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Publications of the 

Carnegie Endowment for International Peace 

Division of Economics and History 
John Bates Clark, Director 



JAPANESE MONOGRAPHS 

EDITED BY 

BARON Y. SAKATANI, D.C.L. 

Formerly Minister of Finance of Japan 

Conscription System in Japan, by Gotaro Ogawa. 
Expenditures of the Russo-Japanese War, by Gotaro Ogawa. 
Military Industries of Japan, by Ushisaburo Kobayashi. 
War and Armament Loans of Japan, by Ushisaburo Kobayashi. 
War and Armament Taxes of Japan, by Ushisaburo Kobayashi. 
Expenditures of the Sino-Japanese War, by Giichi Ono. 
War and Armament Expenditures of Japan, by Giichi Ono. 



EXPENDITURES OF THE 
SINO-JAPANESE WAR 



nc 



BY 

GIICHI ONO 

Councilor of Finance Department 






NEW YORK 
OXFORD UNIVERSITY PRESS 

AMERICAN BRANCH: 35 West 32nd Street 
LONDON, TORONTO, MELBOURNE AND BOMBAY 

1922 



COPYRIGHT 1922 

BY THE 

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 



PRINTED IN THB UNITED STATES OF AMERICA 
AT THE RUMFORD PRESS, CONCORD, N. H. 



NOTE BY THE DIRECTOR 

The plans of the Division of Economics and History of the 
Carnegie Endowment for International Peace have been 
transformed by the World War. Problems now calling for 
study transcend in importance those with which this Division 
has been dealing and material for research and record so far 
transcends any that was formerly available that it will demand 
almost exclusive attention for some years to come. A new 
world has evolved suddenly out of the world which we knew 
and the transformation extends to the foundations of gov- 
ernment and of economic life. 

The process of warfare itself is now so unlike that of former 
days that many military rules of the past have gone into the 
scrap basket. The late war ended when its deadliest tools 
had barely been brought into action. The peoples have 
fought as they had worked, by machinery, mechanical and 
chemical engines of destruction have decided the result and 
will decide in like manner the result of all wars of the future. 
Machine shops and chemical laboratories will so largely 
determine what armies shall win that fighting strength will 
be as much a matter of available capital and of science in 
applying it as of numbers of troops and strategy in directing 
them. It is safe to say that the death dealing arts and instru- 
ments will far surpass in destructiveness those which made 
the late war so deadly, and to a soldier of the future the order 
to march into a cloud of poisonous gas and a whirlwind of 
missiles will resemble an order to plunge into the rapids of 
Niagara. This is one central and obvious fact which the 
war has taught us and it has many corollaries, some of which 
have to do with the increased costs of war and the importance 
of the particular resources that make a nation powerful for 
offense and defense; but there are less conspicuous economic 
facts which are more fundamental, since they may determine 
where and when, if at all, wars shall hereafter occur. 

Causes of warfare are always partly economic and those 
which incited the recent one were mainly so. The business 
plans of a powerful state reached to the ends of the earth 



Vi NOTE BY THE DIRECTOR 

and so crossed and interlaced the claims of other states that 
some writers, then and afterwards, pronounced the war inevi- 
table. If we assume a settled purpose on the part of such a 
state to encroach on the rights of others, we may say that it 
doubtless was inevitable. The victory of the defending 
countries has saved them from an immediate and intolerable 
domination, but it can not be taken as an assured fact that 
similar attempts will never again be made. The economic 
inducement continues and the means may at some time be 
forthcoming. 

Within the several states war has democratized industry, 
giving to labor an increase of .control — a change that if con- 
tinued will entail momentous consequences; but still greater 
effects have been produced on the relations of states to each 
other. The world as a whole has changed more than its 
component parts and the new relation of the parts to one 
another is the critical element in the situation. The great 
increase in the economic functions of governments is one 
cause of this condition. Within the great international com- 
munity in which the several states are units extensive eco- 
nomic functions have gravitated into the hands of govern- 
ments and caused them to face each other as business rivals 
and to deal with each other in a multitude of ways in which 
the merely self-seeking policy of private business is intoler- 
able. Power to invoke principles of justice and international 
law as interpreted by a competent court has become an in- 
dispensable means of allaying strife and this fact exalts to 
supreme importance the high court of nations which has just 
been established. It magnifies also the importance of the 
economic facts and principles with which the law itself will 
have to deal. It is not merely individual men or private 
corporations who now meet each other in the rough and 
tumble of a world-wide mart but states themselves, each 
representing its own population and seeking to foster its 
interests as a zealous and faithful agent. The chances of 
friction that are inherent in ordinary commerce inhere today 
in vast international transactions and will increase in the 
measure in which the intercourse grows. All this means a 



NOTE BY THE DIRECTOR Vll 

great increase in incentives to warfare, on the one hand, and 
in the motives for preventing it, on the other. Private com- 
merce unites more than it separates those who participate in 
it, and it remains to be seen whether international commerce 
will act in the same way; but, in view of what modern war 
means, the human race will deserve to perish, and much of 
it will probably do so, if the forces of strife are allowed to get 
the upper hand. Whether they will or not — whether the 
recent economic changes will tend to reduce warfare or to 
increase it — depends on the ability of nations to create and 
maintain the instrumentalities that in the new state of the 
world are necessary. 

Certain it is that the feeling which prevails today, the 
world over, is not one of security. The dread of further war 
is greater than it was before 19 14. In some areas war still 
prevails, in others peace is held by a precarious tenure and 
in all it can be firmly established only by conscious and intel- 
ligent action by the states themselves. Mere exhaustion 
holds war dogs temporarily in leash, but it will take more 
than that to tame them as they must be tamed if peace is 
to endure. 

We here confront a wide difference between the several 
states in comparative desire for peace and disposition to 
maintain it. One portentous fact is the grim determination 
of Russian communists to extend their system by crude force 
from state to state. Bolshevism is government by the few and 
largely the bad masquerading as government for and by the 
people. In its mother country, Russia, the economic meas- 
ure by which it began its career was confiscation of private 
wealth — in itself an ultra-democratic measure. If this had 
brought in a true communism, it would have been a ruthless 
and unjust measure for creating a peace-loving state. A 
just and orderly democratizing of industry in the several 
states would give new strength to the forces of peace, and it 
would be highly improbable that any state so influenced would 
try to extend its system over foreign countries by military 
invasion. Democracy, socialism, communism and bolshe- 
vism all appear in the aftermath of the war. The first of 



Vlll NOTE BY THE DIRECTOR 

them makes for future peace and so does even the conserva- 
tive element in the second, while all els6 in the series means 
certainty of civil strife and danger of international war. 

The fact that during the war governments had to take on 
innumerable functions that were formerly in private hands 
has lent an impetus to socialism and to the perverted growths 
that have accompanied it, and it has created a new inter- 
national system the meaning of which is profoundly signif- 
icant, though he who runs can not so easily read it. There 
are dangerous features in the system which the war evoked 
and, happily for mankind, there are available safeguards 
which were evoked with them and need to be retained if 
human effort can do it. 

By a compulsion that there was no resisting, the war forced 
the nations of the Entente into economic cooperation with 
each other. Commissions centering finally in the Supreme 
Economic Council adjusted in a harmonious way questions 
that would otherwise have led to rivalry and conflicting 
action in purchasing war materials, securing ships, appor- 
tioning food, controlling railroads, financing the war and 
doing a multitude of other things with the one common pur- 
pose of victory. The special compulsion of the struggle is 
over, but it has left an aftermath of issues grave enough to 
make peace insecure unless something equivalent to the 
Supreme Economic Council survives in full efficiency. The 
agency that did so much to win the war can do so much to 
prevent another one, but to that end it will have to be guided 
by economic principles and it is a saving fact that these still 
survive. The war has not abolished the law of demand and 
supply, though governments may forget it. In the coming 
era they must build better than they now know. Economic 
knowledge must either go in advance of action and prevent 
disaster or follow action and be learned from disaster. Be- 
yond computation is the importance of attaining the knowl- 
edge and using it when evil impends and prevention is possible. 

John Bates Clark, 
New York, Director. 

September 27, ig20. 



AUTHOR'S PREFACE 

When Japan emerged from the old regime and instituted the 
present system of government at the time of the restoration of 
the governmental power to the Emperor, she was beset with 
many troubles both from within and without and the future 
destiny of the Empire seemed hanging in the balance. Yet, 
within no more than half a century, extraordinary changes 
have taken place and Japan has today become one of the great 
Powers, having developed her present state of national power 
and prosperity in that short period. Such a record is hardly 
paralleled in any other country. Japan's history, therefore, 
during the fifty years of the Meiji Era, has, it is needless to say, 
a unique place in the history of the world, while the Sino- 
Japanese War, which is treated in this book, has likewise an 
especially important position in this period of Japan's history. 
There are two reasons for assigning to it such special impor- 
tance: one is the effect of that war upon Japan; the other is its 
special effect upon China and the various foreign countries 
which had interests in the Far East. I shall, for the sake of 
convenience, call the former the internal, and the latter 
external, effect. 

The Sino- Japanese War was the first international war in 
which Japan had engaged since the restoration of Meiji. At 
first the people generally did not believe in the possibility of 
final victory, but fortunately for them the laurels were 
awarded to Japan at last. The nation then, for the first time, 
realized the latent power which she had been conserving since 
the restoration, and henceforth Japanism as opposed to the 
Europ^anism of the ante-bellum period has been encouraged, 
and the nation has constantly planned for the development of 
this national power to the fullest extent. Now this new 
national consciousness may be considered as the internal effect 
of the war. At once Japan made remarkable progress in all 
directions. The enlightened measures adopted, together with 

ix 



X PREFACE 

the resulting economic development, furnish materials for a 
valuable discussion of the effects of the war and for an authen- 
tic history of the nation's development in modern times. As 
for the external effect of the Sino- Japanese War, it had a 
special significance, in its exposure of the weakness of China. 
The loosening of the national bond of unity of China had long 
been foreseen by intelligent observers; but the Sino- Japanese 
War clearly showed the accomplished fact to the world. 
Consequently, both Europe and America, who have for many 
years kept watchful eyes upon enterprises in the Far East, 
realized that their opportunity was at hand. They vied with 
each other in efforts to secure concessions, so that Far Eastern 
affairs assumed special importance in reference to the world's 
political and economic questions. All this was a result of the 
Sino- Japanese War. 

Such were the internal and external effects of this war. As 
for the economic effects, they too have been very great. They 
have completely changed the economic relations of the Far 
East. Consequently, a discussion of that war in its relation 
to Japan and especially to the economic conditions of the Far 
East will help greatly in making clear how the new situation in 
the Orient has been brought about. The value of such dis- 
cussion is immeasurable. While, to be sure, this book does 
not go so far as to treat of the external effects of the war, yet, 
even as a discussion of the internal effects alone, the work 
forms a valuable history of the economic development of 
Japan. From this point of view it may be seen how important 
the Sino- Japanese War was in the economic development of 
Japan. 

The author of this work, Mr. Keiichi Asada, has long served 
in the Department of Finance, where he has been actively en- 
gaged in work relating to money circulation and finance. 
The figures which are assumed as basis of the arguments in 
this book were obtained after careful investigation and are 
trustworthy in the highest degree. Today, any one who 
wants to make investigations of the same kind must depend 
upon the materials in the possession of the Department of 



PREFACE XI 

Finance. The author has made good use of these materials. 
And there is only one thing to regret. That is, that, on 
account of the limited scope of the present treatise, the author 
could not adduce additional figures in proof of his arguments. 
However, he has not failed to grasp the general principles 
underlying those figures, and to this fact the present editor, 
in his concluding remarks, desires cordially to attest. 

GiiCHi Ono. 
Tokyo, Japan, 
May^ igi6. 



BIBLIOGRAPHY 

AsADA Keiichi, Treatise on the Fluctuation in Prices of Commodi- 
ties in Japan since the Meiji Restoration, and the Cause thereof 
(Meiji I shin igo ni okeru Wagakuni Bukka no Hendo oyobi Sono 
Genin ron) 191 2. 

Currency System Investigating Committee, Report and Supple- 
ments {Kahei seido Chosakai Hokoku oyobi do Furoku), 1895. 

Department of Finance: 

References for Monetary Circulation (Kinyu jiko Sankosho), 

1899-1910. 
Report of Financial Readjustment after the Sino-Japanese War 

(Niju shichi hachinen eki Sengo Zaiseishimatsu Hokoku), 1900. 
Comparative Table of Figures for Forty-one Years relating to 

Foreign Trade of Japan {Dainihon Gaikoku Boeki Shiju 

ichinen Taishohyo), 1909. 
Annual Reports on Foreign Trade of Japan (Dainihon Gaikoku 

Boeki Nenpo), 1 882-1910. 
Annual Reports of the Department of Finance (Okurasho Nenpo), 

1875-1911. 
Annual Statistical Reports of the Bureau of Taxation (Shuzei- 

kyoku Tokei Nenpo), 1885- 19 10. 

General Staff of Japan, History of the Sino-Japanese War 
(Nisshin Senshi), 1904- 1907. 

Inaba, Kunzan, Complete History of the Ching Dynasty (Shincho 
Zenshi), 1914. 

KoBAYASHi, Ushisaburo, Treatise of Adjustment of Finance 
{Zaisei Seiri Ron), 19 12. 

Oriental Economics Publishing Co., Finance and Economy after 
the Sino-Japanese War {Niju shichi hachinen Sengo no Zaisei 
oyobi Keizai), 1903. 

Sakatani, Y. (representing the authors), History of Finance of the 
Meiji Era {Meiji Zaiseishi), 1904. 

Statistics Bureau of the Cabinet, Annual Statistical Reports of 
the Japanese Empire, Nos. 1-34 {Nihon teikoku Tokei Nenkan), 
1882-1911. 

Takizawa, Naoshichi, Treatise on History of Japanese Money Cir- 
culation (Nippon Kinyu Shiron), 191 2. 

Yoshida, Togo, History of Ancient Japanese-Korean Relations 
(Nikkan Koshi dan), 191 1. 
xii 



EXPLANATORY TABLES 

Value of Japanese Currencies 

Japan adopted the gold standard system in 1871, but the inconvertible paper 
money became principal currency a few years later. In 1886 the paper money 
became convertible into silver and after that date the Japanese currency system 
was the silver standard de facto, until on October i, 1897, the gold standard system 
was legally adopted. The figures necessary to ascertain the value of Japanese 
currencies are given below: 
(i) I gold yen (according to Coinage Law of 1871) contains 1.5 gramme pure gold. 

(2) I gold yen (according to Coinage Law of 1897) contains 0.75 gramme pure gold. 

(3) I silver yen contains 24.261 gramme pure silver. 

(4) The value of i silver yen in the English currency (according to the demand 

rate of exchange on London in the average of the year) is as follows: 



s. d. 

... 4.02.0 

. . . 4.00.8 

... 3. II. 2 

... 3. II. 7 

1878 309-4 

1879 3.08.0 

1880 3.08.9 

1881 3.08.4 



1874 
1875- 
1876. 
1877 



1882. 
1883. 
1884. 
1885. 
1886. 
1887. 
1888. 
1889. 



s. d. s. d. 

3.08.8 1890 304-5 

3.07.9 1891 2.02.6 

3.07.9 1892 2.10.5 

3.06.0 1893 2.06.7 

3.03.2 1894 2.01.2 

3.02.0 1895 2.01.3 

3.01.0 1896 2.02.0 

3. 01. 1 1897 2.00.4 



(5) The value of i yen of paper money in the English currency (calculated on the 
basis of the above mentioned exchange rate and the quotations of the silver 
price in the Tokyo Exchange in the average of the year) is as follows: 

d. s. d. s. d. 



1877. 
1878, 
1879. 



s. 

3. 10. I 
305. 6 
3-00.3 



1880, 
1881. 
1882. 



s. 
2.06, 
2.02. 
2.04 



1883. 
1884. 
1885. 



2.10.7 
304. 3 
303. 7 



(6) I ryo (unit of value of the old currency system) was declared in the Coinage 
Law of 1 87 1 to be equal to i yen. 

Chronological Table 



Meiji 



1st 


1868 A. 


D. 


Meiji 15th 


2d 


1869 ' 






' i6th 


3d 


1870 ' 






' 17th 


4th 


1871 ' 






' i8th 


5th 


1872 ' 






' 19th 


6th 


1873 ' 






' 20th 


7th 


1874 ' 






' 2ISt 


8th 


1875 ' 






' 22d 


9th 


1876 ' 






' 23d 


loth 


. 1877 ' 






* 24th 


nth 


1878 ' 






' 25th 


1 2th 


1879 ' 






' 26th 


13th 


1880 ' 






' 27th 


14th 


1881 ' 






' 28th 



1882 A. 

1883 

1884 

1885 

1886 

1887 

1888 

1889 

1890 

1891 

1892 

1893 
1894 

1895 



D. 



Xlll 



XIV 



EXPLANATORY TABLES 



Chronological Table — (Continued) 



Meiii29th 


1896 A. 


p 


" 30th 


1897 




•• 31st 


1898 




•* 32d 


1899 




*' 33d 


1900 




" 34th 


1901 




" 35th 


1902 




" 36th 


1903 




" 37th 


1904 




" 38th 


1905 




" 39th 


1906 




" 40th 


1907 





Meiji 41st 


1908 


" 42d 


1909 


" 43d 


1910 


" 44th 


1911 


Taisho 1st / 


1912 


2d 


1913 


" 3d 


1914 


" 4th 


1915 


" 5th 


1916 


" 6th 


1917 



A. D. 



Weights, Measures and Money 
With English, American, French and German Equivalents 



Japan 

Ri = Z^ Cho 
= 2,160 Ken 
= 1 2, ()6o Shaku. 



Great 
Britain 

2 . 44030 
Miles 



•Ri (Marine) ( Un^P 



1 Miles 



Square Ri 



/ 5 95505 
\ Sq. Miles 



U. S. of 
America 

2.44029 
Miles 

115151 
Miles 

5 95501 
Sq. Miles 



France Germany 



3 92727 
Kiloms. 

I. 85318 
Kiloms. 



3 .92727 
Kiloms. 

I. 85318 
Kiloms. 



15 42347, 15-42347 
Km. Carres Quadrat Km. 



Cho = 10 Tan 
— lOoSe 
= 3, coo 5m, 



2.45064 
Acres 



Tsubo =10 Go / 3 • 95369 

= 100 Shaku.. . . \ Sq. Yards 



2.45062 
Acres 



3 95367 
Sq. Yards 



99 17355 
Ares 



3 30579 
Centiares. 



99 17355 
Ar. 



3 30579 
Quadratm. 



Koku = 10 To 
=^ 100 Sho 
= 1,000 Go 



10,000 Shaku. 



.1 



4.96005 
Bushels 



Koku (Capacity of/i/ioof 
ship) \ one Ton 



'47 65389 

Gallons (Liq.) 

5. I 1902 
^ Bushels (Dry) 

i/io of 
one Ton 



Kwan 



■■ 1 ,000 Momme 
10,000 Fun 
100,000 Rin.. . 



Kiri" 160 Momme. . . 



Yen » 100 Sen 
«- 1 ,000 Rin 
= 10,000 Md. 



8.26733 8.26733 
lbs. (Avoir.) lbs. (Avoir.) 
j 10.0471 1 10.0471 1 
[ lbs. (Troy) lbs. (Troy) 

'1.32277 1.32277 
lbs. (Avoir.) lbs. (Avoir.) 
1.60754 1.60754 

^ lbs. (Troy) lbs. (Troy) 



2.0.582 
8. d. 



o . 4984 
Dollar 



I. 8039 I 
Hectolitres 



i/io 

de Tonne 



3 • 75000 
Kilogs. 



0.60000 
Kilogs. 



2.583 
Francs 



I. 8039 I 
Hectolitres 



i/io 
Tonne 

3.75000 
Kilogs. 



0.60000 
Kilogs. 



2.0924 
Marks 



CONTENTS 



PART I — Expenditures of the Sino-Japanese War 

CHAPTER PAGE 

I Introduction 3 

II Disbursements of the War 35 

III Supply of War Funds 47 

PART II — Economic Effects of 
THE Sino-Japanese War 

I Introduction 81 

II Effects on Public Finance 87 

III Effects on the Money Market 152 

IV Effects on Industries 208 

V Effects on Commerce 224 

VI Effects on Transportation and Communication 254 

VII Effects on Primitive Industry 273 

VIII Social Effects 278 

IX Conclusion 320 

Index 325 



XV 



PART I 

EXPENDITURES OF THE 
SINO-JAPANESE WAR 



Note. — In the tables throughout this volume, fractions of 
yen greater than one half have been counted as a whole yen 
and the other fractions have been disregarded. 



CHAPTER I 
INTRODUCTION 

Causes of the War 

W'hat the Balkan peninsula has so long been to Europe, the 
peninsula of Korea has for centuries been to the Far East — 
a "haunted palace" wherein lurked an unceasing source of 
danger to the peace of the Orient. With a vast empire more 
than four thousand years old as its immediate neighbor on 
the one side and the indomitable Empire of Japan on the 
other, it was not strange that the peninsula never gave birth 
to a strong or independent nation, for it is scarcely possible 
for small trees to flourish among giants of the forest. 

With an area of some 75,000 square miles (almost as large 
as Italy) and a population of about 12,000,000 (more than 
that of Scandinavia) the country can not be regarded as 
insignificantly small; yet, overshadowed as it was by two 
great masculine powers on either side, it never evinced re- 
markable virility or greatness. The comparative smallness 
of the peninsula, however, has been the main reason why the 
rulers of the land were unable to maintain undisturbed rela- 
tions with their neighbors or establish a stable government. 
Notwithstanding the fact that various monarchies arose in 
the peninsula from time to time, each in turn assumed a char- 
acter either of half-hearted independence or of meek sub- 
ordination, ever at the mercy of its more powerful neighbors 
whom it sought to humor by continual evasion, obsequious- 
ness and adulation. No sacrifice of national honor or prestige 
was too great for the maintenance of a mere existence. Indeed 
it is scarcely too much to say that there never has existed any 
really independent government in Korea, as the feeble and 
fickle national entities of the peninsula have always wavered 
in uncertain existence through the political upheavals and 
changes constantly taking place on the Asiatic continent. 
It was this continued political instability of Korea that ren- 

3 



4 EXPENDITURES OF THE SINO-JAPANESE WAR 

dered the country a menace to the peace and welfare of Japan 
and the whole of the Far East. 

E\'en the Li dynasty, which five hundred years ago over- 
threw the kingdom of Korai, was unable to prove more per- 
manent than its predecessors, following along in the same path 
of inconstancy and fluctuation. As its power declined from 
year to year it resorted to every possible temporizing expe- 
dient that suggested itself for the prolongation of its life. 
Japan, while she showed sympathy and sought to help Korea 
become a vigorous and independent power, free front disin- 
tegrating disturbances, was helpless to effect reform, as she 
always found her good offices ignored or treated with 
discourtesy. 

In spite of the repeated misdeeds and incivility of Korean 
officialdom during the early part of the Meiji Era, Japan 
persisted in her policy of leniency and willingness to forgive, 
protecting the peninsula from aggression and leading all other 
nations in recognizing its independence by signing a treaty to 
that efi^ect in 1877. But notwithstanding these efforts for 
peace and reform, the misguided officials of Korea gave this 
all-important question no consideration, but, on the contrary, 
devoted their time to internecine strife in following out their 
petty ambitions for higher authority, often engaging in peril- 
ous schemes for crushing their rivals. Thus, both the national 
and international affairs of the country were left to go their 
o\vn way. 

All this time China had been regarding Korea as a depend- 
ency of her own, and was interfering both directly and indi- 
rectly in the internal affairs of the helpless country. It was 
but natural, perhaps, that China should mistrust and dislike 
Japan's paternal attitude toward Korea and try by every 
means to prevent greater intimacy between them, a policy 
which finally culminated in the uprisings of 1882 and 1884. 
Each of these insurrections was due to a struggle for superi- 
ority between the Conservatives and Progressives, the one 
party siding with China and the other with Japan, time driv- 
ing them farther and farther apart. Consequently after the 



INTRODUCTION 5 

disturbances of 1884, in order to prevent an unwelcome con- 
flict with China, Japan concluded the Treaty of Tientsin, 
which recognized and authorized equality of rights for both 
Japan and China in the peninsula. Nevertheless, China 
obstinately continued to regard Korea exclusively as her 
own dependency, thus paying little or no attention to the 
treaty. Having long maintained a footing in Korea, China 
now assumed an aggressive and menacing attitude, contriving 
so to complicate the situation as to render it intolerable to 
Japan. Apparently it was China's policy to subject Japan 
to insufferable pressure and leave her to take what course 
she would, knowing that the island empire could not continue 
to go on yielding step by step to the aggressor. Thus was 
laid the egg from which was hatched the Sino- Japanese War. 
Historically, of course, there should have been no ground 
of conflict between Japan and China. Their relations from 
the earliest days had been those of friendly neighbors, having 
their common roots in similar doctrines as to government, 
nature of civilization, law, art, literature, religion and moral- 
ity. In former limes Japan had in many lines been a pupil 
of China, imbibing the virtues of early Chinese civilization 
which in ancient times was remarkably advanced. But with 
the incessant expansion of European activity in the Orient, 
Japan was well-nigh obliged to strike out for herself and soon 
left China far behind. Japan labored earnestly for the intro- 
duction of enlightened laws, form of government and mode 
of living; whereby she soon grew into a nation far superior to 
her former self and also to her big neighbor, from whom she 
had once been content to learn. Meanwhile, China remained 
unchanged, confined to the rut which she had trodden for 
thousands of years. Already separated by a narrow sea, the 
two nations now became separated by differences in civiliza- 
tion and national policy, the one aspiring to enjoy the best 
of western civilization, the other slumbering in antiquated 
Asiatic conventionalism. Consequently, though Japan had 
once regarded China as a great nation, she now could not but 
consider her as stubbornly conservative, incapable, and even 



6 EXPENDITURES OF THE SINO-JAPANESE WAR 

moribund; while China, on her side, looked upon Japan with 
contempt, as an upstart and a shallow imitator of western 
barbarians — in fact, a mischievous and diminutive empire 
that could accomplish nothing great. Thus estrangement 
grew ever more pronounced as the two countries fell further 
and further apart in thought and action, until at last the 
inevitable open conflict was seen to be close at hand. 

Moreover, the natural pride and mutual suspicion of the 
two countries, of nearly equal strength, now tended to accen- 
tuate mutual hatred and jealousy and each began to take 
warning and prepare for a sudden rupture of relations. The 
Loochoo and Formosan questions, discussion of which we 
reserve for later treatment, would not have led to repeated 
failure of negotiations, and finally to trouble, had China and 
Japan been on friendly terms at the time. The unhappy 
estrangement was then far advanced and ever growing wider 
and deeper; and so, after the disturbances of 1882, Korea 
became the principal cause of dispute between Japan and 
China. The Togakuto affair only brought the trouble to a 
head, and showed that at some time in the future Japan 
would be forced to take up arms to settle her difficulties with 
China, to ensure reform in Korea, and peace in the Orient. 

As the fate of Japan was bound up with that of Korea she 
could no longer endure the ever-increasing maladministration 
and degradation of the hermit kingdom. In addition, China's 
constant disregard of her treaty with Japan, especially after 
the Togakuto difficulty, her treating Korea as still a Chinese 
dependency, together with her attempts to intimidate Japan 
to gratify her own caprices, rendered conflict inevitable. 
Though Japan was well aware of the backward state of China, 
she yet had no desire to come to blows with so great and 
ancient a nation. Nothing but absolute necessity for the 
defense of her own existence would ever have induced Japan 
to take up arms against China. 

In short, the Sino-Japanese War was a conflict between 
two civilizations that had grown too dissimilar to exist longer 
in harmony side by side; but the Korean question was its 



INTRODUCTION 7 

immediate cause; and it was specifically the means whereby 
Japan sought to establish permanently her own independence 
and the peace of the Far East. In Japan sympathy with 
Korea was universal, coupled with a strong desire to check 
the arrogance of China by a chivalric blow. Doubtless, as in 
all wars, there were other contributory causes, for never in 
the history of the world has any country gone to war and 
undergone sacrifice of men and money merely for the sake of 
another nation! Definite proof of this contention could be 
advanced in examples beyond number. Japan's ultimate 
action against China was not without good cause for it was 
for the sake of her own existence and for Oriental peace. 
Now, we shall proceed briefly to review the historical relations 
between Japan and China, the immediate cause of the war, 
the disbursements consequent upon the war, and the eco- 
nomic effects of the war. 

Historical Relations between Japan and China 

The war between Japan and China brought to an end the 
dispute as to Korea, driving the Chinese forces permanently 
out of the peninsula; and furthermore it introduced Japan to 
the outer world, assigning her a new position among the 
powers. The war, moreover, exposed the weakness of China 
and hastened the decline of her territorial integrity. Soon 
afterwards she was compelled to submit to the German occu- 
pation of Kiaochow, to lease Port Arthur to Russia, Weihai- 
wei to the British and Kwangchow Bay to the French, all 
sweeping changes which occurred immediately after the war. 
Before that time there had been some aggression on the part 
of Western Powers in China, such as the Opium War, the 
Franco- British allies' capture of the Taku forts, and the 
Sino-French War; but these were insignificant compared to 
the inroads which took place after this war. Thus Japan 
opened the eyes of European Powers to possibilities in the 
Far East at a time when there was nothing in Europe to tempt 
their lust for territorial expansion. 

Historically, as well as geographically, the Korean peninsula 



8 EXPENDITURES OF THE SINO-JAPANESE WAR 

has been the bridge by which Japan has always sought access 
to the continent of Asia; and at the same time she has always 
regarded it as a barrier to assure her territorial safety. It is 
clear from the pages of history that, as the unification of 
the empire became more firmly established and population 
expanded, the overflow ever sought relief in the direction of 
Korea. Expeditions to Korea by the Emperor Sujin, the 
Empress Jingo, Hideyoshi Taiko, as well as the argument for 
Korean invasion in the early part of the Meiji Era, are vivid 
experiences in the memory of Japan. In his history of Korea, 
Dr. William Elliot Griflis well says that it is impossible to 
discuss the history of the peninsula without taking Japan 
into consideration, just as one can not deal with medieval 
English history without including France. Having had so 
intimate an historical relationship with that country, the 
Japanese mind feels naturally both familiar with and friendly 
toward the Korea of today. From the dawn of Japanese 
history comes the tradition that Susano-no-Mikoto dispatched 
his son Isotake-no-Mikoto to Korea to occupy and rule Soshi- 
mori in the kingdom of Shiragi; and mythology suggests 
that Okuninushi-no-Mikoto transported from Korea the ter- 
ritory with which to extend the promontory of Kizuki in the 
Izumo Province. As there is usually some substratum of fact 
underlying tradition, we may infer that intercourse between 
Japan and Korea has been intimate and unbroken from 
earliest times. It would, therefore, seem but natural that 
Japan' should occupy a part of Korea in establishing her 
relations with the continent of Asia. 

As to China's relations with Korea, it must be remembered 
that that dynasty, as soon as it attained full power, invaded 
and oppressed the peninsula without mercy. Modem intimate 
relations between the two began about the year 1620, in the 
reign of the Emperor Tai Tsung of the Chin dynasty, after 
which time the Chinese practically exercised suzerainty over 
Korea and extorted tribute from her; yet, shrewdly enough, 
whenever any trouble arose over affairs in the peninsula, 
China tried to escape all responsibility, even to the extent of 



INTRODUCTION 9 

denying her protectorate, while Korea in each case handed 
all the profits to her overlord. Although China thus for- 
mally denied her authority over the country, she never for a 
moment abandoned it in fact; and, consequently, when the 
trouble arose with Japan, the Chinese Government, having 
already lost her reputation for diplomacy, had no recourse 
but an appeal to arms. 

The first trouble with foreigners came in 1865 when a French 
missionary was assassinated. Prince Heung-Sun, father of 
the then Emperor of Korea, better known as Tai-Wonkun, 
cast over the government the shadow of his blind nationalism ; 
and when a Russian ship visited Wonsan, requesting permis- 
sion to trade with Korea, the Prince asked the French mis- 
sionary Bellenue to request the foreign vessel to leave the port 
at once. The missionary declined to interfere and the Prince, 
suspecting him of being a European spy, had him beheaded. 
When satisfaction was demanded by the French Legation at 
Peking the Chinese authorities endeavored to evade responsi- 
bility by replying that the peninsula was no longer a posses- 
sion of China. In the following year, when the wreck of the 
General Sherman and the massacre of her crew on the banks 
of the Taidong River created international complications, 
China again tried to shift the responsibility, answering that 
she had no authority over Korea in matters relating to war 
and peace. Yet two years afterwards, when Japan sent an 
embassy to Korea for the purpose of acquainting the penin- 
sular government with the Meiji Restoration and consequent 
political changes and also to renew friendly relations, the 
Koreans (being stirred up by China), suspected Japan's 
motives, and treated the embassy with disdain. In 1872 
Japan brought to an end the practice of sending a tribute- 
bearing vessel from the Tsushima clan and proclaimed free 
commercial intercourse, stationing an ofhcial at Fusan for 
this purpose. But Prince Heung-Sun offered an unwarranted 
official insult which created universal indignation in Japan, 
where there arose a general demand for the chastisement of 
Korea. In the following year Count Soejima was dispatched 



10 EXPENDITURES OF THE SINO-JAPANESE WAR 

to China to request explanation of the offense and to ascertain 
definitely the exact relation between China and Korea; where- 
upon the Chinese Government denied, as before, that it was 
in any way responsible for Korea, saying that the peninsula 
was in no sense a vassal state. 

Although the Japanese Government and people endured 
with remarkable patience the insults inflicted by Korea, the 
latter country in no way amended her attitude; and in August, 

1875, when Lieutenant Commander Ryoka Inouye, who had 
been engaged in surveying operations on board the warship 
Unyo, anchored off the island of Kanghwa near Seoul, he was 
fired upon by the island forts. The Japanese ship replied 
and destroyed the forts as well as killing 35 of the garrison. 
Upon the affair being reported by the Commander to the 
Japanese Government, Japan immediately dispatched her 
men-of-war to Fusan, to protect the Japanese there. In 

1876, an envoy was at once sent to demand satisfaction, the 
mission including Kiyotaka Kuroda as chief and Kaoru 
Inouye as vice minister. This embassy requested satisfac- 
tory settlement of the Kanghwa question and the opening of 
Korean ports to trade. Aritomo Yamagata, then Minister of 
War, proceeded to Shimonoseki with troops so as to be ready 
for any emergency. The repeated negotiations proved abor- 
tive and the embassy was about to abandon its fruitless efforts 
and return when suddenly Bokukeiju, a state councillor, and 
Goko, an interpreter, revolted against Prince Heung-Sun and 
insisted on opening the peninsula to trade, to which the 
Korean Government finally assented; and on February 26, 
1876, a letter of apology was offered for the Kanghwa Island 
affair and a treaty of 12 articles signed, the main points of 
which were that (i) Korea was to remain an independent 
kingdom and enjoy relations with Japan on equal terms; 
(2) that both countries should be ready to exchange envoys 
at any time necessary; (3) that after 29 months Korea was 
to open two ports to trade, Japan having leave to station con- 
suls there; (4) that Japanese navigators were to have permis- 
sion to survey Korean waters; and (5) that cases of trouble 



INTRODUCTION II 

among the nationals of either country residing in the two 
open ports were to be settled by the officials of the nationals 
concerned. 

The treaty being duly signed the Japanese representatives 
returned, and the Korean Government dispatched a special 
envoy to Tokyo to strengthen the friendship with Japan, 
while the latter created a legation in Seoul, sending Yoshikata 
Hanabusa as Charge d'Affaires. In 1887 when the Korean 
authorities attempted to expel all foreign missionaries, the 
French Minister in Tokyo endeavored to have the Japanese 
representative in Seoul mediate for the relief of the mission- 
aries, and the Japanese Government opened negotiations in 
the matter; but, discovering in the Korean reply phrases that 
indicated Korean acknowledgment to being a tributary state 
of China, Japan objected, and Korea reported the matter to 
China. As the Chinese reply contained similar contentions, 
Japan rejected that also. No further discussion was carried 
on, as Japan's treaty with Korea had already settled the 
matter of that country's independence. 

Previous to this, in 1872, there had been trouble in Formosa, 
w^hen some natives of ^liyako Island, Loochoo, who had been 
cast ashore in Formosa, were murdered by the natives, the 
same crime being repeated in the following year on men from 
the prefecture of Oda. To avoid a repetition of such out- 
rages, the Tokyo Government made Loochoo distinctly a 
Japanese possession, instead of allowing its ruler to pay tribute 
both to Japan and China as before, and dispatched Count 
Soejima to China to carry on negotiations. Up to this time 
about half of Formosa had been under Chinese rule, while the 
rest was abandoned to anarchy. China, as usual, endeavored 
to fight shy of responsibility, denying that she had any author- 
ity over the island. But alarmed by the over\vhelming vic- 
tory of the Japanese expedition to Formosa, invoking, as it 
did, the surrender of numerous clan chiefs, China demanded 
the withdrawal of the Japanese forces. Japan refused to 
comply with the demand but after various negotiations agreed 
to evacuate on condition that China recognize Japan's sov- 



12 EXPENDITURES OF THE SINO-JAPANESE WAR 

ereignty over the Loochoo Islands and pay an indemnity of 
500,000 taels. 

In consequence of the increasing influence of Japan in 
Korea and the intimacy that now marked their relations 
after the settlement of the Kanghwa affair, as well as on 
account of Japan's firm attitude in regard to the Loochoo and 
Formosan questions, China began to feel uneasy and wished 
to check the further advance westward of Japan's influence. 
To achieve this object with some appearance of tact, China 
invited Occidental Powers into the peninsula, the United 
States being the first to be so favored. She even dispatched 
a warship of her own to bring over the American envoy, and 
it is said that Li Hung Chang himself drew up the articles 
signed by the United States and Korea. He, moreover, 
informed Prince Heung-Sun that to form a treaty with West- 
em Powers was the best way to ensure the safety of Korea. 
Great Britain, Germany and other powers at once followed 
the American example. Here we see clearly the change of 
Chinese policy toward Korea. But notwithstanding all the 
efforts of Li Hung Chang to carry out his plans secretly, there 
was a sudden turn of affairs, which had its origin in the politi- 
cal disorder that occurred in Seoul in 1882. 

In accordance with the treaty of 1876, Korea opened the 
port of Wonsan to trade in May, 1880, and proposed to open 
Chemulpo, to which Japan had sent a surveyor, in July, 1882. 
By this time Japanese influence was becoming dominant in 
the Progressive party in Korea and a strong organization was 
effected. In addition, important reforms were brought about 
in the military system of Korea, and Lieutenant Hori of the 
Imperial Japanese Army became instructor. The leaders of 
the Progressives were Kim Ok Kiun, Hung Tiyong Ou and 
Li Sai Ben, who had the sympathy and support of the leader 
of the Mins. The Conservatives were led by Prince Heung- 
Sun, who hated everything foreign and began an intrigue 
against the Japanese and the Progressive party. The Mins, 
who were members of the family of the Queen of Korea, had 
for many years filled the highest offices of state. The Con- 



INTRODUCTION 1 3 

servatives now planned to drive out the Japanese, even if it 
required force. The native soldiery were deprived of proper 
rations until infuriated, and then were told all sorts of mali- 
cious stories about the Japanese. On pretext of punishing Min 
Ken Kwong, a member of the Min clan, for some slight offense 
against army regulations, a furious mob gathered and began 
to hunt the Japanese to death, and the legation was attacked. 
The Japanese Minister, Hanabusa, with over twenty of his 
fellow countrymen, fought his way out into the terrorized 
streets of Seoul and escaped to Chemulpo, where he embarked 
on a junk and was picked up by a British ship and taken to 
Nagasaki. This outbreak took place on July 23, 1882. 

Upon receiving the report of the Japanese Minister regard- 
ing the affair, the government sent him back to Seoul on 
August 20, to demand an explanation of the King. In the 
meantime. Prince Heung-Sun had already assumed the reins 
of government and on the minister's arrival showed no sign 
of a conciliatory mood. The latter was, therefore, obliged to 
withdraw to Chemulpo. Then Li Hung Chang, fearing that 
Japan might either kidnap Prince Heung-Sun or dethrone the 
King in some plot with the Prince, dispatched a body of troops 
under Yuan Shi Kai, Bakeuchu and Teijosho to Korea, the 
intention being professedly peaceful. Under pretext of 
inviting Prince Heung-Sun to a friendly conference, the 
Chinese laid hands on him and spirited him away to China. 
On the Prince's departure, the scene changed in a flash. The 
Progressive party assumed office and a treaty was signed 
at Chemulpo on August 30, 1882. By this agreement the 
Korean Government had to apologize to Japan, and to permit 
the presence of Japanese troops in Seoul to protect the lega- 
tion ; the cost of furnishing as well as of repairing the barracks 
for the guard had to be borne by the Government of Korea. 
Japan agreed to withdraw the guard after one year from the 
signing of the agreement if she deemed it safe to do so. Other 
clauses of the treaty provided for the opening to trade of 
Wonsan, Fusan, and Chemulpo, etc., and the port of Yokai- 
chin after a year, while the Japanese Minister and staff were 



14 EXPENDITURES OF THE SINO-JAPANESE WAR 

given permission to travel in the interior. It is significant 
that at this time Japan again acknowledged the independence 
of Korea, and consented to use in the treaty the date of the 
Korean calendar, which was the four hundred and ninety-first 
year from the founding of the dynasty. It was from that 
date also that the Korean national flag began to be used. 

The action of the Chinese in abducting a Korean prince 
and detaining him at Tientsin could only be regarded as one 
more proof of China's desire to treat Korea as a subject state. 
From this time China endeavored by all means to associate 
herself with the home affairs of Korea, which finally com- 
pelled Japan to attempt to remove Chinese influence entirely 
from the peninsula. 

In January, 1883, the Japanese Government sent Shinichiro 
Takezoe as resident minister to Korea, allowing him a legation 
guard in accordance with the rights conceded in the treaty of 
Chemulpo. At that time Yuan Shi Kai was also in Seoul, 
backed by a considerable force, and was laboring assiduously, 
through the efforts of Min, for the establishment of Chinese 
influence throughout the peninsula, Min on his part aiming 
at promoting his own personal interests with the assistance of 
China. The Progressive party, being thus left in the lurch 
by Min, looked to the Japanese Minister for sympathy and 
waited for a favorable opportunity to strike an effective blow 
at the Conservatives, who were then wavering considerably, 
owing to China's trouble with France over the Annam bound- 
ary question. On December 4, 1884, during an official dinner 
in Seoul to celebrate the opening of the Postoffice, the oppor- 
tunity was seized by Kin Gyoku Kin, Bokueiko, and others of 
the Progressive party to attack Prince Min, who, together 
with several of the ministers of the Conservative party, was 
assassinated; they further endeavored to place the King's 
palace under guard. 

The King having requested protection, a Japanese force 
under Minister Takezoe entered the palace and ensured safety. 
The next day a cabinet representing the Progressive party 
was formed, but at dawn on the succeeding day Yuan Shi 



INTRODUCTION 1 5 

Kai, assisted by the remnant of Min's followers, attacked the 
palace. The Japanese force defended it, but in vain. They 
finally had to retire to the legation, the King taking refuge 
with the Chinese forces and a Conservative cabinet being 
installed. That night the Japanese Legation was assaulted 
and the minister, accompanied by his staff, together with 
Kim and Hung, fled for their lives to Chemulpo, leaving the 
legation in flames. The Japanese Government then dis- 
patched Kaoru Inouye, Minister of Foreign Affairs, as pleni- 
potentiary to Seoul for the settlement of the trouble. The 
Treaty of Seoul was signed on January 9, 1885, requiring an 
apology from Korea and the reconstruction of the legation 
and barracks at Korea's expense. 

Thus the affair was settled as far as Korea was concerned. 
But China had still to be heard from; and for this purpose, 
Prince Itom, then Marquis, was dispatched to Peking, where 
he and Li Hung Chang drew up and signed the Treaty of 
Tientsin, on April 18, 1885. The treaty made no reference to 
the assault of the Chinese soldiery on the Japanese Legation 
at Seoul, but acknowledged the equal rights of both nations 
to send troops to Korea in case it should be necessary in the 
future. The clauses of the treaty provided (i) that China 
should withdraw all her troops from Korea, and Japan her 
legation guards, the withdrawal to take place within four 
months from the signing of the agreement, under pain of con- 
flict. The Chinese troops were to withdraw by way of Mas- 
ampo and the Japanese by way of Chemulpo. (2) Both 
countries agreed further to advise the King of Korea to train 
a modern army for the protection of the peninsula and the 
maintenance of order therein, and to have him employ foreign 
instructors for this purpose, neither country to send officers 
to fill the positions. (3) In the third place, it was agreed in 
the treaty that if in the future either Japan or China, or both, 
should have occasion to dispatch troops to Korea, they should 
open communication with each other as to the matter, and 
that when the cause requiring the entry of troops no longer 
existed, they were to be at once withdrawn from the country. 



1 6 EXPENDITURES OF THE SINO- JAPANESE WAR 

It was further stipulated that if any of the troops in Seoul 
should be guilty of improper conduct China should punish 
them on the production of indisputable evidence. 

A general retrospect of the disturbance of 1884 shows that 
the Progressives were defeated on account of their too impetu- 
ous grasp of political power without sufficient forethought, 
and that the Japanese Minister was also somewhat rash in 
acceding too hastily to the King's request for protection, 
since the monarch did not sincerely trust him, but on the con- 
trary sought refuge under the flag of China. Moreover, the 
minister took no immediate steps for the correction of the 
Chinese soldiers when they assaulted the legation and slew 
some of its guards. It was but natural, therefore, that 
Japan's influence should gradually decline, while China's 
continued to grow more and more throughout the peninsula. 
The Conservative party soon became dominant, under the 
Chinese Minister, Yuan Shi Kai. He brought his influence 
constantly to bear on Korean diplomatic policy and the 
Korean Government in turn was ever inclined to heed his 
counsel. The whole situation became unfavorable for Japan, 
and the general attitude of the people grew insolent and offen- 
sive toward all Japanese residents, especially toward those 
engaged in commerce and industry. 

The most severe blow of the time to the Japanese was the 
issue of the Bokokurei of 1889. In September the authorities 
of Kankyodo suddenly prohibited the resale and export of 
agricultural products without any previous notice to the 
Japanese consul, in spite of the clause in the treaty requiring 
such notice a month in advance. Although the same treaty 
clearly stated the necessity of drought or riotous disorder as 
the cause of such law, there was nothing of the kind. The 
loss inflicted upon the Japanese was quite heavy. Japan 
demanded the repeal of the measure and some indemnity, 
but her demand was left unheeded until January, 1893. Kin 
Gyoku Kin, the leader of the pro-Japanese faction, was assas- 
sinated about that time, during a quarrel between the sailors 
of a Chinese warship and some citizens of Nagasaki, and the 



INTRODUCTION I7 

Japanese Government had to make humiliating concessions 
despite the fact that the fault was on the Chinese side. In 
this manner conditions began to obtain derogatory to Japan's 
interests. 

The Korean Government brutally mutilated in public the 
body of Kin and exhibited it with immense gusto all over the 
country as an example of what should be the just fate of all 
traitors. The victim was called "the most vicious traitor 
Kin." 

Just about this time (April, 1894) the revolutionary move- 
ment of Tong Haks began to spread fiercely over the penin- 
sula, more especially in the provinces of ChoUa and Chung- 
Chong. Although the Tong Hak belief was quite a foolish 
and superstitious one, supporters of the doctrine were found 
in every province of the country. As the population had 
long been suffering from the misrule of Min and were anx- 
iously awaiting a change, they at once favored the Tong Hak 
movement. The first definite outbreak occurred at Ko-Po 
in the province of Cholla, where maladministration had been 
particularly oppressive; and three provinces south of the 
Kanko River unfurled the flag of insurrection. The Tong 
Hak leader of this rebellious force in the south was Zempojun, 
who repeatedly expelled the governmental force. Terrified 
beyond measure by the situation, the Korean Government 
sought the intervention of China through the mediation of 
Yuan Shi Kai. As Japan was in the throes of political tur- 
moil in the Imperial Diet at the time, China assumed that it 
would not be easy for Japan to take much interest in foreign 
complications. Under pretext of guarding a tributary nation 
in her habitual manner, China sent troops into Korea, and 
this action she made known on June 7 to the Tokyo Govern- 
ment through her minister there. Japan at once denounced 
China's pretensions to suzerainty in Korea, and, in accordance 
with the treaty of Tientsin, informed China of her intention 
to dispatch forces to guard her legation and interests in the 
peninsula. Japan at once sent her troops from the 9th Army 
Division under Major-General Oshima, which, on account of 



1 8 EXPENDITURES OF THE SINO- JAPANESE WAR 

their irregular composition, were known as the Mixed Brigade. 
These troops marched into Seoul and Wonsan on June 13. 

Previous to taking this action the Japanese Government, 
in sympathy with her unfortunate neighbor and in the belief 
that Korea's disorders would cause loss and have bad effects 
on both Japan and China, as these three countries border on 
each other so closely, had sent a friendly note to China, pro- 
posing that the two powers should cooperate in bringing 
about reforms in Korea, so as to avoid further complications 
between Japan and China and thus maintain peace in the 
Orient. China rejected the proposal, not deeming necessary 
the measures suggested, and not wishing to interfere in the 
internal affairs of Korea jointly with Japan. China insisted 
on the withdrawal of the troops of the two powers, saying that 
these were unnecessary, since the Tong Hak movement was 
already pacified. Thus China continued to assert her suze- 
rainty over Korea in various ways and dreamed of making 
herself master of the Far East, while Japan continued as 
positively to refuse to acknowledge this overlordship. 

Notwithstanding her earlier consent to a reformation of 
government under the guidance of Japan, when the latter was 
determined to bring about such reform even without the help 
of China, the Korean Government suddenly requested Japan 
to withdraw her troops, the action having been taken at the 
suggestion of China, who was always working behind the 
scenes. On July 20, the Japanese Minister at Seoul dis- 
patched the following proposal to the Korean Government : 

1. In accordance with the Seoul Convention of 1885 Korea 
shall at once reconstruct the barracks for the Japanese guard. 

2. The Chinese forces now stationed in Korea under guise 
of protecting her as a dependency shall be immediately with- 
drawn, as Korea is an independent country. 

3. If the foregoing proposals are not complied with by 
the 22d instant, Japan will proceed to carry out reform in 
Korea, even if she has to resort to force to accomplish it. 

The Japanese authorities waited until the 23d; and as 
the reply demanded was not forthcoming, the Japanese 



INTRODUCTION 1 9 

Minister overpowered the Korean guard, forcibly entered the 
King's palace and had an audience with the monarch. The 
King carefully explained the obstacles that had thus far 
impeded reform, expressed gratitude for the interest Japan 
took in the country, and pledged himself to an alliance w4th 
Japan as against China for the reformation of Korea. On 
the 26th the treaty with China, which acknowledged Korean 
dependence of that country, was repealed and a decree was 
issued requesting Japan to expel from the peninsula the 
Chinese troops stationed at Asan. 

While these proceedings wxre under w^ay in Seoul, China 
was trying to smuggle her Asan troops aboard a chartered 
English transport vessel and a Chinese warship, the Kow- 
shing and the Tsao-Kiang. The Tsi-yuen and the Kwang-yt 
of the Peiyang Squadron were to receive the two vessels and 
were steaming boldly out of Asan Bay when they met the 
Japanese warships Yoshino, Naniwa and Akitsushima, which 
had been keeping vigilant watch near Phung Island. The 
Japanese Government had not yet declared war, although her 
men-of-war had been preventing the enemy's transportation 
of troops, so the Japanese vessels patiently waited without 
firing. But the Chinese ships made no formal signal to them, 
and as the two fleets approached closer the Tsi-yuen sud- 
denly opened fire on the Yoshino. Thus the Sino- Japanese 
War began at Phung Island on July 25, 1894. With surpris- 
ing swiftness the Japanese ships closed in upon the Kwang-yi 
and put her out of action, forcing her into shallow water, 
while the Tsi-yuen fled to Weihaiwei with many of her crew 
killed. The Kow-shing was sunk and the Tsao-Kiang cap- 
tured, so that victory was decisively on the Japanese side. 

The Japanese troops invaded and conquered Songhwan on 
the 29th, while the Chinese troops at Asan escaped without 
exchanging a shot. On August i the Imperial Government 
issued a declaration of war, in which Japan showed clearly 
that China was deliberately taking aggressive measures with- 
out considering the calamities and afflictions that would fol- 
low in the Orient. The following is an extract: 



20 EXPENDITURES OF THE SINO-JAPANESE WAR 

Korea is an independent state. The country was first introduced to the comity 
of nations on the advice of and under the guidance of Japan. It has, however, 
been the habit of China to regard Korea as a dependency of her own, and both 
openly and secretly to interfere in her affairs. At the time of the recent civil 
disturbance in Korea, China dispatched troops thither, alleging the purpose to 
be that of affording succor to a suzerain state. Japan, by virtue of the treaty 
concluded with Korea in 1882, and looking to possible emergencies, caused a 
militar>' force to be sent to that country. Desiring to procure for Korea freedom 
from the calamity of perpetual disorders, and thereby to maintain the peace of 
the Far East in general, Japan invited the cooperation of China to that end. But 
China, advancing various pretexts, declined the proposal. Thereupon Japan 
advised Korea to reform her administration so that she might be able to preserve 
order and tranquillity within her borders, and to discharge the duties and respon- 
sibilities of an independent state abroad. Korea had already consented to under- 
take the task. But China secretly and insidiously endeavored to circumvent 
and thwart Japan's purpose. Furthermore, she procrastinated and tried to make 
warlike preparations by land and sea. Completing these preparations, she dis- 
patched large reinforcements to Korea with a view to the forcible attainment of 
her ambitious designs, and even carried her arbitrary attitude and insolence to 
the extent of opening fire on Our ships in Korean waters. Plainly China's object 
has been to render it uncertain where the responsibility for the preservation of 
peace and order in Korea lies, and not only to weaken the position of that state in 
the family of nations (a position obtained for Korea through the efforts of Japan) 
but also to obscure the significance of the treaties recognizing and confirming that 
position. Such conduct on the part of China is not only a direct injury to the 
rights and interests of the Empire, but a menace to the permanent peace of East 
Asia. From the action of China it can only be concluded that from the beginning 
that country has been bent on sacrificing peace to the attainment of her sinister 
object. Under these circumstances, ardent as is our wish to promote the prestige 
of the country abroad by strictly peaceful means and methods, we find it impossi- 
ble to avoid a formal declaration of war against China. It is Our earnest wish 
that by the loyalty and valour of Our faithful subjects peace may soon be perma- 
nently restored and that the glory of the empire may be augmented and ever 
stainless. 

Progress of the Sino-Japanese War 

The historical facts with regard to the question of Korean 
independence and the reformation of the government in that 
country, so necessary to an understanding of the cause of the 
war which began on July 25, 1894, have now been given in 
outline. The struggle continued for eight months, during 
which time Japan won a number of decisive victories one 
after another and was soon ready to march upon the capital of 
China. Whereupon the latter consented to peace by ceding 
territory and paying an indemnity, while Korea was made 



INTRODUCTION 21 

independent of foreign interference, peace being restored on 
April 17, 1895. 

It will now be in order to give a brief review of the progress 
of the war with China and to indicate the causes of the diplo- 
matic troubles which arose after the war. 

From the outbreak of the war to the battles of Ping-yafig and 
the Yellow Sea 

The battle of Phung Island on July 25, 1894, was prepara- 
tory to the great campaign at Ping-yang and the decisive 
battle of the Yellow Sea. The three Japanese warships, the 
Yoshino, a cruiser of 4,267 tons, the Akitsushima, a cruiser of 
3,150 tons, the Naniwa, a cruiser of 3,709 tons, forming the 
First Flying Squadron under Rear Admiral Tsuboi, had been 
guarding the west coast of Korea against Chinese transports 
carrying troops to Korea. On July 25, when a Japanese 
flying column consisting of the above ships appeared off 
Phung Island, southwest of Chemulpo, the Chinese warships 
Tsi-yuen, a cruiser of 2,355 tons and the Kwang-yi, a gunboat 
which came from Chemulpo, came into view. As a state of 
belligerency had not yet arisen the Japanese commander 
naturally expected to meet the Chinese ships with the ordinary 
formality, but to his great surprise the Tsi-yuen at once and 
without warning opened fire on the Yoshino at 7.52 A. M., at a 
range of about 3,000 meters. Consequently the admiral of 
the Japanese fleet could do nothing but give orders to return 
the fire. No sooner had the two assailants been put out of 
action — the Tsi-yuen routed and the Kwang-yi driven ashore 
— than two other Chinese ships, the Tsao-kiang and the Kow- 
shing, a British boat, appeared, the latter transporting Chinese 
troops bound for Asan. While the A kitsushima was capturing 
the Tsao-kiang, the Naniwa ordered the Kow-shing to stop, 
at 9.15 A. M., but the land force on the vessel compelled the 
captain to continue the course back to Tako. The order to 
stop and follow the Japanese vessel was repeated several times, 
but, as the Kow-shing took no notice of it, the Naniwa pursued 
and sank her at i P. M. The captain and others were rescued. 



22 EXPENDITURES OF THE SINO-JAPANESE WAR 

Another battle at Songhwan was fought on July 29. In 
accordance with the request of the King of Korea on the 
25th, the Japanese Minister Otori, at Seoul, at once sent for a 
force from the brigade headquarters at Manriso to expel the 
Chinese troops at Asan. The force proceeded to Soshajo, 
some seventeen miles north of Asan and only about two miles 
north of Songhwan, where the enemy had established them- 
selves in a powerful stronghold. Songhwan is an important 
town on the Asan road. The Japanese brigade captured the 
place in short order while the troops at Asan fled without 
offering resistance. The Japanese force participating in this 
action consisted of four infantry battalions, one company 
each of cavalry, artillery and engineers, 3,000 infantry, 47 
cavalrymen and 8 guns. The Chinese had 8 guns, 3,400 
men and a number of noncombatants. The enemy's killed 
and wounded numbered 500, the result of 63 shells, 191 rounds 
of shrapnel and 67,801 rounds of cartridges fired by Japanese, 
while the latter lost 33 killed and 49 wounded. 

It was after these two battles, one on land and the other on 
sea, that the Imperial Proclamation of War was issued, namely 
on August I, and the Imperial Army headquarters were on 
September 13 moved to Hiroshima. The fact has already 
been mentioned that prior to the outbreak of war the Imperial 
Government endeavored to settle the dispute by peaceable 
means, dispatching a mixed brigade from the Fifth Division 
to Korea; but, seeing the hopelessness of such an attempt, 
the government abandoned the idea with the report of the 
battle of Phung Island on July 25. 

According to reports reaching the Imperial Government the 
number of Chinese troops in Korea, mostly around Ping-yang, 
was more than 10,000 (including those that had fled from 
Asan), and the Mixed Brigade at Seoul was rumored to be in 
danger. For this reason the remainder of the Fifth Army 
Division, namely, the divisional headquarters and the Tenth 
Brigade, was ordered to Korea, on July 21, and on August 
14 half of the Third Army Division, namely, the Fifth Bri- 
gade, was moved. Landing at Fusan and Wonsan they at 



INTRODUCTION 23 

once marched on Seoul. Lieu tenant-General Michitsura 
Nodzu, Commander-in-Chief of the Fifth Army Division, left 
Ujina on August 4, reaching Fusan on the 6th and Seoul on 
the 1 8th. The Japanese forces already in Korea — namely, 
the Third and Fifth Army Divisions — were formed into the 
First Army under General Yamagata, on September i, with 
orders to drive the enemy out of Korea; but until the arrival 
of General Yamagata the command was taken by Lieutenant- 
General Nodzu, the Fifth Divisional Commander. 

As to the Japanese forces already in the peninsula, the 
Oshima Mixed Brigade was at Ryuzan and Rintsushin, the 
Twelfth Regiment of the Tenth Brigade arrived at Wonsan 
on August 8, and the Fifth Brigade was expected there on the 
26th — the former called the Sakryong detachment and the 
latter the Wonsan detachment. Half of the Tenth Brigade 
was scheduled to be at Chemulpo on the 23d. Consider- 
ing the dispositions of the troops at his disposal, Lieu tenant- 
General Nodzu set September 15 as the day for the general 
attack on Ping-yang. The Oshima Mixed Brigade was or- 
dered to lead the attack, while the Sakryong and the Won- 
san detachments were to descend from the north and the 
Main Division from the southwest, the total attacking force 
numbering 12,000 men and 44 mountain guns. 

The Chinese force numbered 15,000 men with 29 mountain 
guns, 4 field guns and 6 machine guns, protected by 27 forts, 
15 on the south, 5 outside of Taidong gate, 4 on the north 
hill without the wall and 3 on Mount Peony. The enemy 
put up an exceedingly stiff defense, aided by the natural fast- 
ness of the castled forts. 

Against these fortresses and defense works the Japanese 
troops fought arduously, and finally succeeded in routing the 
enemy, the Sakryong and Wonsan detachments occupying 
Mount Peony after making desperate attempts to storm it. 
The stronghold fell on the i6th, the Japanese having lost 180 
killed and 506 wounded, and having fired 680 common shells, 
2,128 shrapnel and 284,869 rounds of ammunition. The 
Chinese losses were 2,000 men, including General Tso-Paok- 



24 EXPENDITURES OF THE SINO-JAPANESE WAR 

wai, while 600 were taken prisoners. Thus in two days Japan 
completely demolished China's foothold in Korea. 

On sea the arms of Japan were also decisively victorious. 
On September 12 the Japanese squadron got wind of the 
presence of the Chinese squadron which was guarding trans- 
ports near the Taidong and the Yalu Rivers, and on the 14th 
the Main Squadron consisting of the Matsushima, the Chiyoda, 
the FusOj the Itsuku-shima, the Hiyei and the Hashidate, with 
the first Flying Squadron comprising the Yoshino, the Taka- 
chiho, the Naniwa and the Akitsushima, the third Flying 
Squadron comprising the Tsukushi, the Akagi, the Maya and 
the Chokaij together with a torpedo flotilla including the 
Kotaka, No. 22, No. 12 and the torpedo-depot-ship Yamas- 
hiro, accompanied by the Kaimon, the Iwaki, the Amagi and 
the auxiliary cruiser Saikyo, all proceeded toward Taidong 
and arrived at the mouth of river on the 15th. But finding 
no hostile ship there, the fleet left the Tsukushi, the Maya 
and the Chokai as well as the torpedo flotilla, the Iwaki and 
the Amagi at the river's mouth and set out northward. The 
contending fleets met on the 17th off Tamushan, when a brisk 
action of several hours ensued, lasting until dark. The Chinese 
fleet consisted of the Ting-yuen and the Chen-yuen in the cen- 
ter, followed by the King-yuen, the Sai-yuen, the Ping-yueriy 
the Chih-yuen, the Lai-yuen, the Yang-wei, the Tsi-yuen, the 
Chao-yung, the Kwang-chia, the Kwang-ping and three torpedo 
boats, the total displacement being 34,420 tons with a speed 
of from II to 18 knots. The Chinese had quick-firing guns, 
70 below 30 c. m. and 9 below 12 c. m., as well as about 129 
machine guns, and 31 torpedo tubes and two torpedo boats. 
The Japanese squadron, with the exception of the Saikyo, 
consisted of 11 ships representing 36,771 tons, with a speed 
of from 13 to 22 knots, equipped with 246 guns, 44 below 
33 c. m., 190 quick-firers below 15 c. m., 29 machine guns and 
37 torpedo tubes. Thus the Japanese fleet was superior in 
tonnage, speed and number of guns. Fighting with brilliant 
dash and courage the Japanese succeeded in sending the 
Chao-yung, the Chih-yuen and the King-yuen to the bottom, 



INTRODUCTION 2$ 

while the Yang-wet was set on fire and the Kwang-chia blown 
up, the rest of the enemy's fleet suffering great damage. The 
Japanese lost not a single ship and had only 279 casualties. 

The Chinese Peiyang Squadron was not completely de- 
stroyed in this battle, but it was practically disabled and 
deprived of fighting strength, without further power over 
Korean or home waters. Japan, on the contrary, obtained 
complete freedom of the seas, for transporting troops and 
provisions to China without much fear of molestation. By 
these two actions on land and sea China entirely lost her hold 
on Korea, while Japan saw before her a clear path by way of 
the province of Shingking to the capital of China. The progress 
of the war having thus early taken such a favorable turn, the 
spirits of the Japanese were correspondingly animated. 

