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permission to issue convertible notes; but the application being rejected by the Government, it chiefly devoted its attention to the business of foreign exchange and hypothecation of foreign bills. Notwithstanding many difficulties, it expanded its business operations, its capital being soon afterward increased to 6,000,000 yen.

Being in its organization and the nature of its business operations essentially different from a national bank, it did not properly come under the National Bank Regulations. In recognition of this fact, the Government promulgated the Regulations for the Yokohama Specie Bank in March, 1887. Since then the bank has made a rapid and steady growth, its capital being increased to 12,000,000 yen in 1896, and again to 24,000,000 yen in September, 1899.

To remedy a state of confusion brought about by the rise of a multitude of small banks with very imperfect connections between one another, the Government decided, in 1882, to establish a central bank, and in June the same year the Regulations of the Bank of Japan were promulgated. The newly-established bank was opened in October of the same year. The main objects of the establishment of the Bank of Japan were to smooth relations between the different banks, to facilitate monetary circulation, to lower the rate of interest, to improve the business of bill-discounting, and to issue convertible bank-notes for the purpose of establishing a firm basis for the monetary system of Japan. Moreover, in consequence of the fact that the bank manages the receipt and disbursement of the national revenue, its credit was assured from the moment of its establishment. After the Chino-Japanese War its capital was increased to 30,000,000 yen, with more branches and agencies, so as to meet the requirements of its fast-expanding business.

The Convertible Notes Regulations, which were first promulgated in 1884, were revised in August, 1887, the principal object of the revision being to regulate the maximum limit of note-issue on security reserve. After the adoption of the gold standard in October, 1897, the bank-notes, of course, became convertible into gold coins. Owing to the economic progress of the country, the demand for currency was much increased, and so the limit of note-issue on security reserve was again expanded in February, 1899.

Though the organs of monetary circulation in regard to commerce had been provided and improved, yet there existed no such organ in regard to agriculture and industry, and the need of remedying this defect led to the promulgation of the Law of the Industrial Bank of Japan and the Law of the Agricultural and Industrial Banks (Local Industrial Banks) in April, 1896.

These banks were established in order to supply capital at