Battleships 5 62,524
Cruisers 11 71,276
Destroyers 5 1,740
-- -------
Totals 21 135,530
The vessels built or purchased after the war and up to the close of
1908 were:--
Battleships 4 71,500
Armoured cruisers 4 56,700
Other cruisers 5 7,000
Destroyers 33 12,573
Torpedo-boats 5 760
-- -------
Totals 51 148,533
Some of the above have been superannuated, and the serviceable fleet
in 1909 was:--
Battleships 13 191,380
Armoured cruisers 12 130,683
Other cruisers, coast-
defence ships and
gun-boats 47 165,253
Destroyers 55 20,508
Torpedo-boats 77 7,258
--- -------
Totals 204 515,082
To the foregoing must be added two armoured cruisers--the "Kurama"
(14,000) launched at Yokosuka in October 1907, and the "Ibuki"
(14,700) launched at Kure in November 1907, but no other battleships
or cruisers were laid down in Japan or ordered abroad up to the close
of 1908.
Naval Dockyards.
There are four naval dockyards, namely, at Yokosuka, Kure, Sasebo and
Maizuru. Twenty-one vessels built at Yokosuka since 1876 included a
battleship (19,000 tons) and an armoured cruiser (14,000 tons); seven
built at Kure since 1898 included a battleship (19,000 tons) and an
armoured cruiser (14,000 tons). The yards at Sasebo and Maizuru had
not yet been used in 1909 for constructing large vessels. Two private
yards--the Mitsubishi at Nagasaki and Kobe, and the Kawasaki at the
latter place--have built several cruisers, gun-boats and torpedo
craft, and are competent to undertake more important work.
Nevertheless in 1909 Japan did not yet possess complete independence
in this matter, for she was obliged to have recourse to foreign
countries for a part of the steel used in ship-building. Kure
manufactures practically all the steel it requires, and there is a
government steel-foundry at Wakamatsu on which more than 3 millions
sterling had been spent in 1909, but it did not yet keep pace with the
country's needs. When this independence has been attained, it is hoped
to effect an economy of about 18% on the outlay for naval
construction, owing to the cheapness of manual labour and the
disappearance both of the manufacturer's profit and of the expenses of
transfer from Europe to Japan.
There are five admiralties--Yokosuka, Kure, Sasebo, Maizuru and Port
Arthur; and four naval stations--Takeshiki (in Tsushima), Mekong (in
the Pescadores), Ominato and Chinhai (in southern Korea).
Personnel.
The navy is manned partly by conscripts and partly by volunteers.
About 5500 are taken every year, and the ratio is, approximately, 55%
of volunteers and 45% of conscripts. The period of active service is 4
years and that of service with the reserve 7 years. On the average 200
cadets are admitted yearly, of whom 50 are engineers, and in 1906 the
personnel of the navy consisted of the following:--
Admirals, combative and non-combative 77
Officers, combative and non-combative,
below the rank of admiral 2,867
Warrant officers 9,075
Bluejackets 29,667
Cadets 721
------
Total 42,407
Naval Education.
The highest educational institution for the navy is the naval staff
college, in which there are five courses for officers alone. The
gunnery and torpedo schools are attended by officers, and also by
selected warrant-officers and bluejackets, who consent to extend their
service. There is also a mechanical school for junior engineers,
warrant-officers and ordinary artificers.
At the naval cadet academy--originally situated in Tokyo but now at
Etajima near Kure--aspirants for service as naval officers receive a 3
years' academical course and 1 year's training at sea; and, finally,
there is a naval engineering college collateral to the naval cadet
academy.
Since 1882, foreign instruction has been wholly dispensed with in the
Japanese navy; since 1886 she has manufactured her own prismatic
powder; since 1891 she has been able to make quick-firing guns and
Schwartzkopf torpedoes, and in 1892 one of her officers invented a
particularly potent explosive, called (after its inventor) Shimose
powder.
The Feudal Period.
_Finance._--Under the feudal system of the Tokugawa (1603-1871), all
land in Japan was regarded as state property, and parcelled out into 276
fiefs, great and small, which were assigned to as many feudatories.