Parallel advance of the first and second armies and the sieges of 
Haicheng and Port A rthur 

The first army in Korea was now instructed by the Impe- 
rial headquarters to expel all Chinese forces from Korea, and 
to obtain full control of Kiuliencheng, Fenghuangcheng, 
Haicheng and Liaoyang, and to form another army to take 
possession of Port Arthur and Weihaiwei so as to prepare 
for a decisive campaign in the territory of Liaotung with the 
coming of the spring of the next year. In preparation for this 
invasion of Chinese territory General Yamagata had been ap- 
pointed commander-in-chief of the First Army Corps, so called 
to distinguish it from the other at Pyenyang. General Oyama 
was appointed commander-in-chief of the Second i\rmy Corps 
on the day the welcome tidings of victory reached Imperial head- 
quarters, and the two army corps were organized as follows : 
First Army Corps 

Commander-in-chief: General Count Yamagata 
Third Provincial Division 
Fifth Brigade 

Sixth and Eighteenth Regiments 
Sixth Brigade 

Seventh and Nineteenth Regiments 



26 EXPENDITURES OF THE SINO-JAPANESE WAR 

Fifth Provincial Division 
Ninth Brigade 

Eleventh and Twenty-First Regiments 
Tenth Brigade 

Twelfth and Twenty-Second Regiments 

Second Army Corps 

Commander-in-chief: General Count Oyama 
First Provincial Division 
First Brigade 

First and Fifteenth Regiments 
Second Brigade 

Second and Third Regiments 
Sixth Provincial Division 
Twelfth Mixed Brigade 

Fourteenth and Twenty-Fourth Infantry Regi- 
ments 
Second Provincial Division (did not take part in battle 
of Kinchow) 
Third Brigade 

Fourth and Sixteenth Regiments 
Fourth Brigade 

Fifth and Seventeenth Regiments 
Special Besieging Corps (temporarily dismounted artil- 
lery regiment) 

Each provincial division included two infantry brigades, 
one battalion each of cavalry, engineers, ammunitionists and 
transport men, one regiment of field artillery, with field tele- 
graph corps, stretcher-bearers, medical corps and communi- 
cation equipment. 

The Tenth Brigade of the First Army attacked and reduced 
Wiju on the left bank of the Yalu River, completing their 
task by October 17, while the Hooshan fortress fell on the 
25th and on the 26th the Chinese abandoned Antung and 
Kiuliencheng without combat, thus placing all Chinese de- 
fenses along the Korean boundary in the hands of Japan. 
Although the Chinese had at Kiuliencheng no less than 19,750 



INTRODUCTION 27 

troops, with 8i guns, to Japan's 13,000 infantry, 350 cavalry 
and 78 guns, they were nevertheless so dispirited by the 
defeat at Hooshan that they fled from the castle without 
offering resistance. The Japanese casualties at Hooshan were 
149; they fired 493 shells and 99,950 rounds of ammunition, 
and captured 78 guns with 4,400 rifles. 

After the fall of Kiuliencheng on October 26 the Japanese 
forces divided into two, the Fifth Division marching on Feng- 
huangcheng and the Third Division on Takushan, across the 
Tatungkow. The enemy set fire to and evacuated Feng- 
huangcheng on the 29th ; the Third Division captured Tatung- 
kow on the 27th and Takushan on November 5, and on the 
8th it came into direct communication with the Second Army 
Corps. Advancing from Takushan, the Third Army Division 
overwhelmed Yungancheng on November 18, fought an 
important battle near Taohotsuon December 11 and cap- 
tured Chaimucheng on the following day. The same force 
reduced Haicheng on the 13th and thus opened the road 
between Kaiping and Liaoyang. As the fall of Haicheng was 
so vital to the Chinese, they made repeated counter attacks 
for the recovery of the fort, a fierce battle ensuing on Decem- 
ber 19 at Konwasai near this castle. The Japanese force 
engaged numbered 3,960 with 30 guns, while the Chinese 
numbered 9,200, with 6 field batteries protected by natural 
strongholds. The battle lasted five hours, reddening the 
fallen snow. After five bayonet charges the Japanese troops 
forced the enemy to surrender, but only when on our side 69 
had fallen and 339 been wounded. The number of shells 
fired was 1,383 and rounds of ammunition 65,241. The suc- 
cessive and decisive victories of the First Army Corps gave 
greater freedom for activity and achievement to the Second 
Army Corps. 

To the Second Army Corps had been entrusted the reduc- 
tion of Port Arthur, assisted by the First Army and the fleet. 
Between October 24 and 26 the First Division succeeded in 
safely landing at Huayuankow. Though Tatungkow and 
Takushan had not fallen at that time their fate was too well 



28 EXPENDITURES OF THE SINO-JAPANESE WAR 

assured for much attention to be given them. Consequently, 
the First Army was allowed to proceed with its mission alone, 
and the First Army Division faced the stronghold of Port 
Arthur. On the 6th the force captured Kinchow-ching on 
the way, driving the enemy into the road to Port Arthur. 
Most of the batteries near Talien Bay were silenced on the 
7th by this First Division while the First and Second Armies 
came into direct communication on the following day and 
reached the point of attacking Port Arthur. With the fall of 
the batteries around Talien Bay, the commander-in-chief of 
the Second Army moved its disembarking headquarters from 
Huayuankow to Talien Bay. The Mixed Twelfth Brigade, 
landing at Huayuankow on November 7, was now brought to 
the army, in preparation for a general assault upon Port 
Arthur. On the 13th the number of the hostile garrison was 
estimated at about 12,000, besides some at Poolanteen, at the 
rear of the main fort ; but it was thought that the First Divi- 
sion and the Mixed Brigade with the Special Besieging Corps 
would be sufficient for the reduction, without seeking the aid 
of the Second Division. The date of the attack was fixed for 
November 2 1 . 

Port Arthur was guarded on its eastern shore by Huang- 
chinshan and attendant forts, with Mantonshan, 11 1 meters 
high, and several other forts on the western shore, while 
Sungshushan, 103 meters high, and Erhlungshan, 82 meters, 
with Chihuanshan, 126 meters, and Itzushan, protected the 
land approaches. Thus by these forts, a strong wall and 
12,000 troops the fortress was well protected. Indeed the 
place seemed almost impregnable. 

The First Division of the attacking force was ordered to 
assail forts Sungshushan and Itzushan, while the Mixed 
Twelfth Brigade was given the task of reducing Erhlungshan 
and Chihuanshan. After some sanguinary onsets Fort Itzu- 
shan was captured at 7 A. M. on the 21st, then Sungshushan 
and again Erhlungshan by 1 1.30 A. M. The defenses from the 
rear having been thus reduced the First Division had no dif- 
ficulty in taking Port Arthur in the afternoon. The shore 



INTRODUCTION 29 

fortresses of Huangchinshan and Mantoshan held out a little 
longer, but by the late afternoon and following morning they 
too had been silenced, and on the 22d the flag of the Rising 
Sun floated over the battlements of Port Arthur. 

The forces which accomplished this great achievement con- 
sisted of 15 infantry battalions representing 59 companies, 3 
squadrons of cavalry, 4 companies of sappers, 6 batteries 
of artillery with 30 guns and 8 batteries of field artillery 
with 48 guns; it was found that the Chinese participat- 
ing were 9,500 on the land side with 18 pieces of heavy 
artillery, 48 lighter guns and 19 machine guns, while on the 
water front 3,200 men were engaged with the assistance of 58 
heavy ordnance, 8 lighter guns and 5 machine guns, most of 
the force finally escaping to Kinchow. The Japanese forces 
suffered 288 casualties, firing 247 shells, 1,526 shrapnel and 
179,562 rounds of ammunition. 

Capture oj Weihaiwei, in vicinity of Yingkow and the 
Pescadores 

During the siege of Port Arthur the enemy made repeated 
attacks upon Kinchow-ching, which was a Japanese supporting 
point and guarded by only 3 infantry battalions and a section 
of cavalry. The attacks upon the supply depot on the fol- 
lowing day by the enemy that had fled from Port Arthur 
were also successfully repelled and proved no obstacle to 
the main siege. On the same day this repulse was made, 
China intimated through the American Minister her desire 
for the cessation of war. 

A part of the First Division of the Second Army Corps 
captured Poolanteen and Foochou on December 6, while the 
First Brigade of the First Division took Kaiping on January 
10, previous to which the Third Division of the First Army 
had taken Haicheng, on December 13. Thus during the 
first half of January, 1895, the Third Division of the First 
Army Corps maintained full control of Haiching; and the 
First Brigade of the Second Army Corps at Kaiping swept 
the whole southeast area. As the Chinese forces were driven 



30 EXPENDITURES OF THE SINO-JAPANESE WAR 

back toward the line of Yingkow, Niuchwang and Tien- 
chwangtai with Liaoyang at the right flank, they concentrated 
their men along this line and on Haicheng and made three 
furious attempts to regain it on January 17 and 22 and Feb- 
ruary 16. A point had now been reached where the two 
forces were face to face for the decisive issue. 

The Imperial headquarters had organized a flying column 
consisting of the Eleventh Brigade, being the Thirteenth and 
Twenty-third Regiments, taken from the Second and Sixth 
Provincial Division of the Second Army Corps, which together 
with an artillery battery was dispatched on and after 
January 10, for the purpose of landing at Yungching on 
January 20 and attacking Weihaiwei, where the remnant of 
the Peiyang Squadron had been taking refuge. Landing at 
Yungching on the 20th, the forces at once faced about for 
Motienling and Huanglinchi, the former an elevation east- 
ward of the entrance to the bay of Weihaiwei, facing the 
islands of Liukung and Jih. The force had four 24 c. m. guns, 
besides 64 heavy guns under 24 c. m., which it placed on the 
surrounding heights of Motienling ; it received vigorous assist- 
ance from the Chinese fleet in the bay. The Japanese attack 
lasted but four hours, however, when the fortress yielded, the 
only remaining positions being the forts on the islands and in 
Weihaiwei itself. Our forces swept all the fortresses around 
the city of Weihaiwei on February 2, and by the 12th, as the 
result of the joint action of the army and navy, every Chinese 
ship in Weihaiwei had surrendered, and the Japanese forces 
were complete masters of Weihaiwei. 

The Chinese forces participating in this part of the cam- 
paign numbered 12,000 troops, and 15 warships of the Peiyang 
Squadron aggregating 30,250 tons. The warships were 
transferred to Japanese command and the captured crews 
were delivered under pledge as noncombatants. Having 
accomplished its task so successfully most of the Japanese 
force in Shangtung returned to the peninsula of Kinchow by 
March i. 

During the middle of February the Third Division of the 



INTRODUCTION 3 1 

First Army which had been left on guard at Haicheng, and 
the Fifth Division of the First Army, which had been left at 
Kiulicncheng, braved the freezing temperature and marched 
north, capturing Anshantan on March 2 and Niuchwang on 
the 4th. The First Division of the Second Army at Kinchow 
also invaded Yingkow and took it on the 6th, and then these 
detachments of the two army corps reunited and approached 
Tienchwangtai. 

The Japanese forces taking part in the siege of Tiench- 
wangtai consisted of the First, Third and Fifth Army Divi- 
sions, involving 21 infantry battalions, 6 companies of cav- 
alry, 14 batteries of field artillery and 5 companies of engineers 
with 54 field guns, 30 mountain batteries and 7 mortars. The 
total force numbered more than 19,000. This was the largest 
force participating in any single battle of the campaign on 
the Japanese side. The attack opened on March 9 simul- 
taneously from three directions, the Third Division occupying 
the center, with the Fifth on the right and the First on the 
left. The enemy numbered more than 20,000, with 40 guns, 
and they put up an exceedingly stubborn defense. But it 
was impossible to resist the terrific onset of the Japanese 
forces from three sides, and the fort was taken on the very 
day of the attack. After this defeat the Chinese lost all hope 
of regaining Port Arthur, a hope which they had ardently 
cherished since their first attack on Haicheng. The com- 
bined operations of the First (Third and Fifth Divisions) and 
Second (First Division) Army Corps were then completed for 
the present and they began to plan a campaign in the direc- 
tion of Chihli. 

The Imperial headquarters in the meantime had already 
planned for the occupation of the Pescadores, even before 
the capture of Weihaiwei. For this purpose an expedition 
southward was planned, and as soon as the enemy's fleet was 
no more and Japan was master of the Gulf of Pechili, a mixed 
column of 3 battalions and a mountain battery left Sasebo on 
March 15, convoyed by the Southern Squadron, which had 
been commissioned for the purpose, consisting of the Mat- 



32 EXPENDITURES OF THE SINO-JAPANESE WAR 

sushima, the Hashidate, the Itsukushima, the Chiyoda, the 
YoshinOj the Naniwa, the Takachiho, the Akitsushima and 
the Izuki. The islands were duly occupied. 

Preparations for attack on Peking 

It will be seen that Japan became master of the Gulf of 
Pechili on September 17, 1894, as the result of the Yellow 
Sea fight, and Port Arthur on November 22, and was in pos- 
session of the whole territory east of the Liao River by March 
9, 1895. The Peiyang Squadron was vanquished on Feb- 
ruary 12, 1895, and Weihaiwei taken; and as the Pescadores 
yielded on March 26, nothing remained to prevent Japan 
from transporting her forces across the Gulf of Pechili. In 
the early days of March the Imperial headquarters pro- 
jected a campaign into the province of Chihli by reorganiz- 
ing the various army corps already mentioned. The Second 
Army Corps was to include the Imperial Guards, the Second, 
the Fourth and Sixth Divisions, and it was to concentrate its 
main efforts on the taking of Shanhaikwan. The First Army 
Corps, including the First, Third and the Seventh Extraordi- 
nary Divisions, was commanded to march into and occupy 
the plains of Chihli. Thus the entire force consisted of seven 
divisions with about one-third of the whole second reserve. 
Although this force had to meet a Chinese army of more than 
200,000 it nevertheless felt superior, as it doubtless was, in 
comparison of numbers. 

H. I. H. General Prince Komatsu, Chief of the General 
Staff, was appointed commander-in-chief of the reorganized 
army, and was to have left Ujina, a port near Hiroshima, on 
April 13, establishing his headquarters at Shanghaiwan when 
taken, and from there to promote the attack on Peking. All 
such plans were then suddenly arrested by the arrival of pro- 
posals of peace. 

Reconciliation 

The first suggestion of such a proposal came on November 
22, the date of the attack on Port Arthur, but it ended fruit- 



INTRODUCTION 33 

lessly. China sent a representative to open negotiations on 
January 31, 1895, but there being some defect in his commis- 
sion, leaving him without full powers, no conference could be 
held and he returned to Peking. On March 14 Li Hung 
Chang came to Shimonoseki as the fully accredited repre- 
sentative, and negotiations were opened on the 20th ; a treaty 
of peace was signed on the 17th of April, the exchange of ratifi- 
cations taking place on May 8. By this treaty China agreed 
to recognize the independence of Korea, to cede Formosa, the 
Pescadores and the Liaotung peninsula to Japan, to open the 
ports of Shashih, Chungking, Soochow and Hangchow to 
Japanese commerce and to pay to Japan an indemnity of 
200,000,000 taels. Thus Japan's aim in opening the war was 
attained and peace was restored in the Orient. 

After Japan's occupation of the Formosan Island the natives 
became more restive than before. Consequently the govern- 
ment dispatched the Imperial Guards and the Fourth Divi- 
sion, which carried out expeditions in various parts of the 
island for the subjugation of the savages and of the rebellious 
elements. This operation, however, need not be further 
dwelt upon, since it formed no real part of the Sino- Japanese 
War. 

Unreasonable interference hy Russia, Germany and France: 
political turmoil in the Far East 

But scarcely had peace been restored when Japan had to 
face and submit to partiality and injustice, on April 23, on 
the part of Russia, Germany and France, in being obliged to 
abandon the Liaotung peninsula, on the pretext that her 
occupation of continental territory would be prejudicial to 
the peace of the Orient. Japan had purchased it with the 
tears and the blood of her sons, but she was compelled to 
relinquish it for nothing. So potent a three-fold interference 
she was not prepared to resist. By this action Japan was 
humbled to the dust, a fact which it is well to note carefully. 
The three powers contended that the peninsula under the 
Japanese flag would prove a constant source of trouble in 



34 EXPENDITURES OF THE SINO-JAPANESE WAR 

East Asia. Japan yielded and abandoned the Liaotung pen- 
insula on May lo and the three powers had their way. But 
did matters remain as they had contended they would? They 
ousted Japan and walked into her possessions themselves. 
Germany leased by force the Bay of Kiaochow on March 6, 
1898, Russia leased Port Arthur and Talien on March 27 of 
the same year, and on June i Britain got Weihaiwei. France 
could not be left out, and she got a treaty signed to lease 
Kwangchow Bay on November 16 of the following year. 
Thus the four powers, under pretext of leasing bases, started 
the disintegration of China. It was indeed a shrewd and 
ingenious means of snatching the prize which Japan had pur- 
chased with her blood and was soon after forced to forswear. 
In name it was an act of leasing; in reality it was an act of 
occupation. We have no desire to misrepresent or to confuse 
issues, but to state the simple truth as to the action of the 
powers. It is the practical rather than the theoretical side 
of the matter that Japan has to consider. She must be gov- 
erned by facts, not by names. It was indeed something 
Japan found, and still finds, impossible to understand: that 
these powers should have compelled her to relinquish her new 
possession and then have proceeded to occupy it themselves. 



CHAPTER II 
DISBURSEMENTS OF THE WAR 

General Survey of Expenses 

The Sino-Japanese War opened on July 25, 1894, when 
Japanese warships were fired upon in the Hoto offing; and 
peace was restored by the Treaty of Shimonoseki, signed on 
April 17 of the next year. The space of war time extended 
about nine months (including the Formosan expedition) . The 
number of officers and men participating on the Japanese side 
was more than 240,000, together with some 6,495 civil officials 
and officers and some 100,000 laborers. The number of war- 
ships engaged was 28, representing a displacement of over 
57,600 tons, with 24 torpedo boats aggregating 1,475 tons. 
The theater of operations extended about 268 miles east and 
west, and some 1,269 rniles north and south, covering about 
14,280 square miles of battleground in Manchuria, 18,445 
square miles in Korea, 892J square miles in Shantung and 
5,652^ square miles in Formosa, or about 39,270 square miles 
in all. As it was an oversea war, the cost was comparatively 
large. The total outlay has been put down at 235,866,055 
yen, the period of disbursement running from 1894 to 1903, 
as tabulated on the following page. 

The actual total outlay for the war came to 233,523,252 
yen, including the sum of 135,553 yen spent after 1903, which 
will be accounted for later on. The total may be tabulated 
under (i) War Office, 194,777,467 yen and (2) Naval Office, 
38,745,785 yen. 

Moreover, administrative expenses arising out of the war 
increased the outlay by 2,478,354 yen, bringing the total up 
to 236,001,606 yen, which will be analyzed according to dis- 
bursements in due course. 

35 



36 



EXPENDITURES OF THE SINO-JAPANESE WAR 



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DISBURSEMENTS OF THE WAR 



37 



Cost of the War 

The total amount of actual expense for the Sino-Japanese 
War has been set down above at the figure of 233,523,256 yen, 
which, as has already been stated, represents the outlay by 
army and navy from June i, 1894, which was before the war 
broke out, to March 31, 1896, together with certain further 
disbursements after the war for readjustment of affairs en- 
tailed by the war, compilation of war history and sundries. 
The outlay in detail of the War and Navy Departments may 
be seen from the following tables: 

Expenditures of War Office, i 894-1 903* 



Fiscal 
years 


Extraordinary 

military 

affairs 


After-war 
adjustments 


Compilation 
of war 
history 


Grant of 
lump sum 


Total 


vovovovo oooooooooooo 


Yen 
164,520,371 

20,415,279 

5,915,563 

3,025,960 

22,136 

4,795 
67 


Yen 

56,548 

35,766 

19,560 

9,836 


Yen 

50,540 
50,695 

42,593 
31,810 

43,845 


Yen 

125,197 
82,486 

123,689 
37,108 
28,070 


Yen 
164,520,371 

20,415,279 

5,915,563 

3,025,960 

254,421 

173,742 

185,909 

78,754 

71,915 


Total... 


193,904,171 


121,710 


219,483 


396,550 


194,641,914 



» Between the years 1904 and 191 3 additional expenses in relation to the war were incurred as 
follows: ,, 

Yen 

Compilation of War History and Statistics 61,430 

Grant of lump sum 74.124 



Total 135.554 

When this outlay is added to the total outlined above, the grand total for the War Office will be 
194.777.468 yen. 



38 EXPENDITURES OF THE SINO-JAPANESE WAR 

Expenditures of Naval Office, i 894-1 902 



Fiscal 
years 


Extraordinary 
war funds 


Compilation of 
war history 


Lump sum 
grant 


Total 


i894\ 

1895 i 

1896 


Yen 
35,955,137 

1,449,760 
608,260 

314,744 
122,585 

253,513 
1,602 . 


Yen 
3,094 


Yen 

34,327 

1,431 

205 

1,101 

30 


Yen 
35,955,137 
1,449,760 
608,260 

349,071 

124,016 

256,812 

2,703 

30 


i8q7 


1898 


I 8qq 


IQOO 


IQOI 


IQ02 




Total 


38,705,601 


3,094 


37,094 


38,745,789 



Analyzing the accounts of the War Office and the Naval 
Office, the items include arms, ammunition, supplies for 
troops and transportation of troops and provisions, as follows : 

Details of Expenditures of War and Naval Offices 



Items 


War Office 


Naval Office 


Total 


Arms and ammunition 


Yen 
32,603,214 
91,979,606 

41,371,365 

27,949,985 

873,297 


Yen 

31,850,170 

3,980,079 

1,308,760 

1,566,588 

40,188 


Yen 
64,453,384 
95,959,685 

42,680,125 

29,516,573 

913,485 


Supplies for troops 


Transportation of troops and pro- 
visions 


Accessories to cost of war 

Miscellaneous expenses 


Total 


194,777,467 


38,745,785 


233,523,252 





The above items, omitting those already explained, are fur- 
ther analyzed in the tables on pages 39-42. 



DISBURSEMENTS OF THE WAR 



39 





































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40 



EXPENDITURES OF THE SINO-JAPANESE WAR 



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DISBURSEMENTS OF THE WAR 



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42 



EXPENDITURES OF THE SINO-JAPANESE WAR 























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disbursements of the war 43 

Increase of Administrative Expenses Due to the War 

As already mentioned, the total increase of administrative 

expenses directly caused by the Sino- Japanese War was 

2,478,354 yen, disbursed as follows: 

Yen 

Foreign Office 307.831 

Home Office 414.564 

Treasury Office i ,614,246 

Judicial Office 764 

Communications Office 140,949 

Total 2,478,354 

The above expenses were only a little over 10.5 per cent of 
the total cost of the war ; and the items of expense in detail for 
the above offices are tabulated on pages 44-46. 

An extraordinary session of the Imperial Diet was con- 
vened in October, 1894, at Hiroshima near the Imperial 
headquarters, and extra rewards were given to contributors 
to the war fund in money or materials and to those who 
relieved distressed families of soldiers at the front. 



44 



EXPENDITURES OF THE SINO-JAPANESE WAR 
Expenses of Foreign Office 



Items 


1894 


1895 


Total 


Travelincr exoenses 


Yen 

18,981 
8,432 
7,174 

3,240 

11,125 

1,461 
194,065 


Yen 

6,927 

6,013 

12,941 

2,016 

23.472 

1,550 

3,455 
6,979 


Yen 
25.908 
14.445 
20,115 

5.256 

34.597 

1.550 

4,916 
201,044 


Miscellaneous 


Dispatch of police to Korea . . . 

Allowance to diplomats and 

consuls in Korea 


Reconstruction of legation in 
Korea 


Repairing annex to legation in 
Korea 


Reception of Chinese peace 
envoy 


Miscellaneous 




Total 


244,478 


63,353 


307.831 





Expenses of Legations and Consulates 



Names of legations and 
consulates 


Fiscal year 
1894 


Fiscal year 
1895 


Total 


Foreign office and legations 
abroad 


Yen 

218,645 

1,016 

13,140 

35 

1,297 

160 

2,075 
2,028 

3,551 

2,131 

402 


Yen 
21,918 

27,040 

641 
1,506 

5,588 

6,124 

535 


Yen 

240,563 
1,016 


Legation in China. . . ... 


Legation in Korea 


40.180 


Consulate at Hongkong 

Consulate at Tientsin 

Consulate at Chef 00 


35 

1,297 

160 


Consulate at Shanghai 

Consulate at Fusan 


2,716 
3,534 
9,139 
8,255 
937 


Consulate at Chemulpo 

Consulate at Seoul 


Consulate at Gensan 




Total 


244,480 


63,352 


307,832 





Expenses of Home Office 





Special 

Session 

Imperial 

Diet 


Korean affairs 


Extra 
rewards 




Year 


Home 
Office 


Metropoli- 
tan Police 
Office 


Prefec- 
tures 


Hokkaido 


Total 


1894 

1895 

1897 

1898 


994 


4,475 
16,954 


122,051 
50,176 


16,434 
27,300 


4,105 


139,226 
32,848 


148,059 
94,430 

139,226 
32,848 


Total . . 


994 


21,429 


172,227 


43.734 


4,105 


172,074 


414.563 



DISBURSEMENTS OF THE WAR 
Treasury Office" 



45 



Items 


Fiscal 
year 
1894 


Fiscal 
year 
1895 


Fiscal 
year 
1896 


Fiscal 
year 
1897 


Total 


Extraordinary war expenditures (auditing 


Yen 


Yen 
11.969 


Yen 
11,687 


Yen 
12,241 


Yen 
38.897 




Korean affairs: 
(A) Cabinet 

Dispatches to Imperial head- 


14.022 
931 

4.S79 
4.099 
5.3SI 

414 

2,422 
852 
350 

29.350 


4.792 
1.683 
1,690 

I. ISO 

12,812 
5.058 

2,258 

1.241 

1.378 

242 

6,175 






18.814 
1.683 
2 62 X 




Dispatches to Korea . . 


(B) Treasury Office 

Dispatches to Imperial head- 


S.729 
16.911 
10.409 

2.672 

3.663 

2.230 

592 

35.525 


Dispatches to Korea , 


Dispatches to China and Korea . 
(C) Dispatch of Privy Council to Impe- 


(D) Dispatch to the front of auditors of 
Public accounts 


(E) Prize Court 


(F) Higher prize court 

(G) Manufacturing of military and com- 

mandeering tickets 




Total 


62,370 


38.479 







100,849 




War pensions 





349.779 







349.779 




Extraordinary session of the Imperial Diet: 
Upper House 


22,412 
25.794 






.... 


22,41a 
25.794 






Total 


48,206 










48.206 




Furnishing of temporary Diet building: 


12,729 
12,386 


.... 




.... 


12,729 
12,386 


Lower House 




Total 


25.115 









25. IIS 




Rewards: 

(A) Manufacturing of extra decorations 

and decoration oertificate 

(B) Manufacturing of extra prize cups . 


28.348 


286.399 


65.876 
36.073 


157.134 


380,623 
193.207 


Total 


28,348 


286,399 


101,949 


157.134 


573.830 




Managing allowance extra war funds 





76,121 




2.504 


78.62s 


Manufacturing of public loan bonds 


18,104 


319.597 


45.665 


2.890 


386.256 


Grand total 


182,143 


1,082,345 


162.301 


174.769 


1.601,558 




Expenses of manufacturing public loan 


.... 


.... 


.... 




b 12.688 







» The expenditure of the Treasury Office in relation to the war was 1,614,246 yen, which sum in- 
cluded all expenses concerning the business of the Treasury Office and also some other expenses 
which were legally but nominally attached to the Treasury Office. 

Expenditure after the fiscal year of 1898 was for rewards and the making of prize cups, amounting 
to 12,335.94 yen, and for printing public loan bonds in the same year: 314.80 yen, the following year: 
35.50 yen, and in 1900: 2.25 yen. 

*> For the two fiscal years 1899 and 1900. 

Judicial Office 



Yen 



Fiscal year 1 895 763 



46 EXPENDITURES OF THE SINO-JAPANESE WAR 

Communications Office* 



Communications office. 

Administrative office of light houses. 

Tokyo post and telegraph office . 

Osaka " 

Nagasaki 

Hiroshima 

Nagoya 

Kumamoto 



Total 



Yen 


90,523 


41,415 


2,094 


2,985 


4 


2,337 


837 


754 



140,949 



» The outlay by the Communications Office during 1894 amounted to 140,949 yen, which repre- 
sented the increased expenses caused by the war, fractions of yen being omitted. 



CHAPTER III 

SUPPLY OF WAR FUNDS 



The expenses of the Sino-Japanese War, as already out- 
lined, were about 235,000,000 yen in all; and of this sum the 
administrative outlay was mostly defrayed from reserve funds 
and surplus in the Treasury ; but the amount expended on the 
war being very large, the sources thereof are hereafter de- 
scribed in detail. 

The budget of revenue and expenditure relating to the 
expenses of the Sino-Japanese War, legally known as "extra 
war funds," was 250,000,000 yen; and the resources were 
mostly public loans and surplus funds in the Treasury, as well 
as a special account fund, but not from taxes. This was the 
beginning of war loans in Japan. 

Before entering upon a description of the main source of 

supply for war funds, it may be well to describe the budget 

and total accounts relating to the "special account for war 

purposes." 

Revenue 



First section, war funds . . . . 
First subsection, war funds. 



Budget 



Yen 
25,000,000 
25,000,000 



Fixed amount 
as receipt 



Yen 
225,230,128 
225,230,128 



Amount 
received 



Yen 
225,230,128 
225,230,128 



Expenditures 





Budget 


Mixed sum by 
Imperial 
sanction 


Payment 
ordered 


First section, war funds 

First subsection, war funds .... 


Yen 
25,000,000 
25,000,000 


Yen 
210,973.697 
210,973,697 


Yen 
200,475,508 
200,475,508 



Of the expenditures above mentioned, the amount trans- 
ferred to General Budget Account was 9,037,494 yen, the 

47 



48 EXPENDITURES OF THE SINO-JAPANESE WAR 

unused portion of budget was 40,486,998 yen, and the unused 
portion of sum allowed by Imperial sanction was i ,460,698 yen. 
The total fixed sum of the above revenue stood as follows 
(details of expenditures to be given later) : 

Yen 

Treasury Office 219,361,977 

War Office 5,093»9i7 

Naval Office 774,234 

225,230,128 

The detailed items are as follows: 

Yen 

First section, war funds 225,230,128 

First subsection, war funds: Yen 

Raising of public loan (Treasury Office) 1 16,804,927 

Transfer of the surplus fund of Treasury (Treasury 

Office) 23,439,087 

Contributed w^r funds (Treasury Office) 160,800 

Contributed relief fund to War Office 2,210,650 

Contributed relief fund to Naval Office 578,090 

Miscellaneous receipts: Yen 

War Office 1,323,162 

Naval Office 196,143 

I,5i9,,305 

Receipts from occupied territory (War Office) 624,425 

Receipts from Formosa and Pescadores Islands . . . 935,68o 

Transfers to Special Account (Treasury Office) .... 78,957,165 

225,230,128 

As stated above, the extra war funds amounted to such an 
immense sum, that it was necessary to make arrangement for 
a special account, separated from general revenue and ex- 
penditure. In October, 1894, by Law No. 24 the "Special 
Account for War Purposes Act" was promulgated, as follows: 

Article I. Finances for the extra war funds in regard to the 
affair with China and Korea shall be classified and adjusted 
separately from general revenue and expenditure. 

Article II. All revenue and expenditure for extra war 
funds from June i, 1894, until the termination of the war shall 
be regarded as included in one financial year. 

The above articles were based on Article XXX of the law 
of accounts, according to Law No. 4 of 1889, which says that 
"in case it is difficult to follow the provisions of the present 
law on account of special requirements, a special mode of pro- 
cedure may be allowed, but such special mode of treatment 



SUPPLY OF WAR FUNDS 49 

must be effected by law." Therefore the expenditure allowed 
by this special law of finance was limited to war funds re- 
quired by the War Office and the Naval Office. This special 
account was wound up at the end of March, 1896, in accord- 
ance with the first article of Law No. 10 of the same year 
relating to the special account for war purposes. Since then 
all expenditure incurred by the War Office and the Naval 
Office for extra war outlay was included in the general budget 
accounts. 

Vote for war expenses 

Extra expenses for the carrying on of Korean affairs were 
to be defrayed from the second reserve fund in the fiscal year 
1894 (the amount being 950,000 yen, that is to say, $473,100). 
This second reserve depends upon the 69th article of the 
Constitution of Japan which reads as follows: "In order to 
supply deficiencies, which are unavoidable, in the budget, and 
to meet requirements unprovided for in the same, a reserve 
fund shall be provided in the budget." Article 7 of "the 
law of Finance" explicitly states that "the second reserve 
shall be used to meet necessary expenses unprovided for in 
the budget." At the same time, articles 16 and 17 of the 
Rule of Finance regulates its transaction and process. How- 
ever, the cost proved so enormous that the second reserv^e was 
insufficient. Thereupon in June it was decided by Imperial 
sanction to utilize for war expenses a surplus of 26,000,000 
yen in the Treasury, 3,000,000 yen of which, as may be seen 
from details already given, was a loan to the Korean Govern- 
ment. As the Chinese forces in Korea could not be put 
down by the troops of the Fifth Division, after the battles 
fought on July 25 and 29, at Phung Island and Songhwan 
respectively, mobilization took place, and the Imperial 
Declaration of War was issued on August i, after which the 
Third Division w^as dispatched to the front and the First 
Army Corps organized, thus extending the sphere of operations 
and increasing the outlay beyond the resources of the sur- 
plus in the Treasury. 



50 EXPENDITURES OF THE SINO-JAPANESE WAR 

On August 15, 1894, Urgent Imperial Ordinance No. 143 
was issued, in conformity with Article LXX of the Imperial 
Constitution, for the purpose of raising war funds, which 
provided for the transfer of funds included under special 
accounts, borrowing from banks or the raising of a public 
loan as an urgent measure. On the same day, by Imperial 
Ordinance No. 144, war loan regulations were issued, and it 
was decided to incur a debt of 50,000,000 yen with interest at 
6 per cent or under per annum, the first portion raised being 
the sum of 30,000,000 yen. 

On September 15, the Imperial headquarters were removed 
to Hiroshima; and on the 22d an extra session of the Imperial 
Diet was convened at the same place, which asked for a war 
budget of 150,000,000 yen, a bill being passed authorizing the 
flotation of a public loan of 100,000,000 yen at less than 6 
per cent per annum. The mode of flotation, terms of issue 
and period of redemption and others were entrusted to the 
Minister of Finance. 

Out of the total sum of 150,000,000 yen asked for, 59,996,- 
885 yen had already been spent in urgent necessity, by Impe- 
rial sanction, beginning with June, 1894; ^^d consequently, 
approval of this action was asked for at the special session of 
the Diet, in accordance with Article LXIV of the Imperial 
Constitution. It was a time when the nation's patriotism and 
public indignation had reached a state of high tension and no 
hesitation was had in giving approval to the necessary outlay 
for the war, the sums spent by Imperial sanction and the war 
loan being voted for with enthusiasm; and the war budget 
was promulgated on October 23, 1894. Moreover, at the 
eighth session of the Imperial Diet in February, 1895, the 
Lower House passed the following resolution with regard to 
war expenses : 

With respect to the issue of an Imperial Rescript for the subjugation of China we 
deem it proper to say that we think the attainment of the object of the war and the 
avengement of the nation's honor still a great way off; and therefore it is hereby 
resolved that further disbursement of war expenses shall be approved to any limit 
required. 



SUPPLY OF WAR FUNDS 5I 

During 1894 and 1895 the war was at its height and peace 
nowhere in sight, so that 96,290,000 yen out of the 150,000,000 
yen approved by the Diet was spent by Imperial sanction in the 
eight months from June to January, 1896; and with an outlay 
of about 11,000,000 yen a month for army and navy, the 
balance of the sum voted by the Diet could scarcely suffice to 
June, 1895. The government estimated that the sum of at 
least 100,000,000 yen would be required from July to Decem- 
ber, 1895, and framed a supplementary budget accordingly. 
The measure was submitted to the Lower House on February 
20 and authority for the raising of further war loans was given 
by both houses within a week, the supplementary war budget 
being issued on March 2, 1895. 

Disbursements 

The main resource for war funds was public loans and 
special contributions to war funds, special contributions for 
relief of army and navy men, transfers from surplus in the 
Treasury and from special account funds. The surplus from 
receipts and disbursements of the Treasury was deposited in 
the Bank of Japan either as a fixed or current account at 
reasonable interest, in accordance with Law No. 16, in June, 
1894, at the beginning of the war; and disbursements from 
this account naturally caused an increase in the bank note 
issue, which was further accentuated by a government loan 
from the Bank of Japan and the transfer of the special account 
fund to the war fund. Thus the expenses of the war were 
covered by floating of loans and by increasing the issue of 
bank notes. 

Monthly receipts for the Special Account for War Purposes 
were as follows : ^ 

^ Table does not in some parts correspond to the monthly receipt of war funds 
which will be described later, because it represents the sum received by the revenue 
officers, while the other was the sum paid into the cash office. 

Before the setting aside of a special account for war purposes, the allotted amount 
for war funds from the general account was paid out in the first month from the 
surplus in the Treasury — 26,000,000 y^n — ^and the public loan and contributed 
relief funds are described in the following table according to the months they were 
actually received by the revenue officer. 



52 



EXPENDITURES OF THE SINO-JAPANESE WAR 









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SUPPLY OF WAR FUNDS 



53 



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54 EXPENDITURES OF THE SINO-JAPANESE WAR 

The methods of raising war funds may be classified as 
follows: 

Private Subscriptions to Public Loans and War Funds 



Date 



1894 

July. 

August. . . 
September 
October. . 
November 
December. 

1895 
January. . 
February . 
March . . . 

April 

May 

June 

July 

August. . . 
September 
October. . 
November 
December . 

1896 
January. . 
February . 
March . . . 

April 

May 

June 

July 

August. . . 
September 
October. . 
November 
December . 

Total . 



Public 
loan 



Yen 



2,500,000 

500,000 

5,241,000 

7,241,300 



2,795,000 

6,480,100 

9,645,900 

10,032,400 

13,297,200 

10,721,700 

9,120,000 

88,490 

26,310 

322,860 

1,051,170 

2,749,989 



25,861,135 

843,865 

1,652,000 

1,438,000 

1,015,000 

2,163,000 

679,500 

942,000 

405,808 

116,804,926 



233,618,653 



Contributed 
to war 
funds 



Yen 



[00,000 

60,800 



160,800 



321,600 



Contributed 

to relief fund 

of army and 

navy 



Yen 

5.836 
175,238 

347,444 
420,371 

254,546 
276,854 



280,688 

321,011 

324,163 

166,792 

106,095 

26,046 

22,136 

14,262 

24,676 

9,604 

4,782 

3,478 



964 

1,066 

1,011 

205 

307 

29 

53 

964 

121 



2,788,741 



5,577,483 



Total 



Yen 
5,836 

175,238 
2,847,444 

920,371 
5,595,546 
7,578,954 

3,075,688 

6,801,111 

9,970,063 

10,199,192 

13,403,295 

10,747,746 

9,142,136 

102,752 

50,986 

332,464 

1,055,952 

2,753,467 

964 

1,066 

25,862,146 

844,070 

1,652,307 

1,438,029 

1,015,053 

2,163,964 

679,621 

942,000 

405,808 

119,754.467 



239,517.736 



SUPPLY OF WAR FUNDS 



55 



War Expenses Met by Increasing the Issue of Bank Notes of Bank 

OF Japan • 



Date 



1894 

June 

July 

September 
October. . 
November 
December . 

1895 
January . . 
February . 
March . . . 
April . . . . , 

May 

June 

July 

August . . . 
September 
October. . 
November 
December . 

1896 
January. . 
February . 
March . . . 
April .... 

May 

June 

July 

August . . . 
September 
October. . 
November 

Total . 



Surplus of 
Treasury 



Yen 
26,000.000 



439.086 



3.000.000 



23.439,086 



Miscellaneous 
receipts 



Yen 



1.806 
10.566 



83.202 

5.04s 

11,361 

II. 216 

19.670 

32.743 

146,969 

50,293 

99.514 

15.502 

183.959 

272,832 



126,330 
63.242 
53.077 
51.703 
54.070 
81,711 

102.406 

1.163 

20,237 

19,008 

1,679 



Borrowed 

from Bank 

of Japan 



Yen 



6,000,000 
12,500,000 
19,530.000 



18,420,000 
22,530,000 
20,500,000 
17,500,000 
14,000,000 
12,500.000 
12,500,000 
12,500,000 
18,390,000 
25,000,000 
33,100,000 
41,500,000 



42,500 
41.270 
37,900 
41,240 



000 
000 
000 



Transfers 

from 
Treasury 



Yen 



2.553.377 
8,814,025 
7.970,645 



16.724,798 
16,048,649 
22,368,991 
25,077.224 
24.195.419 
22,661.037 
20,727,592 
26,748.677 
29,080,730 
32,412,194 
31,534.497 
28,710,373 



34.930,525 
41.773.061 
26,710,462 
16,107,780 
3,102,036 



1.519,304 449.380,000 438,252,092 78,957.165 



Transfers 
from spe- 
cial ac- 
count fund 



Yen 



9,020,000 
52,020,000 
4,280,956 
7,665,676 
4.613,948 
1.356,585 



War scrip 
issued 



Yen 



3,780,000 
3,780,000 
3,780,000 
3,780,000 
3,304.269 
2,752,821 
1.886,816 
1.293,606 
861.769 
820,168 



404.713 
104 
104 
104 
104 



26,444,578 



a The sum borrowed from the Bank of Japan, the transfers from the Treasury and the issuing of 
war scrip were temporary measures to meet deficits, and after April i, 1896. these were redeemed 
by public loan and by transfer of special account fund, which accounts for some items being du- 
plicated. 



The revenue from occupied territory amounted to 624,425 
yen, or about $310,964, which, on account of having been 
levied after March, 1896, is not scheduled above. 

The monthly receipt of war funds stood as shown in the 
table at the top of next page, but in case the amount of 
revenue should not correspond to the above tables reference 
had better be made to the former. 

As previously described, the amount of revenue for war 
funds does not always correspond to payment for war ex- 
penses; and such being the case, whenever a deficit would have 
occurred, money was borrowed from the Bank of Japan, or 



56 EXPENDITURES OF THE SINO-JAPANESE WAR 

Monthly Revenue and Expenditures, i 894-1 896 



Date 



1894 
June 6-July 30. 

August 

September 

October 

November 

December , 

1895 

January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 

1896 

January 

February 

March 

April-N ovember 

Total 



Revenue 



Yen 
26.000,000 



3,395,565 
6,579,153 
7.588,052 



3,161,151 
6,805.365 

6,992,033 
10,201,408 
13,422,961 
10,780,339 

9,289,459 

152^984 
151,841 

346,675 
1,239,680 
3,026,534 



127,291 

64,316 

26,548.278 

89.357,043 



225,230,128 



Expenditures 



War Office Naval Office Total 



Yen 

4,789,377 

5,945,497 

7,970,252 

11,988,463 

12,931,275 

10,999,451 

9,262,790 
8,550,979 
13,696,459 
7,974,876 
7,953,360 
6,215,641 
5,651,285 
4,357,157 
6,683,723 
8,406,199 
6,940,476 
6,980,463 

6,096,322 

4,742,457 

7,351,521 

976,652' 



[64,520,371 



Yen 

474,606 
1,705,441 
1,795,013 
3,271,294 
6,408,527 
2,775,220 



1,542,514 
1,688,237 
1,365,916 
1,934,765 
1,087,796 
1,530,316 
1,228,999 
1,265,465 
824,167 
1,288,730 
1,089,670 
1,580,345 



835,667 

529,785 
764,158 
968,509 



35955,140 



Yen 

5,272,982 

7,650,937 
9,765,265 

15,259.757 
19,339,801 

13,774.671 

10,805,304 
10,239,216 
15,062,375 
9,909,641 
9.041,156 
7.745.957 
6,880,283 
5,622,622 
7,507,890 
9,694,929 
8,030,146 
8,560,809 



6,931.989 
5,272,242 

8,115.679 
8,143* 



200,475,508 



•After April, 1896, revenue is not tabulated by the month, since it was an adjustment account 
after the end of the fiscal year; but these amounts show that the fixed sum of refunding exceeds that 
of payment. 

appropriated from surplus in the Treasury, or by the isfeue of 
war scrip; and these temporary measures were repaid after 
April 1 , 1 896, by raising public loans and the transfer of the 
special account fund, which transactions will be described 
hereafter. 

In regard to the above, the government used bank notes 
and copper coins as far as possible to meet extra expenses, and 
thus prevented a diminution of specie as well as the danger of 
a financial panic. The total amount paid out for war from 
June, 1894, to the end of March, 1896, was 200,483,651 yen, 
the following currency being employed : 



SUPPLY OF WAR FUNDS 
Currency Expended for War Purposes, i 894-1 896 



57 



Amount 


Percentage 


Yen 




183,981,744 


91.8 


11,651,482 


5-8 


2,601,028 


13 


300,000 


0.2 


850,000 


0.4 


1,099,293 


0.5 


104 




200,483,651 


100. 



Bank notes and copper coin 

Silver dollars 

Subsidiary silver coins 

Silver bullion 

Mexican dollars 

Sycees 

War scrip 

Total 



\Mth regard to war scrip, it may be necessary to say some- 
thing as to how it was used. Had bank notes been used in the 
theater of war, the paper currency would accordingly have had 
to be increased and in consequence there might have been a 
considerable withdrawal of specie. To avoid this, war notes 
of 1.5 and 10 taels, as well as of 5 sen, 2 sen, and one-half sen, 
were issued. It was found, however, that to circulate both 
war notes and bank notes in the same region was inconvenient 
for transactions ; and so when the Japanese forces were about 
to invade the province of Chihli they were provided with war 
notes to the face value of 3,780,000 yen, equal to 2,700,000 
taels, for use in that region. Peace was so soon restored, how- 
ever, that it was found that only 103.60 yen of the war scrip 
had been used. The supply of war funds has already been 
outlined in a very general way, but each item in detail will be 
given later on. 

Expenditure of the Surplus in the Treasury and the 
Temporary Making Up of Deficits 

The budget for army and na\y outlay during the war with 
China was calculated at the sum of 250,000,000 yen, for the 
greater part of which the government had to depend on public 
loans, the surplus in the Treasury for the fiscal year of 1893, 
the transfer of indemnity and other sources of income being 
comparatively of minor importance, as showTi in the following 
table: 



58 EXPENDITURES OF THE SINO-JAPANESE WAR 

Yen Percentage 

Treasury surplus, fiscal year 1893 23,439,086 10.4 

Public loans 116,804,926 51 .9 

Transfer of indemnity 78,957.165 35.0 

Other receipts 6,028,950 2.7 

Total 225,230,127 100. o 

Although the surplus in the Treasury could be used im- 
mediately at the outset of the war, the public loan turned in 
4,326,108 yen in monthly average from September, 1894, to 
November, 1896; and the transfer of indemnity was carried 
out after April, 1896. So that during this time revenue and 
expenditure did not often correspond, which will be explained 
later. 

Before the Sino-Japanese War, the annual accounts showed 
a yearly surplus, owing to the negative policy, and the actual 
results for five years before the war stood as follows: 

Fiscal year Yen 

1889 16,974,307 

1890 24,343,951 

1891 19,675,597 

1892 24,727,171 

1893 29,187,509 

Total 114,908,535 

The surplus of the fiscal year 1893 was 29,187,508 yen; 
and 5,748,422 yen of this sum was transferred to the next fiscal 
year, so that 23,439,086 yen was transferred to the war fund, 
which facilitated our war movement. Although at the out- 
break of war two or three special accounts were added to the 
surplus of 23,439,086 yen described above, so that it amounted 
to some 26,000,000 yen as war fund (including 439,086 yen 
added in November), 3,000,000 yen out of the amount were 
loaned to the Korean Government. Therefore it was in the 
end the same as mentioned at first. And although the war 
expenses were defrayed by the transfer of the surplus in the 
Treasury, from the outbreak of war to September, in a short 
time there was a deficit. 



SUPPLY OF WAR FUNDS 59 

Monthly Receipts and Disbursements, i 894-1 896 



1894 
June 6-July 31 . . 

August 

September 

October 

November 

December 

1895 

January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 

1896 

January 

February 

March 

April-November * 

Total 



Receipts 



Yen 
26,000,000 



3,395,565 
6,579,153 
7,588,052 



3,161,151 

6,805,365 

6,992,033 

10,201,408 

13,422,961 

10,780,339 

9,289,459 

152,984 

151,841 

346,675 

1,239,680 

3,026,534 



127,291 

64,316 

26,548,278 

89,357,043 



225,230,128 



Disbursements 



Yen 

5,272,982 

7,650,937 
9,765,265 

15,259,757 
19,339,801 
13,774,671 



10,805,304 
10,239,216 
15,062,375 
9,909,641 
9,041,156 

7,745,957 
6,880,283 
5,622,622 
7,507,890 
9,694,929 
8,030,146 
8,560,809 



6,931,989 
5,272,242 
8,115,680 
8,143'' 



200,475,508 



» After April, 1896, accounts were not reckoned by the month, as it was an adjustment account 
after the end of the fiscal year. 

t Fixed sum of refunding exceeded that of payment. 



From June, 1894, to May, 1896, the highest total shortage 
was 83,043,165 yen, which occurred in February, 1896, to 
meet which transfers were at once made from the Treasury, 
or loans were had from the Bank of Japan, or else war scrip 
was issued to make temporary adjustment. The following 
table will indicate the details of the making up of temporary 
deficits. Although the sum borrowed from the Bank of 
Japan will be described later, it is added here for the sake of 
convenience : 



6o EXPENDITURES OF THE SINO-JAPANESE WAR 

Means of Meeting Deficits in War Fund, 1894-1896' 



Date 



1894 

June 

July 

August. . . 
September 
October. . 
November 
December 

1895 
January. . 
February . 
March . . . 

April 

May 

June 

July 

August. . . 
September 
October. . 
November 
December 

1896 
January. . 
February . 
March. . . 
April . . . . . 
May 

Total 



Total 
deficits in 
war fund 



Yen 



8,553.377 
21,314,025 
27,500,645 



35,144,798 
38,578,649 
46,648,991 
46,357,224 

41,975,419 
38,941,037 
36,531,861 
42,001,498 

49,357,547 
58,705,800 
65,496,266 
71,030,541 



77,835,239 
83,043,165 
64,610,566 
57,347,884 
3,102,138 



Transfers 

from 
Treasury 



Yen 



2,553,377 
8,814,025 
7,970,645 



16,724,798 
16,048,649 
22,368,991 
25,077,224 
24,195,419 
22,661,037 
20,727,592 
26,748,677 
29,080,730 
32,412,194 

31,534,497 
28,710,373 



34,930,525 
41,773,061 
26,710,462 
16,107,780 
3,102,036 



914,076,670 438,252,092 449,380,000 



Temporary loan 

from Bank of 

Japan 



Yen 



6,000,000 
12,500,000 
19,530,000 

18,420,000 
22,530,000 
20,500,000 
17,500,000 
14,000,000 
12,500,000 
12,500,000 
12,500,000 
18,390,000 
25,000,000 
33,100,000 
41,500,000 



42,500,000 
41,270,000 
37,900,000 
41,240,000 



Amount of 

war scrip 

issued 



Yen 



3,780,000 
3,780,000 
3,780,000 
3,780,000 
3,304,269 
2,752,821 
1,886,817 
1,293,606 
861,769 
820,168 



404,714 
104 
104 
104 
102 



26,444,578 



» After June, 1896, there was no further shortage. 



SUPPLY OF WAR FUNDS 



6i 



Ratio of Means of Meeting Deficits in War Fund, i 894-1 896 



Date 



1894 
October. . 
November 
December . 

1895 
January. . 
February . 
March . . . 
April . . . . , 

May 

June 

July 

August. . . 
September 
October. . 
November 
December . 

1896 
January. . 
February . 
March. . . 
April .... 
May 



Transfers 

from 
Treasury 



29.9 
41.4 
29.0 



47.6 
41.6 
48.0 
54- 1 
57-6 
58.2 
56.7 
63-7 
58.9 
55-2 
48.1 
40.4 



44 9 
503 
41-3 
28.1 

[GOO 



Loans from 
Bank of 
Japan 



70.1 
58.6 
71.0 



Issue of war 
scrip 



8.1 
8.1 



0.5 



As may be seen from the above, the temporary deficit was 
met by transfers from the Treasury and loans from the Bank 
of Japan. So much then for the summary of war finance. 

Issue of Public Loans 

The public loan floated to cover the expenses of the war 
with China-and affairs in Korea was named the "War Loan," 
and the sum of legal issue anticipated was in all about 230,- 
000,000 yen; but only 124,920,000 yen was put on the market, 
as may be seen from the statements on pages 62-63. 

A necessary disposition of finance with regard to Korean 
affairs was promulgated by Imperial Emergency Ordinance 
No. 143 on August 14, 1894, ^-s follows: "The government is 
authorized to float a public loan for the purpose of meeting 
the expenses of Korean affairs." War loan regulations were 
then promulgated by Imperial Ordinance No. 144 on August 



62 



EXPENDITURES OF THE SINO-JAPANESE WAR 



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SUPPLY OF WAR FUNDS 



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64 EXPENDITURES OF THE SINO-JAPANESE WAR 

15, 1894, when it was decided to float a public loan by in- 
stalments to the limit of 50,000,000 yen. This was the 
beginning of war loans in Japan. 

The war loan regulations fixed only the amount of the 
subscription, the period of redemption, the rate of interest and 
the time of payment. All other details of the loan were to be 
based on the consolidated public loan regulations by Imperial 
Ordinance No. 66 of October 16, 1886; and the war loan 
regulations were as follows: 

War loan regulations 

Article i. War loans shall be floated gradually to the limit of 
50,000,000 yen by Imperial Ordinance No. 143. 

Art. 2. The interest on the loan shall be less than 6 per cent per 
annum, and shall be paid twice yearly, in the month of June and 
December, until the redemption of the principal. 

Art. 3. The principal shall be redeemed within fifty years from 
the sixth year after issue. 

Art. 4. The subscriptions to the loans, the amount of issue, the 
price, rate of interest, the period of subscription, the number of 
times of instalment for subscription and other details shall be fixed 
by the Minister of Finance. 

Art. 5. The delivery of public loan bonds, prescriptions in regard 
to payment of principal and interest, the management of bonds, and 
all other details not fixed by this regulation shall be arranged ac- 
cording to the Consolidated Public Loan Regulations promulgated 
by Imperial Ordinance No. 66 of the year 1886. 

The subscriptions received on the above basis comprised 
the first war loan; and the method of subscription was an- 
nounced by Notification No. 32 issued by the Treasury De- 
partment on August 17, 1894, the amount called for being, 
as already explained, 30,000,000 yen. They were issued at 
par and the security money was to be 10 per cent of the face 
value, the security to be transferred to the first payment, and 
the rest to be paid up in seven instalments from November 16, 
1894, to the end of June, 1895. 



SUPPLY OF WAR FUNDS 65 

Method of Payment for Bonds of First War Loan 



Payments 


1 894- 1 895 


Yen 


First 


to September 20 
October 16-31 
November 16-30 
February 16-28 
March 16-31 
April 16-30 
May 16-31 
June 16-30 


I0» 


Second 


10 


Third 


10 


Fourth 


10 


Fifth 


10 


Sixth 


10 


Seventh 


20 


Eighth 


10 







» Transferred from security. 

The first war loan happened to be placed on the market at 
a time when money in both Osaka and Tokyo was showing 
the customary stringency of the season, and the daily in- 
terest fixed by the Tokyo Bankers' Club was 2 sen, 8.4 rin, 
or 10.022 per cent, and loans from the Bank of Japan were 
then 2 sen, 20. rin, or 8.03 per cent. The daily discount rate 
of securities payable in Tokyo was 2 sen, i rin, which is 
equal to 7.665 per cent, while the daily rate of discount of 
securities payable in another place was 2 sen, 3 rin, or 8.395 
per cent. The minimum and maximum of interest in Tokyo 
and Osaka at that time was as follows: 

Interest Charges in Tokyo and Osaka 



Classification of 






Tokyo 


Osaka 




amount loaned 


Months 










on security 




Highest 


Lowest 


Average 


Highest 


Lowest 


Average 


Yen 




Per 


Per 


Per 


Per 


Per 


Per 






cent 


cent 


cent 


cent 


cent 


cent 


loo-iooo 


Aug. 


1. 127 


0.959 


I 034 


I 351 


1.132 


1. 241 




Sept. 


1 .107 


0.971 


1.056 


1.250 


1 .010 


1 .122 


1,000-10,000. . . . 


Aug. 


1.076 


0.923 


1.003 


1.278 


I 059 


1. 132 




Sept. 


1. 051 


0.934 


1.003 


1. 163 


0.961 


1.059 


Above 10,000 . . . 


Aug. 


0.987 


0.882 


0.926 


1. 241 


I 059 


1. 132 




Sept. 


0.981 


0.875 


934 


1. 165 


1 .009 


1 .090 



The market price of 5 per cent national bonds depreciated 
as follows: 



66 



EXPENDITURES OF THE SINO-JAPANESE WAR 
Depreciation of 5 per cent National Bonds 



Date 


Loans 


Kinroku 


Naval 


Consolidated 


August, 1894 

September, 1894 


Yen 

100.38 

99 57 


Yen 
95 90 
99 56 


Yen 
100.49 
100.21 



To undertake the flotation of a pubic loan for so large a 
sum as 30,000,000 yen was without precedent in Japan. Con- 
sequently the government, and the public as well, regarded 
the outcome with some misgiving. But fortunately the 
loyalty and patriotism of the nation overcame all difficulties 
and the subscriptions amounted to no less than 77,002,650 
yen, the highest bid per hundred of face value being 142.44 
yen, while other bids were 125 and 120 yen. The authorities 
therefore decided to accept applications for subscriptions 
above par to the extent of 11,627,850 yen, and at par to the 
amount of 18,372,150, or 30,000,000 yen in all. 

The sum of actual receipts amounted to 30,063,372 yen, but 
as there were a few applicants who did not take up the amount 
applied for and forfeited their deposit money the total was 
thus affected, yet the amount subscribed was thereby reduced 
by only 2,200 yen, while the reduction in the actual receipts 
was no more than 1,855 3^^^- This signal success was ob- 
tained through the people's patriotism and public indignation. 

The second loan, which was issued in accordance with Law 
No. 25 of October 23, 1894, was put on the market in Novem- 
ber, 1894. The law reads as follows: ** In order to defray the 
war expenses in connection with China and Korea the govern- 
ment is hereby authorized to raise a public loan gradually at 
less than 6 per cent interest; and the necessary details, such as 
methods, agreements, subscriptions and period of redemption, 
shall be fixed by the Minister of Finance." 

On November 22, 1894, by Departmental Order No. 19, 
the Treasury floated a loan of 50,000,000 yen at 5 per cent 
interest, the notice concerning subscriptions being based on 



SUPPLY OF WAR FUNDS 



67 



Departmental Order No. 40, issued on the 22d of the same 
month by the Treasury. The loan was issued at 95 per 100 
yen of face value, the security money to be transferred to 
subscription as first payment, and the balance to be paid up in 
six instalments from January 16, 1895, to the end of June of 
the same year. The period of application for subscription 
was limited to four days only, from December 11 to 15, 
other details being the same as in the case of the first loan. 
The instalments were to be paid up at the following rate per 
hundred yen of face value : 

Method of Payment for Bonds of Second War Loan 



Payments 


I 894-1 895 


Yen 


First 


to December 25 
January 16-31 
February 16-28 
March 16-31 
April 16-30 
May 16-31 
June 16-30 


10* 


Second 


10 


Third 


10 


Fourth 


10 


Fifth 


20 


Sixth 


I'. 


Seventh 







» Transferred from security. 

Applications for subscriptions amounted to 90,301,300 yen, 
being 40,301,300 yen in excess of the issue called for. The 
highest bid was 120 yen. The government then decided to 
accept, first, applications for subscriptions above par to the 
amount of 22,119,850 yen, and, next, from among applicants 
at less than par, but more than 95 per 100 yen, the sum of 
7,924,000 yen; and 19,955,150 yen from among applicants at 
par, making 50,000,000 in all. 

As it was about the end of the year, the money market was 
somewhat tight, and the market price of the national bonds 
tended toward depreciation. Nevertheless the outcome was 
successful beyond expectation. This was due largely to the 
strength of the government's financial credit and the inherent 
economic power as well as to the patriotic feelings of the people. 

The third loan was issued according to Law No. 8 of March 
2, 1895, which says: "In order to meet expenses in regard to 
the war with China the government is hereby authorized to 
float by degrees a public loan to the limit of 100,000,000 yen 



68 



EXPENDITURES OF THE SINO-JAPANESE WAR 



at interest of less than 6 per cent ; and the necessary details as 
to price, method of flotation, agreement and period of subscrip- 
tion and redemption shall be left to the Minister of Firtance." 

On March 4, 1896, in accordance with Order No. 2 of 
the Treasury Department it was decided to call for a loan of 
10,000,000 yen at 5 per cent interest; and in accordance with 
Announcement No. 13 issued by the Treasury, the date of 
payment for subscriptions was to be from April 1 6 to the end 
of October, 1896, in seven instalments, the period for applica- 
tions to be from March 16 to 21, all other details to be the 
same as in the first issue. 

The rate of payment for instalments was as follows: 

Method of Payment for Bonds of Third War Loan 



Payments 


1896 


Yen 


First 


to March 31, 
April 16-30 
May 16-31 
June 16-30 
July 16-31 
August 17-31 
September 16-30 
October 16-31 


10* 


Second 


10 


Third 


20 


Fourth 

Fifth 

Sixth 


10 

10 

20 


Seventh 

Eighth 


10 
10 



" Transferred from security. 

As the war was now over and the nation busily engaged in 
post-bellum enterprises, many hopeful undertakings were being 
started and the money market was showing considerable 
stringency. Consequently the amount subscribed was only 
i>578»050 yen, the highest bid being 103, the applications 
above par reaching 1,026,850 yen and those at par 551,200. 
Therefore to make up the deficiency, 5,000,000 yen was trans- 
ferred from the indemnity account, and the Bank of Japan 
advanced the sum of 3,420,000 yen on these bonds. 

The general features of each of the loans having been out- 
lined above, the loans may be tabulated as on pages 69-70. 

During the periods of subscription for the first and second 
loans the war was in progress, and news of victory was con- 
stantly in the air, but no one of course knew as yet just what 
would be the final outcome. Yet it was quite evident that 
the nation was being worked up to a high state of excitement 



SUPPLY OF WAR FUNDS 



69 











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70 



EXPENDITURES OF THE SINO-JAPANESE WAR 







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SUPPLY OF WAR FUNDS 7 1 

and indignation, and liberal contributions for the relief of 
soldiers as well as many other patriotic works were under- 
taken, with the result that the loan was popular beyond all 
expectation, especially as compared with loans raised in time 
of peace. Even the very poor who could not be expected to 
have more than would keep them, applied for subscriptions 
out of their small savings and by dint of the most careful 
frugality. Accordingly, the number of subscribers to the 
first loan was 119,015; to the second loan, 173,051; and the 
average sum subscribed for in the first loan was 647 yen; 
and in the second loan, 521 yen. The difference was, there- 
fore, as far apart as heaven and earth as compared with loans 
issued in time of peace, the average then being 3,005 yen per 
subscriber. 

On account of the number of applications from small sub- 
scribers being so numerous there were naturally some deferred 
payments, the interest on which amounted to 7,313.71 yen for 
the three issues. Moreover, the regulations concerning con- 
solidated bonds required that applications which were not 
paid up should become invalid and the security money for- 
feited together with the amounts paid up. For this reason 
the fixed amount subscribed was slightly reduced. This being 
the case, the actual sum of the war bonds issued was 89,996,- 
500 yen in all. The actual sum of receipts was still further 
modified by interest on deferred payments, the account being 
as sho\\Ti in the table on page 72.^ 

The public loans heretofore described were issued directly 
to the public by so-called general subscription. At the same 
time a war loan of 35,000,000 yen was subscribed for by 
extraordinary special issue based upon Article VI, paragraph 

^ By regulations of consolidated bonds the paid up sums of those failing to com- 
plete their payments were forfeited; and, in this way, of the first issue 20 yen of 
security money and 90 yen of the first instalment was forfeited, 190 yen of the 
second instalment and 45 yen of the third instalment. In the second issue 65 yen 
among subscribers to the first instalment, 50 yen of the second, 60 yen of the third, 
60 yen of the fourth, and 30 yen of the fifth instalment, were forfeited. 

The difference between par and above par price which was paid up in the first 
issue was 12.80 yen and 4.04 yen in the second. However, in the first, as there was 
a case in which only the security money was paid and not 0.30 yen of the difference 
mentioned previously, a fractional sum of 0.30 yen did not go into the actual receipt. 



