Not many years after the adjustment of paper money in this country, thus, the fall of silver became so marked that its currency sys tem, which for the time had obtained a stability by the reform on silver basis, came to be seriously affected. At that time two-thirds of the country's foreign trade were with the gold countries, and the ratio of exchange with them became so fluctuating that those engaged in the trade knew not how to conduct their business, while the persistent rise of prices of commodi ties tended to engender a speculative spirit among the people. It became apparent that the maintenance of the silver standard system was not to the good of the country.
Such being the case, the then Minister of Finance, Mr. Kunitake Watanobe (since created viscount), recommended to the government the appointment of a commission composed of men experienced and learned in economic matters, to investigate and deliberate carefully on a policy that might be adopted as to the future of the country s currency system. As the result, an Imperial Ordinance was issued in October 1893, appointing a Coinage Investigation Com mission, which, after spending nearly three years on its work, submitted a report in July 1896. Of the commission of 15, eight were of opinion that there was a necessity of making changes in the coinage system, while the re maining seven thought otherwise. Of the majority, six were in favor of a gold standard, and two advocated a bimetallic system. Previ ous to this, in March 1895 Matsuicata had re turned to the post of Minister of Finance. In the following month a peace treaty was con cluded with China, and that country agreed to pay a war indemnity amounting to 200,000,000 taels. As already stated he had foreseen the necessity of the country adopting the gold standard system in order to keep pace with the world's tendency. But owing to the dif ficulty of acquiring an adequate supply of gold for the purpose, Matsukata could not help hesitating forthwith to take up the reform. Now that, however, a large war indemnity was to come from China, the best opportunity was presenting itself for the execution of the re form. In order to pay the indemnity, China could do so only by raising a loan in the European markets. In the peace treaty the indemnity was stated in the terms of Kuping fuel. But since money was to come from the European mar kets, it was plain that it would involve China in no small trouble to reduce it first into silver and then pay it to this country, while it would ranged be to her if it could be so ar ran that she pay it in the currency she raised in London and other markets. Such an ar
rangement would be equally acceptable to this country, which might keep the money paid as a gold reserve for the purpose of adopting the gold standard system. The suggestion alone this line met with the approval of the Imperial government, which, thereupon, approached the Chinese government with the proposition indi cated. China's answer being favorable, negotia tions were concluded in the sense that the weight of one Kuping tad would be fixed at 575.82 grains of pure silver, and China would pay the entire amount of indemnity reduced into the terms of British currency at the ratio of 30.4429202662d. for one ounce of silver of the standard quality in London, being the aver age of the prices for June, July and August of 1895. A protocol to this effect was ex changed between the two countries on 6 Oct. 1895.
Subsequently the two governments agreed to compute in British money the amount to be paid by China as compensation for the retrocession of the Liaotung Peninsula, namely, 30,000,000 Kuping taels, as well as the indemnity for the of occupying Wei-hai-wei, namely 50O,000 Kuping taels yearly. Thus the amount due from China as indemnity and otherwise totaled f.38,082,884 15s. 6%cl., or 231,500,000 Ku ping taels.
Matsukata resigned in August 1895, his views on the post-bellum financing failing to receive the approval of the government. But in September of the following year, he formed a new Cabinet by Imperial order, holding at the same time the post of Finance Minister. This gave him an opportunity, at once, to proceed with preliminaries for the adoption of gold standard. He submitted a draft of the Coinage Law with its laws to the Cabinet Council on 25 Feb. 1897 and obtained its ap proval. It was then that the late Emperor granted him the gracious words to the effect that opinions were divided as to the advisability of adopting a gold standard, but coming from Matsulcata, it should be depended that his views were correct. Ile was profoundly impressed with the honor done and vowed to himself at the time that, happen what may, he must bring the scheme to a success.