These were empowered to raise revenue for the support of their
households, for administrative purposes, and for the maintenance of
troops. The basis of taxation varied greatly in different districts,
but, at the time of the Restoration in 1867, the general principle was
that four-tenths of the gross produce should go to the feudatory,
six-tenths to the farmer. In practice this rule was applied to the rice
crop only, the assessments for other kinds of produce being levied
partly in money and partly in manufactured goods. Forced labour also was
exacted, and artisans and tradesmen were subjected to pecuniary levies.
The yield of rice in 1867 was about 154 million bushels,[21] of which
the market value at prices then ruling was £24,000,000, or 240,000,000
_yen_.[22] Hence the grain tax represented, at the lowest calculation,
96,000,000 _yen_. When the administration reverted to the emperor in
1867 the central treasury was empty, and the funds hitherto employed for
governmental purposes in the fiefs continued to be devoted to the
support of the feudatories, to the payment of the samurai, and to
defraying the expenses of local administration, the central treasury
receiving only whatever might remain after these various outlays.
The shogun himself, whose income amounted to about £3,500,000, did not,
on abdicating, hand over to the sovereign either the contents of his
treasury or the lands from which he derived his revenues. He contended
that funds for the government of the nation as a whole should be levied
from the people at large. Not until 1871 did the feudal system cease to
exist. The fiefs being then converted into prefectures, their revenues
became an asset of the central treasury, less 10% allotted for the
support of the former feudatories.[23]
Paper Money.
But during the interval between 1867 and 1871, the men on whom had
devolved the direction of national affairs saw no relief from crippling
impecuniosity except an issue of paper money. This was not a novelty in
Japan. Paper money had been known to the people since the middle of the
17th century, and in the era of which we are now writing no less than
1694 varieties of notes were in circulation. There were gold notes,
silver notes, cash-notes, rice-notes, umbrella-notes, ribbon-notes,
lathe-article-notes, and so on through an interminable list, the
circulation of each kind being limited to the issuing fief. Many of
these notes had almost ceased to have any purchasing power, and nearly
all were regarded by the people as evidences of official greed. The
first duty of a centralized progressive administration should have been
to reform the currency. The political leaders of the time appreciated
that duty, but saw themselves compelled by stress of circumstances to
adopt the very device which in the hands of the feudal chiefs had
produced such deplorable results. The ordinary revenue amounted to only
3,000,000 _yen_, while the extraordinary aggregated 29,000,000, and was
derived wholly from issues of paper money or other equally unsound
sources.
Land Tax.
Even on the abolition of feudalism in 1871 the situation was not
immediately relieved. The land tax, which constituted nine-tenths of the
feudal revenues, had been assessed by varying methods and at various
rates by the different feudatories, and re-assessment of all the land
became a preliminary essential to establishing a uniform system. Such a
task, on the basis of accurate surveys, would have involved years of
work, whereas the financial needs of the state had to be met
immediately. Under the pressure of this imperative necessity a
re-assessment was roughly made in two years, and being continued
thereafter with greater accuracy, was completed in 1881. This survey,
eminently liberal to the agriculturists, assigned a value of
1,200,000,000 _yen_ to the whole of the arable land, and the treasury
fixed the tax at 3% of the assessed value of the land, which was about
one-half of the real market value. Moreover, the government contemplated
a gradual reduction of this already low impost until it should
ultimately fall to 1%. Circumstances prevented the consummation of that
purpose. The rate underwent only one reduction of ½%, and thereafter had
to be raised on account of war expenditures. On the whole, however, no
class benefited more conspicuously from the change of administration
than the peasants, since not only was their burden of taxation light,
but also they were converted from mere tenants into actual proprietors.
In brief, they acquired the fee-simple of their farms in consideration
of paying an annual rent equal to about one sixty-sixth of the market
value of the land.
State Revenue.
In 1873, when these changes were effected, the ordinary revenue of the
state rose from 24,500,000 _yen_ to 70,500,000 _yen_. But seven millions
sterling is a small income for a country confronted by such problems as
Japan had to solve. She had to build railways; to create an army and a
navy; to organize posts, telegraphs, prisons, police and education; to
construct roads, improve harbours, light and buoy the coasts; to create
a mercantile marine; to start under official auspices numerous
industrial enterprises which should serve as object lessons to the
people, as well as to lend to private persons large sums in aid of
similar projects. Thus, living of necessity beyond its income, the
government had recourse to further issues of fiduciary notes, and in
proportion as the volume of the latter exceeded actual currency
requirements their specie value depreciated.
