—'We had to undergo much financial difficulty. Before the Imperial régime gold and silver constituted practically double standards. At the early stage of the new Government gold was adopted as the standard in theory, but it took a long time before it came into actual operation. The Government had to issue much paper money, and that, too, inconvertible, hence much depreciation of the paper. The strenuous efforts of the Government had been successful in improving the situation when the Satsuma war broke out in 1877. The expense of that war occasioned more issue of paper money, which caused a further depreciation. At one time the difference between silver, which was practically the legal tender at the time, and the paper rose to 100 : 180.
'There was another cause for the depreciation of paper money. It was the issue of notes by the national banks, which were established in all parts of the country after the abolition of the feudal system, and which numbered at one time more than 150. The Government had to meet with these difficulties, and to place the financial and economical condition of the country on a firmer and more satisfactory basis. This the Government began to undertake a few years after the Satsuma war, without hindering the necessary works for the development of the national resources. The Government decided to apply strict economy in all branches of its administration. The money thus saved was partly used for the redemption of the over-issued paper money, and partly to accumulate reserve funds for making the paper currency convertible. The Bank of Japan was established with the view of making it the sole central economical organ of the empire. A scheme was provided for redeeming the notes issued by the so-called national banks, and for converting those banks into strictly private banks in due time.
'The process began in earnest in 1881; it made far quicker progress than was contemplated; thus in 1885 the difference between the silver and the paper money disappeared. From January 1886 the total redemption of the paper money was begun. In 1899 the circulation of the Government paper money and the notes of the national banks altogether ceased to exist, the convertible notes of the Bank of Japan having taken their place. In the same year all national banks ceased to exist, most of them having become private banks, and a few having wound up their business. Two years previously gold had been at last effectively adopted as the Japanese national standard of currency, which was the realisation of the idea cherished by the Imperial Government from the beginning.'
—'What was the nature of the national banks?' asked one; 'and have they proved quite meaningless?'
—'The law for the establishment of those banks was promulgated soon after the abolition of the feudal system. It was modelled after the national banks of America. In the course of time a large number of them came into existence in different parts of the Empire. They were private undertakings, except that they enjoyed the privilege of issuing their own notes, and were subject to Government superintendence. At first the notes were to be convertible into specie, but a modification was introduced in the law by which they could issue notes with Government bonds as security and convertible in Government paper money. Therefore the notes were in reality incontrovertible ones from the point of view of hard money. Previous to that, the Government loan bonds, amounting to one hundred and seventy million yen, were issued for the capitalisation of the feudal lords and their retainers in consideration of their feudal incomes, after the feudal system had been abolished. These bonds were used widely for establishing the banks. The banks enjoyed special privileges of issuing paper money, but in lieu of it they did good service in encouraging and stimulating local industry and commerce, so that we do not regret that those banks were once instituted. Besides, they led to the foundation of the modern monetary system of Japan. You must have observed the efficiency of the monetary system of Japan during the Sino-Japanese war. The success of Japan in great wars is due a great deal to that system. I mean to say that because we have that system, the money possessed by the public could easily be made to serve public purposes in time of emergency. Look at China: as far as individuals are concerned, there is a far greater number of people who are richer than the Japanese, and yet they have no sound banking system in close connection with the state. When the Chinese deposit their money, they prefer to do so with foreign banks. The consequence is that the Government cannot fall back upon the wealth of private individuals. Neither is there much likelihood of home loans being popular in China. Of course there may be some other reasons for this. In Japan nothing but regular taxes and dues regulated by law are levied. No illegal exaction is or could be made. In that respect there exists a perfect understanding between the Government and the people, who know that if they respond to the Government call for loans their dues would be made good in future. No such confidence and usage exist in China, still less in any other part of the East.'
—'You told us that in the beginning of the Imperial Government, the Imperial troops were supported at the expense of the clan governments,' said one. 'Will you tell us a little more about it?'
