Reviewing this chapter of Japan’s material development, we find that whereas, at the beginning of the Meiji era (1867), the nation did not possess so much as one banking institution worthy of the name, forty years later it Review of Banking Development. had 2211 banks, with a paid-up capital of £40,000,000, reserves of £12,000,000, and deposits of £147,000,000; and whereas there was not one savings bank in 1867, there were 487 in 1906 with deposits of over £50,000,000. The average yearly dividends of these banks in the ten years ending 1906 varied between 9.1 and 9.9%.
Necessarily the movement of industrial expansion was accompanied by a development of insurance business. The beginnings of this kind of enterprise did not become visible, however, until 1881, and even at that comparatively Insurance. recent date no Japanese laws had yet been enacted for the control of such operations. The commercial code, published in March 1890, was the earliest legislation which met the need, and from that time the number of insurance companies and the volume of their transactions grew rapidly. In 1897, there were 35 companies with a total paid-up capital of 7,000,000 yen and policies aggregating 971,000,000 yen, and in 1906 the corresponding figures were 65 companies, 22,000,000 yen paid up and policies of 4,149,000,000 yen. The premium reserves grew in the same period from 7,000,000 to 108,000,000. The net profits of these companies in 1906 were (in round numbers) 10,000,000 yen.
The origin of clearing houses preceded that of insurance companies in Japan by only two years (1879). Osaka set the example, which Clearing Houses. was quickly followed by Tōkyō, Kobe, Yokohama, Kiōto and Nagoya. In 1898 the bills handled at these institutions amounted to 1,186,000,000 yen, and in 1907 to 7,484,000,000 yen. Japanese clearing houses are modelled after those of London and New York.
Exchanges existed in Japan as far back as the close of the 17th century. At that time the income of the feudal chiefs consisted almost entirely of rice, and as this was sold to brokers, the latter found it convenient to meet at fixed times Bourses. and places for conducting their business. Originally their transactions were all for cash, but afterwards they devised time bargains which ultimately developed into a definite form of exchange. The reform of abuses incidental to this system attracted the early attention of the Meiji government, and in 1893 a law was promulgated for the control of exchanges, which then numbered 146. Under this law the minimum share capital of a bourse constituted as a joint-stock company was fixed at 100,000 yen, and the whole of its property became liable for failure on the part of its brokers to implement their contracts. There were 51 bourses in 1908.
Not less remarkable than this economic development was the large part acted in it by officialdom. There were two reasons for this. One was that a majority of the men gifted with originality and foresight were drawn into the ranks of The Government and Economic Development. the administration by the great current of the revolution; the other, that the feudal system had tended to check rather than to encourage material development, since the limits of each fief were also the limits of economical and industrial enterprise. Ideas for combination and co-operation had been confined to a few families, and there was nothing to suggest the organization of companies nor any law to protect them if organized. Thus the opening of the Meiji era found the Japanese nation wholly unqualified for the commercial and manufacturing competition in which it was thenceforth required to engage, and therefore upon those who had brought the country out of its isolation there devolved the responsibility of speedily preparing their fellow countrymen for the new situation. To these leaders banking facilities seemed to be the first need, and steps were accordingly taken in the manner already described. But how to educate men of affairs at a moment’s notice? How to replace by a spirit of intelligent progress the ignorance and conservatism of the hitherto despised traders and artisans? When the first bank was organized, its two founders—men who had been urged, nay almost compelled, by officialdom to make the essay—were obliged to raise four-fifths of the capital themselves, the general public not being willing to subscribe more than one-fifth—a petty sum of 500,000 yen—and when its staff commenced their duties, they had not the most shadowy conception of what to do. That was a faithful reflection of the condition of the business world at large. If the initiative of the people themselves had been awaited, Japan’s career must have been slow indeed.
Only one course offered, namely, that the government itself should organize a number of productive enterprises on modern lines, so that they might serve as schools and also as models. Such, as already noted under Industries, was the programme adopted. It provoked much hostile criticism from foreign onlookers, who had learned to decry all official incursions into trade and industry, but had not properly appreciated the special conditions existing in Japan. The end justified the means. At the outset of its administration we find the Meiji government not only forming plans for the circulation of money, building railways and organizing posts and telegraphs, but also establishing dockyards, spinning mills, printing-houses, silk-reeling filatures, paper-making factories and so forth, thus by example encouraging these kinds of enterprise and by legislation providing for their safe prosecution. Yet progress was slow. One by one and at long intervals joint-stock companies came into existence, nor was it until the resumption of specie payments in 1886 that a really effective spirit of enterprise manifested itself among the people. Railways, harbours, mines, spinning, weaving, paper-making, oil-refining, brick-making, leather-tanning, glass-making and other industries attracted eager attention, and whereas the capital subscribed for such works aggregated only 50,000,000 yen in 1886, it exceeded 1,000,000,000 yen in 1906.
When specie payments were resumed in 1885, the notes issued by the Bank of Japan were convertible into silver on demand, the silver standard being thus definitely adopted, a complete reversal of the system inaugurated at the Adoption of the Gold Standard. establishment of the national banks on Prince Ito’s return from the United States. Japanese financiers believed from the outset in gold monometallism. But, in the first place, the country’s stock of gold was soon driven out by her depreciated fiat currency; and, in the second, not only were all other Oriental nations silver-using, but also the Mexican silver dollar had long been the unit of account in Far-Eastern trade. Thus Japan ultimately drifted into silver monometallism, the silver yen becoming her unit of currency. So soon, however, as the indemnity that she received from China after the war of 1894-95 had placed her in possession of a stock of gold, she determined to revert to the gold standard. Mechanically speaking, the operation was very easy. Gold having appreciated so that its value in terms of silver had exactly doubled during the first 30 years of the Meiji era, nothing was necessary except to double the denominations of the gold coins in terms of yen, leaving the silver subsidiary coins unchanged. Thus the old 5-yen gold piece, weighing 2.22221 momme of 900 fineness, became a 10-yen piece in the new currency, and a new 5-yen piece of half the weight was coined. No change whatever was required in the reckonings of the people. The yen continued to be their coin of account, with a fixed sterling value of a small fraction over two shillings, and the denominations of the gold coins were doubled. Gold, however, is little seen in Japan; the whole duty of currency is done by notes.
It is not to be supposed that all this economic and financial development was unchequered by periods of depression and severe panic. There were in fact six such seasons: in 1874, 1881, 1889, 1897, 1900 and 1907. But no year throughout the whole period failed to witness an increase in the number of Japan’s industrial and commercial companies, and in the amount of capital thus invested.
To State Revenue. obtain a comprehensive idea of Japan’s state finance, the simplest method is to set down the annual revenue at quinquennial periods, commencing with the year 1878-1879, because it was not until 1876 that the system of duly compiled and published budgets came into existence.
Revenue (omitting fractions)