1901.] COMMERCIAL JAPAN. 2269 



bo considered in connection with a coinage reform to be effected would be as to the effect of that reform on the price of commodities at 

 home and on the responsibility and liability in cases of monetary contracts, and that the questions connected with the effect on the 

 foreign trade of the country must be looked upon as of lesser importance. Now, considered in relation to the effect of coinage reform 

 on the prices of commodities and on the responsibility and liability connected with monetary contracts, we believe that the reform wa.s 

 undertalten at a most favoi'able moment. There were other causes, too, which made the reform ea.sier. First among these caases may 

 be mentioned the fact that though our country had adopted a gold standard once before, soon after the restoration, it became changed 

 into a bimetallic system, so that wliile there were always gold coins in existence in the country, they were not used in the daily 

 transactions of the people. And later, when a de facto silver standard came to prevail, even then silver coin was scarcely used in daily 

 transactions, but the convertible note representin:^ that coin, the latter being merely kept in the Bank of Japan as the conversion 

 reserve. The second fact to be noted is the snuillness of the native output of gold and silver. The quantity of these metals produced 

 in the country is so small that Japan can scarcely be called a gold or fcllver producing country. The third cau.se is the fact that }x>th 

 gold and silver coins, as well as bullion of the -c metals found in the country, were nearly all absorbed by the Bank of Japan, and but 

 very httle was found among the people in general. Then, fourthly and lastly, there was but very little foreign capital directly invested 

 in industrial and commercial enterprises in tiie country. All these causes combined to make the conditions prevailing in Japan very 

 different from those in American or India, and made it very much easier to carry into effect the plan of coinage reform. 



Another fortunate thing was the fact that the price of silver, which had shown a growing tendency to depreciate, remained almost 

 stationary at the time the reform was lieing effected; and since the price of silver which prevailed at tiie time made our oldl-yen gold 

 coin about equal to 2-yen silver, the Government was able, in establishing the new system, to fix upon the weight of our new coin at 

 one-half the weight of the old coin. For this reason, althougli the standard of our coinage was changed from silver into gold, yet the 

 value of our standard coinage remained almost unchanged. These favorable circumstances together enabled our country to accomfjlish 

 the reform without disturbing the prices of commodities or the responsibility or liability in cases of monetary contracts, and thas to avoid 

 evils most dreaded in foreign countries. We must therefore afllrm that our coinage reform was successful in accomplishing the most 

 important object it had in view. What, then, has been its effect on the foreign trade of the country? There is no doubt, of course, that 

 this is a very important question. In trying to answer it we must remember that all of the countries of the world to-day, except a very 

 few, have now adopted the gold standard, and the volume of our trade with the gold-standard countries amounts to two-thirds of the 

 entire volume of our foreign trade, while the amount of our trade with the silver-standard countries comprises but about one-third. And 

 since it is clear that we have benefited greatly through reform in our trade with the gold-standard countries, we must conclude that the 

 effect of our recent reform on the foreign trade of the country has been, on the whole, wholesome and beneficial. We are not indeed entirely 

 free from the danger that, in competing with the silver-standard countries in the market of the gold-standard countries, we may be 

 sometimes placed at a temporary disadvantage owing to the changes in the ratio between gold and silver; yet it is a fortunate thing that, 

 in regard to silk, which is our most important product, there is scarcely any such danger, since the silk that our own has to compete 

 with is not the Chinese silk, but the Italian silk, the former meeting different customers from ours. Some would indeed attribute the dull 

 state of commerce with China since last year to the effect of our coinage reform, but such critics perhaps do not undei^stand the real state 

 of affairs in regard to our commerce with China. We need hardly to say that the growth or decrease of our exports to any foreign 

 country depends very largely upon the economic conditions of that country. 



