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If it all scales exactly on size then theirs no different challenge as you get bigger, whereas the third one gives something different to consider and it makes sense in terms of historical honour.

As far as I know we haven't said yet how we would scale this. It would of course not be a linear scale from one province and upwards.
 
An influence system / coercion system where you can threaten / flatter small states into becoming your vassals or declaring war. This would have a honour cost too, but less than declaring war. Right now, Sengoku is all stick and no carrot. If I have 300,000 soldiers, would I really need to declare war on a lord with 5000 soliders?

This would just make it even easier for large clans to blob. Just check out the screenshots thread where someone exploited that clans already were too easy to subjugate. He took 100% of Japan before 1550...
 
think 1962 I had all but 7 provinces.

That's not very impressing... :D

The counter to subjugation is making vassals more likely to revolt. If I'm a clan lord and some bully wants to curb-stomp because me he has 150,000 troops and I have 30,000, I'd gladly become his vassal until I get the opportunity to break free, ideally at a moment of over extended weakness. Maybe with a few other ambitious lords. But the AI rarely seems to plot to break free. Maybe they need something like a sub-plot - a conspiracy perhaps, that lets you find out who else is plotting against your lord / neighbors.

I've beaten the game twice now, first as Nagao (quite hard, civil wars saved me twice) and Kono (fairly easy) and I've seen maybe 2-3 AI plots kick in, only 1 involving 2 weaker clans taking on a stronger party. I have tried 1 plot against a stronger party myself, and it was just too much effort arranging marriages and sending bribes. Took me nearly 15 years. In that time, I could have beaten 2-3 smaller clans and had enough clout to stand up to the bigger clan myself.

My point is still this though, why should a 100 province Shogun contender clan go to war against a clan with 3 provinces. There's no system of alliances and guarantees like in the EU games, so the outcome is already known: splat! Unless they were willing to subjugate themselves, they died.

There was a bug with getting external backers to join your plot to break free, so with the patch this will be easier. But even so, in our test games I've seen quite a lot of plotting by the AI, and clans falling apart.