16. FINANCE AND COINAGE SYS TEM IN JAPAN. Introduction.— After the Restoration, 1868-71, Japan passed through many sudden and sweeping changes in her po litical and social affairs. Feudalism was abol ished in favor of the centralization of govern ment, to be succeeded by a representative form of government; the nation was engaged in civil wars and also passed through two foreign wars. In financial matters, too, the changes that oc curred were both important and memorable. The adjustment of the lind system and the reform of land taxation, the adjustment of hereditary salaries of Daunios (feudal lords) and Samurais by means of public loans, the uni fication of the business of the state treasury, the reform of various taxes, the adjustment of paper currency and the adoption of the gold standard were among the most important of the changes. Of these this article will treat chiefly the adjustment of the paper currency, and the adoption of gold standard, as they were the most important and difficult tasks of all. The adoption of gold standard was one of the most important measures to bring this country into the international circle of common economics. A treatment of these two topics will take us over the general view of currency system in modern Japan.
How the Paper Money Came to be Issued.
— The coinage system in vogue at the time of the Restoration (1868) was based on the sys tem that was first established in the 6th year of Keicho (1600 A.D.), and continued to pre vail for upward of 260 years until the end of the Tokugawa regime. The Shogunate govern ment, however, frequently resorted to recoinage in order to relieve its growing financial difficul ties, invariably making the coins lighter in quan tity and poorer in quality. Some of the Dai mios, too, took the liberty of secretly coining money, while, with the permission of the gov ernment, some of them also issued paper money. The consequence of all these irregularities was that the currency system of Japan at the end of the Shogunate government was in a most disorderly condition.
Soon after the Restoration, the Imperial government resolved to reorganize the existing system of coinage on a sound basis, and in 1871 set itself to the task of reminting all the old coins. A gold standard was adopted, making
one yen gold the standard unit. It consisted, after the American system, of 90 per cent of pure Fold, its weight being 25.72 grains. A one yen silver coin weighing 416 grains, 90 per cent which were silver, was also issued to be ex clusively used at the treaty ports. In this way, although a gold standard was adopted, yet as a matter of fact it could not be operated in a satisfactory manner, owing to the over-issue of paper money and other circumstances then pre vailing. Besides, as Mexican silver dollars were generally used as the medium of exchange in the trade of the Far East, it was found impos sible to maintain the gold standard in Japan. Under the circumstances, in 1878 the govern ment allowed the use of the one yen silver piece as legal tender throughout the country, the cir culation of which had formerly been confined to the limits of the treaty ports. The result was that the monetary system of Japan became bimetallic, and after the adjustment of incon vertible paper money it became a de facto silver standard.
Government Paper Money in the Early Years of In 1869 and the year follow ing the government was financially in a very difficult position. This was mainly due to the heavy expenses it had to meet in connection with the revolutionary wars, when there was scarcely any fixed source of revenue to rely upon. In order to relieve this financial distress, in 1868 the government issued paper money called Kinsatsu (literally, gold notes). Then again, when in 1871 feudalism was abolished, the gov ernment had to take over all the paper money which had been issued by different Daimios. In order to adjust this class of paper money and owing to several other circumstances, the gov ernment was obliged to issue further large amounts of paper money from time to time, until about the end of 1876 it totalled 93,000,000 yen.