1901.] COMMERCIAL JAPAJN". 2273 



Art. VII. Persons bringing gold and silver coins to be exchanged for the notes may got them so exchanged at the central or a branch 

 office of the bank without fee. 



Art. VIII. The bank shall prepare tables showing the receipts and disbursements of the notes for each day, as well as for the 

 month, and report the same to the minister of finance. 



Art. IX. The minister of finance shall instruct the comptrollers to oversee all matters relating to the Issuing of the notes; when 

 necessary, the comptrollers may examine the safes where the notes are kept, as well as the books recording the notes is.?ued. 



Art. X. The notes which get defaced or mutilated so as to be unfit for circulation may be exchanged, without fee, at the central or 

 a branch office of the bank. 



Art. XI. All processes regarding the manufacture of the notes, their redemption, the exchange of damaged notes, etc., shall be 

 determined by the minister of finance. 



Art. XII. All crimes respecting the counterfeiting and fraudulent alteration of the notes shall be punished in accordance with the 

 articles relating to the counterfeiting of paper money in the criminal code. 



In accordance with these regulations the Bank of Japan began to issue convertible bank notes oothe 9th of May, 188-5; and the 

 minister of finance (Count Matsukata), in view of the fact that every preparation was now fully made for the Government to resume 

 specie payment, presented the following memorandum to the Government: 



Very soon after the restoration the Imperial Government was sorely pressed with the need of money to defray manifold expenses to 

 which the Government was subjected, and as the only measure of relief they decided to issue paper m'mey. The paper money was thus 

 issued on the 19th day of the second (fourth) month of the first year of Meiji (1868), and the period of circulation was limited to thirteen years. 



On the 28th day of the fifth month, second year of Meiji (1869), the system was changed, and it was publicly notified that the notes 

 W'Ould be exchanged with new coins which were then to be issued. But the demand for the Government expenditures continued to be 

 so great — owing to the facts that every piece of administration had to be newly begun, as well as to the fact that the Government had on 

 hand the task of adjusting the disordered state of affairs resulting from the war just closed — that the promised conversion of paper money 

 had to be practically abandoned. In the twelfth month of the fourth year of Meiji (1871) it was aimounced by imperial ordinance that 

 the various kinds of paper money would all be exchanged with the new paper money. * In the following year the Government put 

 forth a plan of redemption by inviting the people to have paper money exchanged with the Government bonds to be issued for that 

 purpose. The kinsatsu (literally, gold notes) exchange bond regulations were thus issued in the third month of the fourth year of Meiji 

 Q872). Yet the amount thus exchanged was small, never accomplishing the purpose of reducing the amount of notes in circulation. 

 After those days a series of political disturbances occurred, culminating in the rebellion in the southwestern provinces in 1877; and from 

 these causes the financial distress of the Government grew greater step by step, so that the Government was led to issue another large 

 batch of paper money. Thus, while the amount of paper circulating before the war of the rebellion stood at 93,. 32.3,156.338-5 yen, it was 

 increased by the addition of 27,000,000, issued during the war, and also by the issue of a large amount of national-bank notes. In 1878 

 the amount arose to such enormons proportions, and their prices fell so rapidly, that in the years 1880 and 1881 the depreciation 

 amomited to as much as 50 per cent of the face value. This was due, doubtless, to their overissue, but also no less to the fact that the 

 notes being inconvertible could not command enough credit. 



At the time the undersigned (Count Matsukata) accepted the present post the Government was most seriously engaged in an 

 attempt to find some fit measure of relief. The measures I had the honor to suggest having been approved by the Govermnent, and 

 having received the august sanction, progress was made step by step in the line of financial reform. As such steps may be mentioned 

 the reduction of the expenditures of the Government with the view to the contraction of paper currency; the increase of the specie 

 reserve as preparatory to note redemption; the retirement of the paper money temporarily issued from the paper-money reserve; the 

 founding of the Bank of Japan, by which the financial organization of the country was perfected; the revision of the national-bank regu- 

 lations, by which a way was opened for the redemption of the national-bank notes; and lastly, the issuing of the convertible bank-notes 

 regulations. During the first part of the period the amount of paper in circulation was 154,803,242.282 yen, of which 34,398,030 yen were 