Banks.
This question of paper currency inaugurates the story of banking; a
story on almost every page of which are to be found inscribed the names
of Prince Ito, Marquis Inouye, Marquis Matsukata, Count Okuma and Baron
Shibusawa, the fathers of their country's economic and financial
progress in modern times. The only substitutes for banks in feudal days
were a few private firms--"households" would, perhaps, be a more correct
expression--which received local taxes in kind, converted them into
money, paid the proceeds to the central government or to the
feudatories, gave accommodation to officials, did some exchange
business, and occasionally extended accommodation to private
individuals. They were not banks in the Occidental sense, for they
neither collected funds by receiving deposits nor distributed capital by
making loans. The various fiefs were so isolated that neither social nor
financial intercourse was possible, and moreover the mercantile and
manufacturing classes were regarded with some disdain by the gentry. The
people had never been familiarized with combinations of capital for
productive purposes, and such a thing as a joint-stock company was
unknown. In these circumstances, when the administration of state
affairs fell into the hands of the men who had made the restoration,
they not only lacked the first essential of rule, money, but were also
without means of obtaining any, for they could not collect taxes in the
fiefs, these being still under the control of the feudal barons; and in
the absence of widely organized commerce or finance, no access to funds
presented itself. Doubtless the minds of these men were sharpened by the
necessities confronting them, yet it speaks eloquently for their
discernment that, samurai as they were, without any business training
whatever, one of their first essays was to establish organizations which
should take charge of the national revenue, encourage industry and
promote trade and production by lending money at comparatively low rates
of interest. The tentative character of these attempts is evidenced by
frequent changes. There was first a business bureau, then a trade
bureau, then commercial companies, and then exchange companies, these
last being established in the principal cities and at the open ports,
their personnel consisting of the three great families--Mitsui, Shimada
and Ono--houses of ancient repute, as well as other wealthy merchants in
Kioto, Osaka and elsewhere. These exchange companies were partnerships,
though not strictly of the joint-stock kind. They formed the nucleus of
banks in Japan, and their functions included, for the first time, the
receiving of deposits and the lending of money to merchants and
manufacturers. They had power to issue notes, and, at the same time, the
government issued notes on its own account. Indeed, in this latter fact
is to be found one of the motives for organizing the exchange companies,
the idea being that if the state's notes were lent to the companies, the
people would become familiarized with the use of such currency, and the
companies would find them convenient capital. But this system was
essentially unsound: the notes, alike of the treasury and of the
companies, though nominally convertible, were not secured by any fixed
stock of specie. Four years sufficed to prove the unpracticality of such
an arrangement, and in 1872 the exchange companies were swept away, to
be succeeded in July 1873 by the establishment of national banks on a
system which combined some of the features of English banking with the
general bases of American. Each bank had to pay into the treasury 60%
of its capital in government notes. It was credited in return with
interest-bearing bonds, which bonds were to be left in the treasury as
security for the issue of bank-notes to an equal amount, the banks being
required to keep in gold the remaining 40% of their capital as a fund
for converting the notes, which conversion must always be effected on
application. The elaborators of this programme were Ito, Inouye, Okuma
and Shibusawa. They added a provision designed to prevent the
establishment of too small banks, namely, that the capital of each bank
must bear a fixed ratio to the population of its place of business.
Evidently the main object of the treasury was gradually to replace its
own fiat paper with convertible bank-notes. But experience quickly
proved that the scheme was unworkable. The treasury notes had been
issued in such large volume that sharp depreciation had ensued; gold
could not be procured except at a heavy cost, and the balance of foreign
trade being against Japan, some 300,000,000 _yen_ in specie flowed out
of the country between 1872 and 1874.
