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Meiji), the Imperial Government was obliged to take over all the paper money which had been issued by different Daimios, and for the adjustment of this class of paper money the Government was again obliged to issue further a large amount of paper currency. All these causes combined to raise the amount of inconvertible paper money to an enormous figure.

The credit of these notes was at first exceedingly bad. This was doubtless due largely to the lack of credit of the Imperial Government itself, but also to the fact that the people could not free their minds of the sad experiences of the losses they had incurred on account of the various inconvertible notes of feudal times. The new paper money was shunned by the people, even at a large discount, so much so that the Government felt compelled to take steps to reduce its amount by exchanging it for Government bonds, bearing 6 per cent. interest, which were issued under the Kinsatu (literally, gold note) Exchange Bond Regulations. Through these measures, as well as owing to the increase of the Government’s credit, the hatred of paper money gradually wore off, the people finally even coming to prefer it to specie, because of the convenience of handling.

Matters were progressing favourably when, in 1877 (10th year of Meiji), a rebellion broke out in the south-western provinces. The Government was again forced to resort to the issuing of a large amount of inconvertible notes, which brought on an inflation, and consequent depreciation, of these notes. There was also another cause for this result—namely, the increase after 1876 of the amount of the national bank-notes, due to the increase in the number of national banks, owing to certain amendments in the National Bank Regulations, which took place through Imperial Ordinance No. CVI. The effect of this depreciation was felt in various directions: for instance, prices rose rapidly, gold and silver left the country, the imports came to exceed the exports, the farmers contracted habits of luxury, the industrial classes became overexcited with vain hopes of speculation. Thus was brought about the great financial distress of 1880–81. That disastrous results would inevitably follow if inconvertible paper money were made the standard of value might have been foreseen by mere common-sense; but the measures adopted by the Government at this crisis seemed to show that the authorities did not grasp this simple truth. They regarded the difference in price between silver and paper as an indication, not of the depreciation of paper, but of the appreciation of silver. They attempted, therefore, to stop the rise of the price of silver by increasing the amount of its circulation. The Government sold silver coins, opened places for the exchange of Mexican dollars, and established the Yokohama Specie Bank, in order to call forth the