72 EXPENDITURES OF THE SINO-JAPANESE WAR 

Receipts from War Loans 





First issue 


Second issue 


Third issue 


Total 


Subscription: 

Amount issued 

" deferred 


Yen 
30,000,000 
2,200 


Yen 
50,000,000 
1,300 


Yen 
10,000,000 


Yen 
90,000,000 
3.500 


Total 


29,997,800 

30,065,227 
1.855 


49,998,700 

47,639,822 
970 


10,000,000 
10,001,258 


89,996,500 

87,706,307 
2,825 


Receipts: 

Amount received 

deferred 


Total 


30,063,372 
3.134 


47.638,852 
4.044 


10,001,258 
134 


87,703,482 
7.312 


Amount received: 

Interest on deferred 
payments 




Total 


30,066,506 


47,642,896 


10,001,392 


87.710,794 





2, of the amendment to the regulations with regard to con- 
soHdated bonds, promulgated by virtue of Imperial Ordinance 
No. 46, issued on June 16, 1888, which declares that "the 
Minister of Finance is authorized to issue bonds after the 
price of the Consolidated Loan bonds is fixed, in accordance 
with the current market price, without having recourse to 
general subscriptions, the bonds to be delivered to the Bank of 
Japan; but the amount and the price of the bonds so issued 
must be published by the Minister of Finance on the day after 
issue." 

In regard to the above it may be said that the Minister of 
Finance fixes the price of such bonds as he may think proper, 
in accordance with the market price of the bonds of the same 
kind which he has issued before. 

One of the extraordinary special loans was based upon 
Imperial Ordinance No. 137, of October 1895 which says: 
"The grant of a lump sum may be had from the Treasury for 
war purposes by delivering bonds at par to the Bank of 
Japan who will deliver them to purchasers according to con- 
venience, no transaction to be for less than 50 yen.'' This 
loan was issued in instalments at 5 per cent interest to the 



SUPPLY OF WAR FUNDS 73 

limit of 10,000,000 yen, which was part of the 100,000,000 yen 
loan previously arranged to be issued in conformity with Law 
No. 25 of October 23, 1894, known as the Kosho Lx)an, based 
on Order No. 3 of the Treasury Department, October 4, 1895. 

As the said loan was to be issued in place of a grant from 
the Treasury, either the War or the Naval Office applied to 
the Bank of Japan as necessity required, and the bank applied 
to the Minister of Finance, who then issued in accordance 
with the second clause of article 6 of the Consolidated Bond 
Regulations and delivered the bonds to the Bank of Japan, 
and the bank paid the money into the Treasury. Moreover, 
as to certain parts of the war budget up to March, 1896, it 
was known as an extraordinary account, as both the War and 
the Naval Office decided to purchase the bonds above named. 
The total amount of issue was 9,924,250 yen; and the amount 
of actual receipts was 9,734,205.15 yen, being 9,132,756 yen for 
the War Office, and 791,500 for the Naval Office. But in 
regard to the purchase the special account for war purposes 
amounted to 4,102,394.50 yen and the amount not issued was 
75»750 yen. 

Another extraordinary special issue, being the fourth loan, 
was for 25,000,000 yen in face value of bonds issued, taken up 
by employing funds from the Deposits Section of the Treasury.. 
The details with regard to the loan are given on page 74. 

Loans 

The loans for extraordinary war expenses were based on 
Imperial Emergency Ordinance No. 143, issued on August 13, 
1894, which says: ''In order to meet the expenses of Korean 
affairs the government is hereby authorized to borrow money, 
as an urgent measure, from the Bank of Japan." Although 
this power was not used at the time, it authorized the govern- 
ment to make up a temporary shortage by borrowing from the 
central bank to help out the war funds. Again, by virtue of 
Law No. 25 issued on October 23, 1894, ^^e government 
floated a public loan to the limit of 100,000,000 yen at less 
than 6 per cent interest, at the same time borrowing money 



74 EXPENDITURES OF THE SINO-JAPANESE WAR 

Fourth War Loan 



Issues 


Date 


Amount of 
issue 


Price 


Amount actu- 
ally issued 




1895 


Yen 


Yen 


Yen 


Third 


Oct. 16 


90,000 


100.50 


90,450 


" 


Oct. 25 


150,000 


100.20 


150,300 


" 


Oct. 30 


40,000 


10030 


40,120 


" 


?r^^- ^l 


30,000 


100.30 


30,090 


<( 


Nov. 8 


400,000 


100.30 


401,200 


" 


Nov. 14 


50,000 


100.70 


50,350 


" 


Nov. 19 


262,500 


lOI.IO 


265,388 


" 


Nov. 28 


328,000 


101.90 


334,232 


" 


Dec. 9 


60,000 


102.60 


61,560 


ti 


Dec. 13 


250,000 


102.50 


250,250 


n 


Dec. 25 


2,037,000 


101.50 


2,067,555 


tl 


Dec. 27 


350,000 


101.40 


354,900 




1896 








l< 


Apr. 2 


50,000 


98.90 


49,450 


" 


Apr. 6 


30,000 


98.90 


29,670 


" 


June 29 


500,000 


100.20 


501,000 


" 


Sept. 26 


300,000 


98.70 


296,100 


" 


Dec. 16 


500,000 


98.36 


491,800 




1897 








" 


Feb. 26 


300,000 


9949 


298,470 


<( 


Mar. 3 


600,000 


99.04 


594,240 


11 


Mar. 26 


400,000 


99.14 


396,560 


It 


Oct. 14 


600,000 


95.83 


574,980 


n 


Dec. 21 
1898 


1 ,000,000 


93.15 


931,500 


It 


Feb. 7 


45,000 


93.48 


42,066 


** 


Mar. 12 


1 ,200,000 


91.32 


1,095,840 


" 


Mar. 30 


3,000 


89.94 


2,698 


n 


Oct. 24 


48,000 


92.51 


44,405 


<< 


Dec. 28 


57,750 


92.98 


53,696 




1899 








<< 


Mar. 15 


28,000 


95.84 


26,751 


" 


Mar. 28 


130,000 


94.81 


123,253 


l< 


Oct. 13 


20,000 


95.8 


19,096 




1900 








" 


Mar. 27 


60,000 


92.84 


55,704 


" 


Sept. 28 


3,000 


90.71 


2,721 




Oct. 15 


2,000 


90.51 


1,810 


Total 


9,924.250 


9,728,205 


Fourth 


Mar. 4, 
1896 


25,000,000 


100.00 


25,000,000 


Total 


34,924,250 


34,728,205 



SUPPLY OF WAR FUNDS 



75 



from the Bank of Japan, the amount being used for extraor- 
dinary war expenses. By virtue of Law No. 8 of March 2, 
1895, the government borrowed money under the same 
conditions as above. A loan of 20,500,000 yen was raised by 
authority of Law No. 25 and a loan of 20,260,000 yen on Law 
No. 8, the total being 40,760,000 yen, but there was no loan 
caused by urgent measure. 

The above loans were fixed and issued by contract papers 
stating the amount of the loan, or by special orders delivered 
as necessity required. It was after the example of the tem- 
porary Loan Law No. 16 of February 20, 1894, which authorized 
borrowing from the Bank of Japan at reasonable interest to 
make up temporary deficits within any one fiscal year. There 
were two methods of obtaining the money : one by fixed loan 
and the other by current loan. The fixed loan is at a fixed 
rate of interest, the amount of the loan and terms of redemp- 
tion being arranged by contract paper or by command of the 
Minister of Finance. The current loan, on the other hand, is 
raised on security of money forwarded from the treasuries at 
different places in the Empire to the central cash office in 
Tokyo or the branch cash office in Osaka, the interest for the 
loan being the same as the daily rate for overdrafts in the 
Bank of Japan. The loan referred to in this paragraph was a 
fixed loan. 

The details of the loans based on Laws No. 25, 1894, ^^^ 
No. 8, 1895, are as follows: 



Loan Based on Law No. 25, 1894 



Date of issue 


Amount 


Annual rate 
of interest 


Date of 
redemption 


Nov. 15, 1894 


Yen 
8,000,000 
1,500,000 
3,000,000 
3,000,000 
2,000,000 
3,000,000 


Per cent 
5 
5 
5 
5 
5 
5 


Mar. 31, 1895 


Nov. 26, 1894 


Dec. 10, 1894 


i< 


Dec. IS, 1804 


<i 


Feb. I, 1895 


<< 


Feb. 6,1895 


<< 






Total 


20,500,000 











76 EXPENDITURES OF THE SINO-JAPANESE WAR 

Loan Based on Law No. 8, 1895 



Date of issue 


Amount 


Annual rate 
of interest 


Date of 
redemption 


Nov. 14. i8qs 


Yen 
2,000,000 
1 ,000,000 
1 ,500,000 
1 ,000,000 
1,000,000 
1 ,000,000 
1 ,000,000 
1 ,000,000 
2,000,000 
1 ,000,000 
1 ,000,000 
1 ,000,000 
1,000,000 
760,000 
500,000 
1,000,000 
1 ,000,000 
1,500,000 


Per cent 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 


Dec. 31, 1895 


Dec. 2. i8qs 


Dec. '?. i8qs 




Dec. 0. 1 80s 




Dec. 12, 1895 




Dec. 18, 1895 




Dec. 2S. i8qs 




Dec. 26, 1895 




Dec. 28, 1895 




Jan. 22, 1896 . 


Mar. 31, 1896 


Jan. 28, 1896 


Mar. 5, 1896 




Mar. 27, 1896 




Mar. 31, 1896 

Mar. 31, 1896 


"a 

June 30, 1896 


Apr. I, 1896 


Apr. I, 1896 




Apr. 6, 1896 








Total 


20,260,000 











» Date of redemption prolonged to June 30, 1896, by order of the Minister of Finance. 

As already described, the above loan for extraordinary war 
expenses was a temporary measure, and in accordance with 
the receipts of the war loan was to be redeemed gradually. 
Although March 31, 1895, was the date set for redemption of 
the 20,500,000 yen loan raised by Law No. 25 in 1894, the 
battle line extended, with consequent increase of outlay, so 
that it was quite impossible to undertake redemption as 
promised. Therefore, the Minister of Finance gave notice of 
the postponement of redemption to the Bank of Japan, 
naming June 30 of the same year as the date set for redemp- 
tion. However, by April the cash on hand in the Treasury 
had increased to such an extent that 3,000,000 yen of the loan 
was paid off, which was the first redemption of loans from the 
Bank of Japan. Thereafter redemption took place frequently [ 
at the convenience of the Treasury, although sometimes?' 
redemption had to be postponed, not being completed until. 
May, 1896. 



SUPPLY OF WAR FUNDS 



11 



The loan based on Law No. 8 of 1895 was redeemed in May, 
1896, after having been postponed frequently, like the former 
loan. The details of the loan follow: 



Date of redemption 


Amount of redemption 


Total 


By Law 25 


By Law 8 


Aor. 18. i8qs 


Yen 

3,000,000 

2,000,000 

3,000,000 

920,000 

1,310,000 

4,130,000 

1 ,300,000 

440,000 

760,000 

160,000 

2,020,000 

1,460,000 






Yen 
3,000,000 


Mav I. 1 80s 


2,000,000 


Mav I •> i8qs 


3,000,000 


Feb \ i8q6 


920,000 


Feb 8 i8q6 


1,310,000 


Mar 2 i8q6 


4,130,000 


Mar 26 i8q6 


1,300,000 


Mar 26 i8q6 


440,000 


Mar "^i i8q6 


760,000 


Apr 22 1896 


160,000 


May 14 1896 


2,020,000 


May 20 1896 


20,260,000 


21,720,000 






Total 


20,500,000 


20,260.000 


40,760,000 











The payment of interest for the loan stood as follows: 



Fiscal 


years 


By law No. 25 
in 1894, 5% 
per annum 


By law No. 8 
in 1895, 6% 
per annum 


Total 


t8qj. 


Yen 
304,384 
505,274 
144,366 


Yen 

40,685 
359,549 


Yen 

304,384 
545,959 
503,915 


t8qs; 


1896 






Total 


954 024 


400,234 


1,354,258 






Employ 


^MENT OF In 


DEMNITY 





The amount transferred from the sum received as indemnity 
from China to the fund for making up war expenses was 82,- 
171,650 yen, the details being as follows: 



78 



EXPENDITURES OF THE SINO-JAPANESE WAR 



Items 



Transferred to special account for war pur- 
poses 

War and transportation expenses for fiscal 
year 1897-1898 

Total 



Amount 




The amount of Chinese indemnity received for the fiscal 
year 1895 was 74,143,054 yen for war indemnity, 44,907,449 
yen as compensation for the retrocession of the Liaotung 
peninsula, and the sum of 93,624 yen as the profit realized by 
utilizing the paid-in indemnity and the marginal profit gained 
from the exchange rates in Japan's favor, or 119,144,177 in 
all. As first it was intended that the indemnity should be 
devoted to extension of the army and navy. But as it was 
necessary to bring the special accounts for the war with China 
to a close at the end of March, 1896, and a public loan or a 
loan of over 100,000,000 yen from the bank would be required 
to do so, it was decided to use some of the indemnity to 
balance the account, rather than leave the war expense to 
depend on public loans and perhaps greatly disturb the 
money market, while at the same time an idle surplus would 
be piling up in the Treasury. Moreover the interest on 
public loans had to be met. Consequently some of the in- 
demnity was diverted to war expenses, leaving armament 
expansion to future loans. The portion of indemnity used in 
this way was 78,957,164.89 yen, while j, 2 10,000 yen was used 
during the two fiscal years of 1897 and 1898 for repletion 
of war funds. 



PART II 

ECONOMIC EFFECTS OF THE 
SINO-JAPANESE WAR 



CHAPTER I 
INTRODUCTION 

There are two distinct points of view from which the 
economic effects of w^ar may be studied. The first includes 
the effects upon the ordinary Hfe of the nation, and the second 
the effects upon national economics and finance. This latter 
includes the study of the methods of securing funds for prose- 
cuting the war, rehabilitating old industries and starting new 
ones after the war, and meeting the changes which result from 
the fluctuation in the exchange value of money. Of these 
latter changes we may mention (i) the tightening of the 
money market caused by large bond issues; (2) the inflation 
of the currency due to purchase of war supplies, etc. ; (3) the 
rise in prices caused by the war, increase in taxes, and inflation 
of the currency; (4) the increase or decrease in individual 
incomes caused by financial instability, etc., and (5) the 
increase in speculation due to the foregoing causes. 

These, then, are the general economic effects of war to be 
considered, and certainly the Sino- Japanese War was no ex- 
ception, since all of the foregoing phenomena were to be 
observed during and after that conflict. This fact must be 
noted, however, — that it was the first international war in the 
history of modem Japan, i.e., since the beginning of the 
Meiji Era. Only a quarter of a century had elapsed since 
great changes had taken place in our government, and this 
quarter of a century therefore can not be considered a strictly 
normal period. Many serious financial problems were wait- 
ing to be solved, such as the adjustment of debts contracted 
during the feudal or Tokugawa epoch, the securing of money 
for the various needs of the new government and expenditure 
of the same, and the disposal of a large number of inconvertible 
notes. Moreover the new government was beset with other 
difficulties — the initial conflicts of the Restoration period, 
7 81 



82 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

the civil war of the Southwest (1877), etc. As a result, 
finances became constantly more difficult to manage, and 
when the issue of inconvertible notes finally reached the 
highest possible point, a decline in value set in. Only when a 
central bank — the Bank of Japan — had been established, was 
the agio, or difference in value between specie and notes, 
removed. In 1883 a monetary standard was established 
which was virtually silver, although by statute it was bi- 
metallic. Soon thereafter, owing to the fluctuation in value 
of silver and gold, monetary complications arose, and before 
these had been settled the Sino- Japanese War broke out. 
Then, in addition to the internal problems with which we 
were already wrestling, we found ourselves face to face with 
China in the war of 1894 — China that ancient nation with the 
prestige of her four thousand years of history to count upon. 
For a nation like Japan, economically unsteady, and not yet 
prepared for a long fight, to challenge such an antagonist was 
like sweeping the sea with a broom — an impossible task, 
indeed, it seemed! So, although the valiant spirit of the 
people made up for the shortage of material supplies to some 
extent, we must admit that our power of continued resistance, 
financial and economical, was very weak, and that the effects 
of war upon the national economics and finance were very 
severe. 

First, let us proceed to consider the financial effects of the 
war. The whole expenditure amounted to more than 250,- 
000,000 yen. Besides this, the expenses of various post-bellum 
undertakings were enormous, so that the people had to endure 
a constant and heavy drain. The total amount of the Treas- 
ury's annual disbursement at once became double that before 
the war. As to revenues, taxes had not been materially in- 
creased in order to meet the expenditure during the war, as 
this was largely met by means of war loans ; while for restoring 
normal conditions after the war and for various post-bellum 
undertakings the war indemnity secured was employed. But 
this, although large, was not sufficient, and it was necessary 
therefore to increase the taxes and to float loans in addition. 



INTRODUCTION 83 

In consequence, the whole nation, and economic circles in 
particular, became heavily burdened. 

Next, let us consider the general economic effects of the 
war. In the first place, owing to the issue of war bonds the 
money market was greatly tightened, but after victory was 
secured the conditions improved. After the war, the govern- 
ment and the Bank of Japan began to lend capital. By 
changing a virtual silver standard into a gold standard, the 
barrier to the free circulation of capital between Japan and 
the gold-standard nations was removed, and, with a view to 
perfecting financial facilities, hypothec and industrial banks 
were established. The loan power of the Bank of Japan was 
extended. The national banks, which so far had been an 
incubus upon industry, were transformed into ordinary banks. 
These steps facilitated the circulation of capital and helped 
considerably to ease the money market. But this easy 
condition, together with the craze for speculation rife among 
a people drunk with victory, caused a great financial panic 
which subsided only in 1 903-1 904. 

Secondly, as a result of issuing bonds during the war, and 
increasing taxes and notes as a measure of relief for the 
financial world, the volume of currency was considerably en- 
larged and the prices of commodities in general rose, the more 
so as the money market before the war had been tight and the 
entire amount of currency small. 

To take another point of view, let us consider that the 
Sino- Japanese War was the first international war which 
Japan had fought in modem times and that the people were 
unaccustomed to such experiences as they were then having. 
In addition, mindful of the dangers of fighting against this 
vast and ancient empire, they were entertaining grave anx- 
ieties as to the future. Fortunately for Japan, the war ended 
in a glorious victory for her so that the people came to realize 
that the efforts made during the quarter of a century past had 
not been made in vain. They were then fired with ambition 
to exert more energy along the line of national endeavor, so 
that Japan might extend her power in the Far East, and to 



84 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

this end the government and people cooperated in various 
post-bellum undertakings. Means of communication and 
transportation, as well as financial organs, were perfected, 
educational institutions were improved, industries encouraged, 
various facilities to develop foreign trade established, and the 
system of encouraging shipbuilding and navigation by sub- 
sidies or grants of money was established. Thus the com-- 
mercial standing of the nation was improved and industry, 
commerce, communication and various hitherto undeveloped 
enterprises were revolutionized so as to fit in with the new 
period, and therefore any discussion of the effects of the war is 
really identical with an historical statement of the progress 
made in these national activities. As for the increase or 
decrease in individual incomes, such are the inevitable results 
of wars and other great cataclysms of society. Especially is 
this true when the stock market is favorable, following the 
inception of post-bellum enterprises by the government and 
people. After the Sino-Japanese War great changes in 
private incomes were particularly common. 

The foregoing various phenomena were important results of 
the war. But what is to be considered as the most important 
result was the effect of the war upon the life of the people. 
This was felt for a very much longer period than other effects. 
The expenditure for the Sino-Japanese War was about 25a 
million yen. But we must also take into consideration the 
indirect losses suffered on account of the war, the expenditure 
required to restore normal conditions after the war, and the 
capital employed for various post-bellum undertakings. When 
these losses and expenses are added together, the amount 
reaches an enormous figure. This amount could be tempo- 
rarily met to be sure by means of bond issues, loans secured 
from the central bank, the sale of government property, and 
contributions by the people (especially during the war), etc. 
But in the long run it had to be met by revenue from taxes 
(direct and indirect), and the result was (i) an increase in the 
burdens borne by the people by the establishment of new and 
the increase of old taxes; (2) the permanent inflation of the 



INTRODUCTION 85 

currency; and (3) a rise in the prices of commodities, etc. 
The difference between rich and poor then became more 
noticeable, the difficulty of living on the part of the majority 
of the people and also their discontent increased, while social 
and political transformations consequent upon the foregoing 
phenomena took place. These changes, indeed, constitute 
the most important problem for study. 

The increase in t"he burdens of the people, the inflation of 
the currency, and the rise in the prices of commodities were 
all actual phenomena observed after the Sino-Japanese War. 
Fortunately in Japan wages for labor and the other sources of. 
income of the people rose in proportion to the rise in prices, 
so that the evil effects of the change were not felt so very 
sharply. But the increase in the difference between rich and 
poor and the difficulty of living for the majority became more 
and more well-defined facts, so that farmers began to leave 
their homes and flock to cities or manufacturing towns. The 
beauty and simplicity of country life which had generally 
prevailed before was gone and the country districts were left 
to decay. Concentration of the population in cities tended to 
increase the difficulty of living. But as Japan has only 
recently been opened to Western civilization, and is situated in 
the Far East where the civilized nations of the west are con- 
centrating their energy upon conquest, she has been so busily 
engaged in establishing herself as an independent power that 
she has not yet had time to pay proper attention to the 
question of living as it concerns the generality of the people. 
Consequently, the burdens of the people increased considerably 
after the Sino-Japanese War, and even yet they can not 
enjoy the happiness of perfect living conditions. Yet this 
state of affairs was the natural result of the geographical 
position of Japan, and it may not be strictly true to say that 
it was a direct result of the Sino-Japanese War. But as 
international diplomatic relations of Japan assumed more 
importance, with the Sino-Japanese War as the starting point, 
and as it was this war which exposed the weakness of China 
and thereby encouraged the Western Powers to bring pressure 



86 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

to bear upon the East, our statement in the foregoing para- 
graph may be seen to be a correct one. We shall now go into 
more detail as to each of the phenomena mentioned above, 
expressing our views in concrete form in order to show how 
far reaching the effect of the Sino- Japanese War was upon our 
economic world. 



CHAPTER II 
EFFECTS ON PUBLIC FINANCE 

The effects of the Sino- Japanese War on public finance were 
most directly shown in the annual budgets of the government. 
We shall therefore present tables giving the annual budgets 
from 1893, the year before the Sino- Japanese War, to 1903, the 
year before the Russo-Japanese War, in order to show the influ- 
ence of the former war upon the annual budgets of the nation. 
Annual Revenue, i 893-1 903 



Fiscal Year 


Ordinary 


Extraordinary 


Total 


189^ 


Yen 

85,883,080 

89,748,454 

95,444,652 

104,904,501 

124,222,964 

132,869,336 

177,328,528 

192,170,081 

202,035,100 

221,240,408 

224,180,699 


Yen 
27,886,300 

8,421,574 
22,988,069 
82,114,922 

102,167,159 
87,184,792 
76,925,996 

103,684,787 
72,323,950 
76,101,016 
36,040,059 


Yen 
113,769,380 
98,170,028 
118,432,721 
187,019,423 
226,390,123 
220,054,128 

254,254,524 
295,854,868 
274,359,050 
297,341,424 
260,220,758 


1 804. 


1895 


1896 


I 8q7 


1898 


iSqq 


IQOO 


IQOI 


IQ02 


lOO-? 




Total 


650.027,803 


695,838,624 


1,345,866,427 





Annual Expenditures, i 893-1903 



Fiscal year 


Ordinary 


Extraordinary 


Total 


1893 


Yen 

64,545,599 
60,421,346 
67,148,007 
100,712,816 
107,695,127 
119,072,144 
137,590,418 
149,134,167 
160,363,583 
171,059,808 
169,761,914 


Yen 
20,036,273 
17,707,297 
18,169,173 
68,143,692 

115,983,717 
100,685,424 
116,575,120 
143,615,892 
106,493,241 
118,166,923 
79,834,217 


Yen 

84,581,872 

78,128,643 

85,317,180 

168,856,508 

223,678,844 

219,757,568 

254,165,538 

292,750,059 

266,856,824 

289,226,731 

249,596,131 


i8qa. 


1895 


i8q6 


1897. . . . 


1898 


1899 

1900 

IQOI 


1902 


1903 




Total 


307,504,929 


905,410,969 


1,212,915,898 





87 



88 



ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



Taking the figures for 1893 as 100, the percentages of the 
figures for the other years will be as follows: 

Annual Revenue and Expenditures, 1893-1903, in Percentage 



Fiscal year 



1893 
1894 
1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 



Revenue 



Ordinary 



100. o 

104 -5 
III .1 
122. 1 
144.6 

1547 
206.5 
223.8 

235 -2 

257 -6 
261 .0 



Extraor- 
dinary 



100. o 
30.2 
82.4 

294 

366. 

312. 

275 

371 

259 

272. 



29.2 



Total 



100. o 
86.3 

104. 1 
164.4 
199.0 
193-4 
223.5 
260.1 

241 .2 
261 .4 
228.7 



Expenditures 



Ordinary 



100. o 
93-6 
104.0 
156.0 
166.9 
184.4 
213. 1 
231 .1 
248.5 
265.0 
263.0 



Extraor- 
dinary 



100 

88, 
90 
340 
578 
502 
581 
716 

531 
589 
398 



Total 






100 


4 


92. 


7 


100. 


I 


199 


9 


283. 


5 


259 


8 


300 


8 


346 


5 


315 


8 


342 


4 


295 



The foregoing tables show that the annual budget which 
was 84 million yen in 1897 became twice as big after the war, 
that is, over 168 million yen. It increased gradually until in 
1903 it reached over 249 million yen, that is, an increase of 195 
per cent. Now what was the cause of this increase in ex- 
penditure, and from what source was the revenue to come to 
offset it? To make this clear will be to make clear the effects 
of the war upon finance. 

The Sino-Japanese War was, as stated above, the first in- 
ternational war which Japan had waged since the Restoration 
of Meiji. Abroad it raised the status of Japan and proved 
her to be in reality the protector of the safety and peace of 
the Far East, and thus gave her an established position among 
the great powers of the world. At home, it enabled her to 
realize her own power, through the experience of a continental 
war, and at the same time gave her the opportunity to rise in 
power, through victory in this war, in accordance with the 
forward policy laid down at the time of the Restoration. Even 
the tragic incident at the close of this war, the interference by 
the three European Powers, was only an added incentive to the 



EFFECTS ON PUBLIC FINANCE 89 

nation to exert her utmost energy for the development of 
national power and the replenishment and expansion of the 
provisions for national defense. Naturally the expenditures 
greatly increased, because an enormous amount of money was 
needed at the time of the war, not only for war expenses but 
also for the increase in the ordinary administrative expenses 
owing to the war, and again after the war to repay the princi- 
pal and interest of the various war bonds. These were 
assuredly the reasons why the annual national budget in- 
creased so much after the Sino-Japanese War. 

The effects of the war upon national finance may be dis- 
cussed under two headings — 

(i) Securing of a war fund and readjustments incident 
thereto. 

(2) Post-bellum enterprises. 

The first of these two points was discussed in detail in the 
third Chapter of Part I, under the heading "Supply of War 
Funds," so we shall omit it here. We might remark here, 
however, that the only item under this head which caused 
financial trouble in later days was the issue of war bonds. ^ 
The redemption and interest payments on these bonds were 
completed in July, 1910. We shall discuss this matter in 
detail in the next section. 

As for the enterprises undertaken after the war, they were 
many and various. The chief items were (i) rehabilitation 
and expansion of the army and the navy (the latter on a scale 
commensurate with the change in the national status after 
the war) and the establishment of an iron foundry; (2) im- 
provement of educational institutions in order to cherish and 
develop the national strength, increase of legations abroad, 
river repairs, railway construction and improvement, exten- 
sion of the telephone system, expansion of foreign trade, 
subsidies for shipbuilding, encouragement of navigation and 
extension of sea traffic, readjustment of the monetary system, 
perfecting of financial facilities and agricultural institutions, 

^ Amount of bonds issued, 124,920,750 yen; amount actually received, 122,437,- 
^87 yen. 



90 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

colonial development of Hokkaido, and the establishment of 
various facilities for the government of the newly acquired 
territories. In order to put the foregoing plans into execution, 
the government approved the national budget outlined below : 

1. Plan to meet the increase in expenditure after 1896: 

(a) As sources of revenue to meet ordinary expenditure due 
to post-bellum undertakings, a sake tax, a business tax, and a 
registry tax shall be levied, and a leaf tobacco monopoly 
established. 

(b) For army and navy expansion and for the establishment 
of a new iron foundry, a part of the indemnity collected from 
China was to be used. 

(c) As sources of revenue for railway and telephone im- 
provement or extension, bonds were to be issued. 

2. Plan to meet the war expenditure, dispose of the in- 
demnity received from China and provide a budget system 
for Formosa: 

(a) As the indemnity was collected from China in yearly 
instalments, it seemed wise to appropriate the money for use 
in a continuation plan embracing a certain number of years. 
Thus the indemnity was appropriated for the redemption of 
war debts, army and navy expansion, the establishment of an 
iron foundry, a reserve fund for emergencies and a subsidy to 
the Bank of Agriculture and Industry. 

(b) The annual budget for Formosa was to be separated 
from the general accounts of the central government and a 
plan worked out relative to annual revenue and expenditure 
which should be instituted to enable Formosa gradually to- 
establish a system of self-government. 

3. Plan to extend facilities for transportation, communica- 
tion and finance: 

(a) Bonds were to be issued to meet the expense of im- 
provement and extension of railways and telephones. 

(b) The service capacity of the Bank of Japan and the 
Yokohama Specie Bank were to be enlarged and in addition 
a hypothec bank and banks of agriculture and industry were 
to be established. 



EFFECTS ON PUBLIC FINANCE 



91 



We shall now briefly consider the amount required and the 
resources available for the fund to carry out the proposed 
plans, including the extension of the means of national de- 
fense, the perfection of railway and telephone systems, the 
establishment of a new iron foundry, and especially the 
encouragement of navigation. 

Table I at the end of this chapter^ and the following tables 
will give a fair idea of the effects of the Sino-Japanese War 
upon our national finance as a whole. 

Comparing the total amounts in Table P with the total 
annual expenditure, we see that in ten years these amounts 
actually correspond (in average) to approximately 28.29 per 
cent of the total annual expenditure. 

Comparison of Expenditures for Post-bellum Enterprises with the 
Total Annual Expenditures 



Fiscal year 


Total expenditure 
for principal post- 
bellum enterprises 


Total annual 
expenditures 


Percentage of post- 
bellum expenses to 
total annual ex- 
penditures 


1804 


Yen 

2,827,463 

5,279,892 

29,303,746 

85,048,595 

94,813,702 

112,062,975 

118,639,050 

98,278,837 

75.965,524 
67,137,005 


Yen 
78,128,643 

85,317,179 
168,856,509 
223,678,844 

219,757,569 
254,165,528 
292,750,059 
266,856,824 
289,226,731 
249,596,131 


Per cent 
3-62 
6.19 

17-35 
38.02 

43 14 
44.09 

40.53 
36.83 
26.27 
26.90 


i8q«> 


i8q6. . 


i8q7. . . . 


1898 


I 8qq 


IQOO 


IQOI 


1902 

IQO-; 




Total 


689,356,789 


2,128,334,017 


28.29« 



» Average. 

In order to secure this large amount, the government, as 
stated before, adopted the measures of increasing taxes, issuing 
bonds and transferring the war indemnity. The following 
table will show the most important items of revenue r^ 

^ Post, p. 141. 

2 The figures for the revenue from newly established taxes were taken from the 
actual receipts and the figures for the old taxes whose rates were raised were 
taken from the estimate of the expected increase. 

The revenue from the bond issues means the revenue from the bonds issued for 
the railways, the industries, the Hokkaido railways, and the Formosan enterprises. 



92 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Revenue for Post-bellum Enterprises 



Fiscal year 


Revenue from 

increase of 

taxes 


Transfer of 

indemnity 

fund 


Issue of 
bonds 


Total 


1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


Yen 
15,708,589 
29,701,472 
35,617,100 
63,810,962 
85,710,491 
90,404,052 
95,621,115 
100,073,693 


Yen 

11,789,389 
40.360,796 
46,187,071 
32,636,905 
31,240,140 
20,883,427 
13,866,937 
9,514,215 


Yen 

2,796,600 

36,389,874 

35,352,806 

35,166,404 

38,139,599 

31,721,764 

12,741,033 

6,881,256 


Yen 

30,294,578 

106,452,142 

117,156,977 
131,614,271 
155090,230 
143,009,243 
122,229,085 
116,469,164 


Total . . . 


516,647,474 


206,478,880 


199,189,336 


922,315,690 



With the expansion of the general national finance owing to 
the aforesaid causes, the expenditure of the local governments 
naturally increased in proportion. Table II at the end of 
this chapter^ was taken from the report of the investigation of 
the Home Department to show the actual condition as to 
expansion of revenue and expenditure of local communities. 

The cause of this increase in expenditure was largely due 
to the increase required for construction work, encouragement 
of industry and educational enterprises, because of the policy 
adopted by local communities to develop the national re- 
sources and industries in accordance with the post-bellum 
plans of expansion. According to the Japanese system of 
government, the local communities (prefecture, city, borough, 
township, village) have been invested with complete power as 
legal persons, and the officials in these local communities, 
besides performing their duties to the communities, are 
called upon for the additional service of managing the various 
local enterprises entrusted to them by the central government 
and of supervising the expenditure therefor. With a change 
in the status of the nation the duties of these local officials 
were correspondingly increased, and hence the increase in 
local expenditure. Thus, since the expansion of the finance of 
local governments inevitably keeps pace with the advance- 

* Post, p. 142. 



EFFECTS ON PUBLIC FINANCE 93 

ment of a nation, it was natural that with the national 
expansion along various lines after the Sino- Japanese War, an 
increase in local expenditure should take place also. 

In short, after the Sino- Japanese War, Japan spent enor- 
mous amounts for central and local administration in view of 
the post-bellum enterprises, that is, for expansion of means of 
defense, development of resources and industries, and for 
improvement of education. The pressure of this increase of 
expenditure upon the people was certainly crushing. This 
together with the changes caused by the war upon economics 
in general produced serious effects upon the economic world, 
which lasted throughout the entire period in which the post- 
bellum enterprises were being prosecuted, as we state more 
fully later. But, on the other hand, our fellow countrymen, 
moved by the new self-realization following the war, and by 
the feeling of uncertainty concerning the national existence 
due to the insult inflicted upon us by the interference of the 
triple European Powers, rose to the occasion, and sturdily 
resisted the paralyzing pressure of circumstances. We have 
successfully prosecuted the post-bellum enterprises started by 
the government, mastered all difficulties by developing the 
power of resistance, and finally raised the nation's prestige so 
high that within the short period of ten years or so Japan has 
risen to be a mighty power in her recently enlarged sphere 
in the Far East. This fact should be remembered in discuss- 
ing the financial expansion of the nation. This indomitable 
spirit asserted itself more and more, so that Japan did not 
retrograde in any direction. This is the reason why we 
have peace in the Orient, a fact which should be recorded as 
in the nature of a miracle. 

State Finance 

We have briefly reviewed the effects of the Sino-Japanese 
War upon the national finance in general. To sum up, the 
expenditure in the first year after the war, 1896, was twice as 
large as that for the year before the war, 1893, and three 
years after, in 1899, it was three times as large. This tendency 



94 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

to increase continued steadily until the year 1903 just before 
the Russo-Japanese War. Such was the history of the 
expenditure. As for the revenue, in 1897 it was twice as 
large as in 1893, and the tendency to increase continued. In 
1893 the revenue was 113,769,380.54 yen and the expenditure 
84,581,871.56 ;yew; that is, there was an excess of 29,187,508.97 
yen of revenue over expenditure, so that the rate of expansion 
of the revenue in later years was not so extraordinary as that 
of the expenditure. Table III at the end of this chapter ^ was 
compiled to show these facts. 

The direct effects of the Sino-Japanese War upon our 
finance were felt in securing special administration funds 
for the war and in connection with the war (hereafter called 
war expenses). The total amount of these expenses was 
approximately 236 million yen. The greater part of this 
amount was secured through the issue of war bonds and the 
transfer of the war indemnity, so that it did not have any very 
serious effect upon the ordinary revenue of the nation, as we 
have stated before.^ Consequently the burden of the war 
expenses which had to be borne afterward was confined to the 
redemption of the war bonds and the payment of interest on 
them. We shall later explain this point in detail. 

Thus it will be seen that the greatest effects of the Sino- 
Japanese War upon our finance were in connection with post- 
bellum enterprises. Of those undertaken since 1896, the 
chief, as stated before, were the enlargement of the army and 
navy, the establishment of an iron foundry, the building and 
improvement of railways, the extension of the telephone 
system, the extension of educational work, the establishment 
of the Hypothec Bank, the Banks of Agriculture and Industry 
and the Bank of Formosa, enterprises in Formosa, undertak- 
ings in agriculture, industry and commerce and the adjust- 
ment of water courses. All these enterprises had for their 
object the perfecting of the means of national defense and the 
developing of the wealth of the nation. We shall here briefly 
describe the plans for these post-bellum enterprises. 

1 Post, p. 143. 2 Pt. I, Chap. III. 



EFFECTS ON PUBLIC FINANCE 95 

(i) According to the documents introduced in the Diet, 
together with the budget in 1896, the post-bellum enterprises 
were planned to be completed in ten years, from 1896 to 1905, 
with the amount of expenditure estimated at about 587 
million yen; the tax system was readjusted, a part of the war 
indemnity was to be transferred to the fund and bonds were 
to be issued to meet the remainder. The following is the total 
expenditure for the ten years. 

Total Expenditure for Period i 896-1 905 

Expansion of means of defense: Yen Yen 

Army 205,802,866 

Na\T 145,572,264 

351,375.130 

Extension of enterprises: 

Iron foundry 4.095.793 

Railway to be built between Sorachita and Asahig- 

awa 1,1 78,330 

Improvement of existing government railway lines 26,553,000 

Extension of telephone exchange system 12,802,102 

First year's interest on telephone and railway bonds 1,278,080 
Establishment of bureaus to handle leaf tobacco 

and capital 12,213,550 

58,120,855 

Expansion of administrative expenditure: 

Principal and interest payments on loans 110,401,056 

Annual salaries of soldiers, rewards and pensions. . . 112,940,810 

Expense of collecting increased taxes 12,653,833 

Expenses of soldiers stationed in Weihaiwei and 

various Formosan expenses 27,500,000 

Subsidies to banks 13,750,000 

Expenses of printing and issuing bonds 598,520 

277,844,219 

Total 687,340,204 



The complete ten-year plan for revenue to meet the fore- 
going items of expenditure is as follows: 



Ten-year Revenue Plan, 1896-1905 

Yen 

Natural increase of annual revenue 147,698,971 

Increased taxes and adjustment of tax system 246,543,081 

Fund to pay off the expenses of guards at Weihaiwei 5,250,000 

War indemnity 40.093,387 

Bonds 133,648,889 

Profits from bonds for railway and telephone enterprises 11,680,414 

Total 584,914,742 



96 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

(2) The plans for post-bellum enterprises did not end with 
those mentioned in the foregoing paragraphs. Both the 
number of enterprises and the amount of appropriation asked 
for were increased. In the enlarged scheme the principal 
items were means of defense, construction of railways and 
establishment of an iron foundry. The change in the plan 
relating to expenditure necessitated a change in the plan for 
securing revenue. The taxes were increased again, the amount 
transferred from the war indemnity was also increased and the 
bond issue enlarged, thereby maintaining the balance between 
expenditure and revenue. This point will be explained in 
detail later. 

There is one more point to be noted here, and that is re- 
garding the revenue from the indemnity of the Sino- Japanese 
War. The total amount of the indemnity and other special 
funds was 368,248,691 yen. The war indemnity and other 
revenues were handled as a ''Special Account Fund" in 
accordance with our accounting regulations. These separate 
amounts are shown as follows : 

Yen Yen 

Indemnity for war expenses 311,072,865 

Indemnity for return of Liaotung Peninsula 44,907,499 

Interest on indemnity employed profitably 8,888,224 

364,868,588 

Fund to pay back expense of maintaining guards at 

Weihaiwei 3,380,103 

Total 368,248,691 

The indemnity as analyzed in the foregoing paragraph was 
an adequate source of revenue for conducting post-bellum 
enterprises and replenishing the war fund. The total amount 
actually transferred for the support of post-bellum enterprises 
was 278,690,217 yen. The details are as follows: 

Yen 

Repayment of Sino-Japanese War expenses 78,957,165 

Transferred to fund for various post-bellum enterprises: Yen 

Army expansion 56,781,709 

Navy expansion . 139,157,096 

Establishment of iron foundry 579,762 

Fund for special war expenses, transportation, 

communication, 1897 3,214,485 

199733.052 

Total 278,690,217 



EFFECTS ON PUBLIC FINANCE - 97 

The foregoing amounts were drawn from the 364,868,587 of 
indemnity. The fund to pay back the expense of maintaining 
guards at Weihaiwei was from the beginning transferred 
from the general account. Of the indemnity received, 20 
million yen was transferred to a fund for the use of the Im- 
perial family, 50 million yen to three funds, viz., one for 
replenishing warships and torpedo boats, another for emer- 
gencies due to natural disasters and the third for educational 
purposes, while 12 million yen was transferred to the General 
Account in 1898. 

The greater part of the indemnity and the special revenues 
was used for the war and for various other expenses connected 
with the war. The indemnity has had a considerable effect 
upon our national finance. We shall discuss it in detail later. 

Expansion of means of defense 

The government recognized, after the war with China, that 
the then existing army and navy were inadequate, in view of 
the condition of the country at that period, and formulated a 
plan of expansion which was put into execution from 1895. 

For the first period of expansion, the army asked for an 
appropriation of 43,320,000 yen as a fund for a continuation 
plan to extend over four years, from 1895 until 1899, and the 
navy asked for 94,770,000 yen as a fund for a similar plan 
covering the seven years from 1895 until 1903. The general 
outline of these plans of expansion was for the army to es- 
tablish additional divisions and to construct fortresses, etc., 
and for the navy to increase its strength by means of new 
warships and torpedoes. Up to that period our military 
strength was seven divisions for standing service, with about 
50,000 men in time of peace and 200,000 in time of war. 
According to the new plan six new divisions were to be added, 
so that in peace the number of men would be 150,000 and in 
war about 600,000. And the navy which had up to that 
period 50,000 tons of warships, was to be increased to 200,000 
tons or more. The new plans of expansion were severely 
criticised by the people. 



98 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

There was much opposition in the national Diet. But the 
nation generally recognized the need of expansion of the means 
of defense, and the plans were at length carried out. 

But in the first period of expansion, the army counted only 
the cost of erecting fortresses, building barracks, securing the 
first supply of arms and implements for use in camp and other 
immediately necessary expenses for the standing army. 
The arrangements necessary for war preparedness had not yet 
been perfected. The navy counted only the cost of the 
number of warships and torpedoes which were immediately 
needed, and in order to perfect the original plan still larger 
appropriations had to be asked for. Thorough investigation 
was therefore made as to the unfinished work after that, and, 
as a result, additional appropriations were asked for in the 
budget for 1897. 

The estimate of expenses for the second period of expan- 
sion was 38,350,000 yen for the army as a fund for the contin- 
uation plan from 1897 to 1903; and 118,320,000 yen for the 
na\^ for a similar plan from 1897 to 1905; totaling 156,670,- 
000 yen for both army and navy. These demands of the army 
and navy were secured through the approval of the Diet. 

In 1899 the third period of expansion was entered upon in 
accordance with the plans described in the foregoing para- 
graphs. The establishment of the seven army divisions was 
perfected and fortresses were improved or newly made in 
the islands of Formosa and Pescadores. For all of these 
18,040,000 yen was requested, as a fund for a continuation 
plan extending from 1899 to 1906. 

Besides the foregoing, in the same year, the appropriation 
for army expansion had to be increased owing to the rise in 
•prices, so that an additional 5,210,000 yen was appropriated as 
a fund for repairs, for securing implements and for the mis- 
cellaneous expenses of the construction bureau, while the 
naval expansion fund was reduced by 1,450,000 yen after 
providing for construction of the fortresses already decided 
upon, owing to a difference in the exchange rates of 3,350,000 
yen. 



EFFECTS ON PUBLIC FINANCE 



99 



Thus the plans for expansion of the army and navy were 
commenced in 1896 and after going through the first and the 
second period of expansion were nearly completed when in 
1899 the plans for the establishment of the seventh division, 
and construction of the fortresses in Tsushima, Kielung and 
Pescadores Island, were carried out, so that great financial 
problems of the past four years were solved for the time being. 

Just how great was the expenditure for defense after these 
great plans for expansion had been laid, is showTi in the follow- 
ing tables : 

Expenditures for Defense, i 893-1903 
Army 



Fiscal year 


Ordinary 


Extraordinary 


Total 


180-? 


Yen 
12,419,829 
7,828,074 
8,410,212 
22,613,590 
28,746,263 
32,562,072 
35,577,310 
36,123,892 
37,433,911 
39,169,669 
39,355,388 


Yen 

2,301,397 

2,580,862 

1,605,723 

30,628,934 

31,401,725 

21,335,581 

16,973,888 

38,714,309 

20,947,869 

10,272,390 

7,529,174 


Yen 
14,721,226 
10,408,936 
10,015,935 
53,242,524 
60.14.7.088 


z}''^ 

i8q4. 


i8qs 


1896 


I 8q7 


i8q8 


53,897,653 
52,551,198 
74,838,201 
58,381,780 
49,442,059 
46,884,562 


i8qq 


IQOO 


IQOI 


I Q02 


iqo-? 




Total 


300,240,210 


184,291,852 


484,532,062 





Navy 



Fiscal year 


Ordinary 


Extraordinary 


Total 


180-^ 


Yen 
5,141,475 
4,573,605 
4,913,244 
7,351,330 
9,543,889 
11,191,475 

14,577,114 
16,911,000 

19.484,953 
21,063,345 
21,530,237 


Yen 
2,959,446 

5,679,549 

8,607,025 

12,654,428 

40,850,645 

47,338,427 
47,084,496 

41,363,895 
24,494,375 
15,262,843 
14,587,620 


Yen 

8,100,921 

10,253,154 

13,520,269 

20,005,758 

50,394,534 
58,529,902 

61 661 610 


1804 


i8qs 


1896 


1897 


1898 


i8qq 


IQOO 


58,274,895 
43,979,328 
36,326,188 
36,117,857 


IQOI 


IQ02 


lOO"? 




Total 


136,281,667 


260,882,749 


397,164,416 





lOO ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



From this table it will be seen that after 1896 both the 
ordinary and the extraordinary expenditures suddenly in- 
creased. The amount of increase required by the plan of 
expansion of the means of defense may be seen from the follow- 
ing, abstracted from the figures in the foregoing table : ^ 

Increased Expenditures for Army and Navy, Due to Plan of Expansion, 

1 896-1903 



Fiscal 
year 


Army 


Navy 


Total for 


Ordinary 


Extraor- 
dinary 


Total 


Extraor- 
dinary 


Army and 
Navy 


1896 

1897... 
1898.... 

1899... 

1900 

1901 

1902 

1903... • 


Yen 

4,548,454 
4,981,063 
8,675,720 
12,423,570 
13,171,994 
13,145,759 
13,149,013 

13,423,344 


Yen 
8,437,262 
21,914,002 
14,847,021 
14,055,883 
19,202,826 
11,669,525 

6,192,555 
4,628,109 


Yen 
12,985,716 
26,895,065 
23,522,741 
26,479,453 
32,374,820 
24,815,284 
19,341,568 
18,051,453 


Yen 

4,043,288 
32,487,404 
44,554,683 
45,369,046 
33,238,685 
21,147,756 
12,568,445 

9,552,430 


Yen 
17,029,004 
59,382,469 
68,077,424 
71,848,499 

65,613,505 
45,963,040 
31,910,013 
27,603,883 


Total . 


83.518,917 


100,947,183 


184,466,100 


202,961,737 


387,427.837 



We have briefly explained the tendency to an increase in 
both ordinary and extraordinary expenses in accordance with 
the plan of expansion of the army and the navy. We must 
now proceed to explain in detail the extraordinary expenditure 
which is the main thing in the plan of expansion of the means 
of defense. As we have before stated, this plan was carried 
out gradually, having been incorporated in the budget of 1 896 
as the first period, in 1897 as the second, and in 1899 as the 
third, thereby gradually perfecting the work of national de- 
fense as a part of the post-bellum program. The following is a 
table of the amounts required by this expansion plan: 

^ The ordinary expenditure for the army includes the expenses of the seventh, 
eighth, ninth, tenth, eleventh and twelfth divisions, the expenses of the guards in 
Formosa and other miscellaneous expenses, the expenses of the guards in Korea 
and the expenses of the guards at Weihaiwei. Of these, the last two items have 
no relation to the plan of expansion of defenses. But as they are the result of the 
war, they are included in the figures here given. As for the ordinary expenditure 
for the navy, as it is difficult to single out the expenses due to the plan of expansion, 
they are not given here separately. 



EFFECTS ON PUBLIC FINANCE 



lOI 



Budget of Extraordinajiy Expenses Due to Expansion Plan 





First 
period. 
1896 on 


Second 
period, 
1897 on 


Third 
period, 
1899 on 


Additional 
appropria- 
tion. 1899 


Total 


Army: 

Construction of fortresses . 
Repairs and initial pur- 
chase of arms 


Yen 

14,071.894 

17.334.891 
8,486,767 

2,949,108 

479,576 


Yen 
. 6,460,520 

19.363,747 
9.854.538 

3.542 
2,679.790 


Yen 

9.829.134 

8.220.583 


Yen 
5,208,478 


Yen 
27.010, I97» 

50,127.699 


Manufacture of arms 

Expansion of plant in 


18.341.30s 
2,949,108 


Expenses of Army Con- 
struction Section 

Deficit 


483.118 
2,679,790 






Total 


43.322,236 


38,362,137 


18.049.717 


5,208,478 


101,591,217'' 






Navy: 

Ship construction 

Manufacture of arms 

Construction expenses. . . . 


47,154.576 
33.751.163 
13.870,507 


78,893.399 

33,176,330 

6,254.990 


.... 




125,169,547" 
66.355.072d 
20,125.497 


Total 


94.776,246 


118.324.719 














Grand Total 


138,098,482 


156,686,855 


18,049,717 


5.208,478 


3 13.241. 333'» 





» The difference in exchange rate, 3.35i.3Si yen, has been deducted. 
^ The difference in exchange rate has been deducted. 
" The difference in exchange rate, 572,421 yen, has been deducted, 
d The difference in exchange rate. 878,428 yen, has been deducted. 



The results of the execution of the foregoing budget may be 
seen in the following table: 



Extraordinary Expansion Expenses 
Army 



Fiscal year 


Construction 
of fortresses 


Repairs and 
initial pur- 
chase of 
arms 


Manufacture 
of arms 


Additional 


Total 


1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


Yen 
1,291,730 
3,157,624 
2,970,401 

3,465,359 
5,616,912 

4,433,293 
1,591,202 

2,919,341 


Yen 

5,739,279 
12,601,558 
7,404,500 
6,928,578 
9,309,375 
4,482,973 
2,756,393 
1,697,811 


Yen 

934,061 
2,639,205 
2,492,243 
3,541,755 
4,216,945 
2,706,436 
1,810,659 


Yen 

472,192 
3,515,615 
1,979,877 

120,192 

59,594 
46,823 

44,301 
10,957 


Yen 

8,437,262 

21,914,002 

14,847,021 

14,055,884 

19,202,826 

11,669,525 

6,202,555 

4,628,109 


Total . 


25,445,862 


50,920.467 


18,341,304 


6,249,551 


100,957,184 



102 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

Navy 



Fiscal year 


Construction 
of ships 


Manufacture 
of arms 


Construction 
of buildings 


Total 


1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


Yen 
3,099,482 

23,913,987 
30,298,987 
26,233,569 
17,565,610 

9,523,391 
5,964,095 
4,826,199 


Yen 

799,209 

7,218,321 

12,440,942 

16,859,198 

12,498,883 

7,382,769 

3,829,959 

2,592,492 


Yen 

144,596 
1,355,096 

1,814,753 
2,276,279 

3,174,192 
4,241,596 
2,774,391 
2,134,739 


Yen 

4,043,287 
32,487,404 
44,554,682 
45,369,046 
33,238,685 
21,147,756 
12,568,445 

9,553,430 


Total 


121,425,320 


63,621,773 


17,915,642 


202,962,735 



Increase of administrative expenses 
Not only did the administrative expenses of various kinds 
increase on account of the plans for the post-bellum enter- 
prises after the Sino-Japanese War but by reason of the 
general national advancement, which added to the increase in 
administrative expenses. The following table shows the 
expense of the public debts, the expenditure for defense and 
the general administrative expenses separately: 
Expenditures on Account of Public Debts, Defense, and Administration 



Fiscal year 


Public Debts 


Defenses 


General Ad- 
ministration 


Total 




Yen 


Yen 


Yen 


Yen 


1893 


19,455,918 


22,905,993 


43,457,517 


85,819,428 


1894 


19,721,143 


20,764,267 


40,304,766 


80,790,176 


1895 


24,190,858 


23,671,985 


39,580,507 


87,443,350 


1896 


30,504,172 


73,416,902 


68,479,552 


172,400,626 


1897 


29,504,731 


110,666,757 


91,459.859 


231,631,347 


1898 


28,379,828 


112,634,626 


85,990,576 


227,005,030 


1899 


34,278,956 


114,307,693 


105,578,889 


254,165,538 


1900 


34,841,135 


133,173,581 


124,735,343 


292,750,059 


1901 


38,085,910 


102,248,927 


126,521,988 


266,856,825 


1902 


76,075,690 


85,863,957 


127,287,083 


289,226,730 


1903 


36,484,520 


83,218026 


129,893,585 


249,596,131 


Total. . . . 


371,522,861 


882,872,714 


983,289,665 


2,237,685,240 



The following table shows the foregoing different items of 
expense in their respective ratios, and how large was the ratio 
of the general administrative expense. 



EFFECTS ON PUBLIC FINANCE IO3 

Ratio of Public Debt, Defense and Administrative Expenditures 



Fiscal year 



Public debts 



Defenses 



General 
Administration 



1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 



Per cent 
22.7 
24, 
27, 

17 
12 
12 
13 



Per cent 



14 
26 



14.6 



Per cent 
50.6 



It will be seen from Table IV at the end of this chapter ^ that 
the various national expenses have increased enormously 
since 1896. We must here briefly survey the various post- 
bellum enterprises which were the cause of the increase in the 
general administrative expenses. Of these, the following 
may be especially mentioned: (i) establishment of an iron 
foundry and extension of the same; (2) construction and 
improvement of railways; (3) extension of telephone ex- 
changes; (4) subsidies to various special banks; (5) subsidies 
for the encouragement of navigation ; (6) sundry expenses in- 
curred for Formosa, etc. These will be explained in the order 
above enumerated. 

ESTABLISHMENT AND EXTENSION OF IRON FOUNDRY 

The establishment of an iron foundry was the most impor- 
tant of the post-bellum enterprises, because the demand for 
iron manufactures increased enormously every year. Then in 
connection with the plan to extend the means for national de- 
fense it was plain that, as iron was the principal material used 
in building warships and manufacturing arms, in case of 
emergency the supplies must be obtainable at home. Thus 
the iron foundry came to be established. As to the expense of 
its establishment, 4,095,793 yen were asked for in the national 
budget in 1896, and later, in 1898, 6,474,056 yen more were 

' Post, p. 144. 



104 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

added, so that the entire expense amounted to 10,569,849 
yen. 

The work of establishing the iron foundry gradually pro- 
gressed, and in 1899 experiments in manufacturing from iron 
were being made, so that there was urgent need of securing a 
fixed sum as operating capital in order to commence work. 
The enterprise of the iron foundry is a great industry with 
far-reaching effects. The necessary supplies of ore, coal, 
cement and other materials can not be secured in sufficient 
amount from a few private mining concerns. Then, again, 
considered from the economic point of view, as it is more 
advantageous for an iron foundry to own its own mines, it 
appeared necessary to secure a fund for purchasing mines 
from which to obtain raw material. To hasten the work of 
constructing the harbor at Wakamatsu to secure transporta- 
tion conveniences, suitable subsidies must be given to the 
Wakamatsu Harbor Construction Company. In order to 
secure perfect results from the work of the iron foundry, the 
appropriation for expenses must be reasonably increased. 
So, in 1899, 8,632,845 yen'^ were added, the total amount 
finally reaching 19,202,694 yen. 

To meet this expense, 579,762 yen were raised from in- 
demnity and 18,622,932 yen from bonds. The result of the 
plan is seen in the following table : 



Fiscal year 



1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Total 



Establishment 
of iron foundry 



Yen 

157,529 
709,224 

1.747,572 
3,011,008 
7,126,198 

5,853,335 
490,117 
820,011 



19,914,994 



Supplementary 
appropriation 



Yen 



322,762 

495,429 

20,454 



838,645 



Investigation 



Yen 



17,942 



17,942 



Total 



Yen 

157,529 
709,224 

1,747,572 
3,011,008 
7,126,198 
6,176,097 
1,003,488 
840,465 



20,771,581 



^ 500,000 yen were for harbor construction at Wakamatsu, and 4,000,000 yen a 
reserve to be used as operating capital. 



EFFECTS ON PUBLIC FINANCE IO5 

CONSTRUCTION AND IMPROVEMENT OF RAILWAYS^ 

The new railway system was inaugurated by the Railway 
Construction Act promulgated June 20, 1892. The continua- 
tion plan adopted was to include a period of sixteen years, 
beginning with 1893. At the time of the Sino-Japanese War 
the total amount of the expense of railway construction as 
required by this continuation plan reached 59,921,663 yen. 
Thus the work of railway construction steadily progressed 
and the railway lines were extended. But, at the same time, 
the business of transportation increased year by year, and the 
demand for service on the already constructed lines increased 
more and more, so that the existing lines and the number of 
cars in use were not sufficient to meet the demand. Moreover, 
under abnormal conditions, service had to be refused to the 
general public, as for instance, in time of war. So the govern- 
ment, as the first step in advance, changed the whole of the 
Tokaido Government Railway from a single to a double- 
track line. Necessary improvements were added to the 
stations on this, and also on the Shin-Yetsu line, the number 
of cars was increased, and it was generally planned to give 
entire satisfaction to both passengers and shippers in the way 
of transportation facilities. This scheme was established as a 
continuation plan to be worked between 1896 and 1902, 
beginning in 1896. The entire expense for improvement was 
estimated at 26,553,000 yen. 

The work of railway construction steadily progressed in 
accordance with the plan outlined in the foregoing paragraph. 
In 1897 there was need of an increase in the fund for con- 
struction expenses between Tsuruga and Toyama, and between 
Hachioji and Nagoya. Thus, in that year 8,103,381 yen were 
added, and in 1899 the fund for construction expenses between 
Tsuruga and Toyama and between Sinonoi and Shiojiri was 
increased by 5,133,281 yen, bringing the total amount up to 
73» 1 58,325 yen. Then, in 1900, 19,529,886 yen were added in 
connection with the construction of the line between Fuku- 

1 See Table V at the end of this chapter, post, p. 145. 



106 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

shima and Aomori, and also 2,156,248 yen as construction 
expense for the line between Kaidaichi and Kure,so that at the 
end of 1900 the cost of constructing railways during the first 
period had reached 94,844,459 yen, and the additions made to 
the first estimates for construction after the war amounted to 
61,475,796 3^^w. 

Besides the foregoing, in 1897 a plan for railway construc- 
tion in Hokkaido was formulated, involving an expenditure of 
18,562,050 yen and another in 1900 for Formosa with an ex- 
penditure of 28,800,000 yen. We shall explain this plan later. 
The totals in Table V at the end of this chapter ^ show the 
actual results of this improvement and construction work all 
over the country. The funds for these railway undertakings 
were mostly secured by the issue of bonds. To be more 
specific, as shown in the table, about 77 per cent of the fund 
was obtained from bond issues and the rest was from the 
ordinary annual revenue. 

EXTENSION OF TELEPHONE EXCHANGES 

Since the telephone exchange service was commenced 
between Tokyo and Yokohama in 1890, and between Osaka 
and Kobe in 1892, the applications for telephone installation 
have increased year by year, so that even the present develop- 
ment of the system is not equal to the demand. As there 
were many other cities besides the four mentioned above 
which demanded service, after the war the government 
planned to establish a telephone system in Kyoto and the 
thirty- five other cities which needed it most urgently; then 
the single-line system already established was changed to a 
double-line system. Other extensions were planned. In 
1896 the so-called continuation plan was instituted to be 
carried out between 1896 and 1902 with the sum of 12,802,- 

107 yen appropriated for the entire cost of the extension. 
Furthermore, in order to increase the telegraphic lines the 
government executed a continuation plan between 1897 and 
1898 with a budgetary estimate of 705,338.90 yen, 

1 Post, p. 145. 



EFFECTS ON PUBLIC FINANCE 



107 



The following table shows the annual disbursement for 
telephone exchange extension, the actual result of the ex- 
tension, and the sources from which the fund was derived: 

Disbursements and Revenue for Telephone Exchange Extension 



Fiscal year 



1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Total 



Cost 



Yen 

594.196 
2,473,420 
1,896,119 

1,781,655 
2.349,786 
1,807,587 
1,615.532 
268,556 



[2,786,851 



Sources of ordi- 
nary annual 
revenue 



Yen 



437,875 
72,790 



10,665 



Bonds issued 



Yen 

594,196 
2,473,420 
1,896,119 

1,781,655 
2,349,786 
1,807,587 

1,177,657 
195,766 



12,276,186 



Total revenue 



Yen 

594.196 
2,473,420 
1,896,119 

1,781,655 
2,349,786 
1,807,587 
1,615,532 
268,556 



2,786,85] 



SUBSIDIES TO VARIOUS SPECIAL BANKS 

Another method adopted to improve financial facilities 
after the Sino-Japanese War was the granting of subsidies to 
various banks, as tabulated below. 



Fiscal 


Hypothec 
Bank 


Agricultural 
and Indus- 


Hokkaido 
Colonial 


Formosa 
Colonial 


Industrial 
Bank of 


Total 


year 


trial Bank 


Bank 


Bank 


Japan 






Yen 


Yen 


Yen 


Yen 


Yen 


Yen 


1897.. 


55,052 


991,625 


.... 


.... 


.... 


1,046,677 


1898.. 


30,010 


1,983,355 


.... 


.... 


.... 


2,013,365 


1899.. 


30,873 


1 ,990,008 


250,000 


250,000 


.... 


2,520,881 


1900.. 




1,996,010 


250,000 


.... 


.... 


2,246,010 


1901.. 




940,224 


200,000 


.... 




1,140,224 


1902.. 




213,901 


200,000 


250,000 


64,541 


728,442 


1903.. 




5,000 


.... 


.... 


.... 


5.000 


Tota 


1 115,935 


8,120,123 


900,000 


500,000 


64.541 


9,700,599 



ENCOURAGEMENT OF NAVIGATION 

Special encouragement to navigation was early planned in 
accordance with the proclamation issued in September, 1886. 
The government thereupon subsidized the Nippon Yusen 
Kaisha to the extent of 880,000 yen annually, thus enabling 



I08 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

that company to institute regular service between Yokohama 
and Shanghai, Kobe and Tientsin, Kobe and Neuchang, Kobe 
and Vladivostok, between various other points in Japan 
proper and Hokkaido and various points along the line. 
But the period of effectiveness of the proclamation expired 
in September, 1900, and it then became necessary to estab- 
lish a policy to govern the regular service in the future. 
Previous to that, in 1896, with the object of encouraging 
navigation, the government had promulgated a law according 
to which subsidiary grants would be made to ships which 
should subscribe to certain requirements. The highest 
amount designated for this purpose was one million yen 
annually, but the actual result of the operation of this law 
was such an increase in ships that in 1897 no less sum than 
1,700,000 yen was required for this purpose, while in 1898 the 
amount needed for subsidies and extension of steamship 
routes ran above five million yen. Now after the term of 
subsidy to the Nippon Yusen Kaisha had expired, it was 
found that if the general law were to be applied to the com- 
pany in the future as it had been in the past the expense 
would be increased enormously. So discussion centered 
about the point whether the general regulations should be 
applied to the leading regular service routes, or new special 
regulations should be established. The government decided 
upon the latter course, and introduced into the Diet a bill 
which was later approved empowering the government to sign 
a contract for an annual subsidy of 580,000 yen for five years, 
from October, 1900, to September, 1905, for the chief regular 
connecting lines of communication between Japan and Russia, 
and China and Korea (the Yokohama-Shanghai, the Kobe- 
Korea, the Kobe-North China, Kobe-Korea-North China, and 
the Kobe-Vladivostok routes) and between Japan proper and 
Hokkaido (the Kobe-Otaru and the Aomori-Muroran routes). 
In addition, the government decided to subsidize the regular 
service along the coasts of Hokkaido (between Hakodate and 
Nemuro, between Otaru and Wakanai, between Nemuro and 
Abashiri, and between Nemuro and Etorofu) from October, 



EFFECTS ON PUBLIC FINANCE 



109 



\ 



1900, to September, 1905. To the Yangtze- Kiang, the Shang- 
hai-Soochow, and the Shanghai-Hankow steamship Hnes, a 
certain amount of subsidy was to be given every year to 
enable them to maintain regular service. At the same time, 
with a view to restricting the expenditure of the fund, the 
government decided to subsidize only the regular service of 
three steamship lines, European, Seattle, and San Francisco, 
for ten years, i.e., from 1900 to 1909, to the extent of 2,673,894 
yen for the European, 654,030 yen for the Seattle, and 1,013,- 
880 yen for the San Francisco service. The government then 
revised the regulations so that after January, 1899, the 
amount of subsidy granted to ships constructed in foreign 
countries would be cut in half and the period of assistance lim- 
ited to 18 years, from October i, 1896. 