It should be noted that at this time foreign trade was still invested
with a perilous character in Japanese eyes. In early days, while the
Dutch had free access to her ports, they sold her so much and bought
so little in return that an immense quantity of the precious metals
flowed out of her coffers. Again, when over-sea trade was renewed in
modern times, Japan's exceptional financial condition presented to
foreigners an opportunity of which they did not fail to take full
advantage. For, during her long centuries of seclusion, gold had come
to hold to silver in her coinage a ratio of 1 to 8, so that gold cost,
in terms of silver, only one-half of what it cost in the West. On the
other hand, the treaty gave foreign traders the right to exchange
their own silver coins against Japanese, weight for weight, and thus
it fell out that the foreigner, going to Japan with a supply of
Mexican dollars, could buy with them twice as much gold as they had
cost in Mexico. Japan lost very heavily by this system, and its
effects accentuated the dread with which her medieval experience had
invested foreign commerce. Thus, when the balance of trade swayed
heavily in the wrong direction between 1872 and 1874, the fact created
undue consternation, and moreover there can be no doubt that the
drafters of the bank regulations had over-estimated the quantity of
available gold in the country.
All these things made it impossible to keep the bank-notes long in
circulation. They were speedily returned for conversion; no deposits
came to the aid of the banks, nor did the public make any use of them.
Disaster became inevitable. The two great firms of Ono and Shimada,
which had stood high in the nation's estimation alike in feudal and in
imperial days, closed their doors in 1874; a panic ensued, and the
circulation of money ceased almost entirely.
Change of the Banking System.
Evidently the banking system must be changed. The government bowed to
necessity. They issued a revised code of banking regulations which
substituted treasury notes in the place of specie. Each bank was
thenceforth required to invest 80% of its capital in 6% state bonds,
and these being lodged with the treasury, the bank became competent to
issue an equal quantity of its own notes, forming with the remainder
of its capital a reserve of treasury notes for purposes of redemption.
This was a complete subversion of the government's original scheme.
But no alternative offered. Besides, the situation presented a new
feature. The hereditary pensions of the feudatories had been commuted
with bonds aggregating 174,000,000 _yen_. Were this large volume of
bonds issued at once, their heavy depreciation would be likely to
follow, and moreover their holders, unaccustomed to dealing with
financial problems, might dispose of the bonds and invest the proceeds
in hazardous enterprises. To devise some opportunity for the safe and
profitable employment of these bonds seemed, therefore, a pressing
necessity, and the newly organized national banks offered such an
opportunity. For bond-holders, combining to form a bank, continued to
draw from the treasury 6% on their bonds, while they acquired power to
issue a corresponding amount of notes which could be lent at
profitable rates. The programme worked well. Whereas, up to 1876, only
five banks were established under the original regulations, the number
under the new rule was 151 in 1879, their aggregate capital having
grown in the same interval from 2,000,000 _yen_ to 40,000,000 _yen_,
and their note issues from less than 1,000,000 to over 34,000,000.
Here, then, was a rapidly growing system resting wholly on state
credit. Something like a mania for bank-organizing declared itself,
and in 1878 the government deemed it necessary to legislate against
the establishment of any more national banks, and to limit to
34,000,000 _yen_ the aggregate note issues of those already in
existence.
It is possible that the conditions which prevailed immediately after
the establishment of the national banks might have developed some
permanency had not the Satsuma rebellion broken out in 1877. Increased
taxation to meet military outlay being impossible in such
circumstances, nothing offered except recourse to further note
issues. The result was that by 1881, fourteen years after the
Restoration, notes whose face value aggregated 164,000,000 _yen_ had
been put into circulation; the treasury possessed specie amounting to
only 8,000,000 _yen_, and 18 paper _yen_ could be purchased with 10
silver ones.
Resumption of Specie Payments.
