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conditions to the detriment of the economic progress of Japan. He therefore proposed to abandon some of the Government undertakings, and, as the first step towards this end, to postpone the floating of the loan referred to. The Government discussed Mr. Watanabe’s policy. Some of the Ministers urged that to stop the loan, which had been sanctioned by a Diet, would be too inconsistent an action on the part of a Government who had originally proposed it in the Budget Estimates. Although it was at last agreed upon to reduce the proposed loan by 9,000,000 yen, the suggested exclusion of any loan from the Budget Estimates for the following years was not decided upon, and this disagreement of opinion amongst the Ministerial members led, as might have been seen, to the immediate downfall of the Ito Cabinet. After this, as I have already stated, the Katsura Cabinet came into power. As regards financial matters, the difficulty was equally felt by the new Ministry. The Government, however, saw that if they really intended to carry out the reforms, solid and far-reaching principles by which such reforms should be guided must, in the first place, be laid down. Considering that the essential object of public finance is nothing but the economic prosperity of the country, and that if the general economic condition is prosperous, the public finance will be equally so, the Government decided to pay special attention to the improvement of the money market. At this time there was the sum of about 50,000,000 yen of the loan already arranged to be raised. The Government resolved not to float any further amount except the sum mentioned. In order to accomplish the compilation of the Budget Estimates for the year 1901–1902 on principles of strict economy, 9,000,000 yen were deducted from the arranged loan, and 30,000,000 yen were saved from the abandonment or curtailment of the public undertakings, amounting in the aggregate to 39,000,000 yen. When the present Ministry was formed a meeting of the Prefectural Governors was summoned, and the importance of provincial finance in relation to the national finance was explained, and they were advised to refrain from increasing local expenditure through indulging in extravagant works, and particularly to put a stop to the custom of raising local loans. Next, the Government paid attention to the evils resulting from the establishment of small banks, which were becoming too numerous. With small capital and less experience in banking business these banks only encouraged the fixing of capitals in industrial enterprises to an extent which could never be justified, considering the actual state of things, and the money thus disbursed mostly did not return to the banks for profitable employment. The results of this were the expan-