Since these revisions were introduced into the system of discounting foreign of ex} change export merchants gave up any idea of speculation and ceased to cause losses to the government. Further, in June 1884, the priv. ilege of having the bills discounted was ex• tended to foreigners also. The result was very satisfactory, the amount of specie acquired in foreign countries having markedly increased after. September of that year. The government was thus enabled to increase the specie reserve, which was no more than 8,000,000 yen in 1881, to more than 42,000,000 yen at the end of 1885.
Establishment of the Bank of Japan.— Simultaneously with commencing the accumu lation of reserve specie, the government felt that in order to effect the adjustment of the paper money it would be necessary to establish a. great Central Bank. As before said, the national banks in Japan were patterned after the American system. As a matter of fact there were in 1883 over 260 banks, with their branches throughout the country, which issued paper money to the amount of 34.000,000 yen. But the capital they had at their disposal was generally of small amount. Besides they were established in circumscribed localities, each one within a narrow circle of influence. For this reason the communication between different banks was exceedingly bad, so much so that should there be surplus capital in one bank and another bank be in dire need, yet the former could not help the latter. In order to remedy such a state of affairs, it was thought that there was no better way than establishing a great Central Bank, as in Western countries. It was believed that such a bank would do much to regulate the monetary circulation of the country, sure plify the business of the Exchequer, smooth the transactions of foreign bills of exchange and regulate the influx and efflux of specie and bullion. Besides, it was believed that to invest it with the sole privilege of issuing convertible notes was of utmost importance to the adjust ment and unification of paper money.
After studying the systems regarding such central banks in vogue in different European countries, the government came to the con clusion that the Belgic system would best serve as a model, and after its pattern a plan was drawn up for the establishment of a Central Bank, called the Bank of Japan, and the main features to be as follows: (1) That the Bank of Japan would be able to facilitate the circula tion of currency throughout the country, as it would be in a position to look upon other banks somewhat as its branch offices and open cor respondence with them. (2) That the Bank of
Japan would be able to increase the strength of national banks as well as of trading or manu facturing companies by means of rediscounting their bills. (3) That the Bank of Japan would be able to lower the current rate of interest, as it would chiefly engage in the business of dis counting short-period bills and thereby would facilitate the circulation of capital. (4) That when the business organization of the Bank of Japan was completed, it would be possible to simplify the business of the government by en trusting to the bank a part of the business of the Finance Department, such as the receipt and disbursement of government money and the liquidation of the public debt. (5) That the Bank of Japan might be made an organ of im porting and preserving specie by making dis. counting foreign bills of exchange one of its functions.
The Regulations concerning the Bank of Japan were promulgated in June 1882, and in October of the same year the bank was founded. The' main points in these regulations were as folloWs: (1) The term of business of the bank to be 30 years. (2) The capital to be 10,000,000 yen. (3) One-fifth part of the capital to be paid in before the bank opened business and the remainder payable in instalments as the bank might require according to its business needs.
(4) A limit to be placed on the kind of busi ness the bank may engage in; the risky and dangerous kinds of business to be prohibited.
(5) The bank to be entrusted with the receipt and disbursement of government money, so far as it was convenient to the government. (6) While the issuing of convertible bank notes should be considered its rightful privilege, that privilege to be withheld for some time to come. (7) The governor and vice-governor of the bank to be appointed by the government, the former to be of Chokunin rank and the latter of Sonin rank. (8) The Minister of Finance to appoint comptrollers to act as his representa tives. (9) The directors and auditors to be elected by the 13 bank's shareholders. (10) The bank to make the monthly report of its business conditions to the Minister of Finance. (11) The government to become the bank's shareholder to the amount of one-half the en tire capital of the bank.