a new political order -- the Satcho-Hito alliance could not possibly replace the Tokugawa bakufu as the central organ of Japan. Another line of shogun was impossible given the different vested interests in Japan -- no single daimyo could claim hegemony among the various domains. All the other daimyo, apart from the SatchoHito group, remained watchful and had different viewpoints. Even many senior Court nobles were suspicious of the intentions of the Satcho-Hito alliance. Under such circumstances, the search for a new institutional framework pointed to the Imperial Court as the solution to Japan's central government. Emperor Meiji was still a young boy, but at least the samurai leaders of the Satcho-Hito alliance were willing to support an imperial restoration. Doubtless, the influence of Shintoism had a bearing on the minds of these leaders. Consequently, the Meiji Restoration took place in 1868. In April, the young emperor proclaimed the Charter Oath which indicated the major policies of the Meiji era. In the next year, the imperial court moved to Edo -- now renamed Tokyo -- and the castle of the Tokugawa Shogun became the Imperial Palace.

Abolition of feudalism -- a second obstacle was the decentralized feudalistic state of Japan. Though the shogunate was overthrown and an imperial restoration effected, the country was still divided into hundreds of feudal domains. Such political decentralization was unfavourable to modernization. Consequently, the Meiji leaders took several steps to abolish feudal heritages in Japan in order to pave way for a modern, centralized state.
Between 1868 and 1871, a central administration was created at Tokyo. Key personnel in the Tokyo government included a few Court nobles, several daimyo, and a small group of samurai leaders from Satcho-Hito. Real controllers of power rested with the last samurai group. Next, the whole country was put under imperial authority between 1869 and 1871. Not without the threat of using force, all former domains were abolished and 72 prefectures were set up throughout the country. Local officials, subordinate to the central government, were appointed to run the prefectural governments. An elaborate scheme was implemented to compensate both the feudal lords and their retainers. In abolishing the 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.

Samurai discontents -- in the abolition of feudalism, the daimyo lords were well treated and had less complaints. The chief victim was the samurai class as a whole. The samurai had great vested interests in the feudal order -- politically, they were entitled to officialdom; socially, they were superior in the hierarchy; economically, they lived upon fixed stipends from the daimyo. With the end of the feudal order, the samurai suffered severe blows. For instance, their social status declined with the abolition of class distinctions; their economic situation worsened because the Meiji government gave them less stipends. In sum, they lost their past privileges.
At the same time, they were discontented with the new order. In the opinion of many ex-samurai, the reforms of the 1870s were too drastic or too hastily imposed. They resented in particular the creation of a new conscription army. They also wanted war with Korea both to avenge insult and to extend Japan's power. Such samurai discontents finally sparked off the Satsuma Rebellion in 1877. It proved to be the last feudal uprising against the Meiji government and demonstrated the success of the peasant conscription army.

Policy debate -- a fourth obstacle was the quarrel within the ruling circle over policy priority. In the early 1870s, the Meiji leadership was split into two factions. One was led by Saigo and Itagaki who advocated overseas expansion partly as an outlet for samurai frustration. The other was led by Iwakura, Ito and Okuma who preferred modernization first because they had seen personally the strength of western countries. In 1873, the issue of Korean expedition took place. Saigo's faction was defeated. The priority was set as "reform at home and peace abroad." The price was the unity of the ruling group -- Saigo and Itagaki resigned. The first one took part in the Satsuma Rebellion and was killed on the battlefield. The second one chose to lead the minken movement, demanding representative government in the 1870s. On the other hand, the incumbent leaders became more powerful and they carried out coherent and purposeful reforms at home.

Means of survival -- before the Meiji government could carry out purposeful reforms, it needed means of survival. This meant a new revenue system and a new army. The Meiji government was in great financial straits in the early years. The compensation scheme for the daimyo and samurai was an enormous financial burden, and funds were needed for modernization. The Tokugawa system of tax collection was no longer useful. Thus, in 1873, a new land tax system was created. (for details, see sections below)
At the same time, the outdated samurai warrior class needed recast to face the modern world. Also in 1873, a nation-wide conscription army was created, drawing into military service the Japanese peasants. These two innovations enabled the Meiji government to overcome financial and military problems. The new land tax system provided a stable revenue income to the government and financed much of the government's expenditure. The conscription army proved to be successful in the 1877 Satsuma Rebellion.

Relation with the West -- last but not the least, the Meiji leaders faced great difficulties in diplomatic affairs. The threat of the West to the independence of Japan and the existence of unequal treaties were great obstacles in Japan's modernization. In order to fathom western intentions in Japan and to look for treaty revision, the Iwakura mission travelled in western countries between 1871 and 1873. It failed to revise the unequal treaties. Yet it saw much of the West's economic and military progress. Members of the mission felt that Japan had far to go before she could negotiate on equal terms with western powers. They were convinced that the pace of modernization needed to be quickened. Consequently, they overruled Saigo's faction for a Korean expedition upon their return to Japan in 1873.

In short, the Japanese leaders failed to remove the obstacle of unequal treaties with the West in the earlier years of the Meiji era. But they were much more successful in overcoming internal obstacles. The foundation for a full range modernization scheme was thus laid.