In addition, the government promulgated regulations for 
the encouragement of shipbuilding, by which ships built 
according to a prescribed set of regulations might receive 
grants, as an aid to the development of navigation. 

The several budgets required to carry out the foregoing 
plans are shown in the following table : 

Ship Subsidies 



Fiscal year 


Extension of 
steamer routes 


Encouragement 
of navigation 


Encouragement 
of shipbuilding 


Total 


1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


Yen ■ 

134,775 
538,702 
671,321 
896,898 
4,205,729 
5,554,440 

6,387,713 
6,332,448 


Yen 

880,000 

708,384 

2,580,802 

3,957,315 

1,188,762 

906,203 

676,300 

802,431 


Yen 

13,109 

213,875 
187,380 

152,930 
581,094 
411,348 
437,810 


Yen 

1,014,775 
1,260,195 
3,465,998 
5,041,593 
5,547,421 
7,041,737 
7,475,361 
7,572,689 


Total.... 


24,722,026 


11,700,197 


1,997,546 


38,419,769 



SUNDRY EXPENDITURES IN CONNECTION WITH FORMOSA^ 

Formosa came into our possession as a result of the Treaty 
of Shimonoseki. The various expenses incurred in connection 



^ Especially those in connection with special undertakings in Formosa and in 
Weihaiwei. 



no ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

with the island increased considerably the annual expend- 
iture. 

The expenditure in connection with Weihaiwei was that 
made necessary by its military occupation to guarantee the 
fulfilment of the Treaty of Shimonoseki. It was the sum in 
excess of the amount paid by the Chinese Government for the 
guards' service there. Article VIII of said treaty recognized 
the right of our army to occupy Weihaiwei as such guarantee. 
And in Article I of the supplementary treaty, China agreed to 
pay 400,000 taels as one-fourth of the expense of a temporary 
occupation of Weihaiwei by the Japanese Army. But as 
the terms of the treaty were perfectly fulfilled, and especially 
as the payment of the indemnity was completed May 7, 1898, 
this item of expense in connection with Weihaiwei became 
unnecessary. After that date, of the items of expense. men- 
tioned above, those for Formosa, according to the budget for 
1896, were 18,489,811 yen in all, and these are explained in 
detail below. The same amount has been appropriated each 
year ever since. 

Yen 

Civil administrative expense 5,928,705 

Defense expense 7,710,481 

Extraordinary Formosan expense 4,850,625 

But after 1897 the annual receipts and disbursements in 
Formosa were turned over to a special account, with a view to 
making Formosa self-supporting. A reform of the govern- 
ment of Formosa was planned. The number of officials there 
was reduced, some of the government offices were abolished 
and some amalgamated, the ordinary administrative expenses 
were economized, and at the same time, an increase in revenue 
from Formosa was definitely anticipated. Further, new 
local taxes were collected, thereby considerably assisting the 
finances of Formosa. Consequently, the relief fund in the 
Treasury for administrative expenses, which had amounted to 
six million yen, as we mentioned before, was reduced to three 
million yen in 1899. It was gradually reduced after that until 
in 1 910 it ceased to exist. While therefore the ordinary 
administrative expenses of Formosa were economized so that 



EFFECTS ON PUBLIC FINANCE III 

Formosa was being led on to self-support, at the same time 
necessary enterprises in the new possessions could not be 
neglected. So the government decided to carry out a con- 
tinuation plan extending over seven years with a total ap- 
propriation of 35 million yen for financing various enterprises, 
such as (i) construction of railways, (2) investigation of land, 
(3) construction of harbors, and (4) building new offices for 
the government general. These will now be explained 
further. 

(i) A north-and-south railway in Formosa was considered 
a necessity from the point of view of military and industrial 
development. The government at first granted a permit to a 
private concern. But as the work was not begun at once, and 
there was no prospect that the railway would ever be built in 
this way, it was necessary for the government to build the line 
itself. 

(2) The land in Formosa had never up to this time been 
surveyed carefully, and land registry was in a complicated 
condition. Besides, as there were the two systems existing of 
large and small leases and other peculiar conditions attached 
to the land, it was a very difficult task to establish a good land 
system. Indeed such readjustment was impossible without a 
careful survey. 

(3) The harbors and bays of Formosa, with one or two ex- 
ceptions, could hardly be recognized as such, and even in the 
case of the exceptions, extensive work was needed to make 
them safe places for ships to anchor. Now after Formosa 
came into Japan's possession the number of ships coming and 
going between Japan proper and Formosa steadily increased. 
Not only so, but the Formosan trade gradually developed, so 
that it became a matter of urgent necessity to reconstruct the 
harbors and bays of the island in order to make them a safe 
anchorage for ships. The water works and government 
buildings also were of direct and indirect necessity in develop- 
ing Formosa. The following table gives the amounts needed 
for these various undertakings : 



112 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Yen 
Formosan railway construction and improvements . . . 28,800,000 

Kielung harbor improvement 2,000,000 

Temporary land survey in Formosa 3,000,000 

New buildings for the Government General 1,200,000 

Total 35,000,000 

Table VI at the end of this chapter ^ shows the actual ex- 
penditure made by the Treasury for Formosa for the chief 
items. 

The actual account for the guards at Weihaiwei was 917,- 
677 yen in 1896; 855,588 yen in 1897, and 85,576 yen in 1888. 

Besides the foregoing, the chief undertakings planned after 
the Sino- Japanese War were improvement of water courses, 
extension of educational plants, development of Hokkaido, 
subsidy for harbor construction, establishment of agricultural 
experiment stations and schools for sericulture, development of 
foreign trade, erection of a hall for exhibiting goods for foreign 
trade (after 1896), special forestry administration (after 1899), 
improvement of live stock, investigation of sulphur mines, 
establishment of industrial experiment station (after 1900), 
also increasing legations abroad and extending the customs 
service. 

As the government thus launched out ambitiously in various 
directions, the budget expanded enormously after the war. 
The total amount of the ordinary and extraordinary annual 
expenditure in 1 900 amounted to nearly 300 million 3;^^. Later, 
when the extension of defenses and the other continuation 
plan had been nearly completed, the annual expenditure for 
these purposes was stopped and the extraordinary expenditure 
was reduced. Yet before the Russo-Japanese War, that is, in 
1903, the amount did not fall below 249 million yen. A part 
of this increased expenditure was obtained from the indemnity 
and a part from the bond issue, but the balance had to be 
taken from the ordinary revenues of the government. On 
that account an increase in taxes was several times required. 
We shall now disclose in the following chapters the sources of 
revenue for the foregoing various items of expenditure. 

* Post, p. 146. 



EFFECTS ON PUBLIC FINANCE 



113 



Bonds and indemnity 

BONDS 

(i) War Bonds — The bonds issued to pay off the expenses 
of the Sino- Japanese War were the so-called war bonds. The 
total amount of the issue was 124,920,750 yen, with net 
receipts to the government of 122,437,687 yen. The 
period of issue of these bonds stretched from September, 1894, 
to November, 1896. The receipts from the bond issue were 
used entirely for war expenses. As this has been already 
explained we shall not repeat the details here. But below we 
shall show the burden imposed upon the Treasury in conse- 
quence of the bond issue. 

Details of Bond Issue* 



Fiscal year 


Redemption of principal 


Interest paid 


Total 


Face value 


Amount paid 


1894 

1 8q 1^ 


Yen 

.... 
8,339,300 

940,300 

2,235,200 

4,889,300 

108,516,650 


Yen 

8,001,558 
912,255 

2,151,128 

4,986,746 

108,739,883 


Yen 
78,223 

2,937,055 
5,431,824 
6,082,643 
6,206,077 
6,094,789 
5,819,049 
5,825,219 
5,785,426 

5,779,344 
5,774,769 

5,792,879 
5,701,388 
5,779,263 
5,674,934 
5,677,813 
2,721,485 


Yen 
78,223 
2,937,055 


1896 


5,4';i,824 


1807 


6,082,643 


1898 


6,206,077 


i8qq 


14,096,347 
5,819,049 
5,825,219 
6,697,681 
5.779,344 
5,774,769 
5,792,879 
5,701,388 
5,779,263 
7,826,062 
10,664,559 
111,461,368 


1900 ... 


1901 .... 


1902 


TOO'; 


TQOzl 


TQo«; 


1906 


IQ07 


1908 


I QOQ 


IQIO 




Total 


124,920,750 


124,791,570 


87,162,180 


211,953,751 



»A word should be said regarding the amount paid for redemption of the principal. The amount 
paid was only 78,452,300 yen or the amount of the face value of the bonds reduced, by purchase and 
exchange, by 46,339,271 yen. Thus the amount pa:id for redemption and the face value of the bonds 
did not coincide. 



The net receipts were, as before stated, 122,437,687 yen, 
so that after all the amount paid in for redemption exceeded 



114 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

the net receipts by 2,353,884 yen. The net burden to the 
Treasury in consequence of the war bonds issued was therefore 
this last figure, to which should be added 89,516,064 yen 
for the interest payments, and, in addition, about 500,000 yen 
for the cost of printing and preparing the bonds and also the 
expense connected with making the redemption and interest 
payments. 

(2) Sundry bond issues in connection with the post-bellum 
enterprises. When the government was casting about for 
funds to finance the post-bellum enterprises, it decided to 
secure such by the issue of bonds for productive enterprises, 
as the building of railways and extension and improvement 
of telephone facilities. In consequence, as we have seen, an 
enormous number of bonds appeared, such as the industrial 
bonds, the railway bonds, the Hokkaido railway bonds and the 
Formosan industrial bonds, which were decided upon in 1892. 

The industrial bonds were issued in accordance with the in- 
dustrial bonds act, Law No. 59, promulgated March 29, 1896, 
in order to secure a fund for various post-bellum enterprises. 

The amount was at first fixed at 135 million yen and later 
increased to 148,991,834 yen. This amount was apportioned 
to various enterprises, as follows: 



Nature of enterprises 



Expense of improving government 
railways already built 

Expense of building Hokkaido rail- 
ways (Sorachita to Asahigawa) 

Expense of establishing an iron foun- 
dry 



Expense of extending telephone ex- 
changes 

Establishment of transaction office of 

leaf tobacco and its operating capital 

Expenses of army and navy extension 

Army 18,459,484 

Navy 58,999.423 

Interest on bonds for the first year, . . . 



Amount 



Yen 
26,553,000 

1,178,330 
3,516,031 

12,802,102 

12,213,550 
77,458,907 

1,278,080 



Remarks 



Afterward increased one 
yen, i.e., 1,178,331. 
Afterward changed to 
18,622,932 yen, i.e., an 
increase of 15,106,901 
yen. 

Afterward increased 5 
yen, i.e., 12,802,107 yen. 



Afterward 163,007 yen^ 
i.e., a decrease of 1,115,- 
073 yen. 



EFFECTS ON PUBLIC FINANCE 1 15 

Law No. 93, promulgated May 13, 1896, for the building of 
the Hokkaido railways, provided for the construction of the 
line from Asahigawa, I shikari province, through Tokachida in 
Tokachi province, and Atsukishi in Kushiro province, to 
Abashiro in Kitami province ; a line from Ribetsu in Tokachi 
province, through Ainouchi in Kitami province and Atsukishi 
in Kushiro province, to Nemuro in Nemuro province; a line 
from Asahigawa to Soya; a line from Uryu plain in Ishikari 
province to Masuge in Teshiwo province; a line from Nayoro 
in Teshiwo province to Abashiri, and a line from Otaru to 
Hakodate; for all of which it was decided to issue bonds to the 
amount of 33 million yen. 

Next, the object of Law No. 4, for railway construction, 
issued June 20, 1892, was to build to the limit of expenditure 
of 60 million yen the Central, the Hokuriku, the Kokuyetus, 
the Oou, the Sobu, the Joban, the Kinki, the Sanyo, the 
Sanin, the Shikoku, the Kyushu and other lines. Laws, Nos. 
II and 12, issued in March, 1895, revised Law No. 4, and added 
more lines. As a result, the total amount of the appropriation 
was changed to 94,844,459 yen. 

The industrial bonds, the Hokkaido railway bonds, and the 
railway bonds were turned over to special accounts by Law 
No. 13, issued in February, 1899, providing for special ac- 
counts for these three loans. Afterw^ards these bonds were 
called the Imperial five per cent bonds. 

The government now attempted to obtain a fund for 
Formosan development expenses by issuing bonds. Law No. 
75, of March 20, 1899, provided for the issue of Formosan 
industrial bonds to the amount of 3,500,000 yen for the pur- 
pose of building railways, surveying land, constructing forts, 
and erecting government buildings. The foregoing four classes 
of bonds may be summarized as shown in the following table. 

By these immense bond issues, the government tried to 
carry out the aforesaid plans for new enterprises within the 
allotted time. But at that time the money market all over the 
country was very much depressed, and in consequence it was 
impossible to float these bonds. Therefore the money had to 



Il6 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



Class of bonds 


First authorization 


Subsequent substitute 
authorization 


Industrial 


Yen 

135,000,000 

33,000,000 

60,000,000 

35,000,000 


Yen 

148,991,834 

33,000,000 

94,844,459 
35,000,000 


Hokkaido Railway 


Railway 


Formosan industrial 


Total 


263,000,000 


311,836,293 





be transferred either from the Savings Deposits Account of the 
Finance Department, or from the Indemnity Account. But 
in June, 1899, 10 milHon pounds sterling of four per cent bonds 
in British gold were issued (issue price, 90 per cent commission, 
4 per cent net receipts, 86 per cent); and later the money 
collected in the Deposit Section, or bond redemption fund, 
was utilized in order to prosecute the work intended to be 
financed by the bond issues. 

Relation of bond issues to the expense of said enterprises. — 
We shall next consider the details of the amount needed for 
enterprises, to be prosecuted by means of the money collected 
by the issue of industrial, railway, and Hokkaido railway 
bonds, in order to show the relation of the money collected 
from bond issues to the total expenditure for these enter- 
prises. At the end of this chapter are several tables showing 
these details. Table VIP gives the revenue covering the 
expenditures for Formosan development for the years 1896- 
1903 and includes money transferred from the general account, 
money transferred from indemnity, and money received from 
bond issues; Table VHP gives the manifold purposes of the 
industrial bonds for the same period, and Table IX^ gives the 
ratio of actual expenditures for Formosan development, also 
during the same period. 

The following table will show the amounts of interest paid 
on these various bond issues:* 

1 Post, p. 147. ^ Post, p. 148. ^Post, p. 149. 

* The Imperial 5 per cent bonds refer to the railway, the industrial and the Hok- 
kaido railway bonds. The 4 per cent sterling bonds were that portion of the 
Imperial 5 per cent bonds issued abroad. 



EFFECTS ON PUBLIC FINANCE 
Interest Paid on Bonds 



117 



Year 



1 893-1 895. 
1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Total. 



Imperial 

5 per cent 

bonds 



Yen 

325,626 
375.000 
1,287,979 
2,840,368 
2,840,408 
3,031,241 
3,276,790 
4,127,194 
5,967,454 



24,072,060 



Formosan 

industrial 

bonds 



Yen 



39,215 
160,812 
347,283 
443,018 



990,328 



4 per cent 

British sterling 

bonds 



Yen 



3,913,203 
3,907,816 

3,907,934 
3,916,066 



15,645,019 



Total 



Yen 

325,626 

375,000 

1,287,979 

2,840,368 

2,840,408 

6,983,659 

7,345,418 

8,382,411 

10,326,538 



40,707,407 



The interest payments amounted to 40,707,407 yen. In ad- 
dition, a certain amount of expense was incurred in transferring 
money from one bureau to another account, or in borrowing 
for the purpose of utilizing the money temporarily as capital. 

Of the amount accounted for in the foregoing paragraph, 
exclusive of interest payments on the bonds, the total between 
the years 1896 and 1903 was 451,281,722 yen. The sources 
from which it was obtained are as follows. It must be noted, 
however, that the fractions of one yen were discarded, so that 
the detailed figures will not coincide exactly with the total. 

Amount transferred from the Yen Per cent Yen Per cent 

general accounts 76,485,178 16.95 

Indemnity transferred 174,875,542 38.75 

Amount secured from bond issues : 

Industrial bonds 138,846,215 30.77 

Railway bonds 56,106,884 12 .43 

Hokkaido railway bonds 4,967,900 i .10 

199,921,000 44.30 

As shown in the foregoing table, the percentage obtained 
from the various bond issues to the total needed was 44.30 
per cent, the balance having been transferred from the in- 
demnity (38.75 per cent) and from the general account 
(16.95 pGi" cent), but these bonds were not all issued at home. 
About half of them, that is, 83,961 ,800 yen, were issued abroad. 
Furthermore, the money which was not obtained abroad was 



Il8 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

secured by transfer from the Treasury surplus or from special 
account of the indemnity and applied to the prosecution of 
various undertakings, as we have explained before in detail. 
Thus, we should note that the funds for the chief ex- 
penditure for the various enterprises undertaken after the 
Sino- Japanese War were furnished by the indemnity and its 
transfer and the importation of foreign capital. The success- 
ful importation of foreign capital was possible, it is needless to 
say, because the position of Japan in the world had been 
raised by the Sino-Japanese War; but it was also due, we 
believe, to the reform of the currency system. This currency 
reform in 1897 was completed largely by means of the in- 
demnity, as we shall explain elsewhere. When we consider 
this matter, we should remember that the post-bellum enter- 
prises had a very close connection with the indemnity. That 
the government undertook these various aggressive post-bellum 
enterprises at all was due entirely to the indemnity. Here 
let us glance at the disposition made of the indemnity which 
furnished so great a service to the post-bellum finance of our 
country. 

INDEMNITY 

As a result of the Sino-Japanese War, an indemnity was 
obtained from China for four purposes, namely, for war 
expenses ; for interest on the deferred payments of the indem- 
nity; for expense of guards at Weihaiwei, and for compensa- 
tion for the return of the Liaotung peninsula. 

The claim for indemnity for war expenses and for interest 
on deferred payments was based on the Treaty of Shimonoseki 
signed April 17, 1895, Article IV of which reads as follows: 

China promises to pay to Japan 200,000,000 taels in Kuping silver as an indem- 
nity for war expenses . . . against any unpaid portions of the indemnity 
after date of first payment (that is the payment of 50,000,000 taels made within 
six months after the ratification of the treaty of peace) interest at the rate of 5 
per cent per annum shall be paid; provided, however, that China may at any time 
pay the whole or a part of the indemnity in advance of the dates of payment; if the 
whole of the indemnity shall be paid within three years after the ratification of the 
treaty (or by May 8, 1898) all interest on the deferred payments of the indemnity 
shall be waived, and the interest already paid up to that time shall be included in 
the payment of the principal. 



EFFECTS ON PUBLIC FINANCE 



119 



The claim for the indemnification of the expenses of the 
guards at Weihaiwei was based upon Article VIII of the 
Shimonoseki Treaty of Peace, as mentioned before, which 
reads thus: 

China agrees ta the temporary occupation of Weihaiwei in the province of 
Shantung by the Japanese army as a guarantee that the terms of this treaty shall 
be observed faithfully . . . 

and also upon Article I of a separate agreement which stipu- 
lates — 

The size of the Japanese Army which shall occupy Weihaiwei temporarily in 
accordance with Article VIII of the treaty signed today shall not exceed one Jap- 
anese Army Corps. China agrees to pay 500,000 taels {Kuping silver) a year, as 
one-fourth of the expense of the temporary occupation, beginning from the day 
said treaty shall be ratified and copies exchanged. 

The compensation for the return of the Liaotung peninsula 
was based upon Article II of the treaty concerning the return 
of that peninsula which was signed November 8, 1895, and 
reads : 

The Chinese Government agrees to pay to the Japanese Imperial Government 
up to November 16, 1895, the sum of 30 million taels (Kuping silver), as a compen- 
sation for the return of the southern part of Mukden province. 

As the Chinese Government paid in full the entire amount 
of the war-expense indemnity by May 8, 1898, as stated 
before, the interest was waived in accordance with the terms 
of the treaty, as explained before. Consequently, our country 
received the following amounts as a result of the war: 



Funds 


In Chinese 
currency 


In Japanese 
currency 


Indemnity for the war expenses 


Taels 
200,000,000 

30,000,000 

1,500,000 


Yen 
311,072,865 

44,907,499 
2,380,103 


Compensation for the return of the Liao- 
tung peninsula 


Expense of guards at Weihaiwei for three 
years 




Total 


231,500.000 


358,360,467 
8,888,224 


Interest for the use of the indemnity fund. . 


Grand total 


231,500,000 


367,248,691 





120 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

Considering the financial and economic condition of our 
country at the time, the foregoing was indeed an enormous 
amount, and provided funds for various undertakings after 
the Sino- Japanese War, such as the improvement of the 
national defenses and other enterprises; it also led to the 
expansion of our annual budget. This is the reason why we 
have presented here in such detail the receipts and expendi- 
tures in connection with the indemnity and the effects of the 
same upon our finance and economy. 

Our government, in laying financial plans after the Sino- 
Japanese War in reference to the indemnity, decided on the 
policy of applying it to the redemption of the expenses of the 
Sino-Japanese War, the extension of the army and navy, the 
establishment of an iron foundry, an extraordinary reserve 
fund, and a subsidy to the Bank of Agriculture and Industry, 
thereby laying a foundation for extensive post-bellum enter- 
prises. At the same time, the indemnity was placed under 
"special accounts," and separated from the general accounts 
of the government. We shall here enumerate the ways in 
which the indemnity was used. 

The amount available for various enterprises was 364,868,- 
587 yen^ but the fund for the expense of the guards at Wei- 
haiwei was from the first placed under "general accounts" and 
was separated from the indemnity account for war expenses. 

Enterprises for which Sino-Japanese War Indemnity was Employed 

Yen 
(i) Redemption of the expenses of the Sino-Japanese War 78,957,165 

(2) Expenditure for army expansion 56,781,708 

(3) Expenditure for naval expansion I39, 157,097 

(4) Expenditure for establishing an iron foundry 579,762 

(5) Extraordinary war expenses for the year 1897 and for trans- 

portation and communication 3,214,485 

(6) Transferred to general accounts for the year 1898 12,000,000 

(7) Transferred to the Imperial Household 20,000,000 

(8) Supplementary fund for warships and torpedoes 30,000,000 

(9) Education fund 10,000,000 

(10) Reserve fund for calamities 10,000,000 

Total 360,690,2 1 7 

Amount available 364,868,587 

Amount employed for enterprises 360,690,217 

Balance (transferred to consolidation fund of national bonds) . . 4,178,370 



EFFECTS ON PUBLIC FINANCE 121 

The details of the revenue and expenditures are shown in 
Table X and XI at the end of this chapter.^ 

Of the foregoing, the amount used for the redemption of the 
war expenses, that is, 78,957,165 yen, was certainly used in 
accordance with the original purpose of the indemnity. Not 
only so, but it had a very salutary effect in the prosecution of 
the bond policy after the war. At first it was the plan to use 
the indemnity received in 1895, amounting to 120 million yen^ 
for the first period of army and navy expansion. But at that 
time there was urgent need of issuing bonds or borrowing to the 
amount of 100 million yen for the special account of the Sino- 
Japanese War, as this amount had to be secured before 
March, 1896. Now, if the whole of the war indemnity 
received had been devoted to the purposes of army and navy 
expansion and the fund for the Sino-Japanese War expenses 
had been obtained by means of bond issues, the major part of 
the indemnity would have been buried in the Treasury for 
three or four years, while all the time the bonds would have 
been drawing interest — economically, a very wasteful arrange- 
ment. Besides, it would not appear technically correct to 
devote the indemnity obtained from China to expansion of 
means of defense, without using any portion of it for the 
redemption of the expenses of the Sino-Japanese War. Thus 
the original plan was dropped and, as mentioned before, the 
amount drawn from the indemnity, while the war bonds 
were not issued, thereby adjusting the matter of the war 
expenses. By these methods the load on the Treasury 
and the danger of disturbing the financial market after the 
war on account of such bond issue were avoided. So the less 
apparent advantages secured by this change of policy must 
not be ignored. 

Now, regarding the 20 million yen presented to the Imperial 
household in 1898, the government had already decided upon 
it in a cabinet meeting and was about to introduce a bill to 
that effect in the National Diet, when the Diet with a unan- 
imous vote passed a resolution of its own accord to present 

^ Fosl, p. 150. 



122 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

this amount. This was an expression of the loyalty of our 
nation to the Imperial household ; and the fact that the nation 
did not spend for administrative purposes all of the indemnity 
from the war, but presented a part of it to the Imperial 
household in order to help toward perpetuating the glory of 
the Empire, should be displayed in special type. In present- 
ing it the govemrhent used consolidating bonds (face value 
21,022,350 yen, market value 19,404,050 yen, and war bonds 
(face value 645,450 yen, market value 595,905 yen), so that 
these bonds helped the money market both directly and 
indirectly. 

The three funds of which this was the foundation, amount- 
ing in all to 50 million yen, were as follows: 



Item 


Gold coin and 
bullion 


Imperial Government 
bonds 


Cash 


Total 




Amount 


Face value 




Fund for rebuild- 
ing of battle- 
ships and tor- 
pedo boats . . . 

Educational 
fund 

Reserve fund for 
natural disas- 
ters 


Yen 
15,041,827 


Yen 
14,958,173 

9,999,989 
9,999,989 


Yen 

a 
10,775,850 

10,775,850 


Yen 
II 
II 


Yen 
30,000,000 

10,000,000 
10,000,000 


Total 


15,041,827 


34,958,151 




22 


50,000,000 



•Face value, £1,700,000. 

The greater portion of these funds was in bonds. The 
gold coins and the gold bullion, amounting to 15 million yen^ 
were deposited with the Bank of Japan with the understand- 
ing that when the specie reserve should be reduced to 90 
million yen, or when the government should have need, the 
amount deposited should be returned to the government. 
Thus it had a favorable effect upon the money market. Not 
only so, but at the time of the Russo-Japanese War this 



EFFECTS ON PUBLIC FINANCE 1 23 

Special fund was transferred and used for war expenses, 
thereby affording considerable assistance to the government, 
which fact should be mentioned here. 

The foregoing were the undertakings for which the indemnity 
was actually used. But the influence of the indemnity upon 
our finance and economy was not confined to these uses. It 
has been skilfully manipulated to serve in many other im- 
portant ways; for example, after it was received and until it 
was finally disposed of, the balance in hand had a favorable 
effect upon the money market; then again, in order to prevent 
the outflow of our specie it was used as a reserve for exchange 
transactions; then in 1898, when bonds could not be issued at 
home, it was employed temporarily by a system of transfer; 
and finally it has helped the finances of Japan directly and 
indirectly by enabling the government to hold securities in 
England. Thus, while it may be out of place to go into 
detail regarding these matters in the present discussion, it is 
perhaps important to add this explanation to maintain a 
proper balance in point of relative importance of this and 
other effects. 

The first thing to set forth is the service of the indemnity 
in assisting the establishment of the gold standard system. 
Our country, as we shall explain later, ^ long since tried to 
reform our currency system and to change from the double or 
silver standard to the gold standard. In October, 1893, a 
committee was organized to investigate the advantages and 
disadvantages of such a change and earnestly to prepare for 
it. But the government could not make the change for a long 
time because the necessary gold reserve could not be secured. 
When we received the indemnity from China after the Sino- 
Japanese War it was arranged to receive the payment in British 
gold. Therefore the specie and gold bullion in payment were 
shipped here from England and our gold coins were minted from 
this, thereby rendering practicable the plan of establishing the 
gold standard. Here, however, we must explain clearly that 

^ Infra, p. 159. 



124 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

in executing this plan the indemnity itself was not used — the 
coin was merely manipulated to produce this desired result. 

Then again, the temporary balance from the indemnity ac- 
counts was invested in securities, thus employing it for the 
relief of the money market. This step had been highly con- 
tributory toward the betterment of our finances. For 
instance, in the first place, in March, 1899, war bonds to the 
amount of 10 million yen were issued, but the result of the 
subscriptions was not favorable, only 1,500,000 yen being 
subscribed for. So 5 million yen out of the remainder of the 
bonds was subscribed for at face value by the government and 
later these war bonds were exchanged for the railway bonds 
held by the Savings Deposits Bureau. The railway bonds, 
together with the industrial bonds, were later called 5 per 
cent bonds. 

On January 21, 1898, both the industrial and the railway 
bonds (face value 10,807,350 ^^ew, issue price 10,168,636 ;y^w) 
were subscribed for on March 29 at a face value of 5 million 
yen — issue price 4,510,500 yen. The stringency of the money 
market after the war did not permit the issue of these bonds 
in open market. Yet if this capital could not have been 
obtained, the various undertakings would have had to be 
postponed. Besides, difficulties in economic circles were at 
that time increasing more and more. So the government, in 
order to relieve the market and at the same time to manipulate 
the indemnity successfully, decided to purchase 15 million yen of 
the Hypothec debentures and 35 million yen of public loan bonds, 
which were purchased at 96 yen per 100 yen of face value. 

Of the foregoing, the subscription for the Hypothec deben- 
tures was made to help extend the loans of the Hypothec Bank 
of Japan and also to relieve the industrial concerns in Osaka 
and other places which were in serious financial difficulties at 
that time. The conditions of the government subscription 
were that the government should take up the remainder of the 
whole amount of the bond issue after the popular subscriptions 
to the bonds had been taken into account, and that the in- 



EFFECTS ON PUBLIC FINANCE 



125 



vestment of the capital should be confined to export industries 
in Osaka, Kyoto and Tokyo, or to goods which would take the 
place of imported articles. The actual result of the sub- 
scription was as follow^s: 



No. 


Date 


Total 

amount of 

loan 


Private 
subscription 


Absorbed by 
indemnity 
accounts 


Total 
issue 


I 

2 
3 
4 
5 


April 11-22, 1898 
April 25-28, 1898 
June 8-13, 1898 
Oct. i-io, 1898 
April 1-30, 1899 

Total 


Yen 
1 ,000,000 
1 ,000,000 
1,000,000 
2,000,000 
1 ,000,000 


Yen 

477,650 

44,750 

12,750 

1,413,900 

305,620 


Yen 

519,450 
955,250 
987,250 
586,100 
694,380 


Yen 

997,100 
1 ,000,000 
1 ,000,000 
2,000,000 
1 ,000,000 




6,000,000 


2,254,670 


3,742,430 


5,997,100 



It is plain, therefore, that about 62 per cent of the entire 
amount of the bond issue of 6 million yen was absorbed by the 
indemnity accounts. Next, we shall note the circumstances 
surrounding the purchase by the government of the bonds. 
On April 15, 1898, for the first time an order was issued to the 
Bank of Japan to undertake the purchase of the bonds. The 
result was very successful, so that in October of the same year 
the money market was gradually relieved and the interest 
rate of the Bank of Japan was reduced. Therefore on October 
10, the order to purchase the bonds was rescinded. The entire 
amount of the bonds thus purchased at that time was 38,707- 
770 yen (face value) the purchase price being 36,998,826 yen. 

Again, on April 13, 1899, in order to raise the price of 
bonds, the government decided to purchase an additional 5 
million yen of bonds, and thereby succeeded in raising the 
market price to the face value between April 21 and June i 
of the same year. 

We have so far described how the government purchased 
the negotiable instruments for the purpose of relieving the 
money market. We shall now show in the following table the 
amount of the subscription by the government for these bonds 
and the amount of purchase: 



126 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 



Government Subscription and Purchase of Bonds 



Item 



5 per cent bonds: 

Face value 

Purchase value . . , 
War bonds: 

Face value 

Purchase value . . . 
Consolidated bonds: 

Face value 

Purchase value . . . 
Navy bonds: 

Face value 

Purchase value . . . 
Kinroku bonds: 

Face value 

Purchase value . . . 

Total: 

Face value 

Purchase value . . . 



Amount of 
subscription 



Yen 
20,807,350 
19,679.136 



20,807.350 
19,679.136 



Purchase to 
relieve 
money 
market 



Yen 
2,700 
2,527 

13,446,550 
12,897,288 

21,022,350 
20,146,346 

426,000 
402,045 

3,810,170 
3.550.620 



38.707,770 
36,998.826 



Purchase to 

preserve 

market 

value 



Yen 



638,600 
638,683 

1.350.800 
1,340,360 



1,989,400 
1,979,043 



Exchange 

with deposits 

section 



Yen 
3,100,000 
2,966.268 



3.100.000 
2,966,268 



Total 



Yen 
23,910,050 
22,647,931 

14,085,150 
13,535.971 

22,373.150 
21,486,706 

426,000 
402,045 

3,810,170 
3,550.620 



64.604,520 
61,623,273 



Increase of taxes and development of 
government monopoly 

The expenses of the Sino- Japanese War were principally 
met by the issue of bonds and the transfer of the indemnity, 
thus rendering the increase of taxes in the main unnecessary. 
But when the government expenditure increased on account 
of various post-bellum undertakings, funds were secured by 
increasing certain classes of taxes, by creating others, and 
by establishing a monopoly on leaf tobacco. 

An increase in the taxes took place twice after the Sino- 
Japanese War. The estimated amount of revenue from the 
increase was as follows: in the first period, from the fiscal year 
1896, the amount was 33,576,293 yen; in the second, from 
the fiscal year 1899, it was 40,346,875 yen; in all, 73,923,168 
yen. 

According to the first plan, a business and a registry 
tax were newly established, a tobacco monopoly also, and 
the sake tax was increased, while on the other hand certain 
classes of taxes were abolished. The intention was to in- 
crease the net receipts to over 26 million yen. The receipts 
were estimated as follows: 



EFFECTS ON PUBLIC FINANCE 127 

Estimated receipts 
Yen 

Registry tax (new) (in force from April i, 1896) 6,423,993 

Business tax (new) (in force from January i, 1897) 7.551.377 

Sake tax (increased) (in force from October i, 1896) 9,284,544 

Leaf tobacco monopoly (newly established) (in force 

January i, 1898) 10,316,379 

Total 33.576,293 

Decrease from abolition of certain taxes 7.552,397 

Balance 26,023,896 

Later, at the time of the second increase, a tax on tonnage 
was established, and other taxes were increased, in order to 
obtain a total of 42 million yen a year. 

Yen 

Land tax (in force from January i, 1899) 8,475,958 

Income tax (in force from April i, 1899) 1,494,516 

Sake tax (in force from January i. 1899) 22,556,409 

Tonnage tax (in force from August 4, 1899) 237,986 

Registry tax (in force from April i, 1899) 1,846,759 

Leaf tobacco monopoly receipts (in force from April i, 1899) , 2,145,550 

Tax on convertible bank notes (in force from April i, 1899) . . 1,159,560 

Soy tax (in force from March i, 1899) 1.598,387 

License to sell tobacco (in force from April i, 1899) 831,750 

Total 40,346,875 

The entire increase for the two periods was roughly es- 
timated at 73,923,000 yen. Comparing this amount with the 
total amount of 156,552,359 yen from taxes, stamp receipts, 
and the profits of the leaf-tobacco monopoly for the fiscal 
year 1900, the year in which the entire actual amount of the 
increased taxes was to be realized, the estimated amount as 
mentioned above was about 50 per cent of the entire amount, 
and compared with 74,697,624 yen, which was the amount of 
revenue from taxes as actually accounted for in the fiscal year 
1895, the year previous to the increase in taxes, it is seen to be 
nearly the same as the entire amount of the tax revenues. We 
thus see how extraordinary the increase in taxes was. For, 
whereas in 1895 the amount of revenue from various taxes 
classed as indirect was 34,507,661 yen, against the total 
amount of revenue of 40,189,963 yen from the land and income 
taxes classed as direct, in 1900 the indirect taxes amounted to 
74,788,744 yen and the direct taxes to 59,137,351 yen. The 



128 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

ratio of these taxes to the entire revenue from all the taxes 
was as follows for 1895 and 1900: 



Year 


Direct 


Indirect 


1895 
1900 


Per cent 
53-8 
44.2 


Per cent 
46.2 
55-8 



We shall explain later what kinds of taxes were classed as 
indirect, for we must note that these indirect taxes constituted 
one cause of the extraordinary rise in the prices of commodities 
after the Sino-Japanese War. We shall explain this point 
more in detail, under the heading "Fluctuation in Prices" in 
Chapter VIII. 

We have thus briefly outlined the plan to increase taxes and 
the results. The reason why taxes, increased once in 1896, 
were, within a few years, that is, in 1899, again enormously 
increased was because of the extraordinary increase in the 
ordinary expenditure arising from the post-bellum enterprises, 
the rise in prices consequent upon the economic changes made 
after the war, and the various enterprises undertaken in 
the newly acquired territories, since not only were there 
limitations to the use of the indemnity but there were diffi- 
culties in obtaining funds for ordinary expenditure, as the 
market conditions of the country at the time did not permit 
the sale of bonds. Naturally, these financial difficulties led 
to frequent political quarrels and change of cabinets. The 
national Diet was next dissolved so that the results just 
stated could be brought about. Before briefly explaining the 
newly established and increased taxes, we shall present the 
annual financial status in outline. 

We have repeatedly explained before that, in order to meet 
the various expenditures required by the nation's develop- 
ment after the Sino-Japanese War, and also to meet the ex- 
panded administrative expenditure resulting from the rise in 
prices of commodities and in the cost of labor consequent upon 
the economic disturbances after the war, our country levied 
increased taxes to meet the ordinary expenditure and trans- 
ferred the indemnity and issued bonds to obtain financial 



EFFECTS ON PUBLIC FINANCE 1 29 

resources for the extraordinary expenditure. But as it was 
expected that in the fiscal year 1896 there would be a deficit 
of about 20,360,000 yen in the ordinary revenues owing to 
various expenditures, such as those for the expansion of the 
means of national defense, the payment of the principal and 
interest on the war bonds, the Imperial grants of rewards, the 
annual pensions, the expenditure for Formosa and for Wei- 
haiwei, etc., and also that these various expenses would in- 
crease thereafter, it was estimated that the amount needed to 
supply the deficit in the annual revenue would be approxi- 
mately 30 million yen. Hence as we stated before, a registry 
tax and a business tax were newly established, a leaf tobacco 
monopoly was instituted, and the sake tax was increased, so 
that in all an increase of 26,023,896 yen from taxes was 
secured. Although the increase in taxes was thus effected, 
yet in that fiscal year the revenue from the registry tax 
amounted to only about 2,720,000 yen (deducting the revenue 
from abolished taxes). The deficit so caused was made good 
by transferring an equal amount from the surplus in the 
Treasury left over from the previous year, the government 
being thereby barely enabled to balance the annual revenue 
and expenditure. The next year, 1897, the budgetary item 
for expenditure was also enormously increased. But, as the 
increase in taxes had been effected in the previous fiscal year, 
there was a revenue of 16 million yen from the increase (net 
revenue about 10 million yen after deducting the revenue 
from abolished taxes), and in addition a natural increase in 
revenue from other sources; so that the ordinary revenue for 
that year showed an increase of about 20 million yen compared 
with the previous year, thereby enabling the government to 
maintain a reasonable balance between the annual revenue 
and expenditure. But until the succeeding year the entire 
estimated amount of revenue from the increased or newly 
established taxes could not be obtained. So the deficit was 
supplied from the surplus in the Treasury and from a certain 
amount transferred from the indemnity. But in 1898, owing, 
on the one hand, to an extraordinary increase in expenditure 



130 ECONOMIC EFFECTS Of THE SINO-JAPANESE WAR 

(amounting to about 5 million yen) for the encouragement of 
water transportation, the extension of shipping routes, and the 
replenishment of the fund for various enterprises in Formosa 
(amounting to about 10 million yen) and on the other hand, to 
a decrease in revenue (amounting to about 5 million yen)y 
because of the abolition of the tax on registry of population, 
the decrease of the business tax, etc., there was again a deficit 
in the ordinary revenue amounting to 21 million yen. There- 
upon, the government tried to secure the entire amount or an 
increase of 25 million yen from the land and sake taxes. But 
the net revenue from increased taxes for the fiscal year 1898 
amounted to only a little more than 8 million yen. The 
revenue for this year included about 9,500,000 yen of the 
increase in the land tax, but 170,000 yen were expended for the 
collection of the revised sake tax, and 910,000 yen for the ex- 
penses of land revaluation, while 330,000 >'ewwere estimated as 
a decrease through the prohibition of home sake brewing. It 
was planned to meet the deficit thus caused by means of a 
loan. But at that time, the government — the Matsukata 
Ministry — lost control of the political situation. The Diet 
did not approve the ministry, and passed a resolution to that 
effect. Thereupon the Diet was dissolved and at the same 
time the bill to increase the tax was voted down. Conse- 
quently, the only way to supply the deficit was to make use of 
the indemility or temporary loans. 

Thus, in a short time, the Matsukata Ministry fell, and 
the second Ito Ministry was formed. The new Diet formed 
after the dissolution was commanded to assemble May 19, 
1898. In that year, as before stated, there was a deficit in the 
annual revenue and the disparity between revenue a.nd ex- 
penditure was great. As it was plain that this situation 
would be continued into the following year, the government 
again planned an increase in the taxes in order to be ready 
to meet any emergency. It was estimated that the deficit 
in the ordinary revenue would be 35 million yen as itemized 
on the next page. 

So, the government, to offset this deficit, tried to obtain an 



EFFECTS ON PUBLIC FINANCE I3I 

Yen 

Sundry expenses In Formosa 11 ,240,000 

Encouragement of water transportation and extension of shipping 

routes 4,870,000 

Redemption of bonds 7,000,000 

Prison expenses paid out of Treasury 3, 550,000 

Fund established for relief of sufferers from natural disasters 500,000 

Interest on Chitsuroku bonds 460,000 

Increase in the ordinary expenditure on account of the rise in prices . . 6,860,000 
New enterprises on account of revision of treaties with foreign countries 2,550,000 

Total 37,030,000 

Excess of revenue i ,500,000 

Balance (deficit in revenue) 35, 530,000 

increase in revenue from the land tax of 17,550,000 yen, the 
income tax of 1,640,000 yen, and the sake tax of 12,410,000 
yen, totaling 31,600,000 yen. In addition, an increase was 
planned from the telegraph serv^ices, 430,000 yen, from the 
railway profits, 3,240,000 yen, totaling 3,600,000 yen, which 
would bring the grand total of increase to 35,200,000 yen. 
But the Diet considered it unreasonable to deliberate upon an 
increase in annual revenue not accompanied by corresponding 
expenditure. Therefore, the bill for revision of the land tax 
regulations was rejected by a great majority on June 10, 1898. 
The Diet was again dissolved, and the Ito Ministry fell on 
June 30. The Okuma Ministry which succeeded also fell on 
October 31 of the same year, on account of troubles among the 
members of the party, and was followed by the Yamagata 
Ministry. 

In reviewing the budget for the year 1899, we find that the 
revenue amounted to 188,738,437 yen and the expenditure 
to 226,344,792 yen, the deficit in revenue being 37,606,355 yen. 
The following are the principal items of increase in the or- 
dinary expenditure which account for this deficit: 

Encouragement of water transportation and extension of shipping Yen 

routes 3,790,462 

Sundry expenses in Formosa 12,121,597 

Army expenses 1,275,310 

Navy- expenses 3.578,368 

Army expansion 5,140,798 

Temporary repair of warships and torpedoes 440,432 

Sundry expenses in connection with revision of treaties and execu- 
tion of laws in practice 1,961,425 

Sundry expenses for education 1,508,310 

Increase in expenditure of various government departments 6,141,562 

Total 35.958,264 



132 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

There was also urgent need for effecting the payment of 
prison expenses out of the treasury reserve and for establish- 
ing a fund for the relief of sufferers from natural disasters. 
For these purposes, the sum of 46 or 47 million yen was 
required, but as the indemnity had already been allotted to 
various uses, only a very small amount remained available. 
As for a new bond issue, that was out of the question at this 
time when the money market was so tight. But as the fore- 
going items were practically of the nature of ordinary expend- 
iture, a second period of tax increase was planned. Ac- 
cordingly, the rates on land, income, sake, registry, convertible 
bank notes, soy, and tobacco business were raised, the rate of 
revenue from the leaf -tobacco monopoly was increased, and a 
revenue from postoffice and telegraph service was planned, 
amounting in all to 42,020,219 yen. These taxes have been 
discussed before, but we may here mention the fact that in 
anticipation of the proceeds to result from the new tax law the 
deficit in the annual revenues was made up by a transfer of a 
part of the indemnity. The first increase in taxes yielded 
33>576,293 yen additional revenue, the second, 42,020,219 
yen, a total of 75,596,512 yen. But in the early part of 1900 
the Boxer troubles occurred in China and on June 26 of the 
same year Imperial Emergency Ordinance No. 277 was issued, 
authorizing the government to use, for the Boxer punitive 
expedition, a part of the three funds which had been estab- 
lished with the indemnity obtained from China, viz., (i) for 
building warships and torpedo boats, (2) for meeting emer- 
gencies from natural disasters, and (3) for promoting education. 
Before the end of 1900, 28 million yen from these funds had 
been employed for the aforesaid purpose. Accordingly, in 
1 901, an attempt was made to repay the Boxer expenditure 
and reimburse these three funds by raising the taxes on sake 
and sugar and raising, or at least regulating, the customs 
tariff rates, since it had been decided to replace revenue 
raised from bond issues with that raised from taxation. It 
was decided to raise additional revenue from the leaf-tobacco 
monopoly also. The bill to increase the taxes was vigorously 



EFFECTS ON PUBLIC FINANCE 133 

Opposed for a time by the House of Peers. But after an 
Imperial order had been issued, the bill was successfully passed, 
and the various bills as passed were put in force from October i , 
1901 . As stated before, the increase in taxes for the year 1901 
was planned principally for the purpose of repaying the ex- 
penses of the Boxer war. But as the expenditure of the 
money thus raised was not confined to this, a further increase 
soon became necessary. Such were the evil effects of the 
post-bellum enterprises. We shall here tabulate the increase 
from the various taxes as follows : 

Yen 

Beer tax 229,047 

Revised tarifT regulations 141,374 

Sugar consumption tax 2,718,867 

Leaf-tobacco monopoly price changed 3,204,287 

Total 6,293,575 

This increase amounted to about 6 million yen so that the 
whole increase reached about 82 million yen. We shall leave 
the detailed explanation concerning the foregoing various 
kinds of taxes to the volume dealing with the investigation 
of taxes and shall here confine ourselves to saying a few 
words concerning the development of government enterprises. 

After the Sino- Japanese War, the newly planned or ex- 
tended government enterprises were the tobacco monopoly, 
the railways, the iron foundry, and the post and telegraph 
offices. The reasons for starting said enterprises were as 
follows: The iron foundry was considered indispensable 
for defense purposes, the extension of the railways was planned 
in order to develop the wealth of the nation, and as to the 
reform in the regulations for postal and telegraphic service 
and railway freight made in the year 1899, this was made for 
quite other purposes than the replenishment of the annual 
revenues. The leaf-tobacco monopoly, on the other hand, 
was started altogether for the replenishment of the annual 
revenues, and was the first of the monopolistic enterprises 
undertaken by Japan. 

As we have already briefly described the iron foundry in 
discussing the extension of national defenses, and shall 



134 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

explain the extension of railways in Chapter VI, we shall here 
dwell chiefly upon the leaf-tobacco monopoly. 

The leaf-tobacco monopoly is especially notable for two 
reasons, first, because out of the entire budget the amount 
secured from its revenues was the largest in the financial 
program hurriedly formulated after the Sino-Japanese War^ 
(in the first period of tax increase, 10,316,379 yen; in the 
second period, 2,145,550 yen, total 12,461,929 yen), and 
second because with its institution the monopoly system was 
first established as a government enterprise. It may indeed 
be proper to discuss the subject here as one development of 
government enterprises; but especially because it belongs to 
the class of consumption taxes, it is explained here. 

The leaf-tobacco monopoly was established to replace the 
stamp tax on manufactured tobacco provided for in the 
tobacco-tax law of 1876. The annual revenue from the 
stamp tax had been very small, in 1876 amounting to only 
80,000 yen. Later, it increased to between 50,000 yen and 
60,000 yen for about seven years. In 1884, as a result of the 
revision of the law, the revenue reached approximately 1,000,- 
000 yen, and after the revision of 1889, between 1,500,000 
yen and 2,300,000 yen. But if the rate of a tax be raised the 
tax is liable to be dodged and the object — to secure an increase 
in revenue — frustrated. Thus the tobacco monopoly came 
to be established, with the object of controling the sale 
legally. The government was to supervise the raising of 
tobacco, and the tobacco raisers to secure a special permit 
from the government to raise tobacco and to sell the crop to 
the government, after inspection, before harvesting or after 
the crop had been dried. They were not permitted to dispose 
of this to private parties or to consume it privately, and the 
government, after purchasing, was to sell to the tobacco 
manufacturers, thereby securing a margin of profit. This 
plan was executed from January i, 1898, in accordance with 
Leaf-Tobacco Monopoly Law No. 35, promulgated on March 
27, 1896. 

^ Article 12, Leaf-Tobacco Monopoly Law No. 35. 



EFFECTS ON PUBLIC FINANCE 135 

To be more specific, the government had the privilege of mo- 
nopolizing the sale of all the leaf tobacco produced but must 
sell the produce at a fair price, the producers being required to 
report their products to the government. The produce left 
over in the hands of the tobacco manufacturers before January 
I, 1898, which was the date of the execution of the new law, 
was to be governed by the tobacco tax law in force before that 
date. But at that time, the import tariff rate of our country 
was very low in accordance with the old treaty stipulations, 
so the importation of foreign tobacco increased considerably; 
the more so as the direct exportation of leaf tobacco was 
permitted to the producer without first selling it to the 
government.^ Unscrupulous merchants often took advantage 
of this right and thus the desired result of the monopoly 
system could not be obtained. Therefore, on January i , 1899, 
the tariff law was reformed and the existing evils removed, as 
by Law No. 28, issued on March i, 1899, the government was 
to buy or import leaf tobacco. Again, the manufacture of 
tobacco or the monopolistic sale of leaf tobacco was permitted 
to those securing a license issued on payment of a fee (in the 
case of manufacturers, 50 yen each for manufacturies, and 50 
yen each for dealers). This was done to increase the revenue 
by raising the rate. 

The government, as a basis for estimating the profit from 
the monopoly, fixed the average price of manufactured 
tobacco throughout the country in 1894 ^^ 22 sen per 100 
momme (i momme=^ 58 grains troy). From this four sen, four 
rin, and two mo of stamp tax was deducted, so that the net 
market price was fixed at 17.58 sen. Since 100 momme of 
manufactured tobacco requires 145.56 momme of leaf tobacco 
as material, at the aforementioned market price 100 momme 
of leaf tobacco would be worth 12.137 •^^^- The rate of 
revenue for the government from this was fixed at 35 per 
cent so that the amount of revenue for the government 
was 4.248 sen. But the average selling price of leaf 
tobacco by the growers was fixed at 5.084 sen per 100 

^Article 12, Leaf-Tobacco Monopoly Law Xo. 35. 



136 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

momme. The following table will show the basis of monopoly 
prices : 

Sen 

Profit of the treasury (35 per cent.) 4 . 248 

Commission for brokers for transportation (i i percent.) i .026 

Sundry manufacturing expenses (about 20 per cent.) 2 .000 

Profit of the manufacturers and of the dealers (33 per cent.) .... 4 • 027 

Total 1 6 . 385 

If this total is compared with the price of leaf tobacco, that 
is 12.137 ^^f^i to which the stamp tax of 3.034 sen must be 
added, making a total 15. 171 sen, it will be seen that as a 
result of the tobacco monopoly established by the government 
the market price would become higher by about 1.2 14 sen. 

Now, according to the estimate of the government, the 
entire production of leaf tobacco throughout the country 
amounted to 24,285,260.182 kwan^ and at the rate of 4.248 sen 
of profit per 100 momme for the government, as per the fore- 
going table, the revenue of the government, it was estimated, 
would be 10,316,379 yen. But the actual results of the 
monopoly did not come up to this estimate, as will be shown 
below. In the year 1901 the profits of the government 
amounted to 10,866,699 y^^^ but if we remember that the rate 
of profit then was 150 per cent, we may realize what the 
situation was. 

The annual amount of leaf tobacco produced throughout 
the country for several consecutive years was as follows : 





Amount 
produced 


Amount 
received by 
government 


Price paid by 
government 


Price per 

kwan 


iSoS 


Kwan 

8,280,882 
13,714,724 
13,315,291 

8,484,374 

8,349.505 
11,506,790 


Kwan 

8,177,711 
13,493,327 
13,309,991 

8,626,506 

8,430,071 
11,474,249 


Yen 
5,967.625 
8,039,214 
7,720,610 
5.792,281 
6,123,339 
8,660,353 


Yen 
o.7';o 


1 800 


0. sq6 


IQOO 


0. s8o 


IQOI 


0.671 


1902 


0.726 


190-1 


o.7S«5 






Total 


63.651,566 


63,511,855 


42,303,422 





I kwan = 8{ lbs. av. 



EFFECTS ON PUBLIC FINANCE 



137 



Now the rate of revenue was based upon 84 per cent of the 
purchase price paid (the monopoly on imported tobacco was 
commenced from 1 899 and the purchase price was based upon 
the same). Later, from July, 1898, to August, 1900, the 
rate increased to 100 per cent; from August 22, 1900, to 130 
per cent; in the year 1901 it was 150 per cent; and in the year 
1902 between 140 and 180 per cent. 

The amount and the percentages of profit are given below, 
in a table which will show that the estimated revenue was at 
last obtained in the year 1902. 



Expense of 

procuring leaf 

tobacco 



Profit 



Percentage of 
profit 



1897-.. 
1898. .. 
1899... 
1900. . . 
1901 . . . 
1902. . . 
1903 • . . 

Total 



Yen 

375,005 
5,867,618 
8,040,416 
8,221,584 
6,840,999 
6,921,933 
9,743,213 



Yen 

292,141 

5,145,999 

7,559,533 

7,244,159 

10,868,699 

12,367,569 
14,898,291 



Per cent 

77.9 

86.2 

94.0 

88.1 

158.8 

178.8 

152.9 



46,010,768 



58,376,391 



126. 87» 



» Average. 

Now, at the time of the increase in taxes, in 1902, it was 
planned to obtain 1,673,344 3^^^ from the post and telegraph 
revenues; while the direct object was not to replenish the 
annual revenue, yet the change in the telegraphic rate and the 
railway fare produced an increase of over 2,200,000 yen in the 
annual revenue. With this increase, telegraphic apparatus 
was increased, wires were extended, and the means of com- 
munication were otherwise improved in order to help the 
development of the government enterprises. 

Local Finance 

As the finance of the central government expanded after 
the Sino-Japanese War, so the expenditure of the local 
governments for educational and industrial development 
expanded proportionately, to keep pace with the national 



138 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

development. The following table will show the general 
increase in the annual expenditures of prefectures, cities, 
towns and villages, which are the local self-governing units of 
our country. 

Increases in Annual Expenditures of Prefectures, Cities, Towns and 

Villages 



Fiscal year 


Prefectures 
(Do, Fu, Ken) 


Cities 

(Shi) 


Villages 
(Cho and Son) 


Comparison 
annual ex- 
penditure from 
national 
treasury 


iSo't 


100. 
106.0 
lOI .2 

129. 1 
163.4 
170.3 
197.8 
212.3 
219.6 
236.8 
245.6 


100. 
114. 8 
138.8 
176.8 
235-0 
250.8 
343-2 
435-6 
506.1 
593-0 
589-7 


100. 

IIO.O 

119. 7 

134 -3 
170.2 

193-5 
223.3 
263.0 
296.6 

311-5 
316.4 


1 00.0 


1 804. 


92.4 
100.9 
199.9 
283.4 
259-8 
300.5 
346.1 

315-5 
342.0 

295-1 


i8q«; 


1896 


1807 


1898 

1 800 


I QOO 


IQOI 


I Q02 


190'^ 





As shown in the foregoing table, the expansion of the 
finance of the local government was much the same propor- 
tionately as that of the nation. In the case of cities the 
percentage of increase was especially great. The table on page 
139 will show the percentage of various items of expenditure 
of the local governments to the total and also the percentage 
of increase in the expenditure in the year 1904 compared with 
that of the year 1895.^ 

The table on page 139 shows that of the various items of 
expenditures, those for construction and for the police in 
prefectures, those for construction, education and bond issues 
in cities, those for construction, education and offices in towns 
and villages, amounted to enormous sums. It shows, again, 

^ In the annual expenditure, prefectural expenses for sanitation are included 
among other items, also the prison expenses were turned over to the national dis- 
bursements, in the year 1902. The administration of the police and the prisons is 
a governmental work and does not belong to the incorporated local communities, 
so that these expenses of administration do not appear in the expenditure of cities, 
towns and villages. 



EFFECTS ON PUBLIC FINANCE 1 39 

Ratio of Expenditures of 1904 and Rate of Increase over 1895 





Prefectural 
expenditure 


City expenditure 


Town and village 
expenditure 




Percentage 


Rate of 
increase 


Percentage 


Rate of 
increase 


Percentage 


Rate of 
increase 


Police 


16. IS 
31.55 
12.30 

2.90 

6.79 
3.88 

26.70 


101.2 
148.9 
659.1 

813.0 

419.4 
102.9 


14.32 
22.05 

0.36 
4.81 

13' S3 
8.49 
0.S8 

35.87 


721.6 
385.9 

257.4 
795.3 

80s. I 

278.4 

58.7 

427.5 


16.51 
35.82 

1. 21 
5-94 

23.16 

1.08 

10.63 






48.0 


Educational 


250.1 


Encouragement of in- 
dustry 


504. 1 




546.6 


Prison expenses for pre- 




Bond issue 


1,269.4 


Office 


112. 


Conferences 


62.3 


Other 


979.2 






Total 


100.00 


145.6 


100.00 


489.7 


100.00 


216.4 







that the percentage of increase was especially remarkable in 
educational, industrial, sanitation and bond-issue expenditure. 
This shows how the local governments have been endeavoring 
to improve education and to develop wealth to keep pace with 
the central government and help in the advancement of the 
nation. It was indeed in keeping with the general tendency 
to encourage the post-bellum enterprises of the nation. 
Table XII at the end of this chapter^ shows the percentage of 
increase in educational, sanitation, industrial and bond-issue 
expenditure. 

The expenditure for education mentioned in the foregoing 
table refers to that of local communities, that is, for public 
schools and the general education of the people. The ex- 
penditure for sanitation was for preventing disease, for 
disinfection, and for arrangements for public sanitation. The 
expenditure for encouragement of industries was made to 
encourage agriculture, industry and commerce. All these 
were calculated to help conserve and increase the national 
power, but appeared in the local government budgets only in 
connection with the post-bellum enterprises of the nation. 

As for the direct financial effects of the war, there must 
have been various items of expenditure, such as the expense of 

^Post, p. 151. 



140 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

farewell receptions for the soldiers who went to the front, the 
relief of the survivors of the dead, and other similar items, 
which would have increased the expenditure considerably. 
But the exact data are lacking and, besides, the patriotism of 
our countrymen, their enthusiasm to serve their country, the 
ardent desire of the people to relieve their own relatives, have 
created the sentiment that it is a great honor to die at the 
front and have lessened the burdens of the local government 
in relieving the survivors of the dead, so that it will not be 
far wrong to state that the expenditure for these purposes did 
not burden the local governments very much. 



EFFECTS ON PUBLIC FINANCE 



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142 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 





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144 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 



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XX 



146 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



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EFFECTS ON PUBLIC FINANCE 



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00 00 00 00 On O^ O^ On 



148 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



1 


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lo ! 10 pT I 


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to rj-t^ 

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p< 


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T? CO hT hT 




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pf 

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On CO 00" vo" (nT 0" 

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c^ M M CO 


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EFFECTS ON PUBLIC FINANCE 



149 



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Q 00 00 


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10 


VO t^ 


m 


M 


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M 00 O OntJ-oOOO VO rOOO (>< vO 
VO O O O ON M CO VO Tl- c< ON ON 




VO CO 



CO 



Ti-vO 



00 

- - 00 

d"vo" CO vo" 

0\ 1-1 t-i r>. 

C^^ CO •^ P*^ 

hT 00 oo" fi 

10 i-i i-i 



1010 

10 Ov 

cOOv 

o" to 



u a 
o 



»0 t}- • VO M HI On 

r^ CO • HI vd 10 W 
CO vO • n >OvO 



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VOOO 
Tfvo" 
100 



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to 



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tn u, 
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C< U-) O ON 



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a o 

►^ o 



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Tl-O t^co 

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150 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



Table X. — Revenue for Post-bellum Enterprises and Annual Balance 





















Compensation 










Fiscal 


War expense 


for return of 




Total 


Amount 




year 


indemnity 


Liaotung 
Peninsula 


increase and 
decrease 


revenue 


expended 






Yen 


Yen 


Yen 


Yen 


Yen 


Yen 


1895... 


74.143,054 


44.907.499 


93.624 


119,144.177 


78,957,165 


40,187,012 


1896... 


83,719.110 




911.652 


84,630,762 


11,789.389 


113,028,385 


1897. .. 


34.869.189 








7.071.097 


41,940,286 


40,360,796 


114,607,87s 


1898... 


118,341.511 








1,341.450 


119,682,961 


66,187,071 


168,103,76s 


1899. .. 


.... 








311.277 


311,277 


82,636,90s 


85,778,137 


1900 . . . 










661,313 


661,313 


31,240,140 


55,199,310 


1901 . . . 


.... 








1.705,783" 


1,705,783* 


20,883,427 


32,610,100 


1902 . . . 










155,337" 


155,337" 


13,866,937 


18.587,826 


1903. . 


.... 








147,073 


147,073 


9,514,215 


9,220,684 


1904. .. 


.... 








57,849 


57,849 


3.544.375 


5.734,158 


1905... 








154,009 


154,009 


1,709,797 


4.178,370 


Total 


311.072,864 


44,907.499 


8,888,224 


364,868,587 


360,690,217 


4.178.370 



» Decrease. 



Table XI. — Expenditures for Post-bellum Enterprises 





Redemption 








Extraordi- 


Amount 






of Sino-Jap- 








nary war 






anese War 






Estab- 


expendi- 


transferred 




Fiscal 


expenses. 


Army 


Naval 


lishment 


ture and 


to the Im- 




year 


and transfer 


expansion 


expansion 


of iron 


expenses of 


perial house- 


Total 




to General 






foundry 


communi- 


hold and to 






Accounts 








cation 


various 






Fund 








bureau 


funds 






Yen 


Yen 


Yen 


Yen 


Yen 


Yen 


Yen 


189s... 


78,957.165 






.... 


.... 


.... 


78.957,165 


1896... 




7,588,356 


4,043,729 


157,304 






11,789.389 


1897... 


.... 


16.193,396 


20,633,455 


383,156 


3.150,789 




40,360,796 


1898... 


I2,000,000« 


8,932,554 


25.151.519 


39.302 


63.696 


20,000,000^ 


66,187.071 


1899. . . 


.... 


6,053,980 


26,582,925 






50,OO0,000<= 


82,636,90s 


1900,. . 


.... 


8,121,594 


23,118,546 






.... 


.... 


31,240,140 


1901.. . 


.... 


5,346.896 


15.536,531 






.... 




20.883,427 


1902. . . 


.... 


3,083.189 


10,783.748 






.... 


.... 


13,866,937 


1903.. 




1,258,552 


8,255.663 








.... 


9,514,215 


1904... 


.... 


94,431 


3.449,944 






.... 


.... 


3.544,375 


1905... 




108,761 


1,601,036 









— 


1,709,797 


Total 


90.957,165 


56,781.709 


139,157,096 


579.762 


3,214,485 


70,000,000 


360,690.217 



• General Accounts Fund. 



^ Imperial Household. 



« Various Funds. 