 national-bank notes and 14,500,000 yen were the temporary issues from the paper-money reserve. But this amoimt has been reduced 

 during the past three years — including the present year, 1884 — by the redemption of 34,133,754.25 yen, of which 14,500,000 yen were 

 issues from the paper-money reserve and 3,637,772 yen v^ere the notes of national banks. Of the Government paper money that 

 remains, and is now in circulation, there are 89,909,230.032 yen. On the other hand, the increase of the Government's specie reserve 

 has been not inconsiderable. In 1881 the specie reserve of the Government for the purpose of redemption amounted to but 7,385,997.16 

 yen. (This is the balance remaining of the amount of specie in the Government reserve on the 21st of October, 1881, after from that 

 amount has been deducted 1,288,176.722 yen, being the amount employed in discounting foreign exchange bills.) Now, after but little 

 over three years, in October of this year, the specie reserve will probably amount to 39,612,810.722 yen. Comparing this with the 

 volume 0^ paper money in circulation to-day, it comes up to almost half the amount of the latter. That so much has been accumulated 

 in times when there have been so many calls for expenditures must be attributed largely — though, no doubt, partly due to certain 

 natm'al causes — to the earnestness of the Government in making the attempt to relieve the financial distress. 



In view of past circumstances and of the probable direction of future affairs, I can not but think the present to be the most oppor- 

 tune moment for redeeming the inconvertible paper money. I pray most earnestly that the Government will approve these suggestions 

 and not let go the present opportunity. I have no doubt that if these reforms are now effected that all fear of certain unexpected dis- 

 turbances in commercial affairs will be quieted, and the much-needed, facilities finally offered for the circulation of currency. But cur- 

 rency reforms need to be effected with extreme caution on account of their many-sided influence. It will be well, therefore, to effect 

 the change now contemplated gradually — not too suddenly. The 1st day of January, 1886, may be fixed as the date on which the proc- 

 ess of redemption shall begin to take place. The present specie reserve may first be de\"oted to redemption, while the coins minted 

 out of the redemption fund, year by year, may be set apart, as fast as produced, as reserves for further exchange. Let the business of 

 exchange be intrusted entirely to the Bank of Japan and that bank instructed to exchange all the Government "paper money tliat may 

 come to that bank by way of ordinary circulation. Thus may the too sudden change be avoided and the reform effected smoothly antl 

 quietly. If these suggestions shall happily receive the august sanction, not only will the Government be able to accomplish its original 

 purpose in regard to the paj^er money, but the credit of the Government, both at home and abroad, will be thereby assured, the national 

 finance placed on a firm basis, and the future happiness of the people greatly enhanced. 



As the result of this memorandum the public was notified, through imperial ordinance No. XIV, of June, 1885, that the Govern- 

 ment would commence to pay specie in exchange for Government paper money on January 1, 1886. The ordinimce runs as follows: 



IMPERIAL ORDINANCE NO. XIV, OF THE OtH DAY OF JUNE, 1885. 



The paper money issued by the Government shall be gradually exchanged with silver coins from January, 1886, on, and the paper 

 money thus exchanged shall be canceled. The rules concerning the process of making the said exchange shall be fixed by the minister 

 of finance, and the business intrusted to the Bank of .lapan. 



As to the conversion of national-bank notes, the minister of finance, Mr. IMatsukata (now count), saw the need of first amending 

 the national-bank regailations, with reference to which lie presented a memorandum to the Government. * * * 



The policy laid down in the memorandum was adopted by the Government, and by imperial ordinance of the 5th of ^lay, 1SS3, 

 the Government introduced cei-tain amendments to the national-bank regulations. According to these amendments the term of business 

 of national banks was to be twenty years, counting from the day they received their chartei-s, and if they desired to continue their 

 business after the expiration of their term they were to do so as private institutions; moreover, each bank was required to keep a^ a 

 reserve fund for the redemption of notes money equal in amount of one-fourth the amount of notes issued by that bank, and effect 

 redemption within its term of business according to the methods laid down in the following regulations. It was also stated in these 

 amendments that persons desirous of having the bank notes exchanged for currency might do so by taking them to the Bank of Japan. 



« Manufactured in Germany; these nev ones also inconvertible as the old ones. 



