The Tokugawa period witnessed a remarkable flowering of almost all the arts. To be sure, even during the Warring States period the arts never died: Hideyoshi, for example, was a major patron of the tea ceremony. But peace and (for some) prosperity allowed many more people to enjoy going to the theater, reading and writing poetry and novels, and drawing some really world class pictures. Unfortunately, the Confucianist Tokugawa regime was rather prudish and did their best to encourage morality, diligence, and proper thinking and actively discouraged anything that might be fun. So people (including the rulers) had fun and just didnt tell the government. Literature, theater, the fine arts, as well as more "Japanese" arts such as tea ceremony and the martial arts, all prospered and reached new heights under the Tokugawa. Pre-Tokugawa literature was mostly an upper class pursuit, but in Tokugawa times, many lower class townspeople types read and enjoyed literature written for them. Several authors made their livings from writing novels and plays for the masses. Their stories dealt with love and sex and the conflicting demands of duty versus human feeling, often in humorous fashion. Have you been to a kabuki play? Did you stay awake through it? Kabuki actually makes ballet look exciting. Many Japanese proudly and loudly boast of the refinement and ``Japaneseness'' of Kabuki, which can get annoying if you know it originated as a way for itinerant prostitutes to display the goods to prospective clients - mostly young samurai. Yes, you read that sentence correctly. After a fight broke out at one of the shows, the government confined the performances to certain locations. When continued attempts at moral persuasion failed to keep samurai (and others too of course) from flocking to the shows, the Bakufu finally just forbade women to appear on stage. From then on, Kabuki featured men in all the roles and therefore had to depend on the plays story to attract customers. Real distinguished origins, arent they? No matter, since once the writers got a chance to do some real scripting, some of them came up with masterpieces. Once the kabuki theater had gotten its act together, it and the puppet theater competed for the same audience and both were quite innovative in their attempts to lure the others audience away. End result was high quality theater that was very popular. (Think of the modern movie industry: some very popular movies, lots of garbage ones, and occassionally Gone with the Wind.)
East Asia had the movable-type printing press before Europe, but making all those kanji was too time consuming a task to make it worthwhile, so most printers used block printing instead. Block printing involves carving (in reverse) the entire page into a block of wood, which is then used to make prints. No one said you have to carve words into the block though. Japanese artists became very good at making prints of just about anything, from handbills for theaters to the latest best-seller to multi-colored pictures of nature scenes or the newest Kabuki star. After nature - always a favorite of the Japanese - pictures of the "floating world" were the most popular. The floating world is the world of the pleasure quarters, the areas of the major cities where everyone went to have fun. (Everyone except for the girls who were sold to the houses of prostitution. I dont know where they went to have fun.) Ukiyo-e, as these pictures are called, are generally colorful and full of life and action. Because they were carved in wood, they could be used to make prints until the wood wore down too much. This meant that even samurai or merchants of moderate means could afford to have a print from a master hanging in their house. Finally (yeah), everyone has probably heard of haiku, the 5-7-5 form of poetry. Well, it reached its final form and its zenith during this period. Matsuo Basho is without a doubt the most famous of haiku poets of this period or any other.
The Tokugawa period saw either the creation or refinement of most of the major "traditional" elements of modern Japanese culture. The tea ceremony, poetry, and literature all predate the Tokugawa era but none stagnated during it. Kabuki and ukiyo-e were new but quickly reached maturity. The most important break from the past was the role the townspeople played in new and old cultural pursuits. They were both the producers and the consumers of the culture, buying the books and prints and going to the plays. Of course many samurai did these things too, but never in the past had the regular people had such a large role in the culture of the day.