EFFECTS ON PUBLIC FINANCE 



151 





1 

1 

c 
W 


Towns 

and 
villages 








rt-fOt^iOl^- 0N0MC»O 
« rfr<v£) roc «00 00 
HI i-i HH «s 10 fO Tj- 10\0 00 Ov 




1^ 


• -CTj-aNosovooof^ov 

• •00M0^^^t^f00►^ 




tn 

•c 

.s 

'i 

c 

2 

3 

8 

c 
W 


Towns 

and 
villages 


n H^ 00 r'JOO ■^ tJ- 1000 
hiHHi-icsvOrOrJ-iO t^vC sO 




1 


i-T i-T J" ri cT 




is 
i3 


1-1 1-1 M N C< rOro>Ot>.CNCN 




il 
fi 

X 

W 


Towns 

and 
villages 


OvOtiONClNOOi-ClvOTl- 

<-i M ^ ro ""i- 1^ q_ q_ c^oo vo 




1 

U 


Tj-ONt^OOMOrOfOO 10 
i-i (N OMOOO n ONONO 
•-I i-« cj i-i N (S rf-r^oo O_oo 




c 
.2 

3 
0) 

3 

'"O 

c 


Towns 
and 

villages 


Th\0 lO^H lOOThC ON© 
!-> fO^ 00 M f^ re Tt- 10 
HHi-ii-ii-iHHhH(s(StOrOcO 




en 


rOiOvO fOt^OO rOO fOvO 
t-H H- rhO r« OvvO C< Tl-oo 





















C^O^CT^O^C\0^0^0 O O O 

OOOOOCOOOCOOOO CNONOC> 



CHAPTER III 
EFFECTS ON THE MONEY MARKET 

At the time of the Sino-Japanese War, our economic world 
bore the burden of war expenses amounting to about 236 
million yen and met the issue of 100 million yen of war bonds. 
Such an enormous bond issue — and during war time too — 
had never been heard of before in Japanese history. So the 
government was careful not to burden the people too heavily, 
and by employing the Bank of Japan devised a suitable and 
effective financial policy whereby financial circles were enabled 
to pass quite tranquilly through the war. 

When diplomatic negotiations between Japan and China 
assumed a serious aspect, in June, 1894, financiers and econ- 
omists entertained grave anxiety. To understand the situa- 
tion we must realize that the financial policy of the government 
at that time was to prevent stagnation in the circulation of 
capital by restricting the construction of railways. So the 
Bank of Japan raised the loan interest rate on June 18, 1894, 
from 1.9 sen per diem (6.935 per cent per annum), which had 
been the rate in force from February 8, 1894, to 2 sen per diem 
(7.3 per cent per annum). The economic world was struck 
with terror; for, be it remembered, war with a foreign country 
was something of which the people of Japan had only read in 
books on history and of which they had not had the least 
direct personal experience. They were profoundly disturbed 
by the idea of crossing arms with China — a great nation 
hoary with age — and feared they knew not what great 
economic convulsion. The banks throughout the country 
called in their capital, restricted their loans, and were anxious 
only to protect themselves; the industrial world, expecting a 
decrease in the demand for goods during the war, restricted 
production; the people turned their attention altogether to 
economy, and commerce shrank; then, again, the Chinese 
residing in Japan, fearing that as a result of the opening of 

152 



EFFECTS ON THE MONEY MARKET 1 53 

hostilities paper currency might greatly fall in price, would not 
accept anything but silver in payment, and demanded a 
premium of i| per cent on paper currency — so great was the 
apprehension felt by economic circles ! 

But when the war began and arms were actually crossed 
between Japan and China, the Imperial Japanese Army at 
once won a great victory and there was strong confidence in 
the minds of the people that the final outcome would be 
favorable to Japan. This restored confidence in the money 
market, which then became very firm. When the war bonds 
were issued, the people were moved by patriotism and the re- 
sult of the popular subscriptions to the bonds was very good. 
The interest rate was very low, only 5 per cent, and this had 
a great effect in quieting the market, because at that time 
financiers had an idea that if the interest rate on the bonds 
was very high, general interest rates would become high also. 

As had been explained before, the whole financial world 
was seriously shaken up at the commencement of this inter- 
national war and at the same time the people in general were 
deeply influenced toward economy, so that with the exception 
of the articles of daily necessity and war materials, the de- 
mand for merchandise decreased considerably. Then again, 
owing to the dislocation of land and water transportation 
facilities on account of the pressing need of transporting 
troops and war materials, the accumulation and disposition 
of commercial articles was hindered and consequently the 
operation of capital was affected seriously. The prices of 
daily necessities and also of war materials rose at the places of 
consumption. So commerce experienced great depression 
and the demand for industrial capital decreased greatly. How- 
ever, foreign vessels were chartered, and by this means the 
defect in water transportation facilities was remedied and the 
circulation of money greatly facilitated. These steps helped 
somewhat in restoring commercial prosperity. 

Furthermore, as regards foreign trade, it was at first ex- 
pected that trade with China and Korea would be most 
seriously affected. But the government devised various 



154 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

means of relief for the China trade, and furnished the needed 
financial facilities, so that the dislocation of trade proved to be 
only temporary. After our country had secured control of 
the sea, especially, the China trade did not suffer seriously. 
As for trade with Korea, no bad effects from the war were 
felt there, either, after navigation was made safe. The 
American route was from the beginning perfectly safe and 
European trade suffered no ill effects at all. Both routes 
being free from disturbance, a tendency toward constantly 
increasing development was shown. 

While there was thus no particular disturbance to com- 
merce either at home or abroad, the currency, affected by the 
war expenditures, was gradually inflated, as is shown in Table 
I at the end of this chapter.^ 

Thus on the restoration of peace (April 30, 1895), compared 
with conditions at the beginning of the war (June 30, 1894) 
there was an increase of about 44 million yen and on December 
31, 1895, of about 85 million yen. This inflation of the 
currency was caused by an increase in the issue of coins and 
paper currency and by the payments made from the Treasury. 
These were results of the war expenditure, for this expenditure 
of about 200 million yen was made with various kinds of 
specie, while the government, as one of its financial measures 
during war time, spent the money at home as much as possible, 
so that naturally coin and paper currency increased consider- 
ably. The following table will show the facts as to the in- 
crease of convertible notes out of paper money. 



Date 



January 31, 1894 

June 30. 1894 

December 31, 1894 

January 31, 1895 

April 30, 189s 

December 31. 1895 

Comparison with June 30, 1 894 

December 31, 1894 

December 31, 1895 



Bank-note 


Specie 


Reserve 


Extra limit 


issue 


reserve 


securities 


issue 


Yen 


Yen 


Yen 


Yen 


147,372.199 


84.515.404 


62.856.795 




141.736.358 


79.632.988 


62,103,370 


.... 


149.813,700 


81,718,291 


68,095.409 


4.197,549 


142.756,092 


80.924,075 


61,832.017 


.... 


132,839,984 


68.532.320 


64.307,664 




180,336,81s 


60.370,797 


119,966.018 


55,083,148 


8,077,342* 


2,085,303' 


5.992.039' 


5,499.640* 


38,000,457' 


19.262,191'' 


57. 862,648' 


56.385.239' 



Reserve 

power of 

issue 



Yen 

299.973 
1,302,091 

2,547.265 
7,618 



^Post, p. 196. 



• Increase. 



*> Decrease. 



EFFECTS ON THE MONEY MARKET 1 55 

Judging from the foregoing table, we find the specie re- 
serve was not greatly afifected during the war. Even in the 
securities reserve there was a certain amount of reserve 
strength of issue left, so that the financial condition for war 
time was excellent. After the war the specie reserve 
rather decreased, and the extra-limit issue was effected; for 
the effect produced on the securities reserve issue during this 
period was due to the increase or decrease of the specie re- 
serve as the case might be. The decrease of an enormous 
amount of specie reserve after the restoration of peace was 
altogether due to (i) the payments in silver made for war 
expenses, (2) the paying out of convertible notes, as these were 
especially demanded by the Chinese merchants, and (3) the 
unfavorable balance of foreign trade. Aside from these facts, 
the general condition, as to deposits and loans, of the Bank 
of Japan and the private banks, as well as the interest rate, 
remained normal, as we shall explain later; so that except for 
the precautionary attitude which was taken during war time 
there was nothing particularly noteworthy in the situation. 

Thus we see that during the war finances were in an un- 
usually normal condition. To be sure, an enormous amount 
of money was spent for the war without any return and 200,- 
000 men were called out of productive industries to the front, 
thereby restricting the productive power of the nation and 
causing a change in the industrial order, so that it was im- 
possible to prevent economic changes later, the seeds of which 
were indeed germinating during the war. Nevertheless it is a 
fact that conditions similar to those of peace were maintained 
during war time. The following may be given as the principal 
reasons why this was possible : 

(i) The war itself was a stimulus to the minds of the people, 
and a potent cause in producing thoughtful, conservative 
action. We have noted at first how excessive precautions 
were taken, how the money market at once became tight, 
demand for capital decreased, owing to fears as to the financial 
future, and idle capital increased, because owing to the pre- 
cautions of business men lucrative ways of disposing of it 



156 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

could not be found. All these things helped to prevent the 
expected panic in the money market. In other words, 
money circulation shrank not from real necessity but for psy- 
chological reasons. 

(2) The financial policy of the government was duly 
carried out, since (a) stagnation of capital for railway enter- 
prises was prevented, (b) interest on bonds was lowered, (c) 
special attention was paid to the collection and circulation of 
the funds secured from bonds, (d) suitable steps were taken 
for facilitating commercial transactions. 

(3) The activity of the Bank of Japan was altogether be- 
yond that necessitated by the consideration of immediate 
profits for herself, having for its object the securing of the wel- 
fare of the nation. Loans were restricted or bonds redeemed 
and at the same time the fund secured by bond issues was fur- 
nished to the people for their use, and the government was 
supplied with capital as loans to meet the urgent need of war. 
On the other hand, the convertible notes were controlled and 
the interest rate was preserved from fluctuation. 

(4) Besides the Bank of Japan, the influential banks of 
Tokyo, Osaka and other cities, in order to facilitate the 
circulation of money in war time, cooperated with the Central 
Bank in facilitating the issue of bonds, or subscribed for the 
bonds themselves and restricted their loans, in order to pre- 
vent the equilibrium of financial circles from being disturbed. 

(5) The nation expected that, as a result of repeated 
success at the front, the final victory would be with Japan. 
The minds of business men were set at ease and there was no 
further anxiety entertained as to money circulation for the 
future. 

These various reasons combined to quiet the money market 
in time of war. But this was only a temporary phenomenon. 
As has been said, the extraordinary financial conditions after 
the war were being germinated during the war. These 
conditions led to frequent fluctuations after the war which 
were only relieved just before the Russo-Japanese conflict. 

When the Sino-Japanese War, the only international war 



EFFECTS ON THE MONEY MARKET 1 57 

Japan had waged since the Restoration, ended in a glorious 
victory for Japan, and an enormous indemnity was obtained 
and the Liaotung Peninsula and Formosa were ceded to us, 
the Japanese nation first became conscious of her real strength, 
and various important national movements then had their 
inception. In the world of thought, the idea of " Japanism," 
as it was called, was cherished; in the economic world the 
former pessimism gave place to optimism; while an increase 
in extravagance together with the gendering of a spirit of 
enterprise were the results of these national movements. 

But before this stimulation produced any substantial re- 
sults, the interference of the European Powers in the 
peace negotiations with China came suddenly, dealing a 
severe blow to the nation. The optimism which had just 
been expanding was altogether subdued. We shall not take 
the time or trouble to describe this interference, as it is already 
a fact well known to the world. Just how it enraged our 
nation may be realized by recalling the fact that the NihoUy 
a daily newspaper edited by Dr. Yujiro Miyake, a noted 
critic, reported the news of the return of the Liaotung Penin- 
sula to the people by issuing an extra headed with these 
words "Urgent Imperial Message has been issued." . . . 
"Who that has red blood in his veins will not read it with 
tears?" And the forty million people affected did indeed 
look at this unjust interference with bloody tears. The 
Taiyo, a political review, under the title of "Patient, Watch- 
ful Waiting," said: "We must repay the good will of the 
Three Powers, as we are not a nation who would forget the 
favors of others." Thus the so-called "Patient, Watchful 
Waiting " and the " Ten- Years' Plan," became the watchwords 
of the time and gave the people the opportunity to reflect. 
These watchwords were in keeping with the national move- 
ment which was started by the war and led to the realization 
of the plan of a big army and navy and of replenishing the 
nation's wealth; thus a heavy burden was laid upon the people 
owing to the expanded financial program of the government. 

However, the depression in economic circles caused by the 



158 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

retrocession of the Liaotung Peninsula did not last long. The 
national self-realization, which resulted from the victory, 
materialized in the world of thought as " Japanism," while in 
the economic world a national movement was also inaugu- 
rated. So, although the spirit of the nation was sadly de- 
pressed at first because of the return of the Liaotung Peninsula, 
in an incredibly short time confidence was restored, as the 
people were buoyed up by the expectation of a large indemnity 
to be received from China, and the spirit of enterprise was 
bom again. At this opportune time the Bank of Japan 
instituted the policy of encouraging enterprises by loosening 
its purse, so that the spirit of enterprise became widespread, 
its heartening influence being in inverse ratio to the de- 
pression caused by the return of the Liaotung Peninsula. 
Consequently, the tendency to frugality which was favored 
during the war was very generally superseded by extrava- 
gance, prices rose, — though this was not the only cause, — 
foreign trade showed an excess of imports over exports, and 
the business world experienced a complete change. Although, 
as we have stated before, the "Ten- Years' Plan" was a 
serious proposition, considering the national strength at the 
time, yet it was easily executed on account of the rising spirit 
of the nation ; and this enterprising spirit rose as the result of 
the aforementioned national movement in the economic 
world. But as during the war industrial capital had been 
absorbed in war expenditure, and after the war, in the various 
enterprises undertaken by government and people, capital 
became suddenly static. Then, besides, the greater part of 
the indemnity received from China was spent for unproduc- 
tive purposes, which, so far from helping capitalists, caused 
the evils which naturally accompany the inflation of currency. 
Moreover, the securities reserve note issue of the Bank of 
Japan was increased more and more. The result was the 
encouragement of a spirit of extravagance, and a rise in prices, 
which placed various difficulties in the way of materializing 
the enterprising spirit of the time, and even made political 
trouble. The ministry was changed several times. Conse- 



EFFECTS ON THE MONEY MARKET 1 59 

quently the national movement for progressive enterprises 
which arose after the war was checked, and the high spirits of 
the nation were depressed, and finally the financial distress 
experienced after the war led to a slight panic in 1899. This 
was not perfectly relieved, and another panic occurred in 1901. 
The national movement also, which had promised great 
things at the close of the war, was kept from expanding, and in 
this condition the nation had to meet the Russo-Japanese War. 
The financial ups and downs during the Sino- Japanese War 
and ten years thereafter have been briefly explained. We 
shall now proceed to set forth financial conditions during that 
time by taking up the most important points in connection 
therewith. 

Reform of the Currency System 

Japan established the gold standard monetary system by 
Law No. 16, promulgated on March 26, 1897. 

The monetary system of our country prior to this time had 
been based upon the bimetallic system established by the 
Tokugawa Shogunate in the sixth year of Keicho, 1 601, and 
maintained for 260 years or until the period of the Restoration 
of Meiji. But whenever financial distress occurred the 
metallic money was reminted, and except during the reform 
of the Kyoho period, the weight of the coins was reduced and 
the quality debased, so that the currency system in this way 
destroyed itself. In feudal times some among the Daimios 
coined moneys with their own imprints thereon and issued 
notes to circulate only in their own territory, and there were 
1,600 or more different kinds of notes in circulation. In 
short, in the last days of the Tokugawa Shogunate our mone- 
tary system was at the extreme height of disorder and com- 
plexity. 

The government attempted to readjust matters in the early 
part of the Meiji era. In May, 187 1, a new currency law 
was promulgated, thereby laying the basis for the gold-stand- 
ard system. According to this law, the yen, containing 1.5 
grams of pure gold about 900 and if grams of alloy was 



l60 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

made the unit of currency. There was besides this system, 
another with a trade silver yen, the same in quality and 
weight as the Mexican silver dollar current in the Orient 
as the unit of trade currency. Now the trade silver yen 
was circulated only within open ports. But at that time, 
inconvertible notes were issued in our country, so that specie 
flowed out in a great stream, and it was felt that to maintain 
a gold standard system among silver countries in the Orient 
was a very difficult task. So in May, 1878, Laws Nos. 12 
and 13 were issued, whereby the trade silver yen was ordered 
for general circulation at home, in paying taxes, and for pub- 
lic and private transactions. From that time, Japan became 
a bimetallic country. 

The government, owing to the civil war and other momen- 
tous events in the early part of Meiji, found it difficult to 
meet all its needs by means of Treasury revenue alone. So 
it was obliged to issue the following varieties of notes in 
order to secure temporary relief : 



Date of Issue 



Total Amount of Issue 



Kinds 



(i) Dajokwan Notes (Cabinet) 
May 15, 1868-Dec. 31, 1869. . 

(2) Mimbusho Notes (Notes is- 
sued by Dept. of People) Sept. 
17, 1869-Oct. 31, 1870 



(3 ) Convertible Notes by Finance 
Department, Oct. 12, 1871- 
Feb.28, 1872 



(4) Convertible Notes by Colonial 
Department, Jan. 14, 1872- 
Mar. 31, 1872 



48,000,000 ryo 

7,500,000 ryo 
(At first it was in- 
tended to redeem 
the Dajokwan notes 
of small denomina- 
tions with these 
notes.) 



6,800,000 



2,500,000 



10 ryo, 5 ryo, i ryo,\ 
hu, I shu. 

2 hu, I hu, 2 shu, I shu. 



10 yen, 5 yen, i yen. 



10 yen, s yen, i yen, 50 
sen, 20 sen, 10 sen. 



But when the daimiate system was abolished and the pre- 
fectural system was established in 1871, the notes issued by 
different daimiates had to be taken over by the central 
government ; thus it was necessary to increase the notes of the 



EFFECTS ON THE MONEY MARKET l6l 

central government to aid in this adjustment, and finally 
new government notes were issueid. The inconvertible notes 
suddenly increased to an enormous amount. According to 
the proclamation of December 27, 1871, concerning the issue 
of new notes, these notes were to be circulated in exchange for 
the notes of different daimiates. As a result, the former 
became inconvertible notes. Then, when the Civil War of 
1877 broke out in the southwest, the government was obliged 
to issue notes to the amount of 27 million yen temporarily in 
order to meet the war expenses. As the notes in circulation 
exceeded the need of the economic world, there was a sudden 
rise in the prices of commodities. Furthermore, by Decree 
No. 104, issued in August, 1876, the law governing national 
banks (Law No. 349, November 15, 1872) was revised. The 
regulations allowing the national banks to issue bank notes 
with 6 per cent bonds redeemable in gold notes as security^ 
were revised, so that bonds bearing 4 per cent interest were 
allowed to be used as security. The maximum total issue of 
bank notes was fixed at 34 million yen. After that, these 
bank notes were issued in large amounts. But as they were 
convertible with the currency then in circulation, namely, 
government paper money, the prices of the notes fell con- 
siderably, the prices of commodities rose, the specie flowed 
out, the imports exceeded the exports, and farmers became 
extravagant in their expenditures. The evil effects were very 
serious and one who reviews the history of that period can not 
but be horrified thereby. 

In consequence the government made strenuous efforts to 
revise the currency system, on the one hand redeeming the 
notes, and, after the establishment of the Bank of Japan in 
June, 1882, ordering that bank to issue convertible silver 
bank notes from May, 1885 ; and on the other hand, endeavor- 
ing to accumulate specie reserve, thereby gradually restoring 
the credit of the government notes. The market value of 
the notes increased accordingly, and at the end of 1885 the 

^ These were authorized for the purpose of replacing the government notes then 
in circulation. 



1 62 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

difference between silver and the notes nearly vanished. So 
from January i, 1886 (according to Decree No. 14, issued 
June 6, 1885) government notes could be converted into 
silver at par. In addition, the plan of redeeming the national 
bank notes was also established by Decree No. 14, issued in 
1883, and thus our country became a true silver standard 
country. Previous to this, from about 1871, the production 
of silver all over the world increased and the price of silver 
showed signs of declining. When Germany, in 1873, es- 
tablished the gold-standard system by utilizing the indemnity 
received as a result of the Franco- Prussian War and began to 
dispose of the silver in her possession, the price of silver fell 
still more. Then when the United States of America, the 
Latin- Alliance nations, and other countries adopted the 
gold-standard system, and restricted or stopped the minting 
of silver coins, thus initiating the policy of excluding silver 
and gathering in gold, the price of silver fell considerably 
lower. In 1876, the ratio between gold and silver, in price, 
was on an average i to 17.88. Whereupon the silver- 
producing countries and those which possessed silver began to 
discuss methods of maintaining the price of this metal. The 
United States of America was especially noteworthy, as in 
1878 she passed the Brand Law, whereby silver was purchased 
and minted, and in 1890 the Sherman Law, which extended 
the scope of the former statute. But both failed to prevent 
the steady fall in the price of silver. Consequently, Austria- 
Hungary, in 1892, changed her monetary system, adopting 
the gold standard, and in 1893 the United States of America 
revoked the Sherman Law. India also abolished the free 
coinage of silver. Other countries likewise ceased using silver 
for coins. As a result, in 1894 the ratio between gold and 
silver became on an average i to 32.56. 

After this explanation, it is not necessary to show in detail 
how Japan, which was virtually a silver-standard country, 
was affected. On the one hand, following the fall in the price 
of silver, the exports of our country increased and the prices 
of commodities rose, so that agricultural, industrial and 



EFFECTS ON THE MONEY MARKET 



163 



commercial circles were benefited and became quite prosper- 
ous; but on the other hand, the foreign exchange rate was 
constantly fluctuating so that those engaged in foreign trade 
were in danger of monetary losses and could not transact 
business with the certainty as to profits or losses previously 
assured, but had to wait idly until the fluctuations in the 
exchange rate became a little less serious or were obliged to 
venture forth depending only upon luck. Consequently, 
transactions became speculative and business dealings with 
gold-standard countries assumed a state of impasse, which in 
turn produced an unfavorable result upon the money market. 
Below we indicate the tendencies of the exchange rates in 
London, Paris and Berlin: 







Rates of Exchange in 


London, Paris and Berlin 




Year 


London 


Paris 


Berlin 
















Highest 


Lowest 


Highest 


Lowest 


Highest 


Lowest 




s. d. 


5. d. 


/. 


/. 


m. 


m. 


1886... 


3.04.04 


3.00.13 


4.21 


3.79 


3.35 


3.03 


1887 




3.03.80 


3.01.32 


4 


19 


3 


93 


3.34 


3.13 


1888 




3.01.58 


3.00.05 


3 


95 


3 


79 


3.16 


3.01 


1889 




3.02.52 


3.00.36 


4 


03 


3 


84 


3.22 


3.06 


1890 




3.09.08 


3. 01. 10 


4 


73 


3 


92 


3-78 


312 


1 891 




3.05.19 


3.01.32 


4 


33 


3 


93 


3.46 


3.15 


1892 




300. 51 


2.08.64 


3 


84 


3 


43 


3 08 


2.75 


i«93 




2.08.73 


2.03.87 


3 


44 


2 


92 


2.77 


2.36 


1894 




2.03.50 


1 . 1 1 . 50 


2 


87 


2 


45 


2.31 


1.98 


1895... 


2.02.88 


I. II. 13 


2.83 


2.43 


2.27 


1 .96 



For these reasons, the Japanese Government planned to 
change the silver-standard system into the gold standard, and 
in accordance with Imperial Ordinance No. 113, issued on 
October 14, 1893, appointed a committee to investigate the 
currency system and to learn the cause of the fluctuation in 
the prices of gold and silver; also whether there was need of 
reforming the currency system of our country, because of the 
economic effects which the fluctuation in the prices of gold 
and silver produced in Japan, and if there was such need, 
what system should be adopted. The committee by a ma- 
jority vote decided to adopt the gold-standard system. 



164 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

But the reform could not be accomplished by means of a 
set of laws. A large amount of gold reserve was needed. 
From 1 87 1 until the gold standard was established, the total 
amount of silver issued was on its face value 165,133,710 yen. 
It was not an easy matter to accumulate a gold reserve suffi- 
cient to convert this amount of silver into gold, and it was 
necessary to wait for a favorable opportunity. However, 
an agreement was finally reached whereby the war indemnity 
of the Sino-Japanese War, which was to have been received 
in Kuping taels, was received in British gold in London. With 
this amount the gold-standard system was established. 

In discussing the proposition of establishing the gold- 
standard system, some suggested that it would be advan- 
tageous to plan the development of trade with gold-standard 
countries in view of the fall in the price of silver, or objected 
that if Japan alone should adopt the gold-standard system 
while various other countries in the Orient were silver-stand- 
ard countries, she would encounter serious obstacles in 
carrying on trade with those countries; it was also said that, 
as the production of gold in our country is too small for our 
needs, it would be difficult to maintain the gold-standard 
system permanently, and that when the large amount of 
silver exported abroad should be reimported into Japan, the 
nation would meet with great losses. In spite of all these 
objections, the government decided to adopt the gold-stand- 
ard system. 

While the foregoing were the alleged reasons for making 
this change, there was still another reason, namely, the money 
market conditions of that time; for it is plain now that if 
silver fell, the investment of capital by gold-standard countries 
in Japan, which was still a silver country, would decrease, and 
the capital already invested would be recalled. This was not 
clearly seen at the time, since our finances had received bad 
effects from the post-bellum undertakings and showed signs of 
abnormality, resulting in the contraction of the money circu- 
lation and the falling of prices of shares in the stock market. 
Thus the opinion came to prevail in financial circles that if the 



EFFECTS ON THE MONEY MARKET 



165 



gold-standard system were adopted at that time the obstacles 
between Japan and the gold-standard countries would be 
removed and the cheap capital of countries more advanced 
commercially would at once be invested here; for this reason 
there were not a few who favored the gold-standard system. 
Accordingly the bill for currency reform was passed by both 
houses immediately, and by Law No. 16, issued March 26, 
1897, the new system was put into operation. Thus from 
October i of the same year, Japan became a gold-standard 
country. 

That the financial world thus desired to see the gold- 
standard system established because of the conditions which 
existed at that time may be gathered from the fact that 
when the news was circulated in the stock market, securities 
rose in price. A few examples are cited below: 

Effect of Currency Reform Bill on Stock Exchange 





N. Y. K. 


Tanko 
Railway 


Sanyo 
Railway 


Kanega- 

fuchi 
Spinning 


Tokyo 

Stock 

Exchange 


Rumor of Bill being 
introduced : 

Previous day 

On the day 

Rise 


Yen 
78.10 
79 50 

1 .40 


Yen 
87.70 
89.80 

1 .10 


Yen 
53 90 
55.10 

1.20 


Yen 
60.00 
61 .00 

1 .00 


Yen 
369.50 
376.00 


Introduction in 
House of Commons: 
Feb. 26 


79 50 

81.30 

1.80 


98.80 

99.80 

1 .00 


55.10 

56.40 

1.30 


61.40 

62.00 

0.60 


376.00 

386.00 

10.00 


March i 

Rise 


Approved by Special 
Committee of the 
House: 

Previous day 

March 6 

Rise 


75 70 

77.30 

1.60 


95.80 

97.30 

1.50 


5500 

55-20 

0.20 


61.60 

62.10 

0.50 


369.50 

379 00 

9.50 


Passed by the House: 

Previous day 

March 12 

Fluctuation 


76.90 

76.60 

0.30 


97-50 

98.10 

0.60 


55.00 

55.60 

0.60 


61.10 


386.00 


Passed by Peers: 

Previous day 

March 23 

Fluctuation 


76.90 

76.60 

0.30 


99.30 

lOI.IO 

1.80 


55.30 

55.70 

0.40 


62.10 
62.10 


385.00 

402.00 

17.00 



1 66 economic effects of the sino- japanese war 

Expansion of Issue Capacity of Convertible Notes 

The revised law governing the issue of convertible bank 
notes issued in March, 1899, raised the amount of the securi- 
ties reserve issue from 85 million yen to 120 million yen. This 
was due to the fact that the government believed the in- 
creasing stringency of the money market indicated a shortage 
of capital or currency (bank notes), and previous to that 
period the bank notes were almost always issued in excess 
of the settled limitation. What, then, was the condition of the 
extra-limit issue of notes? Before we discuss this matter, we 
must describe the securities reserve issue of notes by the Bank 
of Japan, especially the history of the extra-limit issue. 

The Bank of Japan was established as a central bank on 
October 10, 1882, at the time when inconvertible notes (both 
government and bank notes) fell in price, in order to meet the 
emergency, in accordance with Decree No. 32, issued on June 
27, 1882, setting forth the purpose of the bank. Beginning 
from September 8, 1886, the bank's notes were issued, in 
accordance with Decree No. 18 of May 26, 1885, regulating 
the issue of convertible bank notes. 

At first the bank was required to keep only a reasonable 
amount of reserve specie to redeem the bank notes issued.^ 
The Minister of Finance occasionally suggested the amount of 
notes to be issued, and the reserve for the exchange was at 
first limited to specie. But later the government notes and 
bank notes were constantly being adjusted, so that at the end 
of June, 1889, the amount of government notes on hand was 
49>337.248 yen, and of bank notes 28,059,486 yen. Compar- 
ing these figures with the highest amounts of the various 
notes in circulation, we see what an extraordinary amount of 
redemption had been effected. 

As there were 49,177,864 yen worth of notes on hand on the 
last day of June, 1888, there was after all a decrease of 43,- 
582,880 yen. Consequently, the currency decreased con- 
siderably in amount. So the government firmly established 

* Article 2 of the same decree. 



EFFECTS ON THE MONEY MARKET 
Redemption of Bank Notes 



167 



Notes 



Date 



Highest 

amounts of 

various notes 

in circulation 



Amount 
June 30, 1888 



Decrease, 

June 30, 1888 

compared 



Government notes. . 
National bank notes. 
Total amount of vari- 
ous notes 



Feb. 28, 1878 
Feb. 28, 1879 

Jan. 31, 1880 



Yen 

141,274,862 

28,347,876 

170,157,477 



Yen 

49.337,248 
28,059,486 

77,396,733 



Yen 

91,937,615 
288,390 

92,760,744 



the system of conversion and in addition decided that the 
time to do away altogether with the former currency system 
had now come. So the laws governing the issue for the 
conversion of the convertible bank notes were revised. While 
in principle issuing bank notes with gold and silver specie or 
gold and silver bullion as a reserve (that is, an issue based upon 
the specie reserve), the Bank of Japan was allowed at the 
same time to issue bank notes to the maximum limit of 70 
million yen with government or other reliable securities or 
commercial documents as a guarantee.^ In case of need the 
bank was permitted to increase the bank notes according to 
the market conditions, and to issue notes with the foregoing 
securities as a guarantee by paying to the government a tax 
on the issue at a rate of over 5 per cent per annum on the 
amount of the issue, after the permit of the Minister of 
Finance had been obtained. ^ This was based upon a lesson 
learnt from the principle of indirect restriction (Konzinsen- 
tierung) or the elasticity method of note issue followed by the 
Imperial Bank of Germany, and the Bank of Japan per- 
formed thereafter an important service as a steadier of the 
money market and the supplier of capital. Then, on March 
3, 1890, for the first time there was 300,000 yen worth of the 
extra-limit issue. The highest amount was 500,000 yen, 
between March 10 and April i. This was due to the fact 
that at that time, owing to the rise in the price of rice, the 

^ Of this amount, 27 million yen was issued gradually, with the amount of the 
redemption of the national bank notes since January i, 1889, as the limit. 
^ This was the securities reserve issue. 



1 68 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

adverse balance of foreign trade, the reactionary influence on 
the rise of the enterprising spirit, and other causes, the money 
market showed the prevalence of abnormal conditions. But 
the government construed this fact as indicating that as a re- 
sult of the spirit of enterprise which had sprung up since 1887, 
various enterprises would develop rapidly, foreign trade 
would also be extended and the demand for the bank notes 
in circulation in the economic world of Japan would increase. 
So at length by Law No. 34, issued May 16, 1890, the amount 
of the securities reserve issue was increased from 70 million 
yen to 85 million yen. This was the opening wedge in the 
extension of the securities reserve issue, which we are to 
discuss here. The government, influenced by the experience 
of some nine years thereafter, ultimately increased the amount 
to 120 million yen. Let us describe the actual occurrences 
of these years. 

A reaction following the relaxing of the money market 
since 1891 was shown in the latter half of 1893. Foreign 
trade showed an adverse balance. Furthermore, on the 
breaking out of the Sino-Japanese War, the second extra- 
limit issue took place. From December 29, 1894 (3.272,721 
yen), to January 12, 1895, the highest amount was 4,197,549 
yen at the end of December, 1894, ^^^ the average amount 
was 2,211,054 y^'^' 

In April, 1895, a peace treaty with China was formulated. 
But owing to the return of the Liaotung Peninsula the people 
of Japan were downcast and the economic world greatly 
depressed. But as a result of the third extra-limit issue, on 
May 28, for the purpose of obtaining a loan for the govern- 
ment, and also because the Bank of Japan had instituted the 
policy of reviving finances by lowering the interest rate on 
loans, this extra-limit issue was continued from the end of 
May, 1905 (1,993,433 yen), to May 19, 1906; at the end of 1905 
the amount reached 55,083,147 yen, the average amount 
throughout this period being 29,100,731 yen. This was an 
enormous amount, indeed. As the extra-limit issue of that 
time was due to the loans by the government, when the regu- 



EFFECTS ON THE MONEY MARKET 



169 



lations as to the disposal of deposits of the indemnity were 
established in May, 1896, this extra-limit issue was discon- 
tinued. Then, in the latter half of 1897, the reaction from 
the postbellum spirit of enterprise, the rise in the prices of 
commodities, and the adverse balance of foreign trade became 
both causes and effects in themselves, so that from July 24, 
1893 (455,306 yen) until September 14, 1898, extra-limit issues 
were sent out four times, with a maximum amount of 47,312,- 
657 yen at the end of 1897, and an average of 25,044,485 yen. 
The reason for the withdrawal of the extra-limit issue was 
that the government had purchased the war and consolidat- 
ing bonds from April, 1898, and the money market had relaxed, 
and also that the government, in order to pay for the purchase 
of the bonds with the money borrowed on the indemnity de- 
posits, had returned the convertible notes of the extra-limit 
issue which had been borrowed from the Bank of Japan. In 
short, the extra-limit issue of the securities reserve was trans- 
formed apparently into the specie reserve convertible notes. 
But from October 26, 1898, especially from December 16, 
until February 21, 1899, an extra-limit issue of notes was 
again sent forth several times in succession, with a maximum 
amount of 24,016,568 yen at the end of December, 1898, and 
an average of 3,287,195 yen on the first occasion (from October 
26 to November 7), 1,454,144 yen on the second occasion 
(from November 27 to December i), and 8,254,165 yen on 
the last occasion (from December 16 to February 21, 1899). 
We shall briefly present below the average and the maximum 
amounts of extra-limit issues since the securities reserve issue 
was increased to 85 million yen: 



Duration 


Average 


Maximum 


Dec. 29, i894.-Tan. 12. i8qs 


Yen 
22,111,054 
29,100,731 
25,044,485 

3,287,195 
1,454,144 
8,254,165 


Yen 

4,197,549 
55,083,147 
47,312,657 

8,110,818 


May 31, 1895-May 19, 1896 


July 24, i8g7-Sept. 14.. i8q8 


Oct. 26, 1898-N0V. 7, 1898 


Nov. 27, 1898-Dec. I, 1898 


1.667.027 


Dec. 16, 1898-Feb. 21, 1899 


24,016,568 




Total average 


14,875,296 









170 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

That the actual results of the extra-limit issue were as 
described above is proved by the fact that the government 
and people of Japan raised the amount of the legal guar- 
antee reserve issue from 85 million yen to 120 million yen. 

The relation between the amount of the legal guarantee 
reserve issue and the demand for capital by the financiers of 
any nation is so well known to economists that there is no 
use of enlarging upon it here. But if we reflect a little we 
shall see that the extra-limit issue only signifies that the 
amount of the bank note issue has exceeded the limit estab- 
lished by law, whereas the so-called legal limit is not the limit 
of the first instance, but one based upon a fluctuating specie 
reserve issue. Hence it is not proper to judge the demand for 
capital in the economic circles of a country by this fact 
alone. We should observe also the specie, the guarantee 
reserve issue, and the total amount of the issue. Then, 
again, the legal extension of the amount of guarantee reserve 
issue permitted has given the Bank of Japan considerable 
power to supply capital, and as she would not be likely to 
neglect this opportunity to benefit herself, and as the eco- 
nomic world would eagerly appropriate this supply of cheap 
money, the currency in circulation would greatly increase 
and its effect upon general economic conditions in the country 
would not be slight. Accordingly, the discussion of the pro- 
priety of extending the issue would be a link in the discus- 
sion of post-bellum economy. 

Table II at the end of this chapter^ shows the amount of 
bank note issues since 1894, when the extra-limit issue first 
appeared, and Table IIP shows the increase and decrease 
compared with 1893. 

As shown in the foregoing tables, the bank note issues 
rapidly increased during this time. But there is one thing to 
be noted, namely, that during the foregoing period the con- 
vertible notes of the Bank of Japan were not the only paper 
currency issued. So we must consider the entire volume of 
paper currency in circulation during this period. 

1 Post, p. 197. 2 Fosi, p. 198. 



EFFECTS ON THE MONEY MARKET 
Paper Money in Circulation, 1893- 1899 



171 



At end of year 



1893 

1894 

189s 

1896 

1897 

1898 

1899 (Feb.) 
1899 (Dec.) 

Total . . . 



Government 
notes 



Yen 

16,407,000 

13.404.S47 

11,129,224 

9,376,172 

7.451.098 

5,411.726 

5,293.724 

4.125.783 



72,599.274 



National 
bank notes 



Yen 

22,756,119 

21,781,797 

20,796,786 

16,497.889 

5,024,729 

1.866,563 

1,684,06s 



90,407,948 



Convertible 

notes of Bank of 

Japan 



Yen 
148,663,128 
149,813.700 
180,336,815 
198,313.896 
226,319,058 
197.399.901 
181,218,176 
250,562.040 



1,532,626.714 



Total 



Amount 



Yen 
187.826,247 
185,000,044 
212,262.825 
224,187,957 
238.794.885 
204,678,190 
188,195.965 
254,687.823 



1.695.633.936 



Comparison 


with 


1893 


100 





98 


S 


113 





119 


4 


127 


I 


109 





100 


2 


135 


6 



From the foregoing tables, it will be seen that while the 
increase in the notes issued by the Bank of Japan was great, 
yet these notes, except when required by the natural demands 
of the economic world, were issued to replace the government 
notes and bank notes which were in process of gradual ad- 
justment or extinction, and that in reality the total volume of 
the paper currency rose and fell in turn without showing any 
very great permanent increase. 

Moreover, the extra-limit issue of the convertible notes of 
the Bank of Japan was effected in many instances when there 
was a decrease in specie. 

The extra-limit issues of May, 1895, and July, 1897, both 
coincided with the decrease in the specie reserve. But in 
financial circles there was always need of a certain fixed 
amount of convertible notes. In case the amount of the 
issue of convertible notes fell below what was necessary, be- 
cause of a decrease in the specie reserve, it may naturally be 
inferred that by some other method — the guarantee reserve 
issue, for instance — the deficiency would be met, and 
that the cause of the increase on the guarantee reserve issue 
lay, aside from the government loans, in the increase in in- 
dustrial loans made to the people generally. That the loans 
made by the Bank of Japan increased extraordinarily is 
shown in Table IV at the end of this chapter.^ 

1 Post, p. 199. 



172 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
Extra-Limit Issues of Convertible Notes 



At end of 



1895 

April 

May 

(June-Nov. omitted) 
Dec 

1896 

Jan 

Feb 

March 

April 

May 

(June-Dec. omitted) 

1897 
(Jan-May omitted) 
June 

July 

(Aug.-Nov. omitted) 
Dec 

1898 

Jan 

Feb 

Mar 

(April-July omitted) 

Aug 

Sept 

Oct 

Nov 

Dec 



Specie 
reserve 



Yen 
68,532,320 
66,199,000 

60,370,797 



54,890,176 
54,589,146 
55,347,002 

55,574499 
106,308,649 



119,437,064 
109,780,678 

98,261,473 



91,568,364 
83,626,224 
74,651,152 

88,498,228 
91,307,480 
88,468,720 
90,180,017 
89,570,239 



Decrease 

compared 

with month's 

end, from 

standard 



Standard 
2,333,320 

8,161,523 



13,642,144 

13,943,174 
13,185,318 
12,957,821 
37,776,329* 



Standard 
9,656,386 

21,175,591 

27,868,700 
35,810,840 
44,785,912 

30,938,836 
28,129,584 
30,968,344 
29,257,047 
29,866,825 



Bank note 
issue 



Yen 
132,839.984 
132,573,715 

180,336,815 



171,211,604 
164,408,373 
157,141,819 
154,748,631 
165,837,762 



195,302,669 
198,728,088 

226,229,058 



212,003,989 
195,297,483 
195,889,761 

186,361,320 
174,472,809 
180,122,704 
177,581,079 
197,399,901 



Extra-limit 
issue 



Yen 

1,993,433 
55,083,148 

50,937,636 
44,434,259 
36,409,048 
33,786,956 



10,325,196 
47,312,657 

39,529,488 
30,626,515 
39,658,322 

14,681,165 

8,110,818 

3,677,028 

24,016,569 



» Increase. 

The origin of the extra-limit issue and the increase in loans 
being as just stated, we see that the government considered 
the limit of the guarantee reserve issue too small; especially 
since, owing to the stringency of the money market at that 
time, commercial and industrial circles desired the legal 
limit of the issue to be extended and the powers of the Bank of 
Japan to be increased. Moved by this request, the govern- 
ment extended the legal limit by Law No. 55, issued March 9, 
1898, and applied 15 million yen out of the 35 million yen 
increase to the relief of the domestic money market, thereby 



EFFECTS ON THE MONEY MARKET 1 73 

Opening the way for high-class exchange transactions, the 
discounting of checks, and an increase in branch banks. At 
the same time, 20 million yen were applied to relieve the 
stringency of the money market and facilitate transactions 
with Europe, America and the Orient. The Yokohama 
Specie Bank was ordered to engage in the work of facilitating 
the China trade especially. 

But we believe it was a mistake, in view of existing condi- 
tions at that time, to extend the legal limit of the guarantee 
reserve issue merely because of the frequency of extra-limit 
issues, without first investigating what the reason was for the 
increase in convertible notes. We do not mean to argue at 
length as to the merit of the policy here. We only wish to 
make it clear how this procedure disturbed the money market 
after the war and created an unfavorable effect upon the 
national finances. For even if the amount of the guarantee 
reserve issue had been determined by law, it would not have 
bound economic circles ; and even if the issue of notes should 
go beyond the legal limit, it would not menace the financial 
interests, so that the extension of the legal limit by 35 million 
yen as mentioned above had no practical significance at all. 
But the extension of the amount of issue exempted from 
taxation allowed the Bank of Japan has given that bank 
great power to furnish capital — such that if this power were 
employed wrongfully, bank notes would be at a premium and 
this would have serious effects upon finance. Then, again, 
our financiers and economists, drunk with the glory of victory 
after the Sino- Japanese War, were about to make great 
strides ahead when Japan was obliged to return the Liaotung 
Peninsula. The people suddenly became pessimistic. So 
the government adopted a liberal policy and ordered the 
Bank of Japan to lower the rate of interest.^ This was done 
in order to encourage the people, so that optimism might be 
gradually restored and the people realize that they need no 
longer remain depressed. They accordingly took courage 

^ At that time the discount rate was 2 sen i rin per diem, that is 7.665 per cent, 
which was changed to i sen 9 rin per diem, that is 6.935 P^r cent. 



174 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

and became enthusiastic over post-bellum enterprises; the 
demand for capital for army and naval expansion and for the 
prosecution of said enterprises increased enormously, and 
finally a great financial panic occurred, as is mentioned 
later. 

Thus the sudden increase in capital after the war was due 
partly to the need of the government, but not a little to the 
deliberate policy of the government and the Central Bank. 
Consequently, the development of a sudden demand for 
capital as described heretofore can not be considered the 
result of a healthy development, or a natural evolution in the 
economic life of the people ; for in economic development there 
are true and false tendencies. That financial circles which 
have shown a tendency to great activity should suddenly 
shrink from advancing is a phenomenon to be observed only 
in a period of speculation and vainglory. The conditions in 
the financial circles of our country after the Sino- Japanese War 
were indeed such. Judged from these facts, the arguments 
advanced in favor of extending the amount of the guarantee 
reserve issue based upon the phenomena resulting from this 
false tendency may be considered as castles in the air, with 
great instability of foundation. They can not escape the 
criticism of inconsistency. 

As has been said, the extension of the amount of the guar- 
antee reserve issue can not properly be considered necessary, 
judging from the point of view of a dispassionate critic. On 
the contrary it poured oil on the prairie fire of the false 
phenomena of financial circles in order to cause an increase in 
the issue of convertible notes and may be considered as one 
cause of unsteady ing the money market. If we remember 
that the so-called extension of the issue by 35 million yen is 
22 per cent of 158,517,000,000 yen, which was the average 
amount of the issue between 1893 and 1898, it is not difficult 
to see how great the effect must have been. 

Before closing this section we would call attention to Table 
V at the end of this chapter, which shows the amount of the 
issue at the end of each year since 1899. 



effects on the money market 1 75 

Increase of Monetary Facilities 

Necessitated by the national development after the Sino- 
Japanese War, the increase and reform of monetary facilities 
were planned by the government. In the first place the 
business of the Bank of Japan and of the Yokohama Specie 
Bank was enlarged, the Hypothec Bank and the Bank of 
Agriculture and Commerce were established, and in addition 
industrial banks and the Bank of Formosa were newly es- 
tablished, in order to meet the needs of the time; and, secondly, 
a wise disposition of the national banks was made and the 
causes of economic troubles were removed. The ordinary 
monetary institutions of Japan had been largely reorganized 
before the Sino-Japanese War; i.e., on July i, 1893, a com- 
mercial statute was put into force followed by banking 
regulations ^ and savings bank regulations,^ and thus the bank- 
ing business, which had been under imperfect control be- 
fore, now entered upon a new era of development. Numer- 
ous banks were established at this time. But the Bank of 
Japan and the Yokohama Specie Bank, national banks 
authorized with the power to issue notes and a few private 
banks and savings banks may be especially mentioned. 
Consequently, facilities for supplying capital for commercial 
purposes seem to have been rather general throughout the 
country. But the banks for realties and securities had not yet 
been established. As for facilities for agriculture and in- 
dustry, there was also a great lack here. 

Consequently the government made endeavors to improve 
monetary facilities, and thus meet the needs of the time. For 
example, the Hypothec Bank of Japan, the Bank of Agri- 
culture and Industry, and the Colonial Bank of Hokkaido 
were established for real property, the Industrial Bank of 
Japan for securities and the Bank of Formosa to meet the 
needs in the newly acquired territory of Formosa. As to the 
Bank of Japan and the Yokohama Specie Bank, the govern- 
ment, in order to increase their usefulness after the war, 

1 Law No. 72, August, 1890. ' Law No. 33, August, 1890. 



176 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

allowed them either to increase their capital or to increase the 
amount of the securities reserve issue, ^ thereby increasing the 
loaning power of the banks so that they might contribute 
toward the betterment of finances after the war. 

The following record will enumerate the various advance 
steps made at this time: 

(i) The Bank of Japan increased her capital by 10 million 
yen in August, 1895, thus raising her authorized capital from 
20 million yen to 30 million yen. 

(2) The Yokohama Specie Bank increased her capital by 6 
million yen in March, 1896, thus raising her authorized capital 
from 6 million yen to 12 million yen, 

(3) The Hypothec Bank of Japan (the bank dealing with 
real property) opened her doors in August, 1897. 

(4) In each prefecture a bank of agriculture and industry 
was established between February, 1898, and August, 1900, 
— forty-six banks in all. 

(5) The national banks (153 in number) became private 
banks in February, 1899, ^^d the circulation of national 
bank notes was prohibited from December 9 of the same year. 

(6) The Bank of Japan was permitted to increase the 
amount of her securities reserve issue in March, 1899, by 35 
million yen, making the total 120 million yen^ 

(7) The Yokohama Specie Bank increased her capital in 
September, 1899, by 120 million yen, making her authorized 
capital 24 million yen. 

(8) The Bank of Formosa was opened September, 1903. 

(9) The Colonial Bank of Hokkaido was opened April, 1900. 

(10) The Industrial Bank of Japan was opened April, 1902. 
For several years after the war, a period of reform ensued 

as regarded monetary institutions. The money market, 
which had already been adjusted to conditions before the war, 
had now to be steadied by the aid of special banks operated 
in all directions, so that no more complaints might be raised 
about the lack of financial facilities. In short, the ten years 

» By Law No. 55, March 9, 1899, the amount was increased from 85 million yen 
to 120 million yen as before described. 
' Cf. section on expansion of issue capacity of convertible notes, p. i66. 



EFFECTS ON THE MONEY MARKET 1 77 

after the Sino- Japanese War might be designated as the 
period foi' perfecting financial facilities. The steady na- 
tional development after the war and the solid as well as 
remarkable achievements of national finance may be said to 
have been due largely to the financial policy of the govern- 
ment. Of the financial policies mentioned above, we have 
already dealt with one in detail, viz., the extension of the 
securities reserve issue (in the section on expansion of issue 
capacity of convertible notes). We shall now take up the 
remaining subjects. 

The Yokohama Specie Bank 

The Yokohama Specie Bank, at the end of 1893, that is, the 
year previous to the Sino- Japanese War, had an authorized 
capital amounting to 6 million yen (with a paid-up capital 
of 4,500,000 yen). But after the war her business gradually 
increased. Since February, 1896, the London branch of the 
bank acted as agent for the Bank of Japan, by taking charge 
of the indemnity received from China and disposing of it. 
On July I, 1895, the Shanghai agency of the bank, which had 
been closed owing to the Sino- Japanese War, was reopened. 
On September 15, 1896, an agency was opened at British 
Hongkong. Furthermore, in July, 1894, increased capital 
was required by the bank with a view to opening an agency at 
Bombay, India. So, on March 25, 1896, the authorized 
capital was increased to 12 million yen. In September, 1899, 
this amount was doubled, thus becoming 24 million yen. A 
branch was established at Tientsin (August, 1899), ^-t Neu- 
chang (August, 1900), and at Peking (January, 1902), thus 
extending the sphere of activity in China. A further advance 
was made in September, 1901, when the by-laws of the bank 
were revised so that, in case business transactions abroad 
required it, the various branches and agents would have 
power to issue notes payable on sight. In November, 1902, 
for the first time, such drafts were issued by the Tientsin 
branch of the bank ; in December, by the Shanghai branch ; in 
January, 1903, by the Neuchang branch; and in March by the 
13 



178 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Peking branch. The conditions of loans from 1893 showed a 
sudden development about 1899, as will be seen from Table 
VI at the end of this chapter. 

Realty banks 

Three kinds of banks were established to deal in real prop- 
erty, as given below: 



Name 


Law 
governing 


No. 


Authorized 
capital 


Paid-up capital 
at time of es- 
tablishment 


Opening 


Hypothec Bank 
of Japan .... 

Bank of Agri- 
culture and 
Industry . . . 

Colonial Bank 
of Hokkaido . 


No. 82, April 
20. 1896. . . 
Nos. 83 and 
84, April 20, 
1896 

No. 76, 
March, 1899 


I 

46 

I 


Yen 
10,000,000 

28,370,000* 

3,000,000 


Yen 
2,500,000 

22,923,485b 

1,050,000 


Aug. 2, 1897 
First on Feb. 
I, 1898, and 
last on Aug. 
17, 1900 

April I, 1900 



• Average per bank, 6i6,739 yen. 



•> Average per bank 498,337 yen. 



The province of these three kinds of banks was lending 
money for long terms on real property and at a low rate of 
interest (in case of the Colonial Bank of Hokkaido, agricul- 
tural products or shares or bonds might be used as security 
in place of real property). The object was to improve and 
develop agriculture and industry. The Hypothec Bank of 
Japan was established in Tokyo as the central bank for real 
property, and also one in each of the several prefectures. ^ 
These banks were to cooperate with the Hypothec Bank in 
order to supply capital for agriculture and industry. As to 
the province of the Colonial Bank of Hokkaido, it was not 
fundamentally different from that of the Banks of Agriculture 
and Industry, but whereas (i) the shareholders of the Banks 
of Agriculture and Industry were confined to those who had 
their residence registered and were actually residing in the 
prefectures in which the banks were situated, and (2) the 
amount of subsidy from the government was limited to 5 per 
cent of the paid-up capital per annum, in the Hokkaido Bank 

1 Fu and ken "prefectures" are terms designating administrative districts and 
first-class local organizations, and their number is 46, that is, 3 fu and 43 ken. 
The differences between fu and ken are historical rather than substantial. 



EFFECTS ON THE MONEY MARKET 



179 



these regulations were not and could not be enforced. So, in 
order to permit special regulations for this bank a separate 
law was enacted. The amounts expended by the govern- 
ment as subsidies in the establishment of the banks for real 
property, as mentioned above, are as follows: 

Government Subsidies to Banks 





Subsidy to 


Subsidy to Banks 


Subsidy to 




Year 


Hypothec Bank 


of Agriculture and 


Colonial Bank 


Total 




of Japan 


Industry 


of Hokkaido 






Yen 


Yen 


Yen 


Yen 


1897 


55,052 


1, 138,320* 


.... 


1,193.372 


1898 


30,010 


6,2i6,68o» 


.... 


6,246,690 


1899 


30,873 


688,620» 


250,000 


969,493 


1900 


.... 


155,000* 


250,000 


405,000 


1901 


.... 


5,000 


200,000 


205,000 


1902 


.... 


5,000 


200,000 


205,000 


1903 


.... 


5,000 


.... 


5,000 


Total. . . . 


115.935 


8,213,620 


900,000 


9.229,555 



» 5,000 yen each year (total 20,000 yen) were subsidies to the Bank of Agriculture and Industry in 
Okinawa Prefecture (Loochoo). 

Not only were the foregoing amounts actually expended as 
subsidies, but in the case of the Banks of Agriculture and 
Industry and the Colonial Bank of Hokkaido, immunity was 
given from paying dividends to the government for the shares 
in its possession for a certain number of years. These arrange- 
ments helped greatly to realize the object of the subsidies. 

The establishment of banks dealing with real property 
has been advocated from about 1882. But in order to 
perfect this plan capital for long terms and at low rates of 
interest was needed. At that time, however, the general 
interest rate was very high. Some of the national bonds bore 
more than 7 per cent interest, so that it was not possible to 
secure low-priced capital. Consequently, it was a matter of 
the utmost difficulty to secure by means of bond issues 
amounts several times larger than the capital of the banks. 
Moreover, the value of land as security was very low, and 
the circulation of money was not yet free ; further, in order to 
realize profits from agriculture, a longer term is needed for 



l80 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

loans than is usually allowed by commercial banks. This 
was the reason why, although financial institutions for facil- 
itating commercial transactions had been developed, banks for 
real property had not yet been established; thus the capital 
needed for agriculture and industry was lacking, and conse- 
quently their full development could not readily be effected. 
But the tendency in the money market was toward a 
gradual fall in the interest rate. In addition, the price of 
bonds rose. With the promulgation of the law concerning 
consolidated bonds in 1886, bonds bearing high interest 
disappeared and the price of bonds showed signs of a steady 
rise. Thus a favorable opportunity for establishing banks for 
real property had come. When the Bank of Japan lowered 
the rate of interest after the Sino-Japanese War, the prices of 
securities rose. On account of anxiety as to the inflow of the 
indemnity the interest rate was lowered, bonds and shares 
rose in price, and the proposal to issue bonds to secure capital 
to be loaned by the banks for real property was received with 
great favor. At last the laws governing the Hypothec Bank 
of Japan and the Banks of Agriculture and Industry were 
promulgated. We shall now briefly explain the method of 
organization. 

(A) The Hypothec Bank of Japan and the Banks of Agri- 
culture and Industry were closely related to each other. Both 
aimed at loaning capital for the improvement and develop- 
ment of agriculture and industry, with real property as 
security. The difference between the two was only that of 
size and position ; that is, the Hypothec Bank was the central 
bank, while local Banks of Agriculture and Industry were 
established in the different prefectures. The Hypothec Bank 
lent capital to the Banks of Agriculture and Industry by 
taking the bonds issued by the latter banks. The Banks of 
Agriculture and Industry acted as agents for the Hypothec 
Bank. The two helped each other in supplying capital to 
agriculture and industry. 

(B) The capital of the Hypothec Bank was 10,000,000 yen 
and its shares were valued at 200 yen each, whereas the 



EFFECTS ON THE MONEY MARKET l8l 

capital of the various Banks of Agriculture and Industry 
was not more than 200,000 yen each, and their shares were 
valued at 20 yen each. There was only one Hypothec Bank 
established in Japan, whereas the other banks were numerous 
— one in each prefecture — and their shareholders were re- 
quired to have their residences registered, and actually to live 
in said prefecture.^ 

In accordance with the purpose for which they were es- 
tablished, the loans were made with real property as security,* 
and on the annual instalment system. In the case of the 
Hypothec Bank these were fifty-year, and in the case of other 
banks, thirty-year instalments. In addition, loans might be 
made on a system of regular instalments for five years, the 
limit being one-tenth of the amount mentioned above (Hy- 
pothec Bank) or one-fifth (Banks of Agriculture and Industry). 

(C) The capital was represented principally by the capital 
of each bank, but the most important matter to be considered 
was the issue of bonds. 

When one-fourth or more of the capital was paid up, the 
Hypothec Bank might issue bonds to within ten times the 
paid-up capital and not exceeding the amount of the loans 
payable by annual instalments and the amount of the accepted 
bonds of the Banks of Agriculture and Industry, while the 
Banks of Agriculture and Industry might issue bonds to within 
five times the paid-up capital and not exceeding the loans by 
annual instalments minus the amount borrowed from the 
Hypothec Bank. The bonds were valued at 10 yen and up- 
ward with premium in the case of the Hypothec Bank, and at 
5 yen and upward in the case of the Banks of Agriculture 
and Industry. The reason why the values were fixed so low 
was because thus the banks might be able to gather in small 
amounts as capital. 

(D) These two kinds of banks were under the control of 
the Minister of Finance. In case the dividends of the Hy- 

^ The registry of residence means registry in the locality where is kept the book 
of registry of the family of which one is a member. 

^ Public corporations were exempted from furnishing this security. 



1 82 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

pothec Bank should fall below 5 per cent, the Bank was to 
receive a subsidy for ten years from the time of its establish- 
ment. In the case of the Banks of Agriculture and Industry 
the various prefectures, in accordance with the law of subsidy 
to the Banks of Agriculture and Industry^ were to be allowed 
to have capital to invest in the shares of the Banks to the 
limit of 70 yen per hundred cho of taxable land, not in- 
cluding house lots, mineral-water sites, or swamp grounds of 
the various prefectures; also to the limit of a total of 300,000 
yen per prefecture and not exceeding one-third of the paid-up 
capital. Further, from the time of the establishment of the 
banks it was arranged that no dividends should be required 
for ten years for the shares subscribed by the prefectural gov- 
ernments, and for 5 years more the dividends should be in- 
cluded in the reserve fund. We shall explain later about the 
amount supplied. 

In this way, middle-class farmers and industrialists who 
had been inconvenienced by the high rates of interest uni- 
versally prevalent gained relief. 

In accordance with the foregoing system, the Hypothec 
Bank was established in June, 1897, with a capital of 10 
million yen and a paid-up capital of 2| million yen. The 
doors of the Hypothec Bank were opened August 2, 1897. 

A Bank of Agriculture and Industry was established in 
each prefecture, the first being the one in Tokyo prefecture 
established on December 28, 1897, and the last being the one 
established in Tokushima prefecture on August 9, 1900 — 
forty-six in all. At the end of December, 1900, the year in 
which the establishment of the Banks of Agriculture and 
Industry was completed, the total amount of authorized 
capital was 28,370,000 yen, and the total paid-up capital 22,- 
923,485 yen, of which 8,178,620 yen was the amount of the 
government subsidy, in accordance with the law of subsidy, 
to the Banks of Agriculture and Industry. At the time of 
their establishment, it happened that the money market was 
tight and there was a great demand for capital. So loans 

1 Law No. 84, April 20, 1896. 



EFFECTS ON THE MONEY MARKET 



183 



were steadily made and a great service was thus rendered 
agriculture and industry by these banks. In the case of the 
Hypothec Bank, between 1898 and 1903 the total amount of 
bonds issued was 72,557,820 yen. At the end of each year 
the amounts loaned dwindled, according to the nature of the 
loan, some being repaid in annual instalments, some at regular 
periods. The figures are as follows : 

Outstanding Loans for Various Purposes at End of Each Year, i 897-1903 



Year 


Agriculture 


Industry 


Public 
corporations" 


Public 
associations** 


Total 




Yen 


Yen 


Yen 


Yen 


Yen 


1897 


342,709 


816,600 


10,000 


206,703 


1,376,012 


1898 


1,426,257 


4,477,939 


313,593 


488,945 


6,706,734 


1899 


2,328,762 


4,886,682 


539,425 


1,019,973 


8,774,842 


1900 


3,477.737 


5,873,213 


1,075,883 


1,223,798 


11,650,631 


1901 


4.565,202 


6,451.573 


1,601,883 


1,429,920 


14,048,578 


1902 


6,348,882 


7,559,603 


1,780,858 


1,609,659 


17,320,102° 


1903 


8,544,907 


7,982,041 


3,044,512 


1,940,674 


21.795,394** 



» Includes loans to prefectures, counties, cities, towns and villages. 

^ Includes loans to water improvement guilds, earth-work guilds and arable land adjustment 
guilds. 
« Includes 21,100 yen, loans of the Banks of Agriculture and Industry. 
«J Includes 283,260 yen, loans of the Banks of Agriculture and Industry. 

The amounts of the bonds of the Banks of Agriculture and 
Industry taken over were not included in the foregoing table. 
They were as follows : 



Year 



1899 
1900 
1901 
1902 
1903 



Face value 



Yen 
142,280 
175,580 
239,390 
442,610 
586,650 



Price 



Yen 

137,344 
170,644 

234.454 
437.799 
565.401 



Now, by examining the Banks of Agriculture and Industry, 
we find the amounts of the bonds of those banks reached 
7>033430 3'^^ between 1899 and 1903, and the amounts of the 
loans, those redeemable by annual^ instalments and those 
redeemable at regular periods, are shown in Table VII at the 
end of this chapter. ^ 

^ Post, p. 202. 



1 84 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Again, in order to show the power of the banks to do busi- 
ness in spite of the figures, two additional tables VIII and 
IX have been inserted at the end of this chapter. ^ 

Let us consider next the Colonial Bank of Hokkaido. Its 
purpose was the same as that of the Banks of Agriculture and 
Industry of the various prefectures, but Hokkaido was dif- 
ferent from other parts of the country in that the circulation 
of money was not yet sufficient, and in consequence the 
interest rate was very high. It was not easy, therefore, to 
establish a bank with qualifications as to shareholders, profits 
and subsidy the same as for the Banks of Agriculture and 
Industry. So the sphere of activity of this bank was made a 
little broader, and as we have briefly explained before, a 
special law was framed to permit a special kind of subsidy for 
it. The authorized capital was 3 million yen of which i 
million yen was furnished by the government, and on the 
government shares no dividends were required for ten years 
after the last day of the first period of the establishment. 
The business of the bank was begun on April i, 1900, with a 
paid-up capital of 750,000 yen. 

Although the sphere of activity of this bank was in the 
main the same as that of the other Banks of Agriculture and 
Industry, yet there were some differences. For example, 
as this bank was not only to loan money on the security of real 
property, but also to furnish capital for the development of 
the land of Hokkaido, loans were made with agricultural 
products, shares and bonds as security, bonds were subsidized, 
and the business of handling deposits and drafts was under- 
taken; in short the sphere of activity was somewhat broader 
than that of the Banks of Agriculture and Industry. Funds 
for the business were obtained, in addition to the bank's 
capital, by issuing bonds (colonial bank bonds) to the limit of 
five times the paid-up capital. 

