2272 COMMEKCIAL JAPA^. [December 



bank suffered so much loss as to become almost bankrupt, and other measures did not produce the desired result. The difference in 

 value between silver and paper kept on increasing, so that in April, 1880, the average ratio between the two was 1 yen 54 sen 9 rin of 

 paper to one yen of silver. When all the.se attempts had failed the Government at last opened its eyes to see the necessity of making 

 redemption. With this object in view the ratio of tax on sak6 was doubled by imperial ordinance Xo. XL, of September 27, 1880, so that 

 the increased revenue on that score might be set apart as a redemption fund. Again, by imperial ordinance Xo. XLYIII, the spheres 

 of local taxation were increased, correspondingly lightening the financial burden of the central government, and at the same time the 

 Government expenditures were much curtailed, the surplas obtained in all the.se ways Ijeing also added to the redemption fund. Besides 

 all these, the Government decided gradually to transfer by sale to private hands the Government factories which had been established 

 for the encouragement of industry, stopped making loans to companies and individuals out of the reserve fund in the treasury, and every 

 yen thus gained went to further increase the amount of the redemption fund. 



Yet the depreciation of paper did not stop. In April, 1881, 1 yen silver fetched on an average 1 yen 79 sen 5 rin of paper (the 

 lowest point reached in depreciation during that month being 1 yen 81 sen 5 rin). 



This was, indeed, the lowest point ever reached. At this time a plan to raise a foreign loan of 50,000,000 yen for the purpose of 

 redeeming paper money was advocated by some in the Government, but the plan was never adopted. With the appointment of Mr. 

 Matsukata Masayoshi (now count) to the portfolio of finance, on the 20th of October, 1881, the Government determined at last to adopt 

 the policy on the one hand of redeeming the paper money, and on the other of increasing the specie reserve of the Government as pre- 

 paratory to the introduction of a convertible note system. The amount of Government jjaper and of bank notes at this time in circula- 

 tion stood as follows: 



Yen. 



Government paper money 105, 905, 212 



Government paper monev temporarily issued out of the paper-money reserve 14, 500, 000 



Notes issued by national banks 34,398,030 



Total 154,803,242 



The finance minister of the time (Count Matsukata) thought it an irregular practice to issue a part of the paper-money reser\'e for 

 temporarily meeting the deficit of revenue, as had been the practice of the Government for some years past. In order to paj' back once 

 for all the amount thus utilized from the paper-money reserve, he introduced certain changes in the method of making receipts and dis- 

 bursements of the public revenue. He had, besides, the method of disbursing the expenditures of the Government departments changed, 

 eo that henceforth these disbursements were all made at the exchequer, instead of having the amounts of the estimated expenditures 

 turned over in lump sums to the departmental authorities in the early part of the fiscal year. These changes were effectual, as may be 

 presumed, in leading to economy in the State expenditure. Yet further steps were taken toward economy and the increase of the Gov- 

 ernment reserve by ceasing to make any further loans out of the Government reserve in aid of industrial enterprises, and at the same 

 time by requiring that all the past loans should be paid back to the Government according to the terms of agreements. Now, with the 

 money which came into the treasury in these ways, as well as by temporarily utilizing the money which came in response to the Xaka- 

 sendo railway bonds, issued about this time, the Government was able to pay back to the paper-money reserve in January, 1883, the 

 entire amount of the paper money which had been subtracted for temporary circulation out of the said reserve. A plan was now adopted, 

 on the other hand, of issuing the treasury bills to meet the demand of the exchequer for any temporary deficit in the revenue. * * * 



AVhile in this way was effected the adjustment of the troubles connected with the temporary issue from the paper-money reserve, 

 not quite so easy was the adjustment of the larger troubles which existed in connection with the paper currency proper. 