Up to 1881 fitful efforts had been made to strengthen the specie value
of fiat paper by throwing quantities of gold and silver upon the
market from time to time, and 23,000,000 _yen_ had been devoted to the
promotion of industries whose products, it was hoped, would go to
swell the list of exports, and thus draw specie to the country. But
these devices were now finally abandoned, and the government applied
itself steadfastly to reducing the volume of the fiduciary currency on
the one hand, and accumulating a specie reserve on the other. The
steps of the programme were simple. By cutting down administrative
expenditure; by transferring certain charges from the treasury to the
local communes; by suspending all grants in aid of provincial public
works and private enterprises, and by a moderate increase of the tax
on alcohol, an annual surplus of revenue, totalling 7,500,000 _yen_,
was secured. This was applied to reducing the volume of the notes in
circulation. At the same time, it was resolved that all officially
conducted industrial and agricultural works should be sold--since
their purpose of instruction and example seemed now to have been
sufficiently achieved--and the proceeds, together with various
securities (aggregating 26,000,000 _yen_ in face value) held by the
treasury, were applied to the purchase of specie. Had the government
entered the market openly as a seller of its own fiduciary notes, its
credit must have suffered. There were also ample reasons to doubt
whether any available stores of precious metal remained in the
country. In obedience to elementary economical laws, the cheap money
had steadily driven out the dear, and although the government mint at
Osaka, founded in 1871, had struck gold and silver coins worth
80,000,000 _yen_ between that date and 1881, the customs returns
showed that a great part of this metallic currency had flowed out of
the country. In these circumstances Japanese financiers decided that
only one course remained: the treasury must play the part of national
banker. Produce and manufactures destined for export must be purchased
by the state with fiduciary notes, and the metallic proceeds of their
sales abroad must be collected and stored in the treasury. This
programme required the establishment of consulates in the chief marts
of the Occident, and the organization of a great central bank--the
present Bank of Japan--as well as of a secondary bank--the present
Specie Bank of Yokohama--the former to conduct transactions with
native producers and manufacturers, the latter to finance the business
of exportation. The outcome of these various arrangements was that, by
the middle of 1885, the volume of fiduciary notes had been reduced to
119,000,000 _yen_, their depreciation had fallen to 3%, and the
metallic reserve of the treasury had increased to 45,000,000 _yen_.
The resumption of specie payments was then announced, and became, in
the autumn of that year, an accomplished fact. From the time when this
programme began to be effective, Japan entered a period of favourable
balance of trade. According to accepted economic theories, the
influence of an appreciating currency should be to encourage imports;
but the converse was seen in Japan's case, for from 1882 her exports
annually exceeded her imports, the maximum excess being reached in
1886, the very year after the resumption of specie payments.
The above facts deserve to figure largely in a retrospect of Japanese
finance, not merely because they set forth a fine economic feat,
indicating clear insight, good organizing capacity, and courageous
energy, but also because volumes of adverse foreign criticism were
written in the margin of the story during the course of the incidents
it embodies. Now Japan was charged with robbing her own people because
she bought their goods with paper money and sold them for specie;
again, she was accused of an official conspiracy to ruin the foreign
local banks because she purchased exporters' bills on Europe and
America at rates that defied ordinary competition; and while some
declared that she was plainly without any understanding of her own
doings, others predicted that her heroic method of dealing with the
problem would paralyze industry, interrupt trade and produce
widespread suffering. Undoubtedly, to carry the currency of a nation
from a discount of 70 or 80% to par in the course of four years,
reducing its volume at the same time from 160 to 119 million _yen_,
was a financial enterprise violent and daring almost to rashness. The
gentler expedient of a foreign loan would have commended itself to the
majority of economists. But it may be here stated, once for all, that
until her final adoption of a gold standard in 1897, the foreign money
market was practically closed to Japan. Had she borrowed abroad it
must have been on a sterling basis. Receiving a fixed sum in silver,
she would have had to discharge her debt in rapidly appreciating gold.
Twice, indeed, she had recourse to London for small sums, but when she
came to cast up her accounts the cost of the accommodation stood out
in deterrent proportions. A 9% loan, placed in England in 1868 and
paid off in 1889, produced 3,750,000 _yen_, and cost altogether
11,750,000 _yen_ in round figures; and a 7% loan, made in 1872 and
paid off in 1897, produced 10,750,000 _yen_, and cost 36,000,000
_yen_. These considerations were supplemented by a strong aversion
from incurring pecuniary obligations to Western states before the
latter had consented to restore Japan's judicial and tariff autonomy.
The example of Egypt showed what kind of fate might overtake a
semi-independent state falling into the clutches of foreign
bond-holders. Japan did not wish to fetter herself with foreign debts
while struggling to emerge from the rank of Oriental powers.
