17. BANKING SYSTEM OF JAPAN. The progress of the banking system in Japan commenced at the enactment of the National Bank Regulations in 1872. The progress was rapid, and at present (1918), 46 years after the enactment, Japan possesses a complete system of ordinary and savings banks; special banks to minister to the development of foreign ex change, agriculture, commerce and industry; clearing houses and the different associations, information bureaus, brokerage houses, trust companies, etc., to assist the work of the banks.
Even before the Restoration in 1868 there had been in Japan institutions conducting the works of banks. They received deposits, made loans, issued exchange and commercial bills, and conducting exchequer business for feudal lords and shoguns, thus promoting the eco nomic progress of the country. After the Restoration, establishments called exchange companies were organized, at the instance of the government, at several commercial centres. They also conducted a general banking busi ness and issued gold and silver notes. The constitution of these establishments was, how ever, not perfect enough to entitle them to the name of banks according to the modern under standing. The banking corporation worthy of the name did not exist in Japan until the na tional banks were established.
After the Restoration in 1868 the government sent a deputation to inspect the banking system of foreign countries for the purpose not only of promoting the financial and industrial prosperity of Japan, but of consolidating the government paper money, which had been issued to an enor mous amount. As the result of this inspection tour the government promulgated, in November 1872, the National Bank Regulations, drawn• up after the model of the American system. Ac cording to the regulations the national: banks had to pay six-tenths of their capital to The government in the government paper money to receive in exchange the same amount of public loan bonds; to deposit the bonds with the government and get permission 'to issue the same amount of bank notes convertible 'to gold. The First and three other national banks were established in accordance with the regu lations. At the time, however, the government had to issue inconvertible notes to meet na tional expenditure, and the result was that there was a difference in value between paper and hard money. Bank notes issued by the banks
were returned to the banks instantly, placing them in serious difficulties. About this time the government gave public loan bonds to the nobility and Samurai class to comPensate for the loss of their income. In order to increase the utility of these bonds on the one hand and to relieve the banks of their difficulties on the other, the government encouraged the organiza tion of new banks, and in 1876 made an amend ment to the National Bank Regulations. Ac cording to the new regulations the amount of notes to be issued by the banks was increased to eight-tenths of their capital. The banks had to deposit the same amount loan bonds with the government as security for their bank notes, which were made convertible with coin. As the result of this amendment the 'bank notes heretofore convertible to gold incon vertible, and the banks were able to get more profits than. before, This gave an. impetus to the organization of banks, the number of whicb reached 153 at one time.
Moreover, the government issued a large amount of paper notes in order to meet the expenses relating to the Satsuma Rebellion of 1877, with the result that the amount of incon vertible bank notes greatly increased and their value decreased as compared with hard money.
In order to improve the situation, the gov ernment, after 1877, endeavored to discourage the organization of national banks and to de crease the amount of notes. In 184 it had the Yokohama Specie Bank established as an oilcan of foreign exchange and of promoting the im portation of specie. In 1882 the Bank of Japan was established after the style of the Central Banks in European states. In the next year the National Bank Regulations were again amended, prohibiting the existence of national banks on the expiration of their respective terms of business. The privilege to issue notes was taken back from those banks and given to the Bank of Japan. By this amendment the principle of the unification of paper currency was established, and the national banks, hitherto exercising great influence in the money market, were,, one by one, converted into private banks, and in 1899 the national banks had ceased to exist.