Owing to financial derangements consequent upon her war with our country, as well as to the failure of crops and of silk culture, 

 China was in no condition to buy from us, so not alone in her import trade with this country in cotton yarns, etc., but also in her trade 

 with other countries as well, she has not shown much activity. For this reason, the specie which was received in payment for the 

 exports was absorbed into the interior of that country and never came out. This produced a great scarcity of currency in Shanghai, 

 Hongkong, etc., raising the rate of interest to 20 or 30 per cent per annum. For this reason, and from the fact that the exports of some 

 articles, like matches and coal, which are in great demand throughout the Far East have not decreased at all, we may .safely infer 

 that as soon as the business condition of China improves our export of cotton yarn into that country will increase, as also indeed the 

 exports of other articles. Again, some critics would regard the reduction in the market price of our cotton yam from 100 yen or there- 

 abouts of last year to 75 yen or thereabouts of this year as due to the influence of our coinage reform. This opinion, again, "seems to rest 

 upon ignorance of the facts, for it must be remembered that last year's cotton crop of America was very abundant, so that the price ol 

 raw cotton fell from 22 or 23 yen to 15 or 16 yen, i. e , by about 20 to 30 per cent. When a raw material becomes reduced in price, the 

 article manufactured from it will, as a matter of course, also be reduced in price. There was perhaps another cause for the reduction in 

 the price of our cotton yarn, namely, its overproduction and oversupply in the market, owing to the greatly increased number ol 

 epindles which were set up. In fact, India seems to be similarly suffering on account of the difficulty of selling its cotton yarn and the 

 consequent fall in the price. And when we remember that the currency of India is not a silver standard, but one which rnay most fitly 

 be called an artificially constructed gold standard, there does not seem to be any cause for alarm on account of our change "of currency 

 from the Indian competition in the production of cotton yarn. 



Such, then, being the case, we believe that the beneficial effect of our coinage reform on our foreign trade has already been great, 

 and we do not notice any material evil in connection with it. Besides, our adoption of the gold standard has made it easier for oui 

 country to enter into the economic community of the world at large, so that henceforth it will become practicable for us to invite cajntal 

 from other countries where it is plentiful to be invested in our country. This will undoubtedly he another of the benefits conferred 

 ujoon the country by our coinage reform. We conclude, therefore, that the effect of the coinage reform upon our foreign trade has been 

 beneficial, without a trace of evil, so that there does not seem to be any need for adopting measures for the warding off of possible evils. 



DETAILS OF THE COINAGE HISTORY OF JA^"'AN. 



The above extracts present, in official form, a condensed statement upon the subject in question. For the convenience of those 

 desiring to make a more elaborate study of the subject, the following additional details from the report are presented: 



The report proper, which follows the letter of presentation fi'om the minister of finance, already quoted, states that the monetary 

 system in vogue when the restoration took place in 1867 consisted largely of debased coins issued by the various governments, 

 counterfeit coins, and depreciated paper money, and adds: 



After the country was opened to trade with Western nations the Shogunate government was the first to realize the greatness of the 

 loss from which the country was suffering on account of the disordered state of coinage. Before any steps were taken, however, toward 

 reform the Shogunate regime was overthrown and the restoration regime ushered in. 



The Imperial Government at once felt the pressing need of a monetary reform, and in April, 186S, while the revolutionary wars 

 were yet going on, a plan of recoinage was drawn up and adopted. Steps were immediately taken to found a Government mint, "and in 

 November, 1869, it was determined to base the new coinage on the metric system, making silver the standard unit of value and gold 

 subsidiary. In November, 1870, the Government mint began to coin silver. While such steps v^^ere being taken at home there arriveil, 

 early in 1871, a memorandum from Mr. Ito Hirobumi, vice minister for finance, then traveling in the United States. In that memoran- 

 dum Mr. Ito (now marquis) sets forth the advantage of adopting a gold standard. The memorandum runs as follows: 



REASONS FOR BASING THE JAPANESE NEW COINAGE ON THE METRIC SYSTEM. 



According to the coinage system recently adopted in Japan the silver yen is the standard unit of value, so that may be used as legal 

 tender in transactions to any amount; the smaller coins, various fractions of 1 yen, are to be the subsidiary motlium of exchange, each 

 kind being permitted as legal tender in transactions amounting to one hundred times its value. There is, besides, the gold yen, but it 

 is subsidiary, and may be used in the payment of sums of not more than ten times its value, or 100 you. 



No. 6 18 