The actual business condition of the bank is shown by the 
following table of loans made : 

1 Post, pp. 203-205. 



EFFECTS ON THE MONEY MARKET 
Loans of Colonial Bank of Hokkaido 



185 



Year 


To Agriculture and industry 


To 
Industry 


To Com- 
merce 


To public 
institutions 


Total 


1900 


Instalment 
Regular period 

Total 


Yen 
492,786 
36,840 


Yen 
82,821 


Yen 
30,000 


Yen 

12,620 

3,500 


Yen 

618,227 
40,340 




529,626 


82,821 


30,000 


16,120 


658,567 


1 901 


Instalment 
Regular period 

Total 


Yen 

913.540 
221,200 


Yen 
126,921 
103,400 


Yen 

25,183 
5.000 


Yen 
12,353 


Yen 

1,077.997 
329,600 




1,134,740 


230,321 


30.183 


12,353 


1,407.597 


1902 


Instalment 
Regular period 

Total 


Yen 
1,031,781 
247,460 


Yen 
152,014 
128,000 


Yen 
166,728 


Yen 
51,864 
40,000 


Yen 
1,402,387 
415,460 




1,279,241 


280,014 


166,728 


91,864 


1,817,847 


1903 


Instalment 
Regular period 

Total 


Yen 
1,183,176 
427,741 


Yen 
109,706 
113,600 


Yen 

242,858 

80,700 


Yen 
40,223 
40,000 


Yen 

1.575.963 
662,041 




1,610,917 


224,306 


323,558 


80,223 


2,238,004 



As for the capital used in the business of the bank, the 
colonial bank bonds were issued until 1904. The rest was as 
follows : 





Paid-up 
capita 


Reserve 


Percentage 
of dividends 


Loans 


Year 


Total in 
year 


Balance at 
end of year 


1900 

1901 

1902 

1903 


Yen 
1 ,050,000 
2,098,400 
2,100,000 
2,700,000 


Yen 

2,343 

15,248 

76,400 

106,600 


7.0 
7.0 
8.0 
8.0 


Yen 

723,435 
1,911,118 
3,532,080 
5,287,744 


Yen 

703.544 
1,501,606 
2,102,857 
2,646,278 


Total . . . 


7,948,400 


200,591 




11,454,377 


6,954,285 



Bank of Formosa 
The Bank of Formosa was established in accordance with 
Law No. 38 of March, 1897,^ as the central financial institu- 

1 Concerning the Bank of Formosa. 



1 86 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

tion of Formosa, with the object of furnishing capital for 
commerce, industry and public works, of developing the 
economic resources of Formosa, and of extending the scope of 
business of the Bank to South China and the South Sea 
Islands by providing a financial organ for the commerce of 
these countries; the Bank was also intended to secure the 
economic independence of Formosa and reform the monetary 
system. The government believed that the sound develop- 
ment of Formosa could not be hoped for unless protection was 
given to the Bank, in view of the conditions prevailing in the 
island, where everything was still undeveloped, peace and 
order were not yet secured, and the credit system was not yet 
established. So, by Law No. 35 of March i, 1899,1 (i) 2 
million yen of silver were lent to the Bank without interest, to 
be used exclusively as a reserve fund for the conversion of 
notes, (2) I million yen of the 5 million yen capital of the 
Bank were subscribed by the government. In addition, it 
was arranged that the dividends on shares payable to the 
government should be transferred for five years to the reserve 
fund for meeting the losses of the Bank, thereby making the 
establishment of the Bank easier, and then on July 27 of the 
same year, the silver 2 million yen were exchanged for 2,127,- 
659 pieces of silver yen in coins (94 sen per i piece) and these 
were paid to the Bank together with 54 sen of auxiliary silver 
coins, thereby fulfilling the duty of subsidizing the Bank. 
The Bank on July 22, 1899, secured 1,250,000 yen or one- 
fourth of the authorized capital of 5 million yen, and the 
doors were opened on September 26. 

This Bank, as the central bank, has the power to issue notes. 
At first by Article VIII of the law concerning the Bank of 
Formosa, this Bank was authorized to issue notes valued at 
5 yen and upward redeemable in gold. But the conditions 
in the island were not yet such as to need this conversion into 
gold. So by Law No. 34 of March, 1899, this regulation was 
changed and the Bank was empowered to issue notes redeem- 
able in silver coin valued at i yen and upward. As to regula- 

* Concerning a subsidy to the Bank of Formosa. 



EFFECTS ON THE MONEY MARKET 



187 



tions for the reserve, to guarantee the issue of silver certificates, 
specie (gold or silver) to the amount of one-half and upward 
of the issue was to be kept as a reserve. For the rest, up to 
the limit of 5 million yen, government notes, convertible 
bank notes and other reliable certificates or commercial 
checks could be made a guarantee. Again, in case of need of 
a further issue of notes, the same amount of guarantee reserve 
was to be kept in readiness and the tax on the issue at the 
rate of 5 per cent per annum or upward was to be paid. 
Bank notes were issued for the first time on September 29 
to the amount of 490,000 yen. 

The following table will show the actual condition of the 
business from September, 1899, to December, 1903. 







Specie Reserve 






Date 








Guarantee 


Total 
















reserve 






Gold 


Silver 


Total 








Yen 


Yen 


Yen 


Yen 


Yen 


Sept., 1899 


.... 


449,098 


449,098 


.... 


449,098 


Oct., 1899 


.... 


1 ,050,000 


1,050,000 


.... 


1,050,000 


Nov., 1899 


.... 


1,523,337 


1,523,337 


.... 


1,523,337 


Dec, 1899 


.... 


1,834,917 


1,834,917 


.... 


1,834,917 


Dec, 1900 


494,276 


1,577,585 


2,071,861 


1,511,529 


3,583,390 


Dec, 1901 




1,829,358 


1,829,358 


1,370,371 


3,199,729 


Dec, 1902 


.... 


3,352,719 


3,352,719 


1,746,447 


5,099,166 


Dec, 1903 


222,222 


2,219,303 


2,441.525 


2,181,989 


4,623,514 


Total 


716,498 


13,836.317 


14.552,815 


6,810,336 


21,363,151 



Again, the average annual amounts of issue at the month's 
end were as follows: 



Year 



Specie reserve 



Gold 



Silver 



Total 



Guarantee 
reserve 



Total 



1899 

1900 

1901 

1902 

1903 

Total 



Yen 

352,134 
50,548 

614,368 



Yen 
1,214,338 
2,017,568 
1,925,684 
2,799,880 
2,027,593 



Yen 
1,214,338 
2,369,702 
1,976,232 
2,799,880 
2,641,961 



Yen 

1,467,707 
1,486,970 
1,650,940 
2,222,150 



Yen 
1,214,338 
3,837,409 
3,463,202 
4,450,820 
4,864,111 



1,017,050 



9,985,063 



11,002,113 



6,^2^,^6^ 



17,829,880 



1 88 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

As sho^vn in the foregoing table, the Bank of Formosa 
gradually extended the scope of its business. It established 
branches on the mainland of Japan, and branches and agencies 
in Amoy, Hongkong and other places ; thereby more and more 
perfectly rendering the service for which it was established. 
Table X at the end of this chapter^ sets forth the principal 
facts as to the Bank's activities in recent years. 

Industrial Bank of Japan 

The Industrial Bank of Japan was established as a realty 
bank. It was based upon Law No. 70 of March, 1900. About 
1890 our national finance was freed from the evils of incon- 
vertible notes. When certain new enterprises were under- 
taken and the money circulation became tight, the government 
ordered the Bank of Japan to initiate the so-called security 
system, that is, to give discount or allow an overdraft for a 
certain amount of shares as guarantee in order to relieve the 
urgent needs of the industrial world, and at the same time to 
take over the loans made in accordance with the security 
system mentioned above, by establishing a bank for personal- 
ties. That was how the Industrial Bank of Japan came to be 
established. About ten years later, when at the close of the 
Sino- Japanese War new enterprises were projected, and as 
capital was insufficient it became necessary to plan the 
importation of foreign capital, this Bank was established to 
meet the need. 

The Bank's authorized capital amounted to 10 million yen, 
and with the passage of the industrial bank law its establish- 
ment was planned. But at that time the money circulation 
was tight and did not permit the opening of the Bank. So 
the issue of shares was postponed for a time. The restoration 
of a favorable money market was awaited. At last, in 
March, 1902, 2,500,000 yen were paid in, as the first instalment 
on the shares of the Bank, and the doors were opened on April 
10 of the same year. The Bank was to make loans on the 
security of national bonds, bonds of local governments and 

1 Post p. 206. 



EFFECTS ON THE MONEY MARKET 1 89 

the bonds and shares of various companies, and to underwrite 
these. It was empowered to secure a part of the capital for 
its business by issuing industrial bank bonds. The limit of 
the bond issue was fixed at five times the paid-up capital or 
not to exceed the actual amount of the loans or the local 
government bonds or company bonds then in the hands of 
the Bank. 

Table XI at the end of this chapter^ shows the actual re- 
sults of the business of this Bank. 

Conditions in the Banking Industry 
In the foregoing section we have explained in detail how 
the government, to encourage the national development 
after the Sino-Japanese War, helped to establish various 
special banks, and, by enlarging the spheres of the ordinary 
banks which had been established before the war, planned to 
reform the monetary system. With the change in economic 
conditions after the war, the government was able to solve the 
problem of what disposition to make of the national banks, 
which had been pending since before the war, and thereby 
added to the stability of the monetary system. This should 
be especially noted as a result brought about by the war. 

The system of national banks was established in accordance 
with Law No. 349, with the object of redeeming the govern- 
ment notes which had been recklessly issued since the begin- 
ning of the Meiji Era (1868) and of facilitating the circulation 
of commercial capital. We shall here briefly explain the 
method of issue of these bank notes. The national banks 
offered the government notes in exchange for public loan 
bonds — redeemable in gold certificates, and then by offering 
the latter received bank notes. The national bank notes were 
convertible in specie. But at that time our country exported 
gold and silver, especially gold, to an enormous amount. The 
price of gold coin rose, so that there came to be a difference 
between gold certificates and gold coin,^ and the national banks 

1 Post, p. 206. 

2 Between July 1873 and 1876 the highest difference was 4.9 per cent, in March, 
1876. 



190 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

could no longer issue bank notes. Consequently, the manage- 
ment of these banks became very difficult, and only four or 
five of them were established. The government in order to 
encourage the establishment of national banks and enable 
them to accomplish the original purpose and at the same time 
to maintain the price of the enormous amount of bonds newly 
issued at the time the change in the system was made, 
changed the system of specie conversion into the system of 
conversion into currency, that is, government notes, by 
Law No. io6 of August, 1876. Thus appeared the incon- 
vertible bank notes. After this banks were established one 
after another, 153 banks being established from September, 
1876, to November, 1879, with a paid-up capital amounting 
in all to 40,616,063 yen, while the notes issued amounted to 
34,046,014 yen. 

But, later, the government notes were not redeemed at all, 
and at the end of January, 1878, the highest point was reached, 
the notes issued amounting to 139,301,593 yen. Moreover, 
the inconvertible bank notes increased gradually and the 
price of notes decreased until, in 1881, the lowest point was 
touched when the difference between notes and specie reached 
93 per cent against gold and 79.5 per cent against Mexican 
silver. Thereupon the government decided to redeem the 
various notes and at the same time to change the system. 
Separate banks were replaced by one central bank and in 1882 
the Bank of Japan was established;^ from 1884 convertible 
bank notes were issued. ^ Again the government, by Law 
No. 14, of June, 1885, decided to begin the conversion of 
government notes into silver coins in January, 1886.^ In 
regard to these banks, it must be added that the government 
revised the national-bank regulations on May 5, 1883* thereby 
fixing the period of existence at twenty years in full from the 
day the permit was issued; the term limit of the banks ex- 
pired between September, 1886, and December, 1899. Fur- 

iLaw No. 32 of 1882. 

* Law No. 18 of May, 1884. 

' At the end of 1885 the government notes amounted to 88,345,096 yen. 

* Law No. 14. 



EFFECTS ON THE MONEY MARKET I9I 

thermore, it was decided to redeem the bank notes, amount- 
ing to 31,812,880 yeriy which existed at the time by the 
following method. This was called the united method of re- 
demption of national bank notes. As for a while it caused 
a great sensation in political circles after the Sino-Japanese 
War, we shall briefly explain below this method of redemption. 
(i) The national banks shall deposit with the Bank of 
Japan, for conversion of the notes a reserve (currency) 
amounting to one-fourth of the notes allowed them, which 
reserve shall be kept as a time deposit during the years in 
which the banks are operated, to be applied to the redemption 
of the notes (first class redemption fund) . 

(2) The national banks shall set aside out of their profits at 
the end of each half year an amount equal to 2.5 per cent per 
annum of the amount of the notes allowed them and shall 
deposit this with the Bank of Japan as a fund for the redemp- 
tion of the notes (second class redemption fund). 

(3) The Bank of Japan shall purchase interest-bearing 
bonds with the foregoing sums and shall redeem notes with the 
interest and transfer the notes to the Department of Finance. 
The Department of Finance shall then hand over public loan 
bonds to said bank equal in amount to those redeemed. 

According to the estimate at the time, the market price of 
the public loan bonds bearing 7 per cent interest was expected 
to be as mentioned below, as the result of which transaction 
the amount of interest on bonds purchased up to 1897 with 
the first-class redemption fund would amount to 10,738,982 
yen, and the amount of the face value of the bonds purchased 
with the second-class redemption fund to 13,791,515 yen and 
the interest to 7,992,224 yen, totaling 32,522,721 yen. This 
plan was to leave a certain amount of surplus compared with 
the existing amount of the notes, the banks being able to 
redeem a greater part of the notes with a portion of the in- 
terest of the reserve fund and the profits at the time of the 
expiration of the business term. Moreover, it was expected 
that the public loan bonds and the reserve fund would remain 
in the possession of the bank, and that the notes issued would 



192 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 



return to the bank indirectly in the form of currency, so that 
the problem would be satisfactorily solved. But this plan 
was impracticable for two reasons. One was that the price 
of bonds rose, and the other that the bonds bearing 7 per cent 
interest disappeared. For the former reason the amount 
needed to purchase the bonds was reduced. For the latter the 
amount of interest was reduced. The following table will 
show a comparison between the price of bonds as estimated 
at the time of the initiation of the united plan of redemption 
and that actually received : 

Comparison of Estimated and Actual Price of Bonds, i 883-1 895 



Year 



1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 
1891 
1892 

1893 
1894 

1895 



Estimated price 


Rate of 


of bonds 


interest 


Yen 


Per cent 


80,000 




80,000 




80,000 




85,000 




85,000 




85,000 




85,000 




90,000 




90,000 




90,000 




90,000 




95,000 




90,000 





Actual price of 
bonds 



Yen 

83,947 

93,393 

96,331 

107,309 

101,578 

101,445 

101,015 

99,866 

100,451 

101,726 

106,962 

105,270 

99703 



Rate of 
interest 



Per cent 
7 
7 
7 
7 
5 
5 
5 
5 
5 
5 
5 
5 
5 



The difference between the estimated price and the actual 
market price was as just stated. Moreover, in 1886, the 
law of consolidated bonds was established, and from March, 
1887, the bonds of 5 per cent or above were redeemed so that 
it became impossible to purchase 7 per cent bonds. 

These facts produced a great miscalculation in the estimate 
of the redemption fund. 

Thereupon, the national banks asked for a postponement of 
the right to issue notes, in order to make up for the losses 
arising from the miscalculation mentioned above. The gov- 
ernment on the other hand tried to deprive them of their 
special privilege upon the expiration of the business term and 



EFFECTS ON THE MONEY MARKET 1 93 

to change them into private banks, only thus allowing them to 
continue their business (advocacy for continuation). Thus 
the two diverse opinions, as to extension or continuation, 
constituted a great problem for the nation, especially for the 
Diet, from ante-war times. But after the war, the confusion 
in the money market increased, so that the advocates of 
extension gained the upper hand, enthusiastically upholding 
this doctrine on the ground that the future money market 
would become tighter and the price of bonds would fall, and 
that the reason why the price of bonds, which had risen 
ordinarily at the time of the Sino-Japanese War, was main- 
tained, lay in the fact that the national banks needed them. 
For a while many people considered this view as being a 
reasonable one. So the government by law ordered the Bank 
of Japan to lend capital for the redemption of notes amounting 
to 22 million yen, without interest, in order to relieve the 
national banks from the difficulties which had arisen from the 
aforementioned miscalculation. But, fortunately, from the 
latter half of 1895 the market value of securities generally 
rose and with renewed activity in industrial and commercial 
circles the banking business became most profitable. So the 
once powerful advocates of the doctrine of extension lost their 
influence, and a bill embodying the first principle, that of 
continuation, was passed by the Imperial Diet, and at last the 
153 national banks disappeared altogether from the eco- 
nomic world in February, 1899. Of these 153 banks, 8 
dissolved of themselves on the expiration of their terms, 16 
amalgamated and 7 closed their doors. Only 122 continued 
as private institutions. Of these, 30 were changed after, and 
92 before, the expiration of their term. 

We have so far explained the problem of adjustment 
connected wifii the national banks. We shall now glance at 
the banking business in general. In the first place, as a re- 
sult of this reconstruction of the national banks, a number of 
specially privileged banks, including the Bank of Japan, the 
Yokohama Specie Bank, the National Bank, the Hypothec 
Bank of Japan, the Banks of Agriculture and Industry, the 
14 



194 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

Colonial Bank of Hokkaido, the Industrial Bank of Japan, the 
Bank of Formosa, and a number of ordinary banks, were 
considerably changed, as shown below: 







Increase I^ 


r Number of 


Banks, 


1893-1903 








Main Banks 


Total 


Branch Banks 




Year 


Special 
banks 


Ordinary S 
banks I 


avings 
janks 


Special 
banks 


Ordinary S 
banks 1 


avings 
Danks 


Total 


1893.- • 


135 


545 


r 23 

1 I* 


703 


162 


165 


12 


339 


1894..- 


135 


700 


30 

1 I" 


865 


188 


196 


30 


414 


1895.- • 


135 


.792 


[ 86 
1 6* 


1,013 


193 


277 


107 


577 


1896... 


123 


1,005 


1 149 

I 44* 


1,277 


180 


428 


224 


832 


1897... 


61 


1,223 


1 221 

I 91* 


1,505 


83 


651 


270 


1,004 


1898... 


48 


1,444 


[260 
158"^ 


1.752 


18 


912 


453 


1,383 


1899..- 


49 


1,561 


1 333 
1 198* 


1,943 


30 


1,069 


631 


1.730 


1900.. . 


51 


1,802 


1419 
1 262* 


2,272 


32 


1.374 


814 


2,220 


1901.. . 


51 


1.867 ' 


1441 
273* 


2,359 


33 


1457 i 


r542 

1337* 


2,032 


1902. . . 


52 


1,841 


1431 

1 270» 


2,324 


34 


1,470 


536 
331* 


2,040 


1903... 


52 


1,754 


1469 

L2i9» 


2.275 


35 


1,441 


5«6 
L291* 


2,062 



•Ordinary banks conducting savings business so their number was not included in the total 
figures. 



Table XII at the end of this chapter ^ will show the amount 
of capital, deposits, net profits, and dividends of these 
banks. 

The following table will show the amounts of deposits and 
loans for the various banks i^ 

» Post, p. 207. 

' The special banks include the Bank of Japan, the National Banks (up to the 
end of 1898), the Yokohama Specie Bank, the Hypothec Bank of Japan (after 
1897), the Banks of Agriculture and Industry (after 1898), the Bank of Formosa 
(after 1899), the Colonial Bank of Hokkaido (after 1900), and the Industrial Bank 
^f Japan (after 1902). 



EFFECTS ON THE MONEY MARKET 
Bank Deposits and Loans 



195 





Deposits 


Loans 


Year 


Amount 


Percentage 
(1893 = 100) 


Amount 


Percentage 
(1893=100) 


iSq"* 


Yen 
115,139,920 

138,452.655 
190,840,473 

430,234,984 
383,910,820 
400,892,757 

606,053,315 
610,010,408 
604,618,138 
712,677.790 
778,514,683 


100. 
120.2 
165.7 
373.7 
333.4 
438.2 

526.4 
529.8 
525.1 
619.0 
676.1 


Yen 

195.017,509 
227,909,656 

322,645.257 
543,823,073 
500,821,394 
648,390,268 
882,574,248 
992,247,666 
921,074,784 
991,138,278 
1,046,774,556 


100. 


1804. 


116. Q 


i8qs 


165.2 
278.9 


1896 


1897 


256.8 

332.5 
452.6 
508.8 

472.3 
508.2 
536.8 


i8q8 


1800 


TQOO 


TQOI 


IQ02 


lOCl 






4.971,345.943 




7,272,416,689 





The foregoing figures show the conditions of the banks in 
Japan after the Sino-Japanese War. In point of capital, 
deposits and loans, all made rapid progress. Especially in 
1899 was their development very remarkable, after the period 
of adjustment of the national banks. All this followed as a 
result of the iactivity of economic circles after the war, but 
the reconstruction of the natibnal banks had a great deal to 
do with producing this prosperous condition. Therefore, we 
can not but recognize the fact that the war after all had no 
small effect upon the banking industry. 



196 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 



o 
bo to 



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4!! eg 



c 
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ThOO 



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EFFECTS ON THE MONEY MARKET 



197 





bioTJ w 






1 




(^ QJ 3 


vo 00 r^ HI 00 














Q t>^d crvvd c>o 

•-• W Tt-COTt 






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strength 

issue 


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00 


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98,0 


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Tt-Tj-OO ONtS OMO 


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*^ 


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N a\oo ri-ioM «-• 


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nth-en< 
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nth-end 
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issue 








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k5> f«< iH t^fOvO t>.^ 
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198 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 





a^cj 








1 




c rt Sj 

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°° <=tj "1:^. '^^^ 


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t^ 


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10 -^Cl M 


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C< t^oo ror* 


p« 




1^00 so rOI^ i-i 


tJ- 


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8 


; 0" fo 0" lovrToo" 


NO 


Q 


t) 


. iOt>.»OvO COON 


t>. 


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0*5 


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'^^»^«"2*^°o 


VO 


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d 


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tO-^t^Tj-O 


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g 


111 

S <ti ^ 




t-«NO N fOO On 


t^ 


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t^ -"t ®- cr> q^ <Nj_ 
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t>. 


1. 


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10 

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(Nj ►-• t>* 10 CS 10 


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00 00 00 00 00 00 00 














1 



EFFECTS ON THE MONEY MARKET 



199 



00 

I 



& 

Q 



■^ E o 
S Si c 

SI'S 



ror^ .I O vO 00 xtf 
^ rf >£c6 rf »0 rf rf 

j^ VO •-<_ t^ q_ •« « c^^ 

vo" T? o"oo" <S to »0 

lOt>»»OlOO «OOs 

•^ « W i-i i-i 



00 so «0 'i- 
00 rOO\t^ 

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^00 •- a> 

00" to i-Tvo" 

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OsiOiOtN. 

^f rf »c 



1 


iggg^ 


. lOlOO 00 








ic-i vo 




^ TJ-IO 




re t^ •-' 10 r* i-i 00 

Tf O^ '^ N M >0 Ov 
W vO^ « vO^ >^^<l t>2 

8 T? ■"Too" ds CO 10 rC 
►^ vo vo_^oq^vo_ ^ ^ ®« 

rf\0 vO" fOrf rf i-T 
CO cOvO OvO 00 N 



rO ^lOvO t^OO Ov 



20O ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



3 
J 

"(3 

3 
C3 
C 

a 
< 


II 


g O 00 ID tooo 


■I-) 

c 

3 

1 

< 


(S 00 CO ON C< 

00 M Tj-H. ON 

COM N VO vO 
OnOOOOO o 

H^ C< H< .H N 


a; 

i 


4-> 

w 


»0 rOiOO 

COO OnsO 
00 ON CO »0 

|i •-r6"oo''>o : 
>H t^ N IN. ov : 

d hT cT pT 


0,0 


g . . . . vo 

^ -■■■■■■■■ --4 


< 


Yen 
250,562,040 
228,570,032 
214,096,766 
232,094,377 
232,920,563 


CO 

.Si aj 


00 o\co«nco 
S Sdootrioo 


OS 


1-1 M COOO HH 

8 fi dodoo cT 

^ "^ *? **2 '^.. ^ 
0" rC hT g;vo" 




1 


00 0\ Ov 0^ On 



EFFECTS ON THE MONEY MARKET 



201 







OOvr* Ovt^tOM rO>OOOv 


2" 






\0 O '^OOO J^vO O VO 00 ON 








1.4 












1 


jt hm" fc •-«■ d" »o lo lo (ioo-Qo' T? 


00 




k^t-iOoorOCSOO'-''-' Onoo 
hH »^<» vq, t^ *! »? cr;oo_ lo qj« 


NO 




(NJ 










Si 


to VO vO t^ t^ N to 


00 






o c< vo ov «r> c< o 


in 




^2 


»,H . . . . 1-.^ O C< vO «0 ^ 

^ ci ! ! ! ! « cr^vo" rC rf ai 

O* ... .00 t^vO On to 00 


>-> 
d 




lO 








s.s 


S i-Tvo* pf vo'vo" 


.^ 




Q 


|.^ M H4 M l-« 


00 


f5 








i 








»H 




»0 On t^ C< »OvO vO •-• •-" N O 


M 


1 


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CO 


«o 


G 


VO O^ N ir> t>. t^ Tf rOOO vO l^ 


O 


§ 


3 


8 vo" r-^vo" tT) POvo" ro »o « lOOO* 


C^ 




k^ OviOOO CO "-i M <S O <S O "^ 


00 




VO 










1 


Q 


cT cT ^f vo" d^ cT cToo*" onoo*" tC 


? 


PQ 








d^ 




t^vO tJ-o O tOTfi-ivO ^rh 


g; 


ONr^iMH-c<oo»OTi-ov'-'Ov 

CO H.^vo lo TtoO lO '^ Tt;\0 t-j^ 


Tempora 

loans as for 

exchang 


w 


a CO Cf to lOvo" O"oo" lO CO o" to 


cT 




K^ CO '!*• t^ O >OvO 00 t^ N 0^ 
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c< 




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lllllll II II 















202 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



1 


IP 

to 


00 

M 




i 


Yen 

16,647,648 

2,528,161 


1 


^ OnO 

<>to 





21,701,288 
3,307,224 


M 

to 

00 

8 

in 


Yen 
24,296,668 
3,392,100 


00 

VO 


en 

ll 
f 








• '■ 




; ; 


• 


• d 


: 


• d 


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& 

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d 


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d 


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^ to 






to 

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00 00 


ts 



c^ 




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3 fe 

31 


II 




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00 Tl- 


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vd 


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1 


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to 

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tot-T 


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Hi 


to 

1 


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1000 

•^^ C< ON 


VO 

? 




3 

1 


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►-< to 

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to 


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10 


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10 


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to to 


to 


c 

i 

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to 


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00 


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00 

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10 


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i 
1 


«fl CO «3 W to W 

c c c c c c 

i-S i-S i-S l-S l-S i-S 
«•§ 2-§ si 2I «•§ 3-c 
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2— 2i2 2— 2— 2— 2-^ 

U" la^ 11^ i&^ 11^ i|^ 

<fti <ftJ <a: <D^ <oi: <o^ 






1 




1 




1 








1 




1 





EFFECTS ON THE MONEY MARKET 



203 



Jo 

CQ 



*9 ^ r^O O^ rO t^ 

►1 « i-i (S 



^00 

00 



•H ft Kl JOt^t^ 

jt NO vo" cT ri" ci o" ^t 



O *0 00 ts >0 O 
HH^ rO« ^ cr^ Tt 

cToo" o"oo o" ►h" 
q^ to^o^ *^ ^« crj 

rf tC Ov to rf 00" 






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tZ rToo o~oo d" 

O^-^tOO vO COM 



O O 00 o too o 






a— , 



i-i rJ-vO vO vO vO 
VO Q C< <S M CS 
^ R. Rj ^ ^ ^ 

t^ CO 6" wS o~ o' 

CO t^ CO >-" vO 



?H »0 »0 >0 »0 »0 W C<^ 

cT pT ci cT «i CO CO 



t>.00 

On On 
00 00 00 



30 On On On On 



204 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



i<5 















.-2 a 

Oh W 






•-• N o 00 Tt-ON 
•^ o « t^ "^ *^ 

•^ rO q"vO t? i-T 
« VO OOO "-00 

•-• HI C< M CI 



t>. O^ *0 0^ ►^ O^ 

f<5T»-^vO O to 

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^ ! VO tCcT Q 00 to 
g . >Oi-« C< ONO lO 
v^ *?*^* lOrt-ON 

•f pT o" looo" i-r 

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* t>>00 O^OO 00 00 



• ^ t>»00 00 00 00 



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• "^ CJj O^ •-«_ CJ^ M^ 

^ I M cT T? to t-Tvo 

►^ . 00 COON tCOO 



Q lOlOiO O '^O 

O t^vO 00 O CO Q 
0_ On CO Th O^ W O 

8 \r> d o tr> o tZ o 

k^ t^ "^00 N lOiOt^ 
?N »Ot>.OsOsOvO t>. 



o o o o o o o 
IOCS M ^^^s. j^ fs) 
qv Pl^ N CO CO CO »o 

CO oo" oo" oo" oo" oo" oo" 

N a M C4 W W N 



^ 



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00 00 00 On On O^ On 



EFFECTS ON THE MONEY MARKET 



205 






^1 



PQ cu 



ah 

O «5 










• 6 t^ON 

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206 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



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EFFECTS ON THE MONEY MARKET 



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CHAPTER IV 
EFFECTS ON INDUSTRIES 

Following the crisis of 1890, came business depression, 
which lasted for three years, from 1 891-1893. During these 
three years, the principle of conservation was most carefully 
followed in every branch of industry in Japan, and no positive 
plans were adopted for any. Meanwhile, however, Japanese 
business recovered from the blows of the past, the failures of 
the previous years were forgotten, conditions favorable to 
productive power were secured, and the once disturbed state of 
the business world was remedied. As a result, capital ac- 
cumulated, the condition of the money market became 
sluggish and the business people of the country were thus 
prepared to enter upon fresh activities. But just at this 
time the Sino-Japanese War broke out, and the nation, putting 
everything else aside, was compelled to devote its whole 
energy to the prosecution of the war, which was a life-and- 
death struggle to Japan. 

Fortunately for her, Japan won a glorious victory and in- 
creased her prestige greatly in the eyes of the whole world. 
People in general were encouraged by this victory to such an 
extent that the money market, after having met the very 
large expenditure necessitated during the war, showed reserve 
power after the war was over. Encouraged by this favorable 
state of the money market, the enterprise of the people, which 
had been restrained during the war, suddenly burst forth 
everywhere in new business undertakings. Of the various 
branches of business which the minds of the people were thus 
stimulated to engage in during these years, railways came 
first, and next banking, while the least enthusiasm was shown 
for general commerce and industry. 

A glance at the conditions of industry in Japan during the 
war shows that while the interference with communication 
and the money market affected to some extent the general 

208 



EFFECTS ON INDUSTRIES 



209 



industries of the country, yet on the other hand the unusual 
activity apparent in munition factories, occasioned by the 
need of munitions on the battlefield, balanced this depression. 
Besides, in those days, most of the industries in Japan were 
still at the outset of their development, and therefore supply- 
ing local demands only, so that they did not sustain any very 
serious blows during the war. Indeed, it may be stated that 
even during the war industries in Japan, generally speaking, 
made some progress, and when a business boom set in after 
the war their advancement was of course still more remarkable. 
Thus during these years the Japanese laid the basis for the 
notable progress which their industries attained after the 
Russo-Japanese War in later years. Let us first look at the 
conditions of industrial investment in Japan. As we have 
no authentic materials for a survey of the whole field of in- 
dustry, we shall tabulate the amount of capital of the com- 
panies engaged in various industries as follows: 

Capital Investment in Industry 









Paid-up 


capital 






Number of 
companies 


Authorized 
capital 






Reserve 


Ye 


Amount 


Increase 






Yen 


Yen 


Per Cent 


Yen 


I8q6 


1,367 


143,617,530 


89,900,900 


100. 


7,404,980 


iSqy 


1,881 


165,332,633 


105,381,106 


117. 2 


7,581,535 


I8q8 


2,164 


183,657,046 


122,066,653 


1358 


11,642,993 


I8qq 


2,253 


222,673,634 


147,783,280 


164.4 


13,467,802 


iqoo 


2,554 


216,766,903 


158,851,730 


176.7 


17,697,540 


1901 


2,477 


219,249,806 


166,293,003 


185.0 


24,057,360 


1902 


2,427 


222,120,693 


173,222,689 


192.7 


24,794,154 


1903 


2,441 


214,404,088 


170,346,340 


189.5 


29,966,661 


To 


tal . 17,564 


1,587,822,333 


1.133,845,701 




136,613,025 



As the figures in the foregoing table indicate, the capital 
invested in certain industries was doubled in the four or five 
years subsequent to 1896, and thenceforward it continued to 
increase at the same rate. Yet when compared with the 
amount of capital invested in other kinds of business, ^ it will 

1 Cf. table, p. 210. 

IS 



210 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



be seen that the increase in capital of the companies engaged 
in these industries was far smaller than that of companies 
engaged in agricultural and commercial business and in com- 
munication. The percentage of this industrial investment 
compared with the total amount of investment in all these 
different kinds of business, too, was generally less than 20 per 
cent ; so that it may be seen that industrial investment did not 
increase steadily during said years. In a word, it may be 
stated that industrial enterprises did not make any consider- 
able progress during this period. 

Ratio of Industrial Investment to Total Investment 





Indus- 


Agricul- 


Commer- 


Communi- 




Ratio of 

industrial 

investment 

to the total 


Year 


trial com- 


tural com- 


cial com- 


cation com- 


Total 




panies 


panies 


panies 


panies 






Per cent 


Per cent 


Per cent 


Per cent 


Per cent 


Per cent 


1896 . . 


lOO.O 


100. 


100. 


100. 


100. 


22.6 


1897 . . 


117. 2 


134 


5 


1350 


145-5 


134-0 


19.8 


1898 . . 


• 135-8 


141 





155-7 


174.2 


156.4 


19.6 


1899 ■ . 


. 164.4 


139 





174. 1 


175-0 


172.0 


21.6 


1900 . . 


. 176.7 


157 


8 


201 .9 


202.0 


196.0 


20.4 


1901 . . 


. 185.0 


159 


7 


216.5 


214.8 


208.7 


10. 


1902 . . 


192.7 


154 





228.4 


232.0 


221 .1 


19.7 


1903 . . 


• 1895 


192.9 


234-4 


231.7 


223.3 


19.2 



Of the industrial companies whose paid-up capital is rep- 
resented in the foregoing table, those having one million yen 
or more at the end of the year 1903, and making somewhat 
rapid progress, were the companies engaged in the branches of 
industry given in the following table. The condition of these 
companies indicates fairly well the general condition of the 
business world following the Sino- Japanese War. 

As the figures in this table indicate, the industries which 
made most progress during this period were the cleaning of 
grain, manufacturing of soy bean paste, and tobacco, ship- 
building, electric light manufacturing, printing, paper mill- 
ing, and cement manufacturing. All these industries ex- 
cept tobacco, whose success had a great deal to do with the 
establishment of the government monopoly system, attained 



EFFECTS ON INDUSTRIES 

Progress of Industries, i 896-1903 



211 



Industry 



December 
31, 1896 



December 
31, 1899 



December 
31, 1903 



Increase of 

1903 over 

1896 



Grain refining 

Sakebrev;'mg 

Beer brewing 

Soy and bean paste 
manufacturing 

Sugar refining 

Tobacco manufacturing 

Manufacturingof medi- 
cines and chemicals. . 

Cotton spinning 

Other spinning 

Raw silk 

Hemp yarn 

Silk textiles 

Cotton textiles 

Hemp textiles 

Woolen textiles 

Mining and refining . . . 

Shipbuilding 

Railway wheel making . 

Electric light works . . . 

Gas works 

Printing 

Paper milling 

Tanning and manufac- 
turing of leather 
goods 

Nets and rods 

Petroleum boring and 
refining 

Cement making 

Fertilizer manufacturing 



Yen 

344,668 

2,056,895 

(unknown) 

325,392 
1,474,106 

1,113,099 

(unknown) 
28,770,847 
(unknown) 

3,869,877 
(unknown) 

245,355 
2,355,178 

790,000 

814,416 

8,585,560 

2,272,866 

(unknown) 

4,624,097 

(unknown) 

690,067 
2,872,793 



523,250 
668,210 

9,500,000 

1,330,000 

(unknown) 



Yen 
1,255,978 
6,133,044 
2,756,940* 

928,460 

2,419,968 

11,320,965 

(unknown) 

30,313,054 

5,195,891 

4,547,215 

3,066,120* 

748,079 
3,975,940 
(unknown) 
2,367,000 
10,020,418 
5,011,600 
(unknown) 
7,909,018 
2,302,400* 

992,061 
6,265,095 



636,485 
648,410 

14,241,109 

4,078,085 

660,560 



Yen 
1,498,426 
3.748,253 
3,156,470 

1,943,796 
2,710,300 

13,385,933 

2,132,865 
32,666,875 
7,010,070 
4,620,788 
1,607,230 
2,075,844 
1,201,199 
1,788,400 
1,926,750 

10,933,235 
10,530,100 
1,470,000 
12,151,561 
5,544,500 
1,806,814 
8,729,661 



1,128,815 
1,033,500 

4.497,743 
3,767,374 
1,850,462 



Per Cent 

435 
182 



598 

184 

1,202 



114 
119 

846 

51 
226 

237 
127 

463 
263 

262 
304 



216 

155 

47 
283 



» As of December 31. 1900. 

their several degrees of progress as a result of the general 
advance in the conditions of society at large after the war. 

Let us then note the number of factories in operation, with 
the number and horse power of machines in use, and we shall 
see what remarkable progress the totals in the following table 
indicate. 1 

Now let us compute the number of factory hands. Be- 
tween 1896 and 1906, this was about 430,000, without any 
considerable change during these years. About 40 per cent 

^ Cf. detailed figures given on pp. 221 and 222 relative to the ages and summary 
of factory hands, etc. 



212 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 
Factories in Operation and Horsepower of Engines 



Year 


Number of 
factories 


Percentage 


Number of 
engines 


Percentage 


Horse 
power 


Percentage 


1893 . • 


3.019 


100. 


2,080 


100. 


32,811 


100. 


1894 . . 


5,985 


198.7 


4,020 


193 -3 


41,031 


125. 1 


1895 . • 


7,154 


2370 


4,989 


239 -9 


61,252 


186.7 


1896 . . 


7,640 


253.1 


5.459 


262.5 


64,429 


196.4 


1897 . • 


7.287 


241.4 


5,880 


282.7 


63,434 


193 -3 


1898 . . 


• 7.085 


234 -7 


5.172 


248.7 


79,016 


240.8 


1899 • . 


. 6,699 


221 .9 


4.093 


196.8 


76,885 


234 -3 


1900 . . 


. 7.284 


241.3 


3.977 


191 .2 


95,392 


290.7 


1901 . . 


7,349 


243-4 


^'§^0 


218.8 


91,585 


279.1 


1902 . . 


7,821 


259 I 


4,808 


231.2 


100,901 


307.5 


1903 • . 


8,274 


274.1 


5.226 


251 -3 


102,797 


313.3 



of these hands were males, and the remaining 60 per cent 
females. Considered as to age, 90 per cent of the total number 
were 14 years or older, and the remaining 10 per cent young 
hands less than 14 years of age. About 93.4 per cent of the 
total number of male hands, and about 85.6 per cent of the 
total number of female hands were more than 14 years of age. 
From these figures, it may be inferred that the number of 
young hands (those under 14 years of age) was small among 
male hands, but comparatively large among female hands, as 
Table I at the end of this chapter ^ indicates. 

Of the figures given in the foregoing pages, the most im- 
portant may be summarized as shown in the table on the 
next page. As some figures are lacking in the table, we can 
not make comparison with the time previous to the war. 
While it is true that during and after the war industrial 
schemes were started in various parts of the country, yet we 
must realize that the industrial development attained by the 
Japanese during those years can not be called remarkable. 
Except in the production of half-manufactured articles, an 
industry which had been developing in Japan even before the 
war, the progress made during this period was only in those 
branches of industry devoted to the production of articles 
for home consumption or those necessitated by the improve- 
ment in standards of living, but not for export. This may be 

^Post, p. 218. 



EFFECTS ON INDUSTRIES 213 

Ratio of Capital Invested, Factories and Factory Hands, i 893-1 Q03 













No. of factory hands 


Year 


Paid-up 


No. of 


No. of 


Horse- 








capital 


factories 


engines 


power 


















Male 


Female 


Total 


1893 . •• 


(unknown) 


100. 


100. 


100. 


(unknown) 


(unknown) 


(unknown) 


1894 • . • 


(unknown) 


198.2 


193.3 


125. 1 


(unknown) 


(unknown) 


(unknown) 


189s . . • 


(unknown) 


237.0 


239.9 


186.7 


(unknown) 


(unknown) 


(unknown) 


1896 . . . 


100. 


253. 
100. 


262.5 
100. 


196.4 
100. 


100. 


100. 


100. 


1897 ... 


117. 2 


241.4 

95.4 


282.7 
107.7 


190.6 
98.5 


105.5 


97.5 


100.7 


1898 . . . 


I3S.8 


234.7 
92.7 


248.7 
94.7 


240.8 
122.6 


101.7 


89.5 


94-4 


1899 — 


164.4 


221.9 

87.7 


196.8 
75.0 


234.3 
119. 3 


86.6 


98.0 


93.4 


1900 — 


176.7 


241.3 
95. 4 


191. 2 
72.9 


290.7 
148. 1 


88.7 


94.9 


92.4 


1901 . . . 


185.0 


'ti.i 


218.8 
83.4 


279.1 
142. 1 


90.6 


08.2 


95-2 


1902 . . . 


192.7 


259. 1 
102.4 


231.2 
88.1 


307. 5 
156.6 


106.3 


119. 6 


114. 3 


1903 . . . 


189. S 


274-1 
108.3 


251.3 
95.7 


313-3 
159. 6 


104.4 


iiS-i 


II0.8 



seen from the fact that of the total value of exports from 
Japan to foreign countries in these years, half-manufactured 
articles were usually 45 or 50 per cent. However, the value of 
imported half -manufactured articles was between 15 and 20 
per cent against about 25 per cent of manufactured articles, 
while the value of imported manufactured articles was 26 to 30 
per cent, although this percentage began gradually falling 
towards the end of the decade 1 893-1 903. 

In summing up, it may be stated that while we must admit 
that after the Sino- Japanese War the Japanese were encour- 
aged by the favorable economic condition to start various 
industrial enterprises, these schemes were on rather a small 
scale. Then, again, the various industries thus started were all 
for the purpose of supplying domestic needs, and no develop- 
ment was attained in industries for the production of export 
articles. Though the glorious victory and the intervention 
of the Powers hastened the national awakening of the Japa- 
nese people to a great extent, yet it was still too early for any 
elaborate reorganization of the industrial world. The govern- 
ment was too busy with work such as the administration of 
state finances, the reform of the currency system, adjustment 
of the money market, preparation of armaments, etc. As to 



214 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

the people, it was only a short time after the country had been 
opened to foreign intercourse, and they did not have capital 
enough to do any work independent of the government. For 
these reasons, neither the government nor people of Japan 
could yet lay a firm foundation for the establishment of what 
may be called an industrial empire in Japan. This they ought 
to have done as a result of the war, and it is much to be 
regretted that it was impracticable, because the establishment 
of an industrial empire is an indispensable requisite in the 
improvement of international finance. When we consider the 
elevation in Japan's international position after the war, the 
maintenance of the gold standard adopted after the war, and 
the increase in the people's purchasing power which accom- 
panied the importation of the indemnity from China, we regret 
this the more. Even at the present time (191 5), about 20 
years after the Sino- Japanese War, we have still failed to 
establish such an industrial empire, hindered especially by 
the Russo-Japanese War, and this fact alone tells something 
of the industrial conditions of Japan in those post-bellum 
years. 

The State of Industrial Capital 

The general condition of capital investment in industrial 
works was briefly set forth in the previous section. We shall 
now consider the amounts of paid-up capital in the hands of 
companies engaged in the principal branches of industry. 
Table II at the end of this chapter^ gives the figures for the 
years i 896-1903. 

None of these figures suggest large investments certainly. 
Industries were started during these years either for the pur- 
pose of meeting home demands or of laying the foundations 
for later development, as when Japan might become a leader 
in the production of articles for export to foreign countries. 

The State of Industrial Labor 

In the statistics published by the Department of Agricul- 
ture and Commerce as to the condition of industrial factory 

^Post, p. 219. 



EFFECTS ON INDUSTRIES 21 5 

labor in Japan, figures for 1895 and earlier are lacking, so 
that we have not the materials for a comparison of the 
conditions of factory labor before and after the Sino- Japanese 
War. An investigation of the average number of factory 
hands employed in industrial work, as furnished in the official 
statistics published since the year 1896, shows us that about 10 
per cent of the whole population of the empire was employed 
in this kind of labor. See Table 1 1 1 at the end of this chapter.^ 

If the factory hands enumerated in Table III are divided 
into two classes, adult and young, with the age of 14 as the 
dividing point, we shall find that the adult hands (14 years 
old or older) are about 90 per cent of the total. See Table 
IV at the end of this chapter.^ 

The proportion between male and female hands is 40 per 
cent male and 60 per cent female. Although the number of 
male hands did not increase much during these years, the 
number of female hands increased somewhat rapidly. Of the 
male hands, about 94 per cent were adults, while of the 
female hands, adults formed about 87 per cent of the whole 
number. Therefore it may be inferred that young female 
hands were more numerous than male. See Table V at the 
end of this chapter.^ 

Percentages as to average daily wage of adult factory 
hands in the principal branches of industry (such as flour 
milling, yam spinning, manufacturing of textile fabrics, knit- 
ting, machine making, shipbuilding, furnace working, gas 
works, paper milling, dyeing, etc.) during this period, as in- 
vestigated by the Department of Agriculture and Commerce, 
are given in Table VI at the end of this chapter.^ Compared 
with independent workmen such as carpenters, plasterers, 
etc., the increase in wage appears rather small. 

As regards the kinds of independent labor given in the table 
for reference, further notes will be given in Chapter VIII, 
pages 278-319. 

These facts clearly show us that the condition of factory 
hands was generally bad compared with that of independent 

1 Post, p. 220. 2 Post, p. 221. 3 Post, p. 222. * Post, p. 223. 



2l6 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

workmen. Let us now compare the price of factory labor 
with the prices of commodities. See Table VII at the end of 
this chapter.^ 

As shown by the figures given in Table VII, the prices 
of commodities rose more rapidly than the wages of factory 
hands. It is obvious that the rise in the prices of commodities 
brought about a rise in house rent and other items concerned 
in the cost of living, and a consequent pressure upon the life of 
the working class. This wage, low compared with the wage of 
independent workmen, which rose more rapidly than the 
prices of commodities, made the position of factory hands 
very difficult during these years. 

Let us now investigate the number of hours these factory 
hands had to work a day. In those days we had no factory 
law in operation. Then again, factory owners were not 
farsighted about the management of their factories, nor did 
they experience any trouble with their factory hands. It is 
obvious that the latter were forced to work excessively long 
hours a day — doubtless as much as 12 or 13 hours, although 
we have no authentic statistics at hand to prove it. This we 
may infer, however, from the fact that when a 12-hour day 
clause was inserted in the factory law which was prepared in 
quite recent years, objection was raised by many of the 
authorities best acquainted with the condition of factories in 
Japan. As it was, the appearance of the factory labor class, 
which had not existed in old Japan, presented a serious 
question which the leaders of the country were called upon to 
investigate from the points of view of social customs, public 
sanitation and the preservation of the family system in the 
country. In a word, it may be stated that after the Sino- 
Japanese War, unusual activity was manifested in indus- 
trial circles in Japan, with a consequent heavy demand for 
factory hands. This demand for factory labor brought 
about in some degree an increase in the income of the working 
class. At the same time, however, as there was no factory 
system established in those days, the appearance of this 

1 Post, p. 223. 



EFFECTS ON INDUSTRIES 217 

factory labor class encouraged an undesirable tendency in 
society, which should be seriously investigated in the interests 
of public sanitation, health, and morality. In other words, 
the factory labor class is the most interesting by-production 
of the industrial developments which followed the Sino- 
Japanese War. And the appearance of this factory labor 
class requires the leaders of the country to devise improve- 
ments in the factory system and the condition of the people of 
this class, for the sake of the industrial development of the 
country as well as public sanitation and the health of the 
people in general. 



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CHAPTER V 
EFFECTS ON COMMERCE 

The ill effects that the commerce and trade of Japan in 
general suffered from the Sino-Japanese War were compara- 
tively small. Although the interruption in transportation by 
land and water caused by the transporting of troops and 
civilians in connection with the war (amounting to 300,000) 
interfered with the supply of necessary merchandise for a 
short time, resulting in a subsequent rise in prices, yet these 
difficulties were soon removed; especially as the government 
paid careful attention to the money market and as conditions 
were favorable to Japan all through the war, the Japanese 
Navy having complete control over the China Sea. For these 
reasons Japan's trade with America and Europe was rather 
more prosperous than before and trade with China and Korea 
did not suffer much. In order to show the state of commerce 
and trade in general during the war, we shall now call atten- 
tion to the table on the following page which gives the amount 
of negotiable paper handled, the notes cleared, and the present 
general condition of the country's foreign trade during these 
years. 

As we see from the figures, neither the volume of commerce 
at home nor that of foreign trade decreased ; indeed there was 
more or less increase in each case. 

While it is true, as just stated, that during the war no adverse 
effects were suffered by trade in general, yet after the war 
important effects were more apparent. The minds of the 
Japanese people in general were decidedly stimulated, for as 
the fruits of the war Japail obtained an indemnity of 200 
million taels in Chinese Kuping silver, and the concession of 
the Island of Formosa. Enthusiasm for business enterprises 
speedily developed among the people, and this, coupled with 
the government's post-bellum program, created unusual activ- 

224 



EFFECTS ON COMMERCE 225 

Negotiable Paper and Foreign Trade During War Period 





1893 


1894 


1895 


Notes handled by Tokyo 
associated banks: 
Receiots 


Yen 
71,234,966 
100,467,393 


Yen 
85,203,203 
103,144,795 


Yen 
98,809,120 




137,943,935 




Notes handled by Osaka 
associated banks: 


44,033,992 
66,320,081 


46,981,007 
82,863,147 


64,438,604 
102,981,074 


Exoenditiircs . . 




Negotiable paper handled 
by Tokyo Clearing 
House: 

Amount presented 

Amount cleared 


188,591,742 
i48,oi8,870» 


227,767,017 
i85,597,502'» 


356,841,068 
289,i02,425» 


Negotiable paper handled 
by Osaka Clearing 
House: 


63,600,661 


67,543,806 


79,6s4,Il8 






Foreign Trade : 
China and Korea: 

Exports 


9,015,663 
19,095,414 

57,933,054 
46,482,956 . 


11,179,099 
19,694,820 

76,825,062 
67,608,724 


12,966,586 
25,910,544 

94,327,590 
75,543,047 


Imoorts 


Europe and America: 
Exports 


Imports 




Total 


177,970,038 


220,728,042 


265,372,754 





* 78.5 per cent of amount presented. '' S1.5 per cent of amount presented. 

° 81. 1 per cent of amount presented. 

ity in business. In addition to the importation of cash with 
such great purchasing power as the indemnity from China, 
there was a large inflow of foreign capital as a result of the 
adoption of the gold standard for the country's currency 
system. Various kinds of enterprises were therefore started 
in all parts of the country and carried on by means of the 
financial facilities afforded by a special form of bank, the 
immovable property banks, which the government insti- 
tuted after the war. These all overcame the various diffi- 
culties that beset the money market after the war, and, 
without occasioning any serious hindrance to commerce in 
general, brought about an entire change in the conditions 
of commerce and trade from those obtaining before the war. 
16 



226 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Table I at the end of this chapter ^ is illuminating in this 
connection. 

These statistics do not cover all of the items concerned, yet 
give some idea of the general conditions of commerce and 
trade after the Sino-Japanese War. 

Let us now investigate the subject of capital employed by 
the companies engaged in commerce and trade since 1896. 
The percentage of increase in the paid-up capital of these 
companies was far greater than that in the capital of com- 
panies engaged in such business as agriculture, industry and 
transportation by land and water. And of the various 
branches of commerce and trade the most highly developed 
during these years were money lending, warehousing, in- 
surance, sugar, fishery and marine products, raw cotton, 
cotton yarn, raw silk, textile fabrics, publication and sale of 
books and newspapers, etc., timber and lumber trading, sale 
and purchase of immovables, and banking. Each of these 
branches of commerce made progress in consequence of the 
general development of the country which followed the war. 
Let us first examine the outstanding facts as to the capital in- 
vested in commerce during this period, as given in Table II 
at the end of this chapter. ^ 

While the figures just given represent only a portion of the 
commercial agencies in existence, yet from these figures we 
may judge the general condition of commerce during these 
years. To explain this unusually rapid development, we may 
mention (i) the starting of various sorts of enterprises by the 
government as well as private individuals after the war, (2) 
the increase in the purchasing power of the people, especially 
the lower classes, resulting from -the monetary gifts and other 
payments made them for their services in the war, and also 
from the greater demand for labor of this period. This 
increase in the people's purchasing power naturally brought 
about a rise in the prices of commodities, and an excess of 
imports over exports in the country's foreign trade. In the 
following pages we shall further examine the effects of the 

^ Post, p. 239. ' Post, p. 240. 



EFFECTS ON COMMERCE 



227 



war upon the domestic commerce and foreign trade of the 
country. 

Domestic Commerce 

Domestic commerce in general 

That during and after the Sino- Japanese War domestic 
commerce in Japan did not suffer seriously in any way, but 
rather attained to a more healthy development, was briefly 
stated in the foregoing section. Let us now consider the same 
subject in a little more detail and from various points of view. 

Let us, first of all, note the condition of the money market, 
as presented in Table III at the end of this chapter. ^ The 
figures show us that as soon as business began to re- 
cover from the effects of the war, the supply of capital in 
the market became liberal, which fact indicates the general 
condition of commerce during these years. Next let us 
investigate the buying and selling of merchandise, which 
always promptly reflects commercial conditions. Below are 
given statistics as to the volume of goods carried by railways, 
although the goods carried were not for domestic commerce 

only. 

Volume of Goods Transported by Railways * 





State 
railways 


Private 
railways 


Total 


Year 


Tonnage 


Percentage of 
increase 


1893 

1894 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


Tons 
1,076,689 
1,018,298 
1,100,059 
1,266,119 
1,558,194 
1,793,896 
2,391,471 
2,806,560 
2,659,602 
3,183,720 
3,492,622 


Tons 
2,414,394 
3,265,404 
4,231,353 
5,579,112 
7,070,315 
8,122,230 

9.428,563 
11,594,960 
11,750,150 

12,938,951 
14,268,690 


Tons 

3,491,083 

4,283,702 

5,331,412 

6,845,231 

8,628,509 

9,916,126 

11,820,034 

14,401,520 

14,409,752 

16,122,671 

17,761,312 


100. 
122.7 

152.7 

196. 1 
247.2 
284.0 
338.6 

412.5 
412.8 
461.8 
508.8 


Total 


22,347,230 


90,664,122 


113,011,352 





» Prepared and published by Imperial Govenunent Railways. 



^ Post, p. 241. 



228 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Again let us investigate those branches of business upon 
which a tax was levied in accordance with the Business Tax 
Law^ promulgated in March, 1896, and enforced on January i 
of the following year. Since this law has been in force only 
from 1897, we have no authentic materials for comparison 
with conditions prior to that year, especially from 1893 to 
1896, yet the statistics given below doubtless furnish materials 
from which we may ascertain the true condition of commerce 
during these years. The business tax of the law referred to 
was imposed upon 24 different forms of business, but we shall 
confine ourselves to the sale of commodities. The standards 
for rating the tax were three, viz., (a) the total value of the 
merchandise sold during the previous year, (b) the average 
rent of buildings in the previous year and (c) the maximum 
number of employes engaged in the business in the year 
previous. The figures are shown in Table IV at the end of 
this chapter. 2 

According to the law referred to, the business tax was 
imposed upon such persons, engaged in business, as sold 
merchandise to the value of 1,000 yen or more a year. Al- 
though the law states that the tax was to be levied in accord- 
ance with said triple standards, in reality it was not, because 
of the many difficulties attending the application of such a 
law. The figures prepared by the tax collectors and given in 
the preceding table do not of course indicate the total amount 
of the commercial transactions of the country during this 
period, yet assuredly they do give some idea of the general 
commercial conditions of the time. 

From these it may be inferred that the development of 
Japanese commerce during said years was comparatively 
great. Of course it must be remembered that the said business 
tax was first levied after the war, when the country's commerce 
had attained considerable progress. While we regret that we 
have no authentic written materials from which to ascertain 
the state of commerce previous to the war, especially during 
the years from 1 893-1 896, and also that we can not give here 
1 Law No. 33. 2 posi^ p^ 242. 



EFFECTS ON COMMERCE 229 

the exact commercial development that Japan made since that 
time, yet considering the economic development effected both 
before and after the war, it is reasonable to infer that during 
the same period the country made considerable progress in 
commerce, too. 

Table V at the end of this chapter^ will show the state of 
capital of the various kinds of important commercial com- 
panies. 

From the data given above it may be concluded that 
during and after the Sino-Japanese War, Japanese commerce 
did not suffer any reverses, but even made some progress. 

Trade between Japan proper and the colonies 

The colonial history of Japan began with the acquisition of 
Formosa and the Pescadores, which were ceded to her by 
China as a result of the Sino-Japanese War. The area of the 
new possessions is 2,324.11 square miles for Formosa, and 
7.99 square miles for the Pescadores, making a total of 2,332.^ 
square miles (391.5 square ri) or about 9.4 per cent of the 
total area of the Empire before the acquisition of these pos- 
sessions — 24,794.36 square ri. These islands extend from 
the tropical to the sub-tropical zone, and abound in valuable 
resources, especially in those products in which Japan proper 
is wanting, and thus their effect upon the market in Japan is 
favorable in many respects. Let us examine the statistics 
relating to the trade between Japan proper and Formosa 
since the acquisition of the latter island, as given in the table 
on the following page. 

Of all the favorable effects that the possession of the island 
of Formosa has had on domestic commerce in Japan proper, 
the most striking has come from her production of sugar. 
Before our acquisition of Formosa, we had to import most of 
the sugar consumed in our land from foreign countries, but 
since we acquired Formosa, there had been a gradual change, 
and now Formosa not only supplies all the sugar consumed in 
Japan, but even exports the excess of her production to foreign 

1 Post, p. 243. 



230 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



markets. The sugar industry in Formosa will be treated in 
detail in the following section. 

Trade between Japan and Formosa, i 897-1903 



Year 


Exports from Japan 
proper to Formosa 


Imports into Japan 
proper from Formosa 


Excess of ex- 


Value 


Percentage 
of increase 


Value. 


Percentage 
of increase 


ports over 
imports 


1897... 
1898... 
1899... 
1900. . . 
1901 . . . 
1902 . . . 
1903- • 


Yen 
3,723,721 
4,266,768 
8,011,826 
8,439,033 
8,782,258 
9,235,290 
11,194,788 


100. 
114. 6 

215. 1 
226.6 
235.8 
248.0 
300.6 


Yen 
2,014,648 
4,142,778 

3,650,475 
4,402,110 

7,345,956 
7,407,498 
9,729,460 


100. 
205.6 
181. 2 
218.5 
364.6 
367.6 
482.8 


Yen 
1,619,074 
123,990 
4,361,351 
4,036,923 
1,436,302 
1,827,792 
1,465,328 



Foreign Trade 
General condition of foreign trade 

As mentioned heretofore, the Sino-Japanese War, in which 
Japan won a great victory over China, awakened the Japanese 
people to a realization of the striking progress which they had 
achieved since the time of the Restoration (1868). The 
Japanese so awakened strove for further progress after the 
war, and naturally, unusual activity in the economic world 
followed. In consequence, the foreign trade of Japan, of 
which we propose to treat in the present section, could not 
but feel the effect of this general tendency. Before the Sino- 
Japanese War, foreign trade was quite insignificant, but after 
the war, striking progress was made in the volume of mer- 
chandise, scope of the market, and total value of exports and 
imports. The statistics given below show the average annual 
value of exports and imports for every five years since the 
first year of Meiji (1868). A glance at these shows us that 
during the period from 1868 to 1893, or just before the out- 
break of the war, the largest annual figure for exports and 
imports attained was 80 million yen while in most of the years 
of the period it was 20 or 30 million yen, which means 30 or 40 



EFFECTS ON COMMERCE 23I 

per cent of the value of the trade in the year 1893. In none 
of the years of this period did the value of exports and imports 
exceed 100 million yen, but after the year 1894 it exceeded 100 
million yeji and in 1897 it reached 200 million yen, creating a 
record in the trade history of Japan. See Table VI at the 
end of this chapter.^ 

As the figures in Table VI show, our foreign trade made 
unusual progress after the Sino-Japanese War, but that prog- 
ress can not be regarded as accidental. It was a natural 
outcome of the steady economic development which had been 
in progress since some time before the war, a result of the 
development of the latent power of the nation. The statis- 
tics in Table VII at the end of this chapter ^ show the state 
of our foreign trade for a period of ten years, beginning before 
and continuing after the war. 

While, it may not be correct to say that increase in our 
foreign trade after the Sino-Japanese War was entirely brought 
about by the war, nevertheless, there can be no doubt that the 
war marked a stage of great development in the economic 
world, then just ready for such development, and that this 
development brought about progress in the foreign trade of 
the country. 

Let us now consider the state of our foreign trade in the ten 
years following the war. During that period both exports 
and imports increased about equally, as the figures in Table 
VIII at the end of this chapter^ show; the value of exports 
was doubled in 1898, and trebled in 1902, while the import 
trade advanced even faster, being doubled and trebled a year 
or two earlier than the export trade. 

Thus our foreign trade, as indicated by value of exports 
and imports, advanced greatly year by year, especially after 
the war. And this progress was largely due to the increase in 
the national strength discernible during, and particularly 
after, the war. Thus among the numerous causes which 
brought about the advance in foreign trade, we may mention 
(i) commercial activity, arising from the starting of various 

1 Post, p. 244. 2 Post, p. 245. 3 Post, p. 246. 



232 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

kinds of enterprises and development in systems of trans- 
portation on both land and water; (2) the importation of the 
indemnity from China ; (3) the opening to trade of such ports 
in China as Shashih, Chungking, Hangchow, and Soochow, in 
addition to those already opened as a result of a Sino-Japanese 
peace treaty; (4) increased demand for arms and other 
munitions during and after the war^ (5) the Japanese ac- 
quisition of commercial supremacy in Korea; (6) increase in 
the income of the people, especially those belonging to the 
lower classes; (7) the reform in the currency system, which 
removed anxiety caused by frequent fluctuations in the ex- 
change rate, and favorably affected trade; (8) the abolition of 
the export duty, which helped to extend the market for Jap- 
anese goods ; and (9) the revision of commercial treaties with 
other countries, so long desired by the Japanese Government 
and people, which laid a firm foundation for the future com- 
mercial development of Japan. 

About the time of the Sino-Japanese War, the standard of 
our currency system, as a matter of fact, was silver, and we 
suffered considerably from its steady depreciation. Since 
1873 (6th year of Meiji) the Powers one after another adopted 
the gold standard for their currency system, putting a limita- 
tion on the making of silver coins, and the price of silver 
gradually fell. In the United States attempts were made to 
secure a rise in the price of silver by the Brand Silver Purchase 
Regulations, 1878, and the Sherman Silver Purchase Exten- 
sion Regulations, 1890; but the general world tendency was 
against silver, and the United States Government abolished 
the said silver purchase regulations in 1893. India, too, stopped 
the unlimited coinage of silver. Consequently the price of 
silver quickly fell, and while before 1872 it was generally 
quoted at 60 d., i.e., the ratio of the value of gold to that of 
silver was i to 15^, it fell to 35/^ d. or i to 26| in 1893. As 
silver was practically the standard for the Japanese currency 
system, the fall in the prices of silver placed Japan in a com- 
paratively favorable position in her trade relations. For 

1 Were needed after the war for the replenishment of arsenals, etc. 



EFFECTS ON COMMERCE 233 

the fall of silver meant a fall in its price as compared with that 
of gold, and thus Japanese coins became cheaper than those of 
countries where gold was the standard. Now China with 
other Oriental countries, which are the principal markets for 
Japanese goods, adopted the silver standard, and thus Japa- 
nese coins, in competition with the coins of European and 
American countries with the gold standard system, won in 
these Oriental markets, and thus in the point of export busi- 
ness in the Orient Japan was in a better position than any of 
the countries with the gold standard. Now the excess of ex- 
ports over imports in Japan's foreign trade during the period 
from 1 882-1 889 was due to the said condition of Japan's trade 
with these Oriental countries. On the other hand, however, 
frequent fluctuations in the price of silver brought about sim- 
ilar fluctuations in quotations on exchange rates, and caused 
great anxiety to traders, for in the home market any fall in 
the value of coins ^ means a rise in the prices of commodities. 
Besides, increase in the volume of currency in circulation 
after the war brought about a further rise in the prices of 
commodities. This created a situation beneficial to import 
trade. Despite the benefit which the fall in the price of silver 
gave to Japan in her trade with Oriental countries, it was not 
easy to decide w^hether the silver standard was advisable for 
the country after all. Finally, the government, disregarding 
the immediate minor losses which it might incur, adopted the 
gold standard on October i, 1897. And this reform to no 
small extent laid the foundation for the healthy progress 
which the foreign trade of Japan has made ever since. 

