2296 



COMMEKCIAL JAP^vy. 



[December, 



ISSUE OF NOTES BY THE BANK. 



At the time when the Bank of Japan was organized the market was flooded with inconvertible paper currency. The Government 

 paper money amounted to ] 15,381,292 yen, with denominations as small as 10 sen. The notes of national banks were over 34,396,818 

 yen, which did not all pass with the same credit. The currency was inflated to such a degree that the premium on specie was once 79 

 sen per yen. Under such circumstances it was the policy of the Government to place the power of regulating the currency in the single 

 hand of the Bank of Japan, and to i-eplace this inflated currency with the notes of the bank, which are elastic and redeemable in silver. 

 For this purpose the Government again issued gold-note redemption bonds to contract the circulation of depreciated paper and pur- 

 chased silver and foreign bills to prepare the way for the return to specie payment. Within three years the Government paper money 

 was withdrawn to such an extent that the Bank of Japan felt safe to issue its first notes in May, 1885, and the specie payment of all 

 paper currency was announced to be commenced on January 1, 1886. 



The law which regulate." the notes of the Bank of Japan is based upon the German system, yet there are some interesting differences. 

 The bank notes are of three kinds: 



(1) The notes issued on metallic reserve. This reserve has l>een silver, but since the adoption of the gold standard on October 1, 

 1897, this is gold, save that one-lifth of the total metallic reserve may be kept in silver. But, like the Bank of England, this exception 

 is seldom availed of. 



(2) TJiose issued on business assets within legal limit. This issue is limited at present to the amount of 85,000,000 yen. The limit 

 was at flrst 70,000,000 yen, but has been increased to the present amount since May, 1889. But the outstanding circulation of the Gov- 

 ernment and also the national-bank notes are to be counted into this amount, and it is uieant to replace them gradually with the notes 

 of the bank. Again, for this privilege the bank advanced to the Government a sum of 22,000,000 yen without interest. This has been 

 used as the fund to withdraw the Government paper money. Eecently there has been much discussion of increasing this authorized 

 amount of issue; and while the writer is preparing this essay the lower house of the imperial diet has just passed a Government bill pro- 

 posing to increase the amount to 120,000,000 yen. 



(3) The emergency notes, or those issued upon business assets in excess of the above legal limit. These notes are subject to a 

 special tax. The rate of the tax is to be 5 per cent or more. In the German system, as we all know, this rate is fixed at 5 percent; but 

 in the Japanese system only the minimum rate is fixed, and the power of discretion is given to the minister of finance, who may charge 

 any rate aljove 5 per cent, according to the state of the money market. This is quite an effectual measure to prevent stringency of the 

 market, and at the same time to secure the immediate withdrawal of superfluous notes when the necessity is over. 



That this system of note issue is admirably adapted to meet the varying demands of trade has been very well tested in the German 

 system. But this is especially so in the case of Japan, where, for the reason of her geographical situation, specie can not be called in 

 from al)road to respond to the immediate demand of trade. Since 1890 the emergency issue has been availed of seven times. That it is 

 effective in relieving the market is shown by the fact that Japan has so far been free from any serious commercial panic. 



The notes of the Government and of national banks have been gradually retired, and the bank notes are taking their place. The 

 day is near at hand when the whole paper-circulating medium will be unified into the notes of the Bank of Japan. The following table 

 will show this fact: 



Table Showing the Amount of Circulation of Various Notes. 



The bank note • 



The Government piipcT 

 The national-bank note 



Jan. 1,1886. 



Yen. 



3,941,763 



86,:}01,010 



30, 108, 129 



Jan. 1,1889. Jan. 1,1899, 



Yen. 

 65,547,249 

 46,566,086 

 27,562,931 



Yni. 

 193, 799, 901 

 5,411,726 

 1,864,620 



• The notes of the Bank of Japan are of .seven denominations: One yen, 5 yen, 10 yen, 20 yen, 50 yen, 

 100 yen, 200 yen; but 20, 50, and 200 yen notes have never been issued, and 1-yen notes are being speedily 

 retired. 



KINDS OF BUSINESS TRANSACTED BV THE BANK. 



The kinds of business transacted by the Bunk of Japan are mentioned in its .statute, as follows: 



(1 ) The purchase or discount of exchequer bills, bills of exchange, and other commercial paper. 



(2) Dealing in gold and silver. 



(3) To make loans upon gold and silver coin and bullion. 



(4) To make collection of bills for banks, corporations, and individuals who are the regular customers of the bank. 

 (6) To receive di-posits and accept the custody of objects of value and documents. 



(6) To make advances in current account or in loans upon the securities of Government bonds, exchequer bills, or other lx>ndsand 

 shares guaranteed by the State. 



liesides these the bank performs a number of imi>ortant services for the treasury without coniponsation. Not only does it receive 

 and i)ay out public revenues and expemlitures for the State, but it also manages all operations concerning public <lobt5, public deposits, 

 and the retirement of the Govcrnincnt and national-bank iu)tes. In fact certain j)arts of the bank are do.'^'ly niiiiod with ilio various 

 departments of the trea.sury. 



r.ills an<l checks in modern fonns are new things in .Japan. For the last twenty years the (iovoriunent a- wll as the I»ank ha-« not 

 spare 1 every encoiiragement to their u.^^e in coninicrcial transactions. As the n>ult of these efforts, the dis<«onnt businc-is ha.« grown to 

 a C()nsideral>le amount. The return of the clearing hou.^es in Tokyo and Osaka «Uiring the last year ani<>unl.«i to 7Sl?,744.613 ven and 

 22(),:!()9, HI yen, respectively. l>ills offered for discount to the bank must be indorsed by at le;i.»^t two .Milisiantial name.* and bo jvjyable 

 within one iMiinh-cd days. Those which bear a single name must be accompanied with collaterals, either in the form of warehouse 

 receipts of merchandise or of the shares and bonds clas.«cd su* securities of good cre<lit. These shart>s and bomls are in(»stly of domestic 

 railways, and are valued at (50 per cent of their market price. 



The loans upon securities are much smaller in amounts than the discount."^. These securities aix> the Ininds of the Imperial 

 Government and of Tokyo and Osaka nnmicipalities, and al.>*o those shares and bonds guaranteed by the State. I>oans can b • made for 

 u period of three months or less and rcnt'wal is allowed only once when necc-^sary. 