The minister of finance of the time (Count Matsukata) felt that in order to effect the much needed adjustment of the Government 

 paper money it would be necessary to estabhsh a great central bank, which should have the sole privilege of issuing convertible bank 

 notes; which should serve as a supreme organ for the regulation of the currency of the country; which should, moreover, discount the 

 foreign bills of exchange in order to regulate the influx and efflux of specie and bullion; which should still further be intrusted with 

 certain services in the treasury, so as to simplify the business of the exchequer. 



The above recommendations of the minister of finance. Count Matsukata Masayoshi, for a great central bank were approved by 

 the Government, and in June, 1882, regulations issued authorizing its establishment. 



At the same time with the establishment of the Bank of Japan the Government took measures to increase its revenue. In 1882 

 the Government first levied stamp duties on patent medicines and license tax on the brokers of the rice exchange and the stock 

 exchange, and revised sake and tobacco taxes, and in 1885 taxes on soy and confectionery were levied for the fii-st time. One-half of 

 tiie surj)lu3 of revenue which was secured through the.se means was devoted to the redemption of inconvertible paper money, while the 

 other half was added to the reserve fund with the object of employing it for securing the importation of specie from abroad. 



The Government now established consulates in London, New York, and Lyons, the three greatest foreign markets for Japanese 

 poods, and by employing the reserve fund of the Government in discounting foreign bills of exchange tried to absorb specie from 

 abroad, a.s well Jis to encourage the export trade. To import foreign specie in some Avay was at the time an absolute necessity, since the 

 outi)ut of gold and silver from Japanese mines only amounted to 400,000 or 500,000 yen annually. As results of this policy "the amount 

 of jjajior money was reduced at the end of 1885 to about 88,345,096 yen, while at the same time the Government Avas yet able to keep 

 al)out 42,200,000 yen of specie in the reserve fund. In view of these facts, the price of paper money gradually kept rising until it stood 

 on a par with silver. The minister of finance, Mr. Matsukata (now count), now presented to his colleagues a plan of permitting the 

 Bank of Jajjan to issue a certain amount of convertible bank notes as a sort of experiment preparatory to the resumption of specie 

 payment. 



The Government, on approving this plan, had regulations drawn up concerning covcrtible bank notes. Imperial ordinance No. 

 X\'lll and the accompanying regulations in regard to convertible bank notes, which were issued on the 26th of May, 1884, run as 

 follows: 



IMPEEIAL ORDINANCE NO. XVIII OF THE 26tU DAY OF MAY, JSS4. 



The convertible bank-udte regulations are hereby issued. They will go into operation on the 1st day of July, 1SS4. Imperial 

 ordinance No. C, promulgaled in September of 1874, will ceaso to be effective one year after the day these regulations are issued. 



THE CONVERTIBLE BANK-NOTE REGUL.\TI0NS. 



AitTiri.E I. The convertible, bank notes sliall be issued by the Bank of Japan, in accordance with the provisions of Article XIV of 

 the rcu'ulatinns concerning tho Bank of Japan. These bank notes .«hall be convertible with silver. 



Aki. 1 1. The l'>atik of .I;i])an sliall kci'i) a suliicii-nt amount of silver coins as reserve fund for the conversion of its note?. 



.\ur. ill. Tiie (lenoininationH of tiie converlil)lo bank notes shall be 1 yen, 5 yen, 10 yen, 20 yen, 50 yen, 100 yen, 200 yen — seven 

 kinds in all. The minister (A finance shall determine the amount to be issued of e'acli kind. 



Art. IV. The convertible bank notes shall be legal tender in the payment of taxes and customs duties, as well as in all monetary 

 transaction.^. 



Ai;t. V. The convertible bank notes shall bo manufactured by the Bank of Japan according to the shape, lettering, and design 

 flxo<l by the minister of finance, the amount manufactured being reported to the said minister from time to time. The minister of 

 finance ^^hall i>n>viously notify the inilijic a.s to the specimen of the note to be issued. 



Ai.T. VI. IVrsons desirous of getting the notes exchanged for coins may get them so exchanged at the central or branch office of the 

 bank al any time when the bank is open for business. 