Something must be said here about the revision of the rate 
of import duty and the abolition of the export duty. . For- 
merly the tariff rates originated in Japan's treaties with dif- 
ferent countries. Her first tariff rates were concluded with 
five countries, viz., England, the United States, France, 
Russia and the Netherlands in 1858 (5th year of Ansei), and 
revised in 1866 (2d year of Keiwo). According to the treaties 

^ A fall in the price of silver, when this is the material for the unit coin, is always 
accompanied by a similar fall in the unit of value. 



234 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

concluded in 1858, the export duty was 5 per cent ad valorem^ 
and the import duty was from 35 per cent (maximum) to 5 
per cent (minimum) . In case it was not mentioned specially in 
treaties, it was decided at 20 per cent. But after the revision 
of 1866, both export and import duties were each 5 per cent ad 
valorem. The import duty was imposed in accordance with 
the prices of the articles to be taxed, at the port where they 
were shipped. Now in those days the Japanese were not very 
familiar with the prices of foreign articles, so the prices upon 
which the import duty was imposed at Japanese ports were in 
reality far from the real prices of these articles at the port 
whence they were shipped. So, although the import duty was 
fixed by treaty at 5 per cent ad valorem, in reality it was in 
most cases less than i per cent ad valorem. During the period 
from 1889 to 1899 the average rate of import duty imposed was 
only 3.985 per cent. On the other hand, articles exported 
from Japan in those days were not as a rule special products of 
the country, so that there was no way of shifting the export 
duty, and the imposition was entirely confined to the Japanese 
exporters. Thus before the revision of 1899, the Japanese 
tariff always benefited foreign traders, but was a bar to export 
trade from Japan. So revision was carried out, and the 
revised tariff law^ was promulgated in 1897 and enforced on 
January i, 1899. The rates of duty upon taxable imported 
articles were fixed in the revised law at from 5 per cent (mini- 
mum) to 40 per cent (maximum). Applying these rates to 
the articles imported during the year 1895, you will see that 
the rate of import duty thus realized would be on the average 
12.35 per cent. Apply again the conventional tariff rates in 
the revised law to those articles signified in the treaties 
between Japan and England or Germany for the conven- 
tional rates, and you will get an average rate of 10.052 per 
cent for the same year. Compared with the average rate of 
3.98 per cent of import duty previous to the revision, these 
new rates are far higher. Then, on the other hand, the export 
duty was entirely abolished on July 17, 1899, and the articles 

^ Law No. 14. 



EFFECTS ON COMMERCE 235 

exported from Japan were freed from the imposition of a duty 
of 3.574 per cent, as the average export duty was during the 
period from 1889 to 1899. This greatly helped the develop- 
ment of home industries, on the one hand, and, on the other, 
served to extend our foreign trade. The fact that our foreign 
trade has made remarkable progress since about 1899 was 
largely due to the revision of these import and export 
rates. 

Just here we must say a few words about the successive 
excesses of imports over exports in our trade after the Sino- 
Japanese War. A glance at the state of our foreign trade 
since 1893, just before the war, shows that, except 1894 and 
1895, each year has so far always seen an excess of imports 
over exports. This excess indeed reached 83 million yen in 
1890, which was about 40 per cent of the total value of 
exports.^ 

A glance at the state of our foreign trade from the first year 
of the Meiji Era shows us that up to 1881 imports always ex- 
ceeded exports, but in 1882 the condition suddenly changed 
and exports exceeded imports, and this state continued till 
1893. Then, however, imports again exceeded exports. To 
explain this balance, which has long been in favor of imports 
as against exports, numerous reasons may be given. But first 
of all it may be stated that the inconvertible notes which were 
in circulation in Japan in the early part of the Meiji Era 
began to be adjusted in 1881; in 1886 the government es- 
tablished the convertible note system, and the prices of 
commodities were then brought to a normal state in conse- 
quence. Before the revision of the currency system, the 
standard for Japanese currency w^s silver, so that any fall in 
the price of silver in those days no doubt benefited exports 
rather than imports in Japan. But after the war the govern- 
ment revised the currency system, adopting in 1897 the gold 
standard. Thus she lost the benefit that she had been 

^ In 1898 the excess of imports over exports reached about 112 million yen, but 
this must be regarded as an exception, for a large amount of anticipated import 
orders was received in that year, in view of the enforcement of the revised tariff 
law in the following year. 



236 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

obtaining from the silver standard, i.e., her advantage over 
gold-standard countries in export trade. Besides, she also 
incurred losses and inconvenience in the silver-standard 
countries as well. Then the volume of currency in circulation, 
which was swelling even at the time of the war, did not de- 
crease, but rather increased after the war, because of business 
activity resulting from the various enterprises started by both 
government and people. This increase in the volume of 
currency in circulation caused a considerable rise in the prices 
of commodities. Then the receipt of the war indemnity from 
China, the importation of foreign capital, and the increased 
demands for foreign-made articles, as a result of the advance 
in the people's style of living, brought a large amount of 
foreign capital into Japan at a time when the country's 
power of manufacturing export articles did not greatly in- 
crease. Moreover, with the various kinds of enterprises 
started both by the government and the people after the war, 
the country, which had been exporting mainly raw materials, 
was now about to become an industrial power. These various 
reasons taken together were responsible for the continuous 
excess of imports over exports, which was still a feature of our 
foreign trade in 191 5, when this book was prepared. 

Having given, as we believe, a true though brief summary 
of the condition of our foreign trade after the Sino- Japanese 
War, we shall now briefly investigate in the following pages 
the facts as to articles either exported from or imported into 
Japan in these post-bellum years. 

Commodities exported and imported 

As already briefly stated, during the Sino- Japanese War our 
foreign trade did not sufi^er seriously from the war, but rather 
made healthy progress, as the total value of exports and 
imports increased. Not only did the commercial policy of 
the government not interfere during the war with general 
trade but in fact it brought about some development in our 
trade with China and Korea, even while the war was in 
progress, as the following statistics show: 



EFFECTS ON COMMERCE 



237 



Trade with China and Korea, i 893-1 895 
Exports 





China 


Korea 


Year 


Value 


Percentage 


Ratio to 
the total 


Value 


Percentage 


Ratio to 
the total 


1893 

1894 

1895 


Yen 
7,714,000 
8,814,000 
9,135,000 


100. 

II4-3 
118. 4 


8.6 
7.8 
6.7 


Yen 
1,301,000 
2,365,000 
3,831,000 


100. 
181. 8 
248.5 


1 .1 
2.1 

2.8 


Imports 


1893 

1894 

1895 


17,096,000 
17,512,000 
22,985,000 


100. 
102.4 
1344 


19.4 
14.9 
17.8 


1,999,000 
2,183,000 
2,925,000 


100. 
109.7 
146.3 


2.3 
1-9 
2.3 



Consequently, Japanese exports to these countries were all 
in a favorable state, the principal of these exports being 
matches, cotton yam and cotton manufactures. 

Scarcely less favorable was the state of our trade with 
Europe and America. With development in our home in- 
dustries and a better understanding of the conditions in 
Japan compared with those in European and American 
countries, the volume of our exports to these countries in- 
creased. On the other hand, progress in our home industries 
and advance in the standard of our civilization increased 
the demands in Japan for foreign-made articles, and our im- 
port trade also became very active in consequence. 

The statistics for sundry exports and imports, whose value 
reached about 3 million yen each at the end of 1893, are set out 
in Tables IX, X, and XI at the end of this chapter.^ 

As these tables show, the principal exports during these 
years were raw silk, tea, copper, coal, matches and cotton 
yam, while the principal imports were raw cotton, rice, 
flour, kerosene oil, iron, sugar and woolen manufactures. In 



1 Post, pp. 247-253. 



238 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 

a word, it may be stated that the Japanese were buying 
foreign-made articles for their own consumption by selling 
abroad raw materials or half-manufactured articles, but 
neither case includes these passing articles of trade. 



EFFECTS ON COMMERCE 



239 








) vb 


Tf 




f 


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M . 


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f^ 


M 


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t^ i-i (N 





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t> 


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^ 


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qv 
























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National bank notes. 






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240 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 







■^vO ON rOOO O 00 "Tt- 






mtC'-' O r^ONfs o 




<U 


•^ '^°° '^ ^ "^^ ^ ^ 




t-v 






g J" lo fooo" fi cT i-T rT 




i = 


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>H <^ f^ «0»OvO rl-lOOO 






i^^is"i5g^2 








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4 


OOr^OOr^'-'ro 


en 


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c 


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rt 52 


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„HHHH>-.HH(NMH 








, 




o'tJ5 

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5 2-2 c 


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ills 


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13 






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« n ^o^ocoT^T^T^ 






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OnC) rl-'^-ONCM lOO 






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k ti 


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-§1 
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3 <-> 


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< 




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u '2 


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^2:8 






13 






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\0 r^oo' cr> Q i' (nJ co 

OOOOOOOO OnOnO^On 











EFFECTS ON COMMERCE 



241 



^ 





bo 








c 


vC '-' rO tN. r^ t^ ^00 t^ 
'^.^^ "^^ *^ "^ "} ^. '^ »^ 0, 


10 




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a 


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3 


j^ vo »ovo^ Tt; q\ c^oo^ lo ►-•^vo c*^ 


10 


la 






cS 




di 


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fo 


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N »O00 1- vO \0 fOOO vO fC 


00 


rt 


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00 »0 -^ »0 C< rj- Ti-\0 On 


■^ 


bo 


rt 






Qi> 






£1 


u S^ 


« 00' rC pf »o d" f^ »o <> ci hT vo" 


t^ 


bo 


NO 


bfl 


II 


;^ ioh, tj-00 csoo rtr^t^vo 


NO 


< 




CO \no^tZ(s d ^ »ooo" d" pT 

TfOO 00 H- irj ON On vO lOvO 


'<i' 




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ON 




H 




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^j 








< 








CO 








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c 








•0^ 


too i-vOt^tOOOt^ fOOO 


NO 




(S 




« fO^^ "-L '1 ^ f^ "^^^^ <1 CN 
§ "!? t^ ri 10 CO tooo" oi rf uSvO 






1*0 


rO 




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c< 




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n 0" t^ t^ i-<" no" •^ c^ »o 0" t~^ 


ro 




_ HH 1-1 HH ro tOvO vO lOt^vO 


•o 








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y^ 




re t^ ►^ fO Tj- tOOO HH Th t^ 

§ 6" Tf c> »o ©"od" o" tC T? cT ON 

Jv, lOii ICO <N Ti-O »Ori-lO»-i 

*^^ <=!:; R. ^ '^- ^. '^_^. i^ "t"^^ 




tJ 


t>. 


§, 


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fOr^« iO(N 00000 M MOO 


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■^On-^C, o< ioOnOnii rt-ro 


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»— > 


§ T? M 00" d^ CO «o tCt-T rC rf t-T 

'^ vO vO__00_vq On to 0__ 0_N0_^ ro t^ 
T? vo" vo" ro rf rf M di ro lO HH*" 
ro rONO OvOOO r« tOiOiO 






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OOOOOOOOOOQOOO o^o^o^o\ 





242 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 











' 










It 




Tfoo 1000 (S rh 










>-i cOv£) ro HH hH 










r^ ro cs -^ qv O; 










c?^ 10 (^ (^ oT <:> 








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10 »0 irjO vO 








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m 




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t/5 






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1^ 




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2 




1 • 


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8 ^8^3^ 


h3 








HH 1-1 1-1 hH Hi 


c^ 












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1 








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a; 


t^ 10 ro M M iH 


» 










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3 


8 CO rC c> i-T ro 0" 


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H>i •-<_ -^ »0 CO 10 HH^ 

10 rTvo'vo" di 10 




■-3 

c 






a 








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J3 








10 T^lOtOiOlO 


§ 


6 










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(1) 








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^ 




11 ""^UD CO ON 04 


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a; 


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^ 


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K^ 00 Ttr^Ti- rot^ 










> 


"^ (dN0"N0" i-r rf CO 
ON CO C< -^00 

q^ 0^ cNj^ M^ '-'^ -1^ 








Ui 












2 












kh 




00 On « ri CO 

00 00 On On On On 



































EFFECTS ON COMMERCE 



243 







ro 0> M to 
00 N t^ 11 


CO 
CO 

o" 


III 

5>00*N 

0>t^0 

«H N « 


NO t* 
000 ^^ 
« « lO't 

Nvo t/io' 
NO r» «o 
0. r- qq 


N ^ 


00 




H 


^5S 


00 rf to fO 
ro N fO Oi 


1 


PO PO 
PO 


1 


d ui 


0* 00' 0' fO 




o'^tfo 


dpo dt^ 


r^d 


to 


^ 


« « ro 


** 


N 


N N CO 


^.^ 


to 














fi 


« 






,_^«_s 














N 


Tj-O 0> to t^ 


00 


'tt-O 


« 1- t^ 

00 NO 


^a 


00 




M 


0^ Tj- PO 
Tl-ooOvoO t 
NOo'^^tO to 


N 


fOOO 


o>s- 


r^ 


I 




0* 


r«2Tf 
ro t^ N 


PO 0_ 00 to 

0000" t^ d 


r- 
to-f 


to 


Tj-toO t^ -"t 


N 


« PON 


Tj-O tO'^ 


N 


o> 


'-' 


loq 


rO « ■* to 


'^l 


qto(> 


(O 00 PO 


«^o 


T 




















vdw 


m' fO fO 0* 


N 


M'^f M 


« N ^0 


1" 


to 




^^ 


« 0> Oi 


r> 


"t-^O 


00 1^ 


Oir- 







00 tON Tf 




po 000 


N Tt 00 to 





? 




00_^O 


<N q « O; 


^t 


to 00 00 


0>0 PO to 


N 


M 














N 


S N ^ 


t^ "-<* doo 0' 




OsO PO 


to PO PO to 


.-,0 




0> Oi ro rt 






NO POOv 


POO 




w fOtOt- to 




q PO PO 


q -^ PO t-; 




OS 


















O'w 


M N N T? 


CO 


•-•"•* 


m' n n ^ 


PO •-" 


t 




w 


to 10 1000 to 





rfrj-O 


PO Tft^ 


000 


o> 




00 t~- 


NO fO 00 


CO 


M 10 10 


00 ON 


wO 


0. 




« N 


« q N N to 


* 


N0_0_ 


00 0_ •^ao^ 


t-00 


t~ 


















1 


,S^'^" 


o.\r>t^n 00 




PO d •^ 


NOO" t^OO 


t^o' 


On 


ro Ov -H M 


Tj- 


g^^ 


Ovr- ■*« 


too 




>^ i>r^ 


O\oo_ « 0_ ro 




00 Tf 1000 


PO •* 







4 


i-T N t/i 


N 




i-T N rf «0 


r 


% 




fO >H 


M 000 rt 


00 


rtOO 


too tPO 


to to 







Tj-M 


■^0 "-IN n 


00 


t^ N to 


>-" 00 M 


lOOv 







>O00 


CA tij q cj 0^ 


*°. 


N Oslo 


■>!j-N COOO 


00 0> 


°°. 



















Soo'hT 


t> t^OO* w 


t^ 


TtM rj- 


to M rt 


N 


to 


."»» 00 


r-00 n 00 




Ovt-a 


00 PO t^O 


TttO 


to 


>i 1/5 10 


00 


t^til N 


qco poi> 

























10 


w N Tt 




•* 


m" n poo' 


8"' 

PO 


PO 




--t 


t- M 


0. 


lOOvO 


t-O t^t^ 


N 10 


10 




WOO 


Tt N OS 00 




OiOO 10 


000 ■* 


poio 


00 




00 Ol 


t^ to ro O; 


00 


qo t^ 


to to rf 1-1 


-" 


N 


1 
















8 rooo* 


cX 0" i-"" 


t^ 


N too 


Tj-o 00 r~ 


^ d 




*> 100 


0\ fo " Ti- 


to 


PO Ovt- 


t-r- w 


POtO 


Tt 


to M 


to oo_^ q N 

w" M •^ 





t^ N 

M 


w N 00 t^ 


Tt >H 


0. 

to 


M N W Tt 


to hT 































N 


CO 




rOO 


to ■* 





r^ to 


to 


N 


o> 




rr 


0» N PO 00 


N 


00 to • 


• 000 


t^ to 


to 




(NO, 


N to N Tj- 


f; 


OsPO • 


. M_ q « 


PO 


\q 


00 
















8 fOio 


d; ro •* rf 


rf 


pooo' : 


; pT 0" to 


N rf 


ci 


*»oo r^ 


00 t- 0\ 


CO 


P0-* 


00 00 ■<«■ 


00 t^ 





!iH 100 


00 NN to 





t^q 


N 0_(> 


00 N 


0, 




in 


w w CO 






N m' CO 


r" 


6 







10 t^ 


to 


00 


TtW 


PO- 







to «M 


a ov H. 00 


N 


00 to 




POOO 







■*»-<^ 


N w 00_^ 





10 o_ 


• q o_% 


N N 


0^ 


















s 


8 ©"ro 


to d W M 


d 


m" 0" 


; to doo" 


•<tt^ 


t^ 


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o> fO ■^ t^ 





00 ■* 


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tipo 





>H O_to 


fO r; N N 





to q 


Tt too 


too 






















to 


N w ro 




N 


N ►h'tT 


N 


OS 
N 
N 




to 


to M 10 to 








OvO 


N rj- 







too 


rO 0> O* to 





t^ 10 


.10 to t^ 


00 






NO 


N « N fO 


q 


t^ N 


• O N 


"t®. 


Tt 


00 
















8 t^oo* 


t^ 0" N 0* 


to 


o*t^ 


: t^ t^d 


00 •* 


N 


*> t-00 


N Tt t^ 


N 


CO 10 


r^ N PO 


"-I 


00 


>i 0»N 


CO Tt •* 


■* 


10 w 


°, "t^. 


^ 


t~ 










ei 


t^ !-."■« 


0* 


i 








i : : :^S : 


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8 : 


1: 




: : 1 : : 

bO * 0) E '• • 


1^^ 














1 


n 




.5 :•§:§ : : 
.2 -S :« 


6 :E 

III 








■ -1 


■^ filial 


J3 cJ 




1 

b 

'e 


cll.2||l 


3 





244 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



f 



8 

1 


(0 

II 

c — 


O >0 HH to 

• ror<^ • • • • O Tt- 

S : oo' ^ ; : ; ; vo'vo 


II 


i-i VO ic r^ ro 

*^ q' '. ; •-•" ^" cT lo ■ * 


to 

e 


t! 


•-< VO N O to On O ThvO 

C< ONi-ivO lOtCO t^»o 
•1 CS rOrOTj-oo O O O 


1 
1 


t^ tJ- t^ lO O r^ t^oo ro 
OOO iO'<^tO»Ot-i OvtJ- 

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CHAPTER VI 

EFFECTS ON TRANSPORTATION AND 
COMMUNICATION 

At the outbreak of the war all the available transportation 
facilities in Japan, both land and water, were placed at the 
disposal of the government for the transport of troops and 
munitions from Japan to Korea and Manchuria, and, in 
consequence, the general public suffered considerable in- 
convenience. This state of affairs, however, did not last long, 
for the authorities concerned quickly adopted the necessary 
measures for relief; thus the transportation business was soon 
restored to its normal status, and never since has the general 
public suffered such inconvenience as at the outbreak of the 
war. 

Thus, except for this short period, transportation business 
in Japan was not hampered by the war at all, and all trans- 
portation facilities, both land and water, throughout the 
Empire, remained during the war in the condition as before the 
outbreak of the war. But after the war, which ended in 
Japan's victory, a great increase in activity was noted in 
the transportation, as in almost every other branch of business, 
as a result of the great postbellum boom in industry and trade. 
To meet this tendency toward expansion, many plans were 
formulated — by individuals as well as by the government. 
The latter planned for the improvement and extension of the 
railways and the telephone service, made efforts to augment 
foreign trade, and subsidized the merchant marine as well as 
the companies engaged in shipbuilding. The government 
raised the funds necessary for all these measures by public 
loans. 

How remarkable was the progress Japan made in trans- 
portation after the conclusion of the war in 1896 may be 
observed from the considerable increase in the paid-up capital 

254 



TRANSPORTATION AND COMMUNICATION 



255 



of those companies engaged in the transportation business 
during the several years following the war. Compared with 
the year 1896, in which the war was concluded, the paid-up 
capital of the companies engaged in transportation increased 
by 100 per cent in 1900, and by 130 per cent in 1903, as will be 
seen in the table below : 

Capital Investment in Transportation Companies, i 896-1903 





Authorized 
capital 


Paid-up capital 


No. of 
companies 


Year 


Amount 


Rate of 
increase 


Reserve 


1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


Yen 
171,674,964 
266,973,250 
271,896,976 
269,622,304 
305,810,809 
356,220,426 

361,454,333 
383,422,606 


Yen 
113,216,760 
164,684,165 
197,233,421 
198,146,560 
228,733,512 
243,224,584 
262,676,192 
262,382,936 


100. 

145 -5 
174.2 
1750 
202.0 
214.8 
232.0 
231.7 


Yen 

6,259,011 

6,551,967 

7,302,391 

8,113,324 

14,877,726 

14,221,810 

18,587,260 

24,004,444 


334 
454 
536 

627 
596 
646 
702 



As the table indicates, the authorized capital of these 
companies increased by more than 100 million yen in the two 
years after the conclusion of the war, and then by another 100 
million yen in the few years subsequent. Especially notewor- 
thy is this rate of increase, secured by the transportation 
companies during the several years following the war, when 
compared with that secured by companies engaged in agri- 
culture, industry and commerce. 

The extension of railways, those owned by the government 
as well as private roads, and the increase in the tonnage of 
merchantmen during these years were also remarkable, as the 
tables on the following page indicate. 

Of the systems of communication, which are under govern- 
ment control, the telephone service was extended at an outlay 
of 13 million yen. 

The condition of each of these branches of business will be 
presented in the following sections. 



256 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 
Extension of Railways, 1893- 1903 



Year 



1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 



Mileage of railways 



Government 



Miles 

558 

581 

593 

632 

662 

768 

833 

950 

1,060 

1,227 

1,345 



Private 



Miles 
1,381 
1,537 
1,697 
1,875 
2,287 
2,652 
2,806 

2,905 
2,967 
3,011 
3,151 



Total 



Miles 

1,939 
2,118 
2,290 
2,507 
2,949 
3,420 

3,639 
3,855 
4,027 
4,238 
4,496 



Rate of 
extension 



Per cent 
100. o 
109 
118 
129 
152 
176 
187 



198.8 
207.7 
218.6 
231.9 



Increase in Shipping, i 893-1903 



Year 



1893 
1894 
1895 
1896 
1897 
1898 

1899 
1900 
1901 
1902 
1903 



Tonnage of merchantmen 



Steamships 



Tons 
104,909 
163,029 
207,765 
227,840 
268,223 
287,857 
308,402 
330,622 

357,394 
376,118 
408,990 



Sailing 
boats 



Tons 
31,538 
30,178 
27,563 
25,485 
25,768 

139,835 
253,439 
287,568 

307,031 
310,061 
302,783 



Total 



Tons 
136,447 
193,387 
235,328 
253,325 
293,991 
427,692 
561,841 
618,190 
664,425 
686,179 
711,773 



Rate of 
increase 



Per cent 
100. o 
141 
172 
185 
215 
313 



411. 8 

453 I 
486.9 
502.9 
521.7 



Transportation by Land 
The best way to discover what effect the war had upon 
systems of land transportation in Japan, as in the case of 
other branches of business, is to note the progress attained in 
the following years. The only means of land transportation 
in those days were wagons, rikisha and railways of various 
kinds. How the paid-up capital of companies engaged in 
land transportation increased in the several years subsequent 



TRANSPORTATION AND COMMUNICATION 



257 



to 1896, the year in which the war was brought to an end, may 
be seen from the table below: 

Capital Investment in Land Transportation Companies, i 896-1903 



Year 


Steam 
railways 


Electric 
railways 


Railways 
employing 
hand cars 


Tramways 


Total 




Yen 


Yen 


Yen 


Yen 


Yen 


1896 





90,103,974 




796,827 


90,900,801 


1897 




130,663,015 




44,640 


130.707,655 


1898 




155,881,965 




30,000 


155,911,965 


1899 




156,967,016 




42,400 


157,009,416 


1900 


184,201,311 


2,535,534 


254,227 


2,431,972 


189,423,044 


1901 


196,539,372 


5,419,225 


307,391 


1,059,409 


203,325,397 


1902 


212,926,155 


7,158,750 


374,872 


1,058,392 


221,518,169 


1903 


205,319,921 


13,089,005 


451.504 


1,364,544 


220,224,974 



No other means of land transportation was affected by 
the war as were the railways. Therefore it will be sufficient 
to inquire into the condition of the railways during these 
years. 

In 1893, or before the outbreak of the war, one-half of the 
Japanese railways was under government, and the other 
half under private management. The average working 
mileage of the government railways in those days was 558 
miles and the average profit 16.91 yen per mile a day. The 
private railways were maintained by 15 different companies, 
and the average working mileage was 1,338 miles. ^ Profits 
from the railways under private management were 7.10 yen 
per mile a day; the rate of profit reckoned on the paid-up 
capital was about 7 per cent. Such was the state of Japanese 
railways before the war. In the next ten years, however, the 
working mileage of the government railways increased to 
1 ,282 miles, or more than double the total mileage in 1893, ^.nd 
these railways brought in a profit of 21.82 yen per mile a day, 
or an increase of 30 per cent over that of 1893. Meanwhile 
the number of railway companies had increased to 41, and 
their total working mileage to 3,070 miles, or an increase of 

^ The average mileage owned by each of these companies was 89.2 miles, and the 
paid-up capital 36,524 yen per mile. 

18 



258 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

130 per cent; their daily profit also increased to 16.91 yen, or 
by about 140 per cent, compared with 1 893. This profit means 
9 per cent on the paid-up capital of 67,845 yen per mile. Thus 
the Japanese railways made considerable progress both in 
mileage and profits in the ten years from 1893 to 1903. Let 
us now make fuller inquiries into the condition of the rail- 
ways, both government and private. 

In 1893, or before the outbreak of the war, the Japanese 
Government possessed 558 miles of railway, mostly what may 
be called trunk lines. This dofes not imply, however, that the 
Japanese Government neglected the construction of necessary 
railways in those days. On the contrary, the government 
promulgated the Railway Construction Law^ on June 20, 
1893, whereby a program was announced for the construction 
of railways in all parts of the country. This program, how- 
ever, was to be carried out gradually in different periods. In 
the first period, nine important lines were to be built at a 
cost of 60 million yen, to be secured by a public loan. But as 
soon as this program, or a portion of the greater program, was 
initiated, the war with China began, and the government 
naturally was compelled to suspend the work during the war. 
But Japan won the war, and after peace was restored, the 
Japanese Government in its postbellum program, prepared 
on a scale commensurate with the elevated position now 
occupied by the country, planned to improve the existing 
government railway lines and build new ones by floating 
public loans for this purpose. Thus the government agreed 
to procure a loan of 27,731,331 yen"^, and of this total amount, 
to spend 26,553,000 yen for improvement of the existing rail- 
ways under the government, and 1,178,331 >'ew for construction 
of a line between Sorachita and Asahigawa in the Hokkaido. 
The government also agreed to build a trunk line on the same 
island by raising a loan of 33 million yen."^ Then the govern- 
ment planned to build railway lines on the island of Formosa, 

1 Law No. 4. 

* Public Works Loan Regulations, Law No. 59, promulgated March 29, 1896. 
' ' Hokkaido Railway Construction Law, Law No. 93, promulgated March 13, 
1896. 



TRANSPORTATION AND COMMUNICATION 259 

ceded to Japan as a result of the war, at a cost of 28,800,000 
yen, to be defrayed by a portion of the Formosa Public Works 
Loan.^ Then, too, the scope of the original program, as 
announced before the war, was enlarged, and the appropria- 
tion for the first period increased from 60 million yen to 95 
million yen by Law No. 19, promulgated on April 2, 1901. 

The new lines thus planned and the cost of their construction 
were as follows: 

Construction and Improvement of Government Railways, i 893-1903* 

Construction of railway lines, 1 893-1903, built with pro- 
ceeds of government railway loans: Yen Yen 

Fukushima-Aomori line 20,773,993 

Hachiwoji-Nagoya line 20,300,532 

Shinonoi-Shiqojiri line 6,410,865 

Yatsushiro-Kagoshima line 6,050,676 

Tsuruga-Toyama line 9,407,302 

Himeji-Sakai line 5.574,331 

Kaidaichi-Kure line 2,152,600 

Fukuchiyama-Sonobe-Maizuru line 1,341,459 

Expenses for superintendence 200,019 

72,211,777 

Improvement of existing railways under government 

management, 1896-1903, from proceeds of Government 

Public Works Loan: 

Tokaido line 21,097,422 

Shinyetsu line i.039»545 

Street railway line in Tokyo 2,763,340 

Yokohama harbor line 28,404 

Kobe harbor line 791,765 

25,720,476 

Construction of railway line between Asahigawa and 

Sorachita, Island of Hokkaido 1,176,701 

Construction of new lines, 1 896-1903, from proceeds of 

Hokkaido Railway Loan 5,889,305 

Construction of new lines, 1 899-1903, from proceeds of 

Formosan Railway Construction and Improvement 

Appropriation 14,894,227 

Total 119,8^2,486 

By these means the total mileage of the government 
railway lines was increased considerably, as the table given 
below indicates. The increase is indeed remarkable compared 
with the total mileage of 558 miles in 1893. The following 
table gives the annual increase, for the years 1 893-1903. ^ 

1 Formosa Public Works Loan Law, Law No. 75, promulgated March 20, 1899. 
' Fractions over 50 sen are counted as whole yen; fractions under 50 sen are 
disregarded. 

' Railways built in Formosa during these years not included. 



260 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Miles Chains 

1893 

1894 23 20 

1895 12 40 

1896 38 40 

1897 30 03 

1898 90 19 

1899 40 29 

1900 72 79 

1901 81 74 

1902 131 07 

1903 _93 42 

Total 613 53 

All this extension of the government railways was a part of 
the program which the Japanese Government, stimulated by 
the war, had prepared to harmonize with the elevated position 
assumed by the nation after the Sino-Japanese War. Not 
only was this a direct effect of the war, but there was another 
cause for this extension of the railways in Japan, namely, 
the vast increase in the number of passengers and amount of 
goods carried by train, due to the increased activity in the 
ecomonic world in Japan after the war. This increase in both 
passengers and goods naturally brought about a corresponding 
increase in the profit from the railways. This cause may 
therefore be called an indirect effect of the war. The number 
of passengers and volume of goods carried, fare, gross returns, 
business expense, etc., of the state railways are given in Table 
I at the end of this chapter.^ 

The gross income, profit, etc., of these government railways 
also increased in these years, as indicated in Table II at the 
end of this chapter. ^ 

The progress of the government railways during these years 
was remarkable in every respect. 

Let us now look at the extension of private railways which, 
like the extension of the government railways, was carried out 
on a scale commensurate with the increase in economic activ- 
ities after the war. This extension in the railways under 
private management was also remarkable, as the increase in 
the number of companies, their capital, working mileage, etc., 
given in the following table indicates. 

» Post, p. 265. « Post, p. 266. 



TRANSPORTATION AND COMMUNICATION 
Extension of Private Railways, 1893- 1903 



261 



Year 


No. of 
com- 
panies 


Authorized 
capital 


Paid-up 
capital 


Reserve 
fund 


Loans 


Average 
working 
mileage 






Yen 


Yen 


Yen 


Yen 




1893. ••• 


15 


63,145,000 


48,869,515 


517.975 


5,680,000 


1,338 


1894.- • 


20 


80,290,200 


59,176,637 


1,322,085 


5,778,000 


1,457 


1895. • • • 


24 


99,228,000 


71,626,301 


1,161,682 


5,552,000 


1,617 


1896.... 


26 


120,015,000 


89,010,597 


1,587,045 


5,350,000 


1,698 


i897--- 


32 


175,396,000 


122,542,091 


2,169,267 


5,410,000 


2,027 


1898.... 


42 


213,886,150 


153,924.703 


2,681,711 


10,174,365 


2,466 


1899.- •• 


43 


227,799,300 


169,999,444 


3,374,353 


10,640,400 


2,725 


1900.. . . 


41 


238,042,550 


181,267,472 


3,635,854 


11,017,800 


2,841 


1901.... 


40 


242,585,000 


192,811,305 


4,401,343 


12,839,000 


2,944 


1902.... 


41 


251,675,000 


202,603,626 


5,155,920 


12,852,600 


2,978 


1903.- ■• 


41 


256,575,000 


208,285,567 


6,038,419 


18,364,400 


3,070 



The business of these railway companies was stimulated by 
the general activity in industry and commerce which followed 
the war and their capital greatly increased, as Table II indi- 
cates. Let us now note the increase in number of passengers, 
volume of goods, etc., as given in Table III at the end of this 
chapter.^ 

The increase in the number of passengers and volume of 
goods carried by these railways naturally brought about a 
corresponding increase in the receipts, as shown in Table IV 
at the end of this chapter. ^ 

The railways in Formosa, which were entirely built by the 
Japanese after their acquisition of the island, as a result of 
this war, made a very good showing from the beginning, for 
in a few years after construction these railways brought in 
some profit, as Table V at the end of this chapter ^ shows. 

In conclusion it may be stated that the war did not have 
any direct effects upon or give any marked stimulus to 
railway business in Japan; yet it is true that the railways 
achieved considerable progress in the several years following 
the war, because of the general awakening of the nation and 
improvement in the country's position brought about by the 
war. This progress made by the railways may therefore be 
said to be, to no small extent, the result of the war. 

^Post, p. 267. ^Post, p. 268. *Post, p. 269. 



262 economic effects of the sino-japanese war 

Transportation by Water 
Merchant marine 
In this section we shall give an account of the progress 
attained by the various organizations constituting the mer- 
chant marine of Japan, during these postbellum years. At 
the outbreak of the war, many merchantmen were transferred 
to the government service for the transport of troops and 
munitions, and the merchant marine as a whole was somewhat 
hampered in consequence. Especially was this the case with 
coastwise navigation. But this temporary inconvenience was 
soon remedied, for the government quickly chartered foreign 
vessels and put them in the places of the replevined merchant- 
men. For the remainder of the time, therefore, the Japanese 
merchant marine did not sustain any serious injury from the 
war, but remained in its normal condition. After the war, 
the government, stimulated by victory, adopted all possible 
measures to secure progress in the merchant marine, as in the 
transportation systems on land. Help in the form of govern- 
ment subsidies was given for the construction of good harbors, 
for instance, at Nagasaki and Osaka, so that these places 
might be converted into good trading ports. The construc- 
tion of new vessels and overseas navigation were also en- 
couraged by the aid of government subsidies. For the former 
the government promulgated the Law to Encourage Ship- 
building ^ on March 24, 1896, and for the latter the Law to 
Encourage Overseas Navigation ^ under the same date. The 
companies which enjoyed state bounty in accordance with 
the former law were only such as were composed of Japanese 
subjects, either wholly or in part, engaged in the building of 
vessels, and owning docks equipped as specified by the 
Minister of State for Communications. ^ An encouragement 

* Law No. 16. 

' Law No. 15. 

'The rate of subsidy given in accordance with this law was 12 yen per ton of 
gross tonnage for steamers whose gross tonnage was between 700 and 1,000 tons; 
and 20 yen per ton of gross tonnage for those whose gross tonnage was i ,000 tons 
or over. In case an engine also was built, an additional subsidy of 5 yen per horse 
power was given for the engine. 



TRANSPORTATION AND COMMUNICATION 263 

bounty for overseas navigation was given those individuals 
or companies composed either wholly or in part of Japanese 
subjects that with their own steamers, registered by the Jap- 
anese government, were engaged in the transport of goods or 
passengers from a Japanese port to a foreign port, or from one 
foreign port to another. ^ A steamer eligible to government 
subsidy was to be made of either iron or steel materials, to be 
the best grade of steamer, and possess all the necessary quali- 
fications specified by the Minister of State for Communica- 
tions. In addition any steamer eligible for the shipbuilding 
encouragement bounty was to be of more than 700 tons gross 
tonnage. And any steamer eligible for the overseas naviga- 
tion subsidy was to be more than 1,000 tons gross tonnage, 
and have more than 10 nautical miles maximum rate of speed. 
Besides these two forms of government subsidy for merchant 
marine, another system was devised for those steamers 
engaged in navigation service to ports in America, Europe 
and other foreign countries. This last form of subsidy was 
inaugurated because the Japanese Government, desiring to 
encourage the shipbuilding industry at home, was anxious to 
encourage overseas navigation. 

Through encouragement from the government and the 
stimulus of the increased activity in commerce and industry 
during these post-bellum years, the Japanese merchant 
marine made remarkable progress in the several years follow- 
ing the war, as Table VI at the end of this chapter ^ indicates: 

The number of steamers, registered tonnage, number of 
passengers, volume of goods carried, paid-up capital, etc., of 
the three principal steamship companies in Japan, namely, the 

1 In the case of a steamer whose gross tonnage was 1,000 tons, and whose maxi- 
mum rate of speed was 10 nautical miles per hour, the rate was 25 sen per ton of 
gross tonnage for each 1,000 nautical miles of the voyage. This rate of subsidy 
was increased 10 per cent for every 500 tons increase in the gross tonnage, and 20 
per cent for every nautical mile of increase in the maximum rate of speed per hour. 
For steamers whose gross tonnage was more than 6,500 tons, or whose maximum 
rate of speed was more than 18 nautical miles per hour, the same subsidy was 
given as for a steamer whose gross tonnage was 6,000 tons, or maximum rate of 
speed 17 nautical miles per hour. More or less discrimination was made accord- 
ing to the age or whether the steamer concerned was built in Japan or abroad. 

2 Post, p. 270. 



264 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

Nippon Yusen Kaisha, the Osaka Shosen Kaisha, and the 
Toyo Kisen Kaisha for the years 1 893-1 903 are given in 
Table VII at the end of this chapter. ^ 

Communication 

The war did not have any direct effect on the systems of 
communication in Japan, but after the war the government by 
an appropriation of 12,802,107 yen established new telephone 
systems in Kyoto and fourteen other large cities, and at the 
same time connected all these important points by telephone 
with Tokyo and Osaka, the two largest cities in the Empire. 

The first telephone in Japan was established between Tokyo 
and Yokohama in 1 890. Then another line was run between 
Osaka and Kobe two years later. The fifteen cities where 
the government established telephones as a part of its post- 
bellum program, at a cost of 12,802,107 3'^w» ii^ the years sub- 
sequent to 1896, were Kyoto, Nagasaki, Niigata, Nagoya, 
Sendai, Kanazawa, Hiroshima, Akamagaseki (Shimonoseki) 
Fukuoka, Moji, Kumamoto, Sapporo, Hakodate, Otaru and 
Utsunomiya. The appropriation referred to was apportioned 
as follows : 



Year 


Annual appropriation 


Year 


Annual appropriation 


1896 


Yen 

594,196 

2,473,420 

1,896,119 

1,781,655 


iqOO 


Yen 
2,349,786 
1,807,587 

I.6lS.S'l2 


1897 


19OI 

1902 

1903 


1898 


iSqq 


268,556 





Further than this there is nothing of importance to state 
about the systems of communication in Japan in these post- 
bellum years. 

^Post, pp. 271, 272. 



TRANSPORTATION AND COMMUNICATION 



265 



1 

*E 

d 




»m" pT cf m' cT rO rO -"f »0 lOvo" 


u 

Oh 


1000 « t^OO W 00 P« fi h>. 

vO vO r^OO 00 0^ 0^ 0^ '-i_ fO 'i^ 


g 


<S t^ •-« rCOO t^ fO t^ t>. fO to 
M HN HH 1-1 M fC rO to 'Jl- -«*• 10 


0) 

1 


rt 

1 


1- On^C^OOvO fOONONt^ 

iOt>.ONO HN lOMvO t^OvO 

00 »O00 OMO-^O ONvO ONt^ 

8 rf 00" rf d^oo" m" to d" fO CO « 

. '^ to i-i vO rOvO fO M ^ 10 t^ 

^ 9.°° "1:^. <^. "5 '^^ CN o_ 10 ro 

loiotCr^cfJd'fOrf lovd'oo" 


41 


»0 ON to r^ rOvO P< t^ t^oo 
lOvO 00 CI •"• ror^ON,-iOO Tf 

s CO cfoo'vo" ^f d" •-<" dJ rf fOOo" 

K^ Tj-oo -^vo « fo ON «o 

?M <N^ "2«3.vo_ o_oo_^ f^ '^ '^ '^ 

M I-T w I-T cT cT CO '^ -"^ »o 10 


bi) M 


«00 ONC« 10 t^vO M HH 

"? "^^ "^ "? '^ '^ ^. "^^ *^ '^ '-^ 
S I-T d\^d" -^ CO cT h^" hh'oo" d" cT 
^^ Ov r< »ooo W Ov Tl- ri- c» 
►^ t>.c<vo 00 t^Oi Tt-\o »o »o 

CO rf »o »o tC rC ON d" d" '-^" cT 


!•? 


OnOO ON TfvO "-I (N (S 

, 00 ov »o PI ON ON r^NO c< n 

^ vO N '-' "-I 00 Ti-iovo t^vO 

"Ooo" d"vd" oo"" CO ^^o d; CO cT 

L^ t^,-< 0^ iOOnOnO »000 On 

9. 9. "I. <^- "? *^ '^'^^ "^^ "^^ ^ 
_r hH~ H^" I-T w hi ci" (nT cf CO CO 


la 


t^\0 t^ ON t~>. r^ covO ■«*• lOvO 
(N 00 00 rj- t^vO 00 "0 »0 "^OO 
CO O; CO r^ «0 »^^^"» C<_ 0^ N 
rf CO rf d" (N d^ CO -^ •^ rCoo" 

rhoo NO trxs ovvo Tt-r^oNO 
"^°° •^ '^ '-^ "2^- '^ ^-1°° '-I 

rf rf 00" cT tC « oo" •-«" (nT >-<" -^ 
HH«-i(N<N<rOMCOcOcocO 
















fO-*«OvO t^OO On I-" M CO 



266 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



1. 

2-S 

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re 

-S.s 

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1 


iH fO ■^CX) O •-' O vO o »o n 
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CO CO 

Q 


-.i- t^ lO rh Th lO ON r^vo vo to 
^ lo >o t^oo cs HH tj- (-1 a\o\>-i 


^ a\0 covo o •^ c< N r< •-" "-I 


CO 


vo O On N »0 lO ON fOvO C« NO 
grhC><NlOMMC<ONO'<:l-ON 

tilj NO 00 t>.NO I-" «S NO 00 »0 rl- c« 


Average 
working 
mileage 


5 00 »ONO MOO Tht^NO O HH (V, 

r-* »OnO 00 C^ ■^ f< i-t o^ n rooo 
^ lO »0 lONO NO t^OO 00 O^ M c<^ 




O t^n Onhhoo coo fOt^Tl- 

00 HH t^OO Tl- CONO l-l ON "-I M 

o^ t^NO_^ <^ 't '^ ^> ^> ^-. 'It ^» 
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fc^ tJ- fO lO »0 ThOO ON t^ H t^ 11 
Ph Tt-NO O rt-ONt>.Ot^c< r« (S 

CO fO »0 Tf rf rf tCod'oo" S d 


is 

3 C 

.2 6 
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lONO HH CO ON HH r< »ONO >0 l-H 

r^ ON NO ^ Tfioi-Hvo MNO o 
coNO^ lovo^ o. <^ "^^ "2 ^_ •"!, ^ 

8 fvf hT ii" lOv^r cTnO" t-i t^NO NO 
►^ tJ-00 lO t-1 00 00 O t^ -^NO ON 

H-i ON HH ONOo t^ f*2 f^ ^1 "5 o_oo_^ 
t-T cT oT to rf vo'no" fCoo" c?i 6^ 


(0 


tococoN o ONioioo^ri in 

lO •-• CO »0 OnOO t^ l^ hh 00 11 

Th -.^ c«_NO_ "^oo^ fo t>. "5 lo 11 

S rfo^TfcOt^iOrf iOvo'no"^ cf^ 

^ cooo_ o_ w i^ M oo_ O^ r^ CO « 

lO lOOo'oo" On i" CO no" no" OO" o" 












cOtJ-iOnO r^OO On Q 1 fs CO 
OOnOnOnOnOnOnOOOO 
00000000000000 ONONONON 



TRANSPORTATION AND COMMUNICATION 



267 



1 

'C 
u 


6 




re --f lOvo'oo" O" rT rf 4 lOvO 




vooooo lOor^ovHH t^ 1^00 

OvO rOr^r< rots tOO rOC< 

00 OnCI^tJ-Ooo •-• rO'^ lOvO 

•-T hh" (s~ cT rO fO rO CO ro 


1 

§ 


Ki t^ 10 C( tooo r^ Th t^ ro 
N CI fO TfvO t^OO 00 Ov ON o_ 


1 


1 


00 ro <OvO rOiOOvvO »0 n O 

8 hh" 0" hh" i-T c^ cf^ i-T tC 6" o" »o 

K^ l^vO NOO iOC« CS (NvO low 

HH »o C4_ r>.vq^ '^ '^ "^^ ^ ^ ^ ^ 
»o t^ cf^ i-T 10 ctI to rCoo" cf^ 0" 

•-"hHi-iC^NWCJCO 


4_) (0 

1^ 


vo vo t^vo t^r^ONvo N ts 

10 (S 01 vO Tl-00 vo 1^ fOvO vo 
>0 OM-« CO »0 t^OO ro vo »0 

8 vo" fooo SinS ^f vo' hT <n" ci 

K^vo f0r0<0>00v0n rO lOvO 

"^ "^^ "^"^^ 't O- "^ "^^ ^ 'I: "-L 

m" oT ro rfvo" tCoo" o" •-»" m" cO 




VO -^vO 10 f^ TfvO HH hH ov fO 
n Ov OvvO <S 0\ (S vo -^ 
<^°° "5 "^ ^- '^ '^ ^."^» '^^^ 

8 rf \0~ fO cf -^ O^vo" 0" Ch rC cT 

.^ (N 00 ThO M <N <N OvvO 

•^ "^ ^°°^ ^« <^ <^ ^_ "^^ ^ <^_°° 

ro -^ >o fC c^ "-J" rf vo'vo" tC rC 


11 

3 

1^ 


rhThrocs lOO fOO O >-< O 
OS »0 i-i H^ covO VO »0 lO Ov 
rO'^rO>-' fOCi lOOMi OvvO 

g Th »o hh' c^ 0' (vToo" 4 o'od'oo" 

d "-"vO tOt^t^OI <N CMO fOvO 

^ rj-(v« C< iOO i-i THOr^OvCS 

cT CO rf 10 t^oo" S "-T «" cT Tf 


4 


vOi-ii-iOOJOCMO TfvO 00 
rOCN Ovt^O (S •O'-i lOiOOv 
00 CO --i rOvO t-i 0» ON -"^ t^ 

0" c> •-Too" 10 -^ oTvo-vo" -T « 
ON ro »o r^ t^ r^ lOvO ro <n vo 

^«^- "t "1: "^^ ^ "1: *^ "^^ '^_°° 

00 t-T 0" ro rC tC fo "-T cf 00" d^ 
HH (s fc^iovo t^oo t^r^t^ 


1 








tO-^iOvO 1^00 Ov "-I N fO 

00000000000000 OvOvCTvOv 



268 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



t 

p 

1! 

o 


2 


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(0 

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3 
en 

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en 

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lo r^ h- H< I-. ►H 00 OMOoo o 




1 


OOO^OOvOOvOrOMOON 
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8 oo" tC rCvo" cT -^ CO "-T tC o" r^ 

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kS TfvO_^ '^^ "^^ ^« "^ *^^ ^ "} '-' O 

ro ^f \o tC o^ cyi cT in\o rC c^ 


(0 


OS ON lOvO t^ ■^ O ^ ^ CO ►-• 
■^»Ot^C< rJ-HH Tl-lOOO (N O 

t-<_ ■<:*; q; Tt; q^ lo »o HH^ q^ M vo 

8 cT >0 »0 tCoo" cTvo" <n" ro CO rf 
<tt i-( uo^ fOt^<S COO) OnO t^ 

•^ "2 "^^ 9. ^» "2 't ^^.'^^ H ^» ^ 

oT CO rf lO tC i-T oT CO lOvO'vo" 


? 


t^OO lOiOt^rhvO ONOO coo 

lOQ cor^iOcovO O CI t-H HH 

o o qt^o ONM q^cocN cs 

g t-T ro CO CO 0"vO d" rf 6" T? (N 

v^ooocor^O»oOHHT*-ri-r^ 

^ q<» CO cow »o lo q^vq^ co Tt; 

»o rC o" cTvo" d" "?f c^ '-<' CO »o 

i-ii-ihHOtcSOIcOcOCO 


1 
































cort-iovo r^OO OnQ •"« N CO 

00 00 00 00 00 00 00 O^ O^ O^ On 



TRANSPORTATION AND COMMUNICATION 



269 







c 


^ * • * 
« !> 00 vo ov r^ 


ii 

W 


^ t^vO 00 tJ- t^ 

j:^, ^ ~ rC (j; d" <s 10 




2 
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P « « Tj-O ON 


4-> cn 


*^ "^ ^- *^« '^ '^ <^ ^ 

j^ \o rCoo" cf! cT « cf; 
'^ »r> rovo vo 00 ►"« 

« ►_ HH HH CS Tj- 


c2 


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_ Tj-Tj-oo ro <r) n 

Sl-lMlOHHCOlOON 

;^ vo d" fo d" fovo" ^ 

" 1^00 Tj-iorO-* 

HH HH cs 01 tr>^in 


II 


ror^ t^ rDvO rj- ci 
Th 10 (N t>. (S i-i i-i 

"^ '^^^ *^ "^^ ^> "^^ '^ 

8 10 d"vo" d" c^ ■«? 10 

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bO 
^ 1 


Tj-v£> vO 00 r^vO rl- 

'~L ""L "5 0«°° 't^. 
1000" CO tr> cToo" tC 


Average 
working 
mileage 


HI M 1-1 HH CO "<*• 
vO vO vO On ,-< »0 !>. 




> 


lllllll 



270 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 







73 








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vrf ro 10 CO CO tC hH^exT rf ^o" t-T 






cO<?NfO»OON<NvO --ivOOO i-t 






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0) 


vO covO rhvo M e» M ONOO 




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2 5 


cT rf 0" 6" t-^ rOOo' 0" <N cT tC 




on^ aMO»-tvr> Ti-o cot^ 






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00 VO •-< 10 t>. T^VO 00 Tj- r^ (V) 






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»^^^^«^»^_« 






Tt-cot^t^oo t^oo rv.vo 00 






0>0 CJVOOO co»Ot^O 






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cr^ ci »-r CO c> rf 00"" Tp rC rf vo" 




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1-1 CS COcOtJ-t^-tJ-IO »OvO VO 






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CO -rj- lovd r^oo' cfv Q •-« ci ro 















TRANSPORTATION AND COMMUNICATION 



271 



m 
CO 

1 

3 

1 


^ 
^ 

H 




d 






1 CO fO 10 r>. q;« oq_ •-<_ q_ "-.^ 10 

^ hh" hh' hh' «" « hh" ►^" cT ci Cf OT 


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:>' ; i ' : ■ 'mSm'S^ 


d 


n c^t^>oo^'-' '-' '-'00 foo 
.00 oMoa''<+fO»ot^M coon 
c^oo q_ o_ a^oo •-<_ ■^vo oq_ 




.00 t^N t^OO rOt^OO 1000 


1 

C 
C 


1 

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2 CO CO fO »o tJ- 

1 fOO ror^.-' "-1 

^ to 0" 0" ci 10 10 


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ONC7^'-''-'fO<No^Th loso 

5 Tj- OsQO fOro<N '-iCX) rfro^ 
g 00^ Th (s oo_ r» 00 00^ \0 t^ Tf T^ 
c^ d" "-T rf vo"m3 rf tCi-T c>o" cf; 




, 1000 t^vO vO ^00 vO i-i Tf 
2 rOCs(N00vO CI lOOcO t^iO 

°° <^> ^ 9. <1, ^"^-^R. ^. "2 "2 

t^ 00" cT 0" ^O '-T d'vO" ro rf 00' lO 


en 

1 




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in 
6 


lOvO (N '1 fOOr^rOt-ioO 

;^ 10 »o lovo vD »o 1000 00 a\ ON 


> 


cs '1 r^oo •-* t^ooo -^r^ONfO 
;^ rj- w T^o 100 \o vo t^ 


1 






ONOooooi^o 
00 00 00 00 00 00 00 ON a> ov ON 



272 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 



a 

T 

ON 
00 



O O N C« M N 



^00 N 00 so CO 1^00 ON o o o 



8 

u 00 O 



OrhHH0000OC<C<n 



r^ i^ t^ co^O 00 o vO 

vo" tC oroo" cT rf o" C> 

COO vO »-" o t^ CO 



i-i O^aO ThiOONONQNOOO ON 
0)00 miOCI rOrO'^'^a^"-' 

r>. M lo hh^ q^ r^ q> o; •-<_ q^QO__ 
i-T lo i-T i-T ro i-h' CO o" rToo" cT 

Tj-CMOrJ-T^TtONO Threes 
M fO^D N rt- lO ON lO tOvO 



n 00 t^ lO tJ-vO ro <S rOvO hh 
00 O t^ -^OO O t^ (N vO t^ O 
t^ r^ 0» 0_ O^ "2 Tj; rt; w TfvO^ 

§ (nToo'oo" O^ lO o" t^ >o -rf o" oT 

1^; TtOO Tj-(N lOO ►-« «OTt-t>.(S 

^_"2®_°° *? *^ "^ "^ "2°°» 

oT )-^ >^ cT cf ^f lO rf rf 



OOI^OOOOO 
O^j-ioOOOOO 

o_ "^ N q_ o_ q_ o^ o^ 
lovo"" 1^ o" d" o" o" o" 

^»^« '^ ^« ^. ^> ^^ ^» 
hT cvT cT CO rO CO CO CO 



CM 

^ O O O vo'op' 

00 O^ ON NO O \n vrivrnjo in u-i 
hh" hT t-T ci »o »o lo »o lo »o »o 



o o o 
^ o o o 
S o o_ o_ 

O O O Q O 
O Tj- t4- oskO o o o o o o 





18888 

PH 00 00 00 OO 

oo'oo'oo'oo'oo' 



M CM (N (N M 



ro-^iovo r^oo ON O i-i M ro 

OnOnOnOnO O O O 



CHAPTER VII 
EFFECTS ON PRIMITIVE INDUSTRY 

It may possibly be correct to say that the Sino- Japanese 
War had little direct effect upon primitive industry in Japan, 
although indirect effects were noticeable here and there. For 
instance, the interruption in the transportation of general 
merchandise, both by land and water, due to the transporting 
of troops and munitions at the outbreak of the war, caused a 
lack of balance between supply and demand for the products 
of various branches of primitive industry in the Empire. In 
consequence the prices of such commodities as lead and other 
contraband, coal, provisions, dried bonito, salted greens, 
pickled plums, barley, soy beans and certain munitions, rose 
somewhat. 

It can not be denied that the rise in the prices of these third- 
class commodities in particular gave their producers — farm- 
ers, mine owners and fishermen — an opportunity to enlarge 
the scope of their productive capacity and so to increase prof- 
its. The rise in the prices of these commodities may there- 
fore be regarded as an indirect effect of the war upon primitive 
industry in Japan, but even this was not so great as to be 
worth special mention. 

But the measures that the Japanese Government adopted 
as a part of its post-bellum program for the development of 
various branches of primitive industry are worth special 
notice, although they, too, may be called an indirect effect of 
the war. These measures included the establishment of an 
iron foundry under state management ^1 improvement in the 
condition of rivers to secure better irrigation; the establish- 
ment of more agricultural experiment stations and sericultural 
training institutes, the enlargement of those already in exist- 
ence, etc. Furthermore, the government established such 

* Full particulars are given in Chapter II. 
19 273 



274 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

banking systems as the Japan Hypothec Bank of Tokyo, and 
the banks of agriculture and industry located in various parts 
of the country. All these banks engaged in the business of 
lending money on security furnished by real estate. These 
banks were started to give increased financial facilities to 
farmers, who were suffering from the lack of funds for their 
work. Of course these banks were imperfectly adapted to 
their purpose of developing the agricultural industry in Japan; 
especially in the case of farmers with small capital did they 
prove defective. Nevertheless it can not be denied that these 
banks gave an impetus to the agricultural industry and 
practical assistance to farmers. This may be proved from 
the fact that the greater part of the money that the Japan 
Hypothec Bank and the banks of agriculture and industry 
advanced in various parts of the country, through the system 
of redemption by annual instalments, was lent to the irriga- 
tion and earth-work guilds, all composed of farmers, as the 
figures in Table I at the end of this chapter ^ indicate. There 
is no denying the fact that they really did benefit many 
farmers who had been suffering from lack of capital to carry 
on their business. 



Advances by Banks of Agriculture and 


Industry, i 898-1 903 


Year * 


To agri- 
culturists 


To agri- 
cultural 
companies 


For adjust- 
ment of 
arable land 


Total 


Grand total 


1898 

1899.... 

1900 

1901 

1902 

1903.. ■• 


Yen 
2,297,870 
7,163,043 
11,095,842 
13,342,196 
14,931,925 
17,194,710 


Yen 

18,001 
25,126 

34,595 
58,852 


Yen 

5,270 
4,869 

4,431 
60,241 


Yen 
2,297,870 
7,163,043 
11,119,113 
13,372,191 
14,970,951 
17,313,803 


Yen 
3,687,490 
10,522,750 
16,647,648 

19,994,537 
21,701,288 
24,296,668 



■ Close of year. 



Areas under cultivation in rice and wheat since 1893, 
showing the improvement effected by the aid of the above- 
mentioned banks, are tabulated on the next page. 



1 Post, p. 276. 



EFFECTS ON PRIMITIVE INDUSTRY 275 

Areas under Cultivation in Rice and Wheat, i 893-1903 



Year 



Rice 



Area under 
cultivation 



Price 
(per koku) 



Wheat 



Area under 
cultivation 



Price 
(per koku) 



1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 



Cho 
2,769,478.9 
2,736,494-6 
2,784,682.5 
2,792,499.4 
2,787,181.3 
2,817,624.0 
2,839,550-2 
2,828,459.9 

2,847,357-3 
2,847,191.9 
2,864,139.1 



Yen 
7.08 
8.24 
8.21 
9.16 
II. 81 
13. II 

9-84 
11.32 
11.47 
12.07 
13-68 



Cho 
744,010.3 
753.409-8 
774,159-8 
767,043.2 

749,571-7 
806,667.4 
809,822.6 
1,806,668.6 
1,816,200.8 
1,804,938.0 
1,799,346.1 



Yen 



The areas under cultivation in rice and wheat as given in 
the foregoing table refer to the lands on which rice or wheat 
was actually raised, and not to the entire area prepared for 
cultivation. Besides, the area of cultivated land changes 
according to the conditions of crops each year or the price of 
rice or wheat; therefore these figures can not be accepted as 
exactly reflecting what these banks did for the agricultural 
industry. Yet to some extent we may see by these figures 
the progress made by their aid. 

In addition, the government established a training school 
to develop fishery experts, and adopted various other meas- 
ures to improve the fishing and mining industries. As these, 
however, are not worth special notice, we shall content our- 
selves with a glance at statistics regarding the paid-up capital 
of the companies engaged in the agricultural industry during 
these years, as shown in Table II following. 



276 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 







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CHAPTER VIII 
SOCIAL EFFECTS 

The national life of the Japanese people during the past 
fifty years may be divided into two periods, with the Sino- 
Japanese War as the dividing point. In the first period, that 
is, from the Restoration of 1868 up to the Sino-Japanese War, 
we accomplished, in addition to the Restoration which re- 
placed the Shogunate with the Imperial rule, the introduction 
of a modem system of administration in place of the old feudal 
methods, experienced the Korean trouble, over which the 
leaders of the country differed, with a serious reflection on 
home politics as a result; and then went through the Saigo 
Rebellion of 1877. Through these events Japan accomplished 
great political reforms, her finances being so much affected 
thereby that the government was obliged to issue inconverti- 
ble bank notes to meet the needs of the time. In 1886, how- 
ever, the finances of the country were put right, and the value 
of paper money began to assume a close relation to that of 
gold for the first time after many years of financial chaos. 
On February 11, 1889, the Imperial Constitution was pro- 
mulgated, and the Imperial Diet was opened in the following 
year. The country was then just prepared to enter upon a 
period of activity, both politically and economically, with the 
one great aim of promoting the welfare of the nation, when 
the Sino-Japanese War broke out. 

Prior to this time, the Japanese had never had any experi- 
ence with international warfare, in the true sense of the word. 
They had had, it is true, frequent troubles with Korea and 
Formosa before this, but these troubles could not be called 
international war in the real sense of those words. In the 
eyes of the Japanese of that time, therefore, it was a great 
matter to be at war with China, the oldest and greatest coun- 
try in the Far East, with a history running back 4,000 years 
into the past. Indeed, the Japanese were somewhat appre- 
278 



SOCIAL EFFECTS 



279 



hensive as to the outcome. Fortunately for them they won, 
and this victory gave them the chance to realize for the first 
time the superior ability which they had been developing 
since the time of the Restoration in 1868. "To manifest the 
glories of the country to the world," was now the banner 
under which both government and people were determined to 
carry out their post-bellum program, prepared for the purpose 
of extending victorious Japan's influence. In accordance 
with this program the Japanese effected drastic reforms in 
their military system, business methods, and machinery for 
the promotion of culture. 

Simultaneously the cost of living went up, and prices of 
commodities and labor rose correspondingly. Development 
in business methods resulted in the concentration of capital, 
and naturally disturbed the balance in the distribution of 
capital in consequence. The figures in the table below were 
based upon the results obtained by the commission appointed 
to investigate the currency system. They tabulated the 
wholesale prices of about 42 principal commodities inthe 



Prices of 


Commodities in 


Japan from 1873 to 


1912 


Year 


Index-numbers 


Year 


Index-numbers 


187-1 


100. 
100. 
102.0 
loi .0 
102.0 
104.0 
109.0 
108.0 
103.0 
lOI .0 
103.0 
106.0 

IIO.O 

107.0 
109.0 
115. 2 
119. 2 
122.2 

117. 9 
122.3 


180-; 


126. 1 


1874. . . . .... 


i8q4.^ 


135 8 
143-5 
154-9 
174-I 
182.7 


187'^ 


I8QS'' 


1876 


1896 


1877 . . . 


i8q7 


1878. 


l8q8 


l87Q. 


1800 


182.5 
195-2 
186.3 
182. 1 


1880. 


I goo 


1881. 


iqoi 


1882 


I qo2 


1883 . . 


iqO'? 


195-2 
200.9 


1884 . . 


I qo4. 


i88«^ 


iqos 


221 .6 


1886 


iqo6 


230.3 
248.8 

241-3 
229.1 


1887 . . . 


iq07 


1888 . . . 


iqo8 


i88q 


iqoq 


1800 .... 


iqio 


235-6 
247.8 


* z7 

i8qi 


iqi I 


1802 


iqi2 


265.1 







« War time. 



280 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

city of Tokyo, of about i6 different commodities in the city 
of Osaka and of about 31 principal articles of export (prices 
at place of export) .^ In addition, the results of similar investi- 
gations made by the Bank of Japan concerning the prices of 
about 40 of the principal commodities in the city of Tokyo 
were used. As these figures indicate, the history of the rise 
in the prices of commodities in modern Japan may be defi- 
nitely divided into two periods, with the Sino-Japanese War 
as the dividing point. Each period has its special features. 

As the figures in the foregoing table show, in the twenty- 
one years from 1873 to 1893, the prices of commodities in 
Japan rose 26.1 per cent, or approximately 1.3 per cent a year, 
but during the war with China and in the several years there- 
after, or from 1894 to 1903, prices of commodities went up 
69.1 per cent, or 6.9 per cent a year, and in the nine years 
from 1904 to 1 91 2, or during the Russo-Japanese War and 
several years thereafter, prices of commodities rose 69.9 per 
cent, or 7.8 per cent a year. In a word, the prices of com- 
modities in Japan were rising approximately i per cent every 
year up to 1896, but since then they have been rising 7.8 per 
cent on an average every year. These figures therefore denote 
quite a revolution in the life of the Japanese people. 

That the prices of commodities have been rapidly rising in 
Japan since 1893 has already been stated. What were the 
causes of this rapid rise? This is a question which has been 
continuously investigated by government officials and indi- 
vidual experts ever since, but no decisive conclusion has yet 
been reached. As I understand it, however, one cause was 
the disturbance of the balance between supply and demand, 
especially in the case of rice, resulting in a rise in the price. 
Another cause was a considerable increase in the volume of 
currency in circulation, and yet another was the increase in 
the taxes, particularly taxes on consumption. The questions 
of currency and the increase in taxes will be dealt with later, 
so we shall here consider only the price of rice. From time 
immemorial, Japan has been known as a land of rice. Cer- 

^ All these investigations were made from 1872 to 1893. 



