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law, the working of the system proved not quite satisfactory. Besides, the currency was dangerously inflated by the issue of inconvertible notes, to which the Government was obliged to resort in consequence of the political crises. A proper regulation of the currency thus became the prime necessity of finance, and it was to relieve the situation that the Bank of Japan was established in 1882 as part of a broad scheme of financial reforms. The following objects of the institution were set forth in the memorandum presented to the Cabinet by Count Matsukata, then Minister of Finance:

1. To promote the co-operation and assimilation of banks under a central bank.
2. To increase capital available for trade and industry.
3. To reduce, as well as to equalize, the rate of interest.
4. To transfer to the bank various services in the Treasury, when its business is firmly organized.
5. To discount foreign bills, so as to regulate the influx and efflux of specie.

In 1884 the Convertible Bank-Note Act was enacted, whereby it was aimed to replace both the Government and national bank notes with those of the Bank of Japan, so as to unify the currency system under this central institution. Thenceforth the issue of convertible notes became an important function of the bank.

At first the capital of the Bank of Japan was 10,000,000 yen. This was divided into 50,000 shares of 200 yen each. One-half of this capital was subscribed by the Government with its surplus fund. This was afterwards transferred to the Crown property. The expansion of business necessitated an increase of capital, and in 1887 it was increased to 20,000,000 yen, and again in 1895 to 30,000,000 yen. Its capital, which is all paid up, is divided into 150,000 shares. The shares are all registered, and their ownership is allowed only to Japanese subjects, who obtain permission of the Minister of Finance to acquire it. The number of the shareholders now stands at 948.

The profit is semi-annually divided in the following way: Out of the net profit, 6 per cent. is declared as the first dividend, and then at least one-tenth of the rest is added to the reserve, and another one-tenth may be distributed as a bonus to the bank officers. The second dividend is to be declared out of the remainder, some part of which is sometimes carried to the reserve account. Since 1887 the sum of these two dividends has varied between 10 per cent. and 15 per cent. per annum.

The reserve fund can be drawn on only to make up for the losses of the capital or to equalize the annual dividends. This fund is to be invested only in the purchase of gold, silver or