Abstract: Development ofﬁcials and scholars routinely argue that land reform can raise productivity. It may not always do so, they write, but it can—and during 1947–1950 in Japan it did. Land reform may sometimes raise productivity, but it did not raise it in Japan. The claim that it did is a fable, a tale people tell and re-tell only because they wish it were true. A lease is a credit transaction—a way for local elites (tied to local information networks in ways that banks can never be) to extend funds to farmers. Elites could lend money directly, but would need to create a security interest to protect their loans. Doing so requires legal procedures, however, and most local elites in prewar Japan lacked the university education necessary to manipulate those procedures. By contrast, a lease lets local elites protect their funds simply by retaining the right to evict tenants who fail to pay. As such, it represents a way for investors and farmers jointly to economize on credit market costs. The Japanese land reform program effectively banned this transaction-cost economizing credit-market strategy, expropriated the wealth of the investors who used it—and cut the rate of growth in agricultural productivity.