Closing of the National Banks.
After the revision of the national bank regulations, semi-official
banking enterprise won such favour in public eyes that the government
found it necessary to impose limits. This conservative policy proved
an incentive to private banks and banking companies, so that, by the
year 1883, no less than 1093 banking institutions were in existence
throughout Japan with an aggregate capital of 900,000,000 yen. But
these were entirely lacking in arrangements for combination or for
equalizing rates of interest, and to correct such defects, no less
than ultimately to constitute the sole note-issuing institution, a
central bank (the Bank of Japan) was organized on the model of the
Bank of Belgium, with due regard to corresponding institutions in
other Western countries and to the conditions existing in Japan.
Established in 1882 with a capital of 4,000,000 yen, this bank has now
a capital of 30 millions, a security reserve of 206 millions, a
note-issue of 266 millions, a specie reserve of 160 millions, and
loans of 525 millions.
The banking machinery of the country being now complete, in a general
sense, steps were taken in 1883 for converting the national banks into
ordinary joint-stock concerns and for the redemption of all their
note-issues. Each national bank was required to deposit with the
treasury the government paper kept in its strong room as security for
its own notes, and further to take from its annual profits and hand to
the treasury a sum equal to 2½% of its notes in circulation. With
these funds the central bank was to purchase state bonds, devoting the
interest to redeeming the notes of the national banks. Formed with the
object of disturbing the money market as little as possible, this
programme encountered two obstacles. The first was that, in view of
the Bank of Japan's purchases, the market price of state bonds rose
rapidly, so that, whereas official financiers had not expected them to
reach par before 1897, they were quoted at a considerable premium in
1886. The second was that the treasury having in 1886 initiated the
policy of converting its 6% bonds into 5% consols, the former no
longer produced interest at the rate estimated for the purposes of the
banking scheme. The national banks thus found themselves in an
embarrassing situation and began to clamour for a revision of the
programme. But the government, seeing compensations for them in other
directions, adhered firmly to its scheme. Few problems have caused
greater controversy in modern Japan than this question of the ultimate
fate of the national banks. Not until 1896 could the diet be induced
to pass a bill providing for their dissolution at the close of their
charter terms, or their conversion into ordinary joint-stock concerns
without any note-issuing power, and not until 1899 did their notes
cease to be legal tender. Out of a total of 153 of these banks, 132
continued business as private institutions, and the rest were absorbed
or dissolved. Already (1890 and 1893) minute regulations had been
enacted bringing all the banks and banking institutions--except the
special banks to be presently described--within one system of
semi-annual balance-sheets and official auditing, while in the case of
savings banks the directors' responsibility was declared unlimited and
these banks were required to lodge security with the treasury for the
protection of their depositors.
Special Banks.
Just as the ordinary banks were all centred on the Bank of Japan[24]
and more or less connected with it, so in 1895, a group of special
institutions, called agricultural and commercial banks, were organized
and centred on a hypothec bank, the object of this system being to
supply cheap capital to farmers and manufacturers on the security of
real estate. The hypothec bank had its head office in Tokyo and was
authorized to obtain funds by issuing premium-bearing bonds, while an
agricultural and industrial bank was established in each prefecture
and received assistance from the hypothec bank. Two years later
(1900), an industrial bank--sometimes spoken of as the _crédit
mobilier_ of Japan--was brought into existence under official
auspices, its purpose being to lend money against bonds, debentures
and shares as well as to public corporations. These various
institutions, together with clearing houses, bankers' associations,
the Hokkaido colonial bank, the bank of Formosa, savings banks
(including a post-office savings bank), and a mint complete the
financial machinery of modern Japan.
Review of Banking Development.
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 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%.
Insurance.
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 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_.
Clearing Houses.
The origin of clearing houses preceded that of insurance companies in
Japan by only two years (1879). Osaka set the example, which was
quickly followed by Tokyo, Kobe, Yokohama, Kioto 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.
Bourses.
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 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.
The Government and Economic Development.
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 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.
Adoption of the Gold Standard.
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 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.
State Revenue.
To 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.