The Bill passed the Lower House on March 10, was read the first time in the Upper House on the 15th, passed on the 23rd, and after receiving the August Sanction was promulgated on March 26. On October 1 the new gold currency began to be exchanged for the silver yen (see Chapter IX.). A Japanese proverb says, "to look at things lightly is the only way to become energetic."

Meanwhile, the English papers published in Yokohama either proved the madness of the scheme, or, in less ratiocinative manner, contented themselves with prophesying the unhappiest results.

Chapter V. gives a minute account of the regulations for the new coinage, with full details and illustrations of the various new coins.

To return to the Indemnity (Chapter VI.). China paid the first instalment in London in October 1895, when the question arose, "How will you take it?" At that date Viscount Watanabe being Minister of Finance, with no intention of making a reform in the currency, a certain amount of both gold and silver were bought, as the imports to Japan exceeded her exports. But in September 1896 Count Matsukata again became Minister, and he having made up his mind. to introduce the gold standard, "the purchase and importation of gold bullion became now the main undertaking" (p. 222). Instructions were also given to employ the Indemnity credit in London by discounting bills on Yokohama which were drawn against "productive" goods exported to Japan ("e.g., machinery and cotton "), avoiding as far as possible the advance of money on bills representing articles of luxury (p. 223).

This business was managed by the Bank of Japan and its agency, the Yokohama Specie Bank; but "it was no easy thing to accomplish such a work on so large a scale without disturbing the economic market." A comptroller of the bank was sent to London, while the Government was kept accurately informed as to economic conditions abroad by reports (“mail or cable according to the need of the case") from its consuls and from its Bank officials in various countries. The comptroller of the Bank of Japan, co-operating with the London manager of the Specie Bank, "adroitly manipulated and accomplished the purchase of a vast amount of gold bullion, thus enabling the Government to carry through the gold standard measure without a single hitch" (p. 225).

Nearly £16,000,000 of the Indemnity were used in buying bills, about £11,500,000 was sent home in gold, and £3,000,000 in silver.

(Chapter VII.) As already stated, the Gold Coinage Bill passed in March 1897, and the Government being now supplied with bullion at once began minting the new coins. Working day and night they turned out by the 1st of October nearly 50,000,000 yen (£5,000,000) of gold coins, and another batch of 25,000,000 before April 1898.1 This total of 75,000,000 yen was the amount considered sufficient for accom1 Besides these, 18 million yen of gold coins were issued to private applicants (p. 236).

plishing the reform, i.e., for exchanging with the silver 1-yen coins hitherto in circulation, as well as with the promissory notes issued by the Mint against silver held uncoined. Would this quantity of gold be enough? was a question which had caused anxiety, for reasons set forth in Chapter IX.

As regards subsidiary silver coins, it was considered advisable to increase the supply, so as to bring up the percentage in Japan nearer to that of other countries. It was decided to coin an additional amount of 40,000,000 yen, mainly 50-sen pieces (1s.); this would raise the total of subsidiary silver coins to 65,000,000 yen. This gives a per capita rate of about 3s., against 12s. for Great Britain, 9s. for Germany, 6s. for France, and 4s. for the United States (p. 232).

There was another reason why a large extra issue of small silver was needed; viz., that the 1-yen convertible notes hitherto issued by the Bank of Japan, amounting to 66,000,000 yen, the favourite currency of the nation, were now ordered to be gradually withdrawn from circulation, and there were not to be any new notes of similar denomination (none smaller than 5-yen). The Government wished to educate the people to rely more on "hard money." "It is particularly important that coins be used by the people in their smaller daily transactions" (p. 229). Since 1897, therefore, coins have supplanted paper 2 in retail transactions.

In Chapter VIII. there is a short digression dealing with the sources from which the gold reserve of Japan may be replenished in future. Japan itself produces only £170,000 of gold per annum,3 but from £200,000 to £300,000 is obtainable from Korea, and some £850,000 annually may be expected from China. Thus Japan should in these ways alone be able to secure a yearly gold supply averaging £1,260,000.