—'Under the Shogunate,' I answered, 'the feudal lords had to support their own troops, even when they were ordered to send them out somewhere. This was the duty they had to render in return for the tenure of land. Just before the battle of Fushimi, Satsuma and some other clans had their troops stationed in Kioto. Chosiu, which on all sides had come triumphantly out of the war against the attacking forces of the Shogunate, also sent some troops to Kioto; not indeed by order of the Shogun, but rather against it. These troops were all supported by their clan governments. After the battle of Fushimi, the troops of the Satcho and other clans which had become Imperialists, were ordered to the front in the North-Eastern provinces. They now fought as Imperial troops under the "brocade banners," which was the emblematic banner used solely by the Imperial forces, and much reverenced by the Japanese in general, because with us those who fought against those banners had been, and were at all times, universally stigmatised as disloyal subjects. The leaders of those troops were generally commissioned by the Imperial Government. The cohesion of the troops of different clans in one direction was maintained by a generalissimo, who was a high court noble, assisted by a certain number of staff officers, specially appointed by the Imperial Government. In that manner, troops of different clans fought for the cause of the Imperial Government. After the war, the troops of some of the clans were still used for the Imperial purposes, whilst others of them were all sent home. The future of the military system was, however, a great problem. Immediately after the war, the present Marshal, Marquis Yamagata, who was the leader of the Chosiu troops in the province of Echigo, visited Europe, together with Saigo the younger. On his return to Japan, he advocated the adoption of the European system of universal service. He succeeded in his advocacy, and in 1870 regulations were promulgated relating to the subject, by which the system was experimentally put in force in five provinces in the vicinity of Kioto; and the system was made universal and more complete soon after the total abolition of the feudal system. It has undergone further improvement from time to time, until we have come into possession of the army which the world has come to see during the present war. I may add, that in the earlier parts of the new organisation, many French officers were engaged to instruct our men and officers in different ways, and afterwards some German officers were similarly engaged, as you know.'
'Can you roughly explain,' said one, 'the evolution of your modes of fighting before it reached the efficiency of the present day?'
—'It has been pretty much the same as yours,' I answered. 'Putting aside the remote antiquity, I will briefly tell you how it has been since the commencement of the chivalric period. The sword was always our chief weapon of honour, that you know very well. Then bows and arrows were also regarded as honourable weapons, so much so, that the families which made military affairs their constant occupation were called "the houses of bows and arrows," The phrase "bow-handlers" came to signify "leaders." Thus when the famous Takeda Shingen, towards the end of the sixteenth century, spoke of Iyeyasu, his junior contemporary, as "the first bow-handler of the Tokai provinces," he meant by the phrase "first bow-handler" a general of great ability. The spear which was used by the leaders was also held in high esteem. Thus "distinction at the point of the spear" was a phrase commonly used to denote distinguished deeds of warriors. "The seven spears of Shizugatake" is a phrase constantly used by people at large. It refers to the gallant fighting of the seven famous captains of Hideyoshi at the battle of Shizugatake. They all used spears. The Naginata was a weapon with a long curved blade, with a handle a little shorter than that of a spear: it was considered a proper weapon for women and monks, and was not, therefore, looked upon as being so honourable as a spear for ordinary warriors to use. The decisive battles were necessarily hand-to-hand combats. There was even time-honoured heraldic etiquette, that when two combatants were about to fight they announced their names and positions, etc., to each other. I believe a somewhat similar custom existed in Europe also. Warriors of position considered it a disgrace to be killed or captured by "nameless common soldiers," as they were called. The hand-to-hand combat, being the chief feature of battle, it was natural that a person who had overcome an enemy of greater distinction or of higher rank was regarded as having done a correspondingly greater action; hence the custom of bringing back the enemies' heads by the combatants, and submitting them to the inspection of their leaders, came into existence, and in the sixteenth and seventeenth centuries, the modes of such inspections had become an elaborate part of the heraldic ceremonies. The measure of the boxes in which the heads were put, the manner in which to place them and how to take them out, what attitude to be assumed by the one who submitted the heads for inspection, and what composure the one who inspected should assume, and what glance he should give to the head—all these matters had fine and minute rules, though when taking place on the actual spot at a hasty hour, much of the formality was necessarily simplified.'
—'How was it with the firearms?' asked one.