Returning to the narrative, Chapter IX. gives an account of "the withdrawal from circulation of the 1-yen silver coins." The Coinage Law of 1897 enacted that the 1-yen silver coins, hitherto legal money, must cease to circulate on April 1st, 1898, but that they might continue to be brought to the Bank for exchange with gold until 1903. Finding, however, that nearly all the 1-yen coins in the country were quickly bought up and exchanged, and fearing that "if the five-year period were allowed to remain, counterfeit 1-yen pieces might be imported from abroad," the Government passed a supplementary law (June 10, 1898) that all further exchange of 1-yen coins must cease after July 31, 1898. We have seen (in Chapter VII.) that the Government had provided 75,000,000 yen of new gold coins, considering this amount adequate for all the purposes of exchange. But this decision was not reached until after a period of much anxiety and hard work.

1 The Japanese have always preferred small paper to coins, owing to the absence of pockets in the national dress.

2 Much to the regret of both Japanese and foreigners.

3 The recent discoveries of gold in Hokkaido (the N. island) may quite change this figure.

They could easily estimate the number of 1-yen coins in circulation at home, or held as part of its reserve by the Bank (together some 35,000,000 yen), to which must be added about 30,000,000 yen of Mint bullion-notes which would also have to be exchanged-making a total of about 65,000,000 yen. This left a margin of only 10,000,000 yen in gold to exchange with the 1-yen silver coins which, some critics said, might return in a flood from the countries on the Pacific Coast to which they had been at various times exported. Since the founding of the Mint in 1870 no less than 116,000,000 yen had gone to China, Hongkong, Singapore, &c., and if a very large number should return it might be impossible to carry out the promised exchange. Now, ever since 1885, "the Government had never relaxed its efforts to keep track of the movements abroad of our 1-yen silver coin" (p. 252), and " previous to proposing the Coinage Bill in February 1897, Count Matsukata despatched telegrams to Japanese consuls at various places, instructing them to report in regard to facts concerning our 1-yen coin in their respective regions." Most careful inquiries were made, and it was ascertained that (a) many of the coins had been melted down in China; (b) many bore private stamps, rendering them illegal in Japan; (c) while many more formed the chief medium of exchange in the Straits Settlements. (The Reports of the Consuls occupy pp. 253-305 of Chapter IX.) "In view of these facts," continues the Count, I estimated that no more than 10,000,000 yen would come back for exchange." It was gratifying that the result proved the almost literal correctness of that estimate (p. ix.). As a matter of fact 10,846,465 yen returned from abroad to be exchanged. And thus, in the short period of ten months, was accomplished without a hitch a work which might easily have proved an embarrassing failure. Great disappointment was felt by the Treaty-port newspapers at such an untoward success.

1

Having called in 75,000,000 yen of silver (coin and bullion), Government had now to dispose of it (Chapter X.). At first, owing to a heavy drop in the price of silver during 1897 (to 23d.), “the situation created much anxiety;" but in 1898 the price recovered (p. 335), and nearly 41,000,000 yen were sold in Hongkong and Shanghai. Over 6,000,000 were taken to Formosa and Korea, to be there disbursed. The remaining 27 millions were re coined into subsidiary coins, as mentioned in Chapter VII. "The whole amount was thus disposed of in just one year and three months after the new coinage law was promulgated. The rate realised (averaging 27-057d.) was even slightly higher than the average price of silver bullion in London at the time " (pp. xi., 337).

There was a discrepancy of 5,397,581 yen between the proceeds of the sale and the original value of the silver, showing a loss of 7 per cent.; but this loss was more than made good by the profits of

1 This was also the amount predicted as a maximum by Mr. Jackson, Manager of the Hong Kong and Shanghai Bank,

the Mint (5,651,960 yen) in coining subsidiary coins during 1897 and 1898 (p. 333).

Count Matsukata then points out (Chapter XI.) that none of the Indemnity was "consumed" in this change to a gold standard. A portion of it, in the form of gold coins, was handed over to the Bank to manipulate the exchange of the silver yen, but out of the sale of these latter an equal sum was handed back to the Indemnity account, which was thus restored to its original integrity.

In Chapter XII. the Minister indicates the probable effects of the Coinage Reform. The rate of exchange with gold countries will be steadier (since October 1897 the exchange on London has varied very slightly), and trade with these countries, being less speculative, will become more flourishing. One cause of fluctuation in general prices is removed by discarding unsteady silver. "Besides, since the adoption of the gold standard, our Government bonds have been sold in no small amount in the European market, so that their names appear regularly in the price list of the London Stock Exchange." Foreigners also seem to show a growing tendency to make investments at low rates of interest" in Japan.

There remains the question of the trade with silver countries— which however amounts to only one-third of the whole foreign trade. Japan may sometimes be handicapped (owing to silver fluctuation) when competing in gold-standard countries with products of silverusing countries; "but in regard to our most important product, silk, there is scarcely any danger," since it competes not with Chinese but with Italian silk (p. 371).

One cannot help admiring the sobriety of mind disclosed in this chapter. Having at last achieved a monetary reform to which he had. devoted twenty years of his life, the Japanese statesman refrains from hysteric exaggeration of currency influences. Feeling that the prosperity of his country depends on many important conditions besides that of the monetary standard which it adopts, he does not claim as the results of his labour all the comprehensive efficacy of a quack pill, but contents himself with the remark, "that in the long run the advantages of the gold standard will be deep and abiding, conducive to the healthy industrial growth of the country, scarcely seems to admit of any doubt" (p. xii.).

After an interesting analysis of the circumstances which helped to make the reform easier (p. 370), Count Matsukata concludes his report with an account of the problem to be solved in Formosa (Chapter XIII.), where it has as yet been found impossible to establish the gold standard pure and simple. The task of gradually converting the people of Formosa to new monetary conditions is entrusted to the able hands of Mr. Jiuchi Soyeda.

We must not omit mention of the statistical Tables with which the work abounds, tables illustrating every phase of the fiscal and commercial vicissitudes of the country during the period under considera

tion. These tables, extremely well printed, exemplify the passion for minute accuracy which is inherited by every native of Japan.

Any reader of this remarkable book will be strongly impressed by a sense of Japanese buoyancy-that most characteristic virtue of the race. What other country in the history of the world has had thrust upon it such a chaos of revolution and such a Herculean labour of reconstruction to be faced? and what other country would have achieved the end so quickly or so serenely? It is the Japanese tenacity of purpose combined with the Japanese light-heartedness which made the phenomenon possible. That curious combination of qualities should be noted by European observers, as capable of producing strange economic results in future years. English economists, unless they have lived on the Pacific coast, must find extreme difficulty in recognising the fact that there are 500,000,000 human beings minutely civilised, very healthy and intelligent, possessed of vast economic potentiality, yet accustomed to exhibit their powers on economic lines widely divergent from those laid down in the canonical books. The history of their development has been so different from ours-almost as different as if they had lived on another planet-that we are apt to dismiss them with an impatient contempt. A genuine effort to grasp the national character of the Chinese and Japanese might teach new truths, and would prepare the English nation for wise commercial procedure in relation to the surprising economic developments which the twentieth century will witness on the shores of the western Pacific. ERNEST FOXWELL

THE BERLIN PRODUCE EXCHANGE

THE recent resumption of the operations of the Berlin Produce Exchange in its old quarters has recalled attention to the circumstances under which its functions were interrupted on the passage of the Exchange Act of June 22, 1896.2 That Act subjected all Exchanges in the German Empire to regulations in which might be required the

The writer remembers the calmness with which the Japanese Government carried through the Bill, in March, 1897, amidst a chorus of adverse criticism from 'nearly every Englishman who held the eye or ear of the public in Tokyo, criticism of a high-pitched intensity, culminating in threats of the commercial ruin of Japan should the measure be adopted. Every well-educated foreign resident was then a Bimetallic apostle of the most denunciatory type, and the papers were daily filled with columns of dialectic cannonade directed against the intellectual calibre of the Government, and its failure to read history or to grasp axiomatic principles. The English newspapers, knowing little of currency matters, found it simpler to copy arguments from the bimetallic tracts. The said Government read it all, and quietly pushed its way (p. viii.), quickly converting-by methods suitable to the circumstances an ignorant and hostile Diet into an overwhelming majority in their favour, and then rapidly disarming opposition in the Upper House. The onward progress of Japan has been directed by first-class Generals since 1868.

For a discussion of the Act, cf. the article by Professor Lexis in ECONOMIC JOURNAL, September, 1897.