SOCIAL EFFECTS 



281 



tainly rice is the staple food of the country — the people in 
general live on rice.^ How to keep the price of rice normal, 
or to adjust the changes in it, always constitutes the initial 
problem in the Japanese Government's policy as to prices of 
commodities, and even as to economic affairs in general. 
Now the price of rice has been constantly rising since 1893, so 
great an increase as 90 per cent being observable in the ten 
years from 1893 to 1903, as the figures in the table below 
show: 

Average Price of Rice throughout Japan, i 893-1 903 



Year 




Percentage 



1893 
1894 
1895 
1896 

1897 
1898 

1899 
1900 
1901 
1902 
1903 



100. o 

117. 8 
II5-9 
129.4 
166.8 
185.2 
139.0 

159 9 
162.0 
170.4 
193.2 



It is a well-known principle that a rise or fall in the price of 
a single commodity will produce corresponding changes in 
other commodities, in the same market. 

It is obvious, therefore, that a rise in the price of an impor- 
tant commodity will be accompanied by a similar rise in the 
prices of other commodities in one and the same market. 
Besides rice, tobacco, another stable commodity in Japan, 
also rose in price, after the government had established its 
monopoly in the manufacture of the article. This rise in the 
price of tobacco affected the prices of other commodities too. 
Now concerning the rise in the price of rice, it may be stated 
that the amount of the rice crop each year was partially re- 
sponsible for it, but the principal cause of the rise in the price 



1 Of the whole population of Japan, about 70 per cent live on rice, so far as I 
hav^e been able to ascertain. 



282 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

of rice was the increase in consumption of those living on rice 
due to the general improvement in the standard of living in 
Japan, and for this the increase in the income of middle and 
lower-class people in recent years has been largely responsible. 
Let us look at the ratio of prices of commodities and prices of 
labor in the two largest cities in Japan, namely, Tokyo and 
Osaka, during these years, as given in the table below^ : 



Year 



Tokyo 



Prices* Wages** 



Osaka 



Prices" Wages'^ 



1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 



100 

lOI 

107 
119 
133 
139 
145 
159 
148 

145 

148 



100. o 
109.2 
118. 6 
129. 1 
140.2 
145-8 
147-8 
167.2 
169.7 
170.6 
170.2 



100. o 

106.0 

III .9 

126. 

144 

159 

156. 

173 

173-5 

173.0 

181.8 



100. o 
III. 9 

132.3 
141. 7 
161. 6 
168.6 
169.4 
183.6 

179-3 
182.3 
199.0 



» Average prices of 3 1 dififerent commodities. 
*> Average prices of 26 different kinds of labor. 



" Average prices of 14 different commodities. 
<J Average prices of 43 different kinds of labor. 



These figures speak eloquently of the growing increase in 
the income of middle and lower-clkss people in Japan, on the 
one hand, and on the other unmistakably demonstrate a 
steady rise in the price of labor in the same country. Both 
facts were together responsible for the rise in the prices of 
commodities during these years. 

Wherever the prices of commodities and labor rise so 
quickly, the condition of society must be far from tranquil. 
Now, from the Restora;tion of 1868 to 1893, — a most eventful 
period in Japan's history, including as it did civil wars and a 
financial crisis, — the prices of commodities did not rise greatly^ 
but they rose steadily after the year 1893. This steady rise 
in the prices of commodities could not but reflect the uneasy 
current under the surface of society during those days. 

* Based upon the investigations made by the Finance Bureau in the Finance 
Department. 



SOCIAL EFFECTS 283 

The intervention of the three Powers, France, Germany and 
Russia, after the Sino-Japanese War, which largely deprived 
Japan of the fruits of her victory, seriously warned the Jap- 
anese at large as to the probable future of their country, ai;id 
they accordingly made up their minds to carry out a stu- 
pendous post-bellum program to elevate the position of their 
country among the Powers of the world. Yet the glorious 
victory with which the Japanese concluded the war, coupled 
with their expectation of an inflow of a large amount of capital 
from foreign countries, because of the large indemnity which 
China was compelled to pay to Japan as a result of the war, 
weakened to some extent the apprehension created by the 
intervention of the three Powers as to the future of their 
country. In the financial world, in addition to the govern- 
ment's post-bellum program, many "fake schemes" were 
started by individual business men for various kinds of enter- 
prises. In spite of their rotten foundations, these plans 
worked smoothly for a while, and this fact tempted many 
other adventurers to start similar bogus enterprises. Thus 
was initiated a tendency which became well-nigh universal 
in financial circles until the whole of the country was shocked 
by the great financial crisis in 1901. The unusual rise in the 
prices of commodities and labor in the years following the 
Sino-Japanese War, as the figures in the foregoing table show, 
was therefore nothing but a reflection of the insecure condition 
of society in those days, when the majority of people lived on 
false pretensions. Indeed, it may be stated that in those 
pleasure-seeking days the people lacked sincerity somewhat in 
their mode of life, and that under the surface of society was 
running an indeed dangerous current. 

For a few years after the Sino-Japanese War, the Japanese 
people, like many others in similar circumstances, lived on 
vaingloriously on account of their martial victory; yet they 
recovered their senses again during the great financial crisis 
of 1 901, and were able to meet the Russo-Japanese War in 
1904 in full preparedness. All the circumstances attending 
these events will be further examined in the following pages. 



284 economic effects of the sino-japanese war 

Prices of Commodities 

An inevitable economic phenomenon of war is the sudden 
rise in the prices of commodities which takes place in bellig- 
erent countries after the outbreak of a war. The Sino- 
Japanese War was no exception to the rule, as the statistics 
on prices of commodities in Japan during and after the war 
indicate. But in Japan except for those commodities whose 
prices went up either because of interruption in the supply, 
due to the outbreak of the war, or on account of shortage of 
stock, chiefly munitions, prices did not rise during the war, 
but did go up considerably after the war was over. Thus 
during the war and approximately ten years following, the 
wholesale price of the principal articles of merchandise in the 
city of Tokyo rose about 50 per cent, as indicated in Table I 
at the end of this chapter. ^ 

As the statistics in Table I indicate, the degree of the rise 
varies with the three classes of commodities, namely, food- 
stuff's, raw materials and manufactures, but it is true of all 
three classes that prices rose after more than during the war. 
Among the reasons for this rise, we may place the increase in 
taxes, especially duties on consumption, post-bellum enter- 
prises carried out by both government and individuals, in- 
crease in the volume of currency in circulation resulting from 
the business boom, and finally the luxurious mode of living of 
the people at large. All these, which may be called bad 
effects of the war, were responsible for the considerable rise in 
the prices of commodities after the Sino- Japanese War. 

As already stated, a rise in the prices of commodities in 
these post-bellum years undoubtedly resulted from the war, 
so I shall now dwell in more detail upon the effects of the war 
upon prices of commodities in the two largest cities, Tokyo 
and Osaka. 

The first appreciable effect of the war was felt in commercial 
circles, when the government chartered many of the vessels 
belonging to the Nippon Yusen Kaisha and other merchant 

^ Post, p. 303. 



SOCIAL EFFECTS 285 

marine companies, in the latter part of June, 1893, for the 
transporting of troops and munitions. As this interruption 
in transportation both by land and water — for railways, too, 
were placed at the government's disposal for the same pur- 
pose — came just at the time when the bulk of produce had to 
be marketed, the supply was suddenly interrupted, and prices 
jumped up in consequence. Especially was such the case 
with munitions. In the early part of the same year, or at 
least before June, the rate of interest was high and the price of 
silver rather low. From these two causes, as well as some 
minor ones, the prices of commodities in general had been 
going up, and while it may not be correct to say that the rise 
in the prices of commodities of that year was entirely an effect 
of the war, we may safely say that the war was the principal 
cause. The interruption to transportation at the outbreak of 
the war without doubt brought about a shortage of foodstuffs, 
etc., in the market, and merchants in anticipation of such a 
shortage had bought up as much as possible, without con- 
sidering whether the merchandise would sell well or not. 
The articles whose prices thus rose were salted greens, pickled 
plums, barley, soy beans, etc. Lead, which could be bought 
for 6.50 yen or 6.60 yen per 100 kin before the war went up to 
10.50 yen in September of the same year, because, being a 
contraband, its importation was stopped after the outbreak 
of hostilities. Coal, too (best brand of Karatsu and Ho- 
chiku), jumped up to 48 yen in September, as compared with 
31 yen or so before the outbreak of the war. Provisions also 
rose 30 or 40 per cent, for they were imported at Neuchang and 
Korea for the troops. But chinaware, umbrellas, silk fabrics, 
etc., which are not daily necessaries of life, and also seaweed, 
trade in which was interrupted by the outbreak of the war, 
rather fell in price after the outbreak of hostilities. The 
articles which were not affected by the war to any serious 
degree were soy, bean paste, kerosene oil, and articles ex- 
ported to Europe and America. 

In May, 1895, the Sino-Japanese War was concluded. 
Owing to the intervention by the three Powers, Japan re- 



286 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

stored to China the Liaotung peninsula, once occupied by her 
army. For a while the Japanese were discouraged by this 
intervention but they soon recovered, and prepared for fresh 
activities in business. Just at this time the Bank of Japan 
began lending out money rather generously in business circles, 
and the condition of the country's foreign trade became very 
encouraging. The rice crop for the same year was very good. 
Furthermore, a large amount of specie was brought to Japan 
from abroad through China's payment of her war indemnity 
and by the improved condition of foreign trade. Soldiers and 
sailors returned home in triumph and were given decorations 
and monetary gifts for their brave services at the front. 
These factors naturally had their effect upon business through- 
out the country, and prospects in general became far better. 
In addition, enthusiasm for speculative enterprises became 
almost universal among business men, and quotations on 
stocks and bonds went up considerably; the volume of con- 
vertible notes issued increased in consequence, as well as loans 
made by the associated banks in Tokyo, and the business 
done by the Tokyo Clearing House. For these phenomena 
the development of industry may have been partly responsi- 
ble, but the principal cause was the increase in the volume of 
currency in circulation. If the volume of currency increases, 
the prices of commodities will assuredly go up. In 1896, the 
condition of the market became depressed, due to the govern- 
ment's raising of the taxes, the bad condition of trade in raw 
silk, cotton and tea, as well as the poor rice crop. Thus 
during the first half of the year prices of commodities fell 
somewhat. But this did not last long, for the Bank of Japan, 
by using the indemnity from China and the increase in its 
specie reserve, issued more convertible notes, which brought 
about an increase in the amount of bank notes in circulation, 
and thus the prices of commodities went up again. 

In 1897 the amount of convertible notes issued continued to 
increase. To make the matter worse the price of rice rose, 
and the lower-class people suffered accordingly. In October 
of the same year the government adopted the gold standard 



SOCIAL EFFECTS 287 

as the currency system of the country, but this change was by 
no means effective in bringing down the prices of commodities. 

In 1898 business in Japan suffered a great depression, owing 
to the bad rice crop and the tense condition of the money 
market then prevailing. Prices of commodities rose accord- 
ingly. In the following year prices continued rising, and even 
later were rather on the increase, on the whole, although not 
without some fluctuations from time to time. It was from 
1902 or thereabouts that business in Japan was finally freed 
from all effects of the Sino- Japanese War. Thus the rise in 
the prices of commodities during those years was caused by 
the tense condition of the money market and the increase in 
the volume of currency. And when we see that the Sino- 
Japanese War and the post-bellum program of enterprises by 
the government and people were entirely responsible for the 
increase in the volume of currency, the rise in the prices of 
commodities, and later the tense condition of the money 
market, we can not but wonder how far-reaching was the 
effect of the war upon the Japanese economic world. 

The rise in the prices of commodities during and after the 
Sino- Japanese War was principally due to such general 
causes as increase in the volume of currency in circulation, the 
tense condition of the money market, and an increase in the 
purchasing power on the part of the general public, although 
interruption in the supply of merchandise during the war and 
the raising of taxes after the war may also be mentioned as 
secondary causes. In the following pages we shall first note 
the fluctuations in the prices of merchandise in general, and 
then examine the case of each class of merchandise. 

In Tables II-IV at the end of this chapter ^ the index num- 
bers of the annual average wholesale prices of merchandise in 
the cities of Tokyo ^ and Osaka, the largest commercial city in 
Japan ^ are given for the period 1 893-1 903. 

A comparison of these three tables shows us that the fluctua- 
tion in prices of the several commodities differs according to 

^ Post, pp. 304-310. 

2 Investigations of the Bureau of Finance and of the Bank of Japan. 

' Investigations of the Bureau of Finance. 



288 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

the commodity, location, etc. For instance, the rate of 
increase in Osaka was greater than that in Tokyo; and in 
Tokyo, of the three kinds of merchandise, raw material rose 
most, and foodstuffs next, while manufactured articles rose 
least. However, generally speaking, the prices of these com- 
modities fluctuated about the same in most cases, according 
to the prevailing state of the financial and economic market. 
And when we realize that it was due to the Sino- Japanese War 
and its effects that the financial market of Japan in those years 
was constantly disturbed and could not remain stable, we 
must admit that the war was responsible for said fluctuations 
in the prices of commodities, especially for the considerable 
rise noted. 

Let us now study the relation between the index numbers 
for the prices of commodities as given in the above-mentioned 
Tables II-IV and the percentage of the volume of currency 
in circulation, as well as the amount of bank notes in circula- 
tion, as given in Table V at the end of this chapter. ^ 

As the foregoing statistics indicate, the prices of commod- 
ities rose during those years which saw the volume of cur- 
rency in circulation increased, or in the years following. 
Such being the case, the increase in the volume of currency in 
circulation in the years following the Sino- Japanese War was 
responsible, we may conclude, for the rise in the prices of com- 
modities during those years. But as it may be premature to 
draw such conclusions from investigations covering a period 
of only a little more than ten years, I will give below the 
results of my investigations as to prices of commodities and 
percentage of currency in circulation during the period from 
1887 to 1911. 

These results of investigations covering twenty- five years 
simply confirm my former conclusion. Such being the case, 
it is not too much to say that the rise in the prices of com- 
modities in the several years following the Sino-Japanese War 
was caused by the increase in the amount of currency in circu- 
lation due to the post-bellum financial and economic program. 

^Post, p. 311. 



SOCIAL EFFECTS 



289 



Comparison of Prices of Commodities and Currency in Circulation, 

1887-1911 



1887. 
1888. 
1889. 
1890. 
1891. 
1892. 

1893- 
1894. 

1895. 
1896. 

1897. 
1898. 
1899. 
1900. 
1901 . 
1902. 
1903. 
1904. 

1905. 
1906. 
1907. 
1908. 
1909. 
1910. 
1911. 



Year 



Index number for 
prices of commodities 


rerceniage 01 cur- 
rency in circulation 
(1886=100) 


102. 1 


100.8 


107.9 


105.2 


III. 7 


III .0 


114. 4 


103.4' 


110.4* 


106.2 


114. 6 


109.2 


118. 1 


120. 1 


127.2 


124.8 


134 4 


142.0 


145 I 


• 151 3 


163. 1 


166.4 


171. 1 


143.8* 


170.9* 


169.6 


182.8 


160.2* 


174 5* 


154- 5' 


170.6*' 


164 5 


182.8 


166.8 


193-7 


196.0 


213.6 


214-3 


215-7 


239 .2 


233-0 


256.1 


226.0* 


254-5' 


214.6* 


257-8 


220.7 


286.9 


232.1 


306.3 



» Decrease, as compared with previous year. 



After the Sino- Japanese War, the Japanese Government 
raised the taxes on consumption of sake, tobacco, soy, etc., in 
order to meet her financial needs following the war. Let us 
look at the changes in the rate of these taxes. 

(A) The tax imposed upon sake in general varies according 
to the brand, and is very complicated compared with similar 
impositions on other articles. We shall therefore here examine 
the rate for the consumption tax upon refined sake (seishu) 
only. The rate imposed upon this brand of sake was 4 yen 
per koku annually in 1893, the rate having been decided in 
accordance with Order No. 61, issued in 1882, but it was 
raised to 7 yen per koku in October, 1896, to 12 yen per koku 
in January, 1899, and to 15 yen in 1901. 

(B) The rate imposed upon soy was at first i yen per koku 



290 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

a year in accordance with Order No. lo, issued in May, 1885, 
but it was doubled on March i, 1899. 

(C) The imposition upon tobacco was a stamp duty of 20 
per cent ad valorem from July i, 1888, until the manufacture 
of tobacco was monopolized by the government on January 
I, 1898. After the business was brought under government 
management, returns from the business were at first 84 per 
cent compared with the price for which the government bought 
the business from individual concerns. The rate became 100 
per cent from July, 1898, to August, 1900, 130 per cent from 
August 22 of the same year, 150 per cent in 1901, and it was 
quoted between 140 and 180 per cent, according to grade of 
tobacco, in 1902. The net profit of the government from its 
tobacco monopoly, or rate of income as compared with the 
purchasing price of the business from individual concerns, 
was 77.9 per cent in the fiscal year 1897 (from January to 
March) ; 86.2 per cent in 1898; 94.0 per cent in 1899; 88.1 per 
cent in 1900; 158.8 per cent in 1901; 178.8 per cent in 1902; 
and 152.9 per cent in 1903. 

The raising of the tariff rate by the government should also 
be noted in connection with the rise in prices of commodities 
during these years. In 1897 the Japanese Government pro- 
mulgated its customs tariff law^ which took effect from 
January i, 1899. According to this tariff law, the taxable 
articles in Class No. i were 497, divided into 16 groups. 
These articles were subjected to the imposition of a tax from 
the minimum rate of 5 per cent up to the maximum rate of 
40 per cent. By applying these rates of duty to the articles 
imported into Japan from abroad during the year 1895, we 
get an average rate of duty of 12.3 per cent. But as Japan 
has a conventional tariff contract (treaty) with England, 
France, Germany and Austria, this treaty too must be taken 
into consideration. Even in that case the average rate of 
duty was 10.52 per cent. Previous to the promulgation of 
the said tariff law, the average rate of customs duty in Japan 
"was 3.57 per cent. The following statistics show the relation 

1 Law No. 14. 



SOCIAL EFFECTS 



291 



between the amount of the government's income from cus- 
toms duties and the prices of the imported articles upon which 
duty was levied, for twenty years from 1889. As the figures 
below indicate, the average rate of tariff duty in- Japan was 
3.89 per cent for the ten years previous to the promulgation 
of the said tariff law, that is, from 1889, but it increased to 
11.37 per cent for the ten years 1 899-1 908 which followed the 
promulgation of the said law. 

Revenue from Customs Duties, i 889-1908 



Year 



Returns from 
import duty 



Value of imported 

articles, upon which 

duty was levied 



Rate of 
customs duty 



1889 
1890 
1 891 
1892 

1893 
1894 

1895 
1896 

1897 
1898 

1899' 
1900 
1901 
1902 
1903 
1904 

1905 
1906 
1907 
1908 



Yen 
2.863, 
2,932, 
2,401, 
2,745, 
3,098, 
3,506, 
4,238, 
4,915. 
5,295, 
6,280, 

13,251 
16,764 

14,457 
14,727 
16,372 
20,519 
34,298 
41,230 
46,959 
44,817 



,576 
,637 
,238 
,777 
,627 
,500 
,842 
,289 

,123 
,620 

,833 
,165 
,526 
,596 
,024 
,938 
519 
391 
,596 
,856 



Yen 
63,403,345 
65,795,098 
54,822,790 
64,299,862 
79,462,140 

103,195,819 
118,680,124 
130,431,094 
139,975,246 
165,522,430 
136,489,625 
200,458,007 
165,214,574 
151,037,567 
168,547,397 
208,450,952 
294,268,906 
281,337,980 
307,358,291 
281,399,648 



Per cent 



» New tariff enforced. 

As the foregoing figures indicate there can be no doubt that 
the raising of the rate of import duty influenced the prices 
of commodities in Japan during these years. 

The imposition of a consumption tax upon merchandise 
brings about a rise in the price of that merchandise of approx- 
imately the same amount, either more or less, according to 
circumstances. Then a rise in the price of one article in- 
fluences the prices of other articles which have relations with 
that article in the same market. Therefore it may be stated 



292 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

that the raising of the duty on consumption was the principal 
factor in causing the rise in the prices of commodities during 
these years in Japan. 



Prices of Labor 

As stated heretofore, the price of labor always rises more 
rapidly and to a greater degree than the prices of commodities 
in Japan, as the prices of labor and commodities during these 
years in the two largest cities in the country, Tokyo and 
Osaka, as given in the table below, indicate : 

Prices of Labor and Commodities in Tokyo and Osaka, 1893-1910* 





Tokyo 


Osaka 


Year 


Labor 


Com- 
modities 


Rice 


Labor 


Com- 
modities 


Rice 


1893 


100. 
145-8 
170.2 

196. 1 

193-9 
196.5 


100. 
139-5 
148.5 
186.0 
176.7 
180.9 


100. 
200.7 
176.3 

213.5 
178.7 

179-9 


100. 
168.6 
199.0 
279-0 
268.6 
274.4 


100. 
159.5 
185.3 
224.1 
217.7 
220.2 


100. 


1898 


196.4 
194. 1 
212 .0 


TQO'^ 


1908 


IQOQ . . . 


173-7 
176.3 


IQIO 





» For particulars of the foregoing figures, the previous section as well as statements that will be 
given later on the same subject are referred to. But as the figures for the years 1908 and beyond 
have been prepared especially for the above table, no further explanation of them will be given. 

From the foregoing statistics it may be seen that the prices 
of labor always rose higher than the prices of commodities, 
especially rice. But we must first examine what changes the 
price of labor has passed through since the Restoration of 
1868, and then we can see what effect the war had upon the 
prices of labor in general. 

The table on the next page, prepared by the Bank of Japan, 
gives a view of the prices of 24 kinds of labor in the city of 
Tokyo from 1873 to 1910. 

As these figures indicate, the price of labor did not rise 
at all rapidly, from 1873 to 1893, or before the outbreak 
of the Sino-Japanese War, but after that war it sud- 
denly rose considerably. After the Russo-Japanese War 



SOCIAL EFFECTS 
Price of Labor in Tokyo, i 873-1910 



293 



Year 


Price of labor 


Year 


Price of labor 


l87'» 


100.00 
102.80 

101.95 
101.25 
104.46 
109.88 
116. 17 
125.92 
127.58 
129.96 
130.58 
126.03 
127.29 
127.38 
126.42 
126.63 
125.79 
123.17 
121.29 


1 802 


124.04 
124.92 

135.25 
152.00 
158.29 
166.58 
179.75 
185-43 
194-38 
203.17 
200.08 


1874. 


l8q^ 


^"''t 

i87q 


I 8q4. 


1876 


i8q«; 


z,' 

1877 


1896 


1878 


1897 


1870 


1898 

1899 


1880 


I88I 


1900 


1882 


1901 

1902 

190-^ 


188^ 


1884 


200 . 50 
201.38 
210.29 
219.91 
225.32 
237-54 
233 -92 
224 -54 


i88s 


1904 


1886 


1905 


1887 


iqo6 


1888 


1907 


1889 


1908 


1 8qo 


1909 


i8qi 


191O 





( 1 904-1 905), the price of labor did not rise so rapidly as 
it did after the Sino-Japanese War. It may be seen, 
therefore, that the changing conditions in the economic 
world following the Sino-Japanese War affected the price 
of labor, too, for the great activity prevailing during 
those years in economic circles increased the income of 
the people at large, and brought about a rise in the people's 
standard of living. The increase in the cost of living 
thus brought about, naturally caused a rise in the price of 
labor. 

Let us further examine the relative prices of labor in both 
Tokyo and Osaka, as investigated by the Finance Bureau of 
the Department of Finance as well as by the Bank of Japan 
for these years. Particulars are given in Tables VI, VII, and 
VIII at the end of this chapter.^ 

As the figures in these tables show, the prices of labor 
during the years specified advanced 6 or 7 per cent a year. 
What relation the price of labor has to the prices of commod- 
ities will be discussed in the next section. 

^Post, p. 312-315. 



294 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
Prices of Labor in Tokyo and Osaka, i 893-1903 



Year 


In Tokyo 
(of 26 kinds 
of labor)* 


In Osaka 

(of 43 kinds 

of labor)* 


In Tokyo 
(of 24 kinds 
of labor)'' 


Average 


Rate of in- 
crease com- 
pared with 
previous year 


1893 

1894 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 


lOO.O 

109.2 
118. 6 
129. 1 
140.2 
145 -8 
147-8 
167.2 

169.7 
170.6 
170.2 


100. 
III. 9 
132 3 
141-7 
161. 6 
168.6 
169.4 
183.6 

179.3 
182.3 
199.0 


100. 
108.3 
121. 7 
126.7 
133-3 
143-9 
148.4 
155-6 
162.6 
160.2 
160.5 


100. 
109.8 
124.2 

132.5 
145 
152.8 
155-2 
168.8 

170.5 
171. 
176.6 


9 
14 

8 
12 

7 

2 

13 

I 

5 


8 
4 
3 
5 
8 

4 
6 

7 
5 
6 




7-7'' 



a As investigated by Finance Department. ^ As investigated by Bank of Japan. 

"Average. 

Prices and Incomes 

Since 1893, the prices of labor have fluctuated to a far 
greater extent than the prices of commodities in Japan, as 
was briefly stated in the foregoing sections. The following 

Fluctuations in Prices of Labor and Commodities, i 893-1 903* 



Year 



1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 



Prices of 
commodities 



100. 
105.0 
III .0 

123. 1 
138.8 

147-9 
148.8 
162.7 

156.4 
154 2 
161. 7 



Prices of 
labor 



100. o 
109.8 
124.2 

132.5 
145 o 
152.8 
155-2 
168.8 

170.5 
171 .0 
176.6 



Excess of rise in prices 
of labor over rise in 
prices of commodities 



4-8 
[3.2 

9.4 
6.2 



16.8 
14.9 



» Figures for prices of commodities given in the above table are the average prices of 31 different 
commodities in Tokyo and 13 commodities in Osaka, as investigated by the Finance Bureau, and 
of 40 commodities in Tokyo, as investigated by the Bank of Japan. Details as to these figures 
were given under *' Prices of Commodities," p. 284. Figures for the prices of labor are the average 
prices of 26 kinds of labor in Tokyo, as prepared by the Finance Bureau, and of 24 kinds of labor 
in Tokyo and 43 kinds of labor in Osaka, as prepared by the Bank of Japan. 



SOCIAL EFFECTS 



295 



statistics, prepared by the Finance Bureau of the Department 
of Finance and by the Bank of Japan, give the ratio of the 
fluctuation in the prices of labor to that in the prices of com- 
modities in the cities of Tokyo and Osaka. 

As the figures in the foregoing table indicate, there is little 
doubt that the increase in the income of the working people 
of Japan during the years specified was proportionately 
greater than that in the prices of commodities. 

The income of a laborer belonging to the class referred 
to is generally 30 or 40 sen a day, the highest not exceeding 95 
sen. The annual income, therefore, must be less than 300 
yen. A man of this rating certainly belongs to a financially 
low class in society. We must therefore examine the incomes 
of the middle and higher classes. Now as the people belong- 
ing to these classes pay an income tax, we may determine 
their income by studying income-tax statistics. The fol- 
lowing table shows the number of people paying the third- 
class income tax and their income : ^ 







Incomes 


AND Income 


Taxes, 


I 893-1903 














Amount 




Index 




No. of 


Per- 


Total 


Per- 


of in- 


Per- 


numbers 

for prices 

of com- 


Ye 


ar tax- 
payers 


centage 


income 


centage 


come 
per tax- 


centage 












payer 




modities 








Yen 




Yen 






1893 


• . • 124,077 


100. 


91,313,447 


100. 


73^ 


100. 


100. 


1894 


... 129,327 


104.2 


99,470,716 


108 


9 


769 


104 -5 


105.0 


1895 


••• 134,732 


108.6 


107,553,679 


117 


8 


798 


108.4 


III.O 


1896 


... 151,041 


121. 7 


127,299,728 


139 


4 


843 


II4-5 


123 I 


1897 


• • • 172,764 


1393 


147,676,544 


161 


7 


855 


116. 2 


138.8 


1898 


... 195,292 


1574 


168,480,424 


184 


5 


863 


117. 2 


1479 


1899 


... 342,721 


276.2 


204,117,466 


237 


4 


633 


86.0 


148.8 


1900 


■•• 431,378 


347-7 


253.251,341 


291 


7 


617 


83.8 


162.7 


1901 


• • • 510,779 


411. 7 


291,256,213 


334 


9 


599 


81.4 


156.4 


1902 


• . . 580,849 


468.1 


326,230,305 


373 


8 


588 


79 9 


154 -2 


1903 


... 548,976 


523 


366,931,266 


420.7 


592 


80.4 


161. 7 



^ The income tax of this class is levied on their individual incomes, after interest 
on public bonds or debentures belonging to them has been subtracted. In other 
words, it is levied on all incomes except those of legal persons, or those which accrue 
from interest on public bonds or debentures payable in the territories of Japan 
where the income tax law is effective. 



296 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

As the above figures indicate, the number of taxpayers 
belonging to this class steadily increased and in 1903 became 
about five times as great as in 1893. But disregarding the 
number, and considering the taxpayers of this class as a body, 
we see that the rate of increase in their aggregated incomes 
closely corresponds to the rate of increase in the prices of 
commodities during these years. The increase in the number 
of taxpayers and decrease in the amount of income per tax- 
payer are phenomena arising from the revision of the Income 
Tax Law, and from a stricter enforcement of the law, so 
nobody will contradict us if we say that these phenomena do 
not necessarily indicate a decrease in the aggregate income of 
the Japanese people at large. In a word, as the entire income 
of any one class in society is the collective income of the tax- 
payers in that society, it is not improper to compare the 
fluctuations in the total income of a country with the index 
number of price. But in this connection a few points must 
be borne in mind, (i) Excepting those who receive a stated 
income from their earnings, there may be many who do not 
report their entire incomes correctly and strictly to the govern- 
ment. (2) As a result of the revision of the Income Tax 
Law in 1899, the method of deciding as to taxpayers and of 
estimating the amount of individual incomes was somewhat 
changed. For instance, before the said revision, permanent 
residents only paid an income tax, but after the revision, the 
tax was obligatory not only upon permanent residents, but 
also upon those who reside in one place for more than a year, 
and also upon those who merely own property, or have busi- 
ness interests, or carry on their occupations in any place where 
this income tax law is effective. Again, before the said 
revision, the taxable income of each individual taxpayer 
included the whole of his income, but after the revision 
incomes were divided into three classes: (i) income of legal 
persons, (2) income from interest on public bonds or deben- 
tures, and (3) income of individuals. From the income of 
individuals was subtracted that part, if any such there were, 
as certain shares of legal persons, upon which the income tax 



SOCIAL EFFECTS 297 

had already been levied by the government. So that the 
above described amount of income tax is not the total of 
individual incomes; moreover, the amount of the income tax 
of each new taxpayer was given in full from the year when he 
became qualified for paying the tax. This point, too, dif- 
fered a little from the former regulations. These points must 
all be taken into consideration if the method suggested above 
for calculating incomes is to produce correct results. 

We may sum it all up by saying that after the Sino-Jap- 
anese War the incomes of the middle and higher classes in 
Japan gradually increased with the improvement in the 
economic condition of the country, so that the incomes of 
these classes maintained much the same relation as before to 
the prices of commodities, notwithstanding the rapid rise of 
the latter during the years specified. 

Cost of Living 

During the Sino- Japanese War the style of living of the 
Japanese people did not show any appreciable effects of the 
war, but after the war a great change was observable. 

When the war was concluded, the Japanese people in gen- 
eral, stimulated by their recent victory, began to show a 
tendency toward a more luxurious style of living. This 
tendency was further encouraged by the increase in the in- 
comes of the people, especially of the middle and lower classes, 
due to the increased activ.ty in the economic world which 
followed the war, and also to the distribution of monetary 
gifts by the government among soldiers, sailors, etc., for their 
services in connection with the war. Then, again, the war 
awakened the Japanese people, and they began to adopt 
many features of Western style to meet the various social 
requirements of their improved mode of living. Thus, on 
the one hand, the style of living in Japan was greatly im- 
proved, but on the other, the cost of living was considerably 
increased. As stated in the foregoing sections, the prices of 
labor and the incomes of the people at large increased in pro- 
portion to the rise in the prices of commodities during these 



298 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

years. If we look only at these facts, the living conditions 
seem to have been very encouraging, but when we consider 
that the cost of living includes not only the daily necessaries 
whose prices have just been quoted, but also house rent, bath 
charges, etc., we shall understand more perfectly what effect 
the war really had upon living conditions in Japan. Thus, 
in the present section, we propose to examine the relation 
between the increase in the incomes of the people and the 
ratio of house rent, bath charges, etc., — items of expense 
which constitute a part of the cost of living. 

Before the Sino-Japanese War, with a view to ascertaining 
the recent changes in the cost of living of the people, the 
Monetary Investigation Commission appointed by the 
Finance Department of the Japanese Government investi- 
gated the prices of such commodities as rice, bean paste (miso), 
salt, soy, firewood, charcoal, cotton fabrics, house rent and 
bath charges in the city of Tokyo, made averages of these, 
and compared these averages with the prices of labor and 
commodities in the same city, as follows: • 

Ratio of Cost of Living to Prices of Commodities and Labor, i 873-1 893 



Items 


1873 


1877 


1882 


1887 


1892 


1893 


Cost of living: 

Rice 


100 
100 
100 
100 
100 
100 
100 
100 
100 


III 

138 

76 

130 

125 
100 
106 
123 
165 


184 
221 
158 
157 
305 
226 
129 
150 
246 


103 

153 
86 

138 
153 
127 
112 
192 
216 


151 
197 
108 
154 
158 

118 
226 
221 


154 
192 


Bean paste 


Salt 

Soy 


95 
156 


Firewood 

Charcoal 


162 
165 


Cotton fabrics 


124 


House rent 


225 


Bath charges 


221 






Average 


100 
100 
100 


119 
107 
106 


197 
95 
90 


142 
104 
131 


168 
122 
128 


166 


Prices of commodities 

Prices of labor 


122 
129 







From the figures in the foregoing table it will be seen that 
prices of labor rose steadily with the increased prices of com- 
modities, but they remained far below the increased cost of 
living. We shall now continue the investigation from the 



SOCIAL EFFECTS 



299 



year 1893 on. As we have no authentic figures for house 
rent and bath charges during these years, we shall first com- 
pare the prices of daily necessaries with the prices of labor, and 
then compare them with the rate of increase in taxes, which 
was especially remarkable after the war. The average prices 
of some of the daily necessaries in the city of Tokyo are shown 
in Table IX at the end of this chapter.^ 

According to the figures in this table, the prices of labor 
always advanced faster than the index number for the prices 
of commodities. They also rose steadily year after year, 
except in 1903, when they fell slightly. Bath charges, too, 
rose gradually during these years, while house rent rose con- 
siderably in response to improvement in the means of trans- 
portation in the city of Tokyo. Such being the case, it may 
be stated that the style of living of the people did not improve 
commensurately with the rise in the price of labor and the 
incomes of the people. 

In addition we must note the changes in taxes, which in- 
creased the financial burdens of the people, and indirectly 
made improvement in style of living difficult. The increase 
in the burden of each taxpayer (such as government, pre- 
fectural, municipal, town and village taxes) was 50 per cent 
in 1898, and 100 per cent in 1900, and this increase certainly 
reduced the scale of living to a considerable extent. The 
particulars are given in the table below: 

Comparison of Wages, Cost of Living and Taxes, i 893-1903 



Year 



Prices of labor 



Prices of daily 
necessaries 



Taxation 



1893 
1894 

1895 
1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 



lOO.O 

109.8 
124.2 

132.5 

145 o 

152.8 

155-2 
168.8 

170.5 
171 .0 
176.6 



100. 
109.2 
118. 6 

129. 1 
140.2 
145-8 
147-8 
167.2 
169.7 
170.6 
170.2 



100. o 
lOI .2 
105.2 
III .9 
133-8 
148.6 
187.2 

199.5 
211 .7 
226.2 
218.6 



^ Post, p. 316. 



300 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

In short, after the Sino- Japanese War, while the price of 
labor rose, and the general income of the Japanese people 
increased to a considerable extent, the burden of taxes in- 
creased also, prices of commodities rose, and thus the general 
cost of living advanced. In addition, the people developed 
a tendency toward more luxurious living; therefore the style 
of living in Japan did not improve at all during these years. 
And it may also be stated that these obstacles to improve- 
ment in the condition of living during these years all arose 
from the Sino- Japanese War. See Table X at the end of this 
chapter. 1 

Population 

The economic activity that followed the Sino-Japanese 
War brought about much prosperity in cities throughout the 
country, and as many kinds of industrial enterprises were 
started in these cities, there was naturally, in consequence, a 
general demand for labor in such places, especially in what 
are known as the industrial centers of the country. In such 
localities the price of labor and the income of the people in 
general were rather higher than in the agricultural districts. 
Large numbers of people, therefore, moved from the agri- 
cultural districts to these industrial centers. They included 
many ambitious young persons who, stimulated by the gen- 
eral awakening after the war, left these districts to seek their 
fortunes in cities. Thus the tendency was towards a con- 
centration of population in cities during these years, as indi- 
cated in the statistics given in Tables XI (i) and XI (2) at 
the end of this chapter.^ 

As the figures in these tables indicate, the rate of increase 
in the total population of the towns and villages was rather 
small — smaller, except in 1898, than that in the whole popu- 
lation of the country, and far smaller than the rate of increase 
in the population of cities. Among towns and villages, the 
population in those towns whose population is above 10,000 
showed a considerable increase. 

Let us now consider the number of towns and villages 
iPo5/, p. 317. ^ Post, pp. 318, 319- 



SOCIAL EFFECTS 



301 



whose population is less than 20,000 each (Class No. i); then 
those cities whose population is above 20,000 but below 
100,000 (Class No. 2) and finally those cities whose popula- 
tion is more than 100,000 each (Class No. 3) with the popu- 
lation of these cities, towns and villages, and then compare 
them with each other. The rate of increase in the population 
of the towns and villages of Class No. i is smaller than in the 
case of Classes Nos. 2 and 3, and far smaller than the rate of 
increase in the whole population of the country. The rate of 
increase in the population of cities in Class No. 2 was a little 
larger, and it was largest of all in the case of cities in Class 
No. 3, as the statistics below indicate: 

Towns and Villages Whose Population is Less Than 20,000 (Class No. i) 



Year 


Number of 

towns and 

villages 


Total 
population 


Percentage of 

number of 

towns and 

villages 


Percentage of 
population 


1888 


71,295 
15,810 

13,947 
13,224 
12,351 


35,874,298 
37,275.893 
39,384,980 
40,974,921 
42,430,105 


100. 
106.0 
109.0 
III .0 
118. 


100 


1893 

1898 

IQ06 


104.4 
no. 6 
118 


1008 


126 







Cities Whose Population is 20,000 and More but Less Than 100,000 

(Class No. 2) 



Year 



1888 

1893 
1898 
1903 
1908 



Number of 
cities 



50 
61 
72 
80 
95 



Population 



1,808,726 
2,270,110 
2,520,151 
3,098,251 
3.775.540 



Percentage of 
population 



100 
120 

139 
171 
208 



Cities Whose Population is 100,000 and More (Class No. 3) 



Year 



Number of 
cities 



Population 



Percentage of 
population 



1888 

1893 
1898 
1903 
1908 



2,422,455 
2,514.973 
3,497,910 
4,469,564 
5.536,835 



100 
104 
144 

185 
229 



302 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

The percentage of the whole population of the country 
means the rate of increase in the whole population of Japan. 
Observing the above figures in this light, it may be stated 
that the rate of increase in the population of towns and vil- 
lages, especially in those of small population, was less than 
the rate of increase in the whole population of the country. 
This indicates that the people of these smaller towns and 
villages were moving to the cities. 

The migration of people to cities is a phenomenon which is 
unavoidable with the advance of society. And the Sino- 
Japanese War, which brought about a general awakening of 
the Japanese people, may be considered one of the principal 
factors which caused the concentration of people in cities in 
Japan. 



SOCIAL EFFECTS 



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CHAPTER IX 
CONCLUSION 

The Sino-Japanese War was begun on July 25, 1894, ^^^ 
on April 17 of the next year a treaty of peace was concluded. 
We have discussed in the foregoing chapters the effects of the 
war, especially as to expenditure and econorhic phases in 
general. It is not necessary to add more. Yet, on reflection, 
we note two or three points which may be especially dwelt 
upon in generalizing upon the phenomena which have here 
been presented — in particular the age-long weakness of 
China as exposed by this war and the awakening of Japan 
which followed the conflict. 

Prior to the Sino-Japanese War, the various nations of the 
world had regarded China as a powerful nation and one not 
to be held in contempt. There was a general belief in her 
fighting strength, and because she had the Manchurian cav- 
alry on land and the Peiyang fleet at sea at the beginning of 
the war, they thought Japan would certainly be defeated. 
But after the commencement of hostilities, China suffered one 
defeat after another, and the dignity of that great Empire of 
forty centuries was completely lost. The "sleeping lion" 
at last became the "lioti that does not awaken." What a 
tragic state of affairs! Thereafter, the "lion that does not 
awaken," with her mild climate, rich natural resources, and 
dense population, became the center of attraction for the 
world. There followed, in quick succession, the acquisition 
of important concessions — Kiaochow Bay by Germany 
(March 6, 1898), Port Arthur and Dairen by Russia (March 
27, 1898), Weihaiwei and Kow-loon extension by England 
(June I and 6, 1898, respectively), and Kwangchow by France 
(November 16, 1899). The acquisition of a concession by 
one nation became the excuse for another nation to demand 
one also, and the latter an excuse for more demands on the 
part of the first. The European Powers were not satisfied 

320 



CONCLUSION. 321 

with the mere establishment of a concession, but concluded 
treaties for the nonalienation of territory, thereby establish- 
ing so-called "spheres of influence." At last came the dec- 
laration by America, in 1899, of the principle of the "open 
door" and "equality of opportunity" in China. The prin- 
ciple of the balance of power in Europe brought about a new 
situation in the Orient. This was a by-product of the Sino- 
Japanese War. Japan had to face this new situation, besides 
undertaking various post-bellum enterprises. The conse- 
quences of the Sino- Japanese War were indeed serious. 

Now Japan began to realize her national strength, and in 
view of the changed conditions in the Orient after the war, 
planned the development of the national forces by starting 
various ambitious undertakings quietly and with united 
efforts. As a result, (i) expenditures increased, and (2) 
consequently the taxes of the people increased, (3) the cur- 
rency was inflated, owing to the various government post- 
bellum undertakings and the initiation of private enterprises, 
and (4) the prices of commodities rose suddenly. These 
were the noteworthy features. We shall show below the 
changed percentages as calculated on the basis of the year 
1887 — the next year after the resumption of converting notes 
into specie. 

By the following table, we may ascertain the various 
changes which took place from 1887 to 1903. With 1894- 
1895 as the limit, we notice especially that there have been 
extraordinary changes in all the various items except popu- 
lation. Before the war, the fluctuation was generally very 
slight, but since the war there have been extraordinary 
fluctuations. This was the result of the people's changed 
conceptions of Japan's position in the Orient, which material- 
ized in the ambitious post-bellum enterprises heretofore 
described. We consider these changes as a sign of extraordi- 
nary development. 

Thus after the war the phenomena of social life completely 
changed from ante-war times. Society assumed an entirely 
new aspect, as if completely revolutionized. In other words, 



322 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
Fiscal Statistics in Annual Percentages, i 887-1905* 



Ye 


ar Expenditure 


Tax revenue 


Currency in 
circulation* 


Average price 
of commod- 
ities 


Increase in 
population'' 


1887 


100. 


100. 


100.8 


102. 1 


100. 


1888 


102.6 


97.7 


105.2 


107.9 


101.4 


1889 


100.3 


107.6 


III.O 


III. 7 


102.5 


1890 


103.4 


99.2 


103.4 


114. 4 


103-5 


1891 


105.2 


97.2 


106.2 


no. 4 


104-3 


1892 


96.6 


101.4 


109.2 


114. 6 


105.2 


1893 


106.5 


105.7 


120. 1 


118. 1 


105.9 


1894' 


98.3 


107.6 


124.8 


127.2 


107.0 


1895"^ 


107.4 


112. 7 


142.0 


134-4 


108.3 


1896 


212.5 


II5-9 


151-3 


145 -I 


109.3 


1897 


281.5 


143.7 


166.4 


163. 1 


no. 6 


1898 


276.6 


1551 


143-8 


171. 1 


112. 1 


1899 


319.9 


201.6 


169.6 


170.9 


112. 8 


1900 


368.5 


213-1 


160.2 


182.8 


114. 4 


1901 


335-9 


227.1 


154-5 


174.5 


116. 3 


1902 


364.0 


246.7 


164.5 


170.6 


117. 9 


1903 


3141 


243-1 


166.8 


182.8 


119. 7 


1904* 


758.2 


530.7 


256.1 


233 


125.0 


1905' 


736.8 


581.8 


306.3 


232.1 


131. 7 



• The percentage of the expenditure means the total amount of expenditure (net amount) ; the 
percentage of revenue from taxes means the revenue from taxes and the revenue from the profits 
of the monopoly bureaus. The percentage of currency was based upon the standard at the end of 
1886, the percentage of prices of commodities on the average wholesale prices of forty of the prin- 
cipal kinds of merchandise sold in Tokyo in January, 1877, and the percentage of population means 
the population as registered at the appointed places of registry. 

b At close of year. " Beginning of Sino- Japanese War. 

^ Ending of Sino- Japanese War. « Beginning of Russo-Japanese War. 

' Ending of Russo-Japanese War. 

the Sino- Japanese War marked a new period, in which the 
aggressive spirit of the nation so notably shown in the period 
of the Restoration of Meiji had taken on new life after twenty- 
five years of quiet, and was now to replenish the national 
forces at home and develop her credit abroad. Furthermore, 
the remarkable development of the nation within so short 
a period was largely due to the spirit of enterprise shown 
soon after the close of the war. So the effects of the war 
as presented in the foregoing chapters really embody the 
history of Japan's economic development after the Sino- 
Japanese War. 

What we regret is the fact that the policy of the Japanese 
Government was not more carefully considered, since it was 
on account of the extreme haste to meet the new situation 
that the currency was inflated, the burdens of taxation were 



CONCLUSION 323 

extraordinarily increased, and the prices of goods went up; 
consequently, while the income of the people generally in- 
creased in due proportion, the government undertakings did 
not fully meet the need of improving the living conditions of 
the people. Fortunately, however, the people generally 
showed a sincere devotion to the country and were not seri- 
ously indignant because their living conditions did not im- 
prove pari passu with the financial and economic develop- 
ment of the nation. No serious social or political problems 
arose at this time. This fact should be set forth in bold- 
faced type in discussing the economic effects of the war. 

In short, the economic development after the Sino- Japa- 
nese War was in general so extraordinary that the phenomena 
which attracted attention before the war were no longer 
noticeable. But under all this apparent prosperity there was 
running a dangerous undercurrent, viz., the aforementioned 
rise in the prices of commodities, the inflation of the currency, 
and the extraordinary increase in the government's revenues 
and expenditures as well as in taxes. Thus we must not for- 
get that the effects of the war upon the economic world had a 
dark as well as a bright side. The bright side shone as the 
people endeavored to utilize wisely the effects of the war in 
meeting the new situation. The dark side was inevitable 
from the passing condition of our economic world, the evils 
resulting from the period of inconvertible notes, which had 
just been tided over, having reasserted themselves as a by- 
product of the post-bellum upheaval of economiiis. That the 
war was the cause of all this cannot be denied. But the 
nature of our economic world and the economic policies 
pursued in Japan were, needless to reiterate, still more re- 
sponsible for such a state of things. The Sino- Japanese 
War was, indeed, a test of our national strength and resulted 
in the self-realization and awakening of the nation, thereby 
bringing in its train a notable economic development. But 
there have been many examples in history of the downfall of 
mighty empires even while enjoying great prosperity, such 
as Alexander the Great, the Roman Empire, etc. Indeed, 



324 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 

war is not a true cause of national greatness, nor victory in 
war a sure means of bringing about such greatness. On the 
contrary, there must be an irresistible rise in nationalism to 
wage a victorious war, which will prove only the first step in 
the advancement toward an ideal goal. The Sino- Japanese 
War was no more, no less than that, and it is far from our 
desire to extol the material and moral effects of war. 



INDEX 



Administration: increase of expendi- 
tures for, 43, 102-3; general expendi- 
tures for (1893-1903), 144. 

Agriculture: prohibition of resale of 
Japanese products of, in Kanlcyodo, 
16; progress in, 89; Bank of Agri- 
culture and Industry, 90, 94, 107, 
175. 178 et seq., 193; expenditures to 
encourage, 139 ; experimental stations, 
273; capital invested in (i 896-1903), 
277. 

Amoy, 188. 

Anshantan, captured by Japanese, 31. 

Antung, Chinese evacuation of, 26. 

Aomori, ic6. 

Army: organization of, corps, 25-6; 
size of, 35; rehabilitation of, 89-90, 
94 et seq.; four year expansion scheme 
(i 895-1 899), 97 et seq.; expenditures 
for (1893-1903), 99-100; extraordi- 
nary expansion expenditures for 
(1896-1903), loi; use of Chinese in- 
demnity for expenditures for, 120. 

Asan, 19, 21-2. 

Bakeuchu, 13. 

Bank notes: 51; issued by Bank of 
Japan (i 894-1 896), 55, 166, 286; 
issued to meet extra expenditures, 56 ; 
increased circulation of, 154; redemp- 
tion of national, 162, 167, 191 -2; 
guarantee reserv^e issues of, 166, 168 
et seq., 200; issued by Bank of For- 
mosa, 186-7; issuance of national, 
189-90; issued (i 893-1 899), with in- 
crease or decrease, 197-8, 

Bank of Japan: 72, 82, 152, 155, 161, 
193; loans to government by, 51, 59 
et seq., 73, 75, 83, 158, 199; war ex- 
penses met by note issue of (1894- 
1896), 55, 166, 286; redemption of 
loans of, 76; enlarged business of, 90, 
156, 175; deposit of Chinese indem- 
nity funds in, 122; purchase of bonds 
by, 125; increased capitalization of, 
176. 

Banks: Hypothec and Industrial, 83, 
90, 94, 175, 178 et seq., 274; national 
banks, changed to ordinary, 83, 189- 
9O1 193; of Agriculture and Industry, 
90, 94, 107, 120, 274; subsidies to, 90, 
103, 107, 120, 179, 182; bonds issued 
by, 156; regulations concerning issue 



of bank notes by, 161 ; reorganization 
of, 175 et seq., 193-^; development of 
realty, 178 et seq.; deposits and loans 
of (1893-1903), 195; capital, de- 
posits, profits and dividends of 
(1893-1903), 207. See also under in- 
dividual headings. 

Banks of Agriculture and Industry: 
subsidies to, 90, 107, 120, 179; estab- 
lishment of, 94, 175; business of, 178 
et seq. (1897-1903), 204-5, 274; re- 
organization of, 193-4; loans by 
(1894-1903), 202, 274. 

Bellenue, French missionary, 9. 

Ben, Li Sai, Korean Progressive leader, 
12. 

Bokueiko, Korean Progressive leader, 

Bokukeiju, revolt of, 10. 

Boxer Rebellion, 132. 

Budget: of revenue and expenditures, 
47-8, (1893-1913), 87-8; for army 
and navy, 57, 87-8; for expenditures 
after 1896, 90; for 1899, 131. 

Business tax, 90, 129. 

Chaimucheng, battle at, 27. 

Chang, Li Hung, 12-3, 15; peace repre- 
sentative of China, 33. 

Chemulpo: 15, 21, 23; opened to trade, 
12-3; Treaty of, 13-4. 

ChihH, Province of, 31-2, 57. 

Cholla, Province of, revolutionary 
movements in, 17. 

Chung-Chong, Province of, revolution- 
ary movements in, 17. 

Chungking, opened to commerce, 33, 
.232. 

Cities, towns and villages: increase in 
annual expenditures for (i 893-1903), 
138; ratio of increase of expenditures 
for 1904 over 1895, 139; expansion of 
expenditures for, 142; population of, 
300-1,(1893-1903), 318-9; increase in 
population of (1887-1905), in annual 
percentages, 322. 

Coal, rise in price of, 285. 

Colonial Bank of Hokkaido: business 
of, 175-6, 178 et seq.; reorganization 
of, 193-4. . 

Communications Office, expenditures 
for (1894-1905), 36, 43, 46. 

Conservative party, in Korea, 12 et seq. 



325 



326 



INDEX 



Currency: expended for war expenses 
( 1 894-1 896), 57; scarcity of, 81, 83; 
inflation of, 84-5, 154, 196; reform of, 
system, 118, 161, 165, 232, 235; in- 
creased volume of, 288; in circulation, 
in annual percentages (i 887-1905), 
322. 

Customs, revenue from (i 889-1908), 
291. 

Disbursements, monthly (i 894-1 896), 
59; for government and private rail- 
ways (i 893-1903), 266, 268. 

Education: improvements in system of, 
84, 89, 94, 112; use of indemnity 
funds to promote, 132; expenditures 
for, 138-9, (1893-1903), 151. 

Enterprises: comparison of expendi- 
tures for post-bellum, with total an- 
nual expenditures (i 894-1 903), gi et 
seq.; revenue for post-bellum, (1896- 
1903). 92; revenue for (1895-1905), 
150; expenditures for (1895-1905), 
141, 150; development of, 226. 

Exchange, rates of, in London, Paris 
and Berlin (1886-1895), 163. 

Factories, number of, and capital in- 
vested in (1893-1903), 212-3. 

Factory hands: number of (i 893-1 903), 
211 et seq., (1896-1903), 218; per- 
centage of, to total population (1896- 
1903), 220; percentage of adult and 
minor, to total number of (1896- 
1903), 221 ; comparison of number of 
adult male to female (i 896-1903), 
222. 

Fenghuangcheng, 25; Chinese evacua- 
tion of, 27. 

Foreign Office: expenditures for (1894- 
1903), 36, (1894-1895), 43-4. 

Formosa: 6; Japanese expedition to, 11; 
ceded to Japan, 33, 224, 229; fighting 
in, 35; Bank of, 94, 175, 185 et seq., 
194, 206; expenses incurred in, 103, 
109 et seq.; railways of, iii, 261; 
loans for development of, 11 5-6; ex- 
penditures for (i 895-1903), 146 et 
seq.; production of sugar in, 229; 
trade of, with Japan (i 897-1903), 
230; passengers, freight, income, etc. 
of railways of (1897-1903), 269. 

Fortresses, expenditures for construc- 
tion of, 98-9. 

Foundary, iron: establishment of, 89, 
94, 96, 273; expenditures for con- 
struction of, 103-4; use of indemnity 
funds for construction of, 120. 



France: occupation of Kwangchow by, 

7, 34, 320; interference of , in IJaotung 
Peninsula, 33-4; tariff agreement 
with, 233, 290. 

Fukushima, 106. 

Fusan: 9-10, 22-3; opened to trade, 13. 

Germany: acquisition of Kiaochow Bay 
by» 7» 34» 320; invitation to, to occupy 
Korean territory, 12; interference of, 
in Liaotung Peninsula, 33-4; mone- 
tary system of, 162; tariff agreement 
with, 290. 

Goko, revolt of, 10. 

Gold standard: adoption of, 83, 123, 
159, 163 et seq., 225, 232-3, 286-7. 

Great Britain : occupation of Weihaiwei 
by, 7, 34, 320; invitation to, to oc- 
cupy Korean territory, 12; inter- 
ference of, in Liaotung Peninsula, 
33-4; tariff agreement with, 233. 

Griffis, Dr. William Elliot, cited, 8. 

Hachioji, 105. 

Haicheng, 25, 27, 29, 31. 

Hanabusa, Yoshikata, Charge d'Af- 
f aires at Seoul, 11, 13. 

Hangchow, opened to commerce, 33, 
232. 

Heung-Sun, Prince, 9-10; Korean Con- 
servative leader, 12-3. 

Hiroshima: 43; Imperial army head- 
quarters at, 22, 50; telephone exten- 
sion in, 264. 

Hokkaido: colonial development of, 90, 
112; plan for railway construction in, 
106, 258; bond issue for railway con- 
struction in, 114; Colonial Bank of, 
175-6, 178 et seq., 194. 

Home Office: expenditures for (1894- 
1903), 36, (i 894-1 898), 43-4. 

Hongkong, branch bank at, 188. 

Hooshan, Chinese defeat at, 26-7. 

Hori, Lieutenant, military instructor in 
Korea, 12. 

Huanglinchi, 30. 

Huayuankow, 27-8. 

Hypothec Bank: establishment of, 83, 
90, 94, 175; business of, 178 et seq., 
(1897-1903), 203; reorganization of, 
193-4; advances made by (1898- 
1903), 274, (1897-1903), 276. 

Income tax: 131; returns from (1893- 

1903), 295 et seq. 
Indemnity: Chinese, to Japan, 12, 20, 

33, 82, 119, 224, 286; transfer of, 57- 

8, 77-8, 116; use of, for army expendi- 
tures, 90, 120; revenue from, 96-7, 
119-20. 



INDEX 



327 



Industry: capital investment in (1896- 
1903), 209-10, 219, 240, 243; progress 
of, 211. 

Industrial Bank: 194; business of , 188- 
9, 206. 

Inouye, Kaoru, vice-minister of Japa- 
nese mission to Fusan, 10. 

Inouye, Ryoka, Lieutenant Command- 
er, 10. 

Interest rates: in Osaka and Tokyo, 65; 
on loans by laws Numbers 8 and 25, 
77; paid on bonds (1893-1903), 117. 

Isotake-no-Mikoto, 8. 

Itom, Prince, 15. 

"Japanism", 157-8. 

Jingo, Empress, expedition of, to 

Korea, 8. 
Judicial Office, expenditures for (1894- 

1903), 36, (1895), 43, 45- 

Kai, Yuan Shi, Chinese Minister, 13-4, 
16-7. 

Kaidaichi, 106. 

Kaiping, 27, 29. 

Kanghwa Island Affair, 10. 

Kankyodo, 16. 

Kiaochow, German occupation of, 7, 
34. 320. 

Kin, Kin Gyoku, Korean Progressive 
leader, 14; assassination of, 16. 

Kinchow-ching, capture of, 28-9. 

Kiuliencheng, 25; Chinese evacuation 
of, 26-7. 

Kiun, Kim Ok, Korean Progressive 
leader, 12. 

Kizuki (Izumo Province), 8. 

Kobe: extension of telephone service in, 
106; encouragement to navigation 
from, 108. 

Komatsu, Prince, General, Chief of 
Japanese General Staff, 32. 

Konwasai, battle at, 27. 

Korai, overthrow of kingdom of, 4. 

Korea: population and area of, 3; 
Chinese and Japanese attitude to- 
ward, 4 et seq.; 11-2; Japanese expe- 
dition to, 8; trade with, 9, 12, 154, 
237; independence of, 10, 14, 21; dis- 
turbance in, 13 et seq., 35. 

Kure, 106. 

Kuroda, Kiyotaka, chief of Japanese 
Mission to Fusan, 10. 

Kwangchow Bay, leased to French, 7, 
34, 320. 

Kyoto: 124; extension of telephone 
system in, 106, 264. 

Labor: prices of, in Tokyo and Osaka 
(1893-1903), 282, 292, 294; prices of 



in Tokyo (1873-1910), 293, 312-3; 
fluctuation of price of (1893-1903), 
294; prices of, and commodities com- 
pared with cost of living, 298; price 
of, in Osaka (1893-1903), 3H-5- 

Land tax, 130-1. 

Legations and Consulates: expenditures 
for ( 1 894-1 895), 44; increase of ex- 
penditures for, 89. 

Liaotung Peninsula: ceded to Japan, 
33; retrocession of, 34, 78, 157-8; 168, 
286; compensation for return of, 118. 

Liaoyang, 25, 27. 

Loans: public, 50, 54, 57-8; of Bank of 
Japan, 51, et seq., 75, 83, 158, 199; 
details of "First", 61 et seq.; regula- 
tions for war, 64 et seq.; "Second", 
66 et seq.; "Third", 68 et seq.; details 
of first three, 69 et seq.; receipts from 
war, 72; extraordinary special, 72-3; 
"Fourth", 74; based on laws Num- 
bers 8 and 25, 75 et seq.; for railway 
and telephone improvement, 90, 114; 
for expenditures for Sino-Japanese 
War (1894-1910), 113; for industrial 
enterprises, 114 et seq.; for Formosan 
development, 115-6; sterling, 116; by 
Hypothec Bank and Banks of Agri- 
culture and Industry, 181, 202; out- 
standing, of Hypothec Bank (1897- 
1903), 183; of Colonial Bank of Hok- 
kaido, 185; of banks (i 893-1903), 195. 

Loochoo, 6; as a Japanese possession, 
lo-i. 

Manchuria, fighting in, 35. 

Merchandise, value of, sold (1898- 
1903), 242. 

Merchant Marine: subsidies to, 254, 
263, (1893-1903), 270 et seq., progress 
of, 256, 262 et seq. 

Min, Prince, assassination of, 14. 

Miyake, Dr. Yujiro, cited, 157. 

Monopolies: leaf tobacco, 90, 126; in- 
creased revenue from tobacco, 132, 
137; workings of, 134 et seq. 

Motienling, 30. 

Nagasaki: 13, 16; subsidy for harbor 
improvement at, 262; telephone ex- 
tension in, 264. 

Nagoya: 105; telephone extension in, 
264. 

Naval Office: expenditures for (1894- 
1903), 36; extraordinary expenditures 
for ( 1 894-1901), 40 et seq. 

Navigation, subsidies for, 103, 108-9. 

Navy: rehabilitation and expansion of, 
89-90, 94 et seq.; seven year expan- 
sion scheme (i 895-1903), 97 et seq.; 



328 



INDEX 



expenditures for (i 893-1903), 99- 
100; extraordinary expansion expend- 
itures for (i 896-1903), 102; use of 
Chinese indemnity for, expansion 
funds, 120. 

Negotiable paper, handled (1893-1895), 
225, (1893-1903), 239. 

Neuchang, 285; encouragement to nav- 
igation from, 108. 

Niuchwang, capture of, 30-1. 

Nodzu, Michitsura, Lieutenant-Gen- 
eral. Commander-in-chief of Fifth 
Army Division, 23. 

Notes, government: issued, 160-1; re- 
demption of, 189 et seq.; cleared 
(1893-1903), 241. 

Okuninushi-no-Mikoto, 8. 

"Open door" policy, 321. 

Opium War, 7. 

Osaka: 124; interest rates in, 65, 75; ex- 
tension of telephone service in, 106; 
subsidy for harbor construction at, 
262 ; prices of commodities and wages 
in (1893-1903), 282, 292, 294; whole- 
sale prices in (i 893-1903), 310; 
prices of labor in (i 893-1 903), 314-5. 

Oshima, Major- General, Japanese of- 
ficer, 17. 

Otori, Japanese Minister at Seoul, 22. 

Ou, Hung Tiyong, Korean Progressive 
leader, 12. 

Oyama, General, Japanese commander- 
in-chief of Second Army Corps, 25. 

Panic: financial, 83, 174; of 1899 and 
1901, 159, 283. 

Paper money in circulation (1893- 
1899), 171. 

Payment plan of war bonds, 65, 67-8. 

Peking, 9, 15; proposed attack upon, 32. 

Pescadores, occupation of, 31-2; ceded 
to Japan, 33, 229. 

Phung Island, battle at, 19, 21-2, 49. 

Ping-yang, campaign of, 21 et seq. 

Population : of towns and villages, 300- 
i» ( 1 893-1 903), 318-9; increase of 
( 1 887-1 905) in annual percentages, 
322. 

Port Arthur: 25, 27; leased to Russia, 7, 
34, 320; attack upon, 28-9. 

Prices: rise of, 81 et seq., 153, 158, 161, 
273; of tobacco, 136; of commodities 
(1873-1912), 279-80, 284 et seq.; of 
labor and commodities in Tokyo and 
Osaka (1893-19 10), 282, 292; com- 
parison of, of commodities with cur- 
rency in circulation (i 887-191 1), 289, 
311; of labor in Tokyo (i 893-1 903), 
293-4, 312-3; fluctuation of, of labor 



and commodities (i 893-1 903), 294; 
wholesale, in Tokyo (1893-1903), 303 
et seq.; in Osaka, 310; of labor, in 
Osaka (1893-1903), 314-5; of neces- 
saries in Tokyo (1893-1903), 316; of 
commodities in annual percentages 
(1887-1905), 322. 
Progressive party, of Korea, 12, 14. 

Railways: construction and improve- 
ment of, 89, 94, 96, 103, (1893-1903), 
I45» 255-6, 258 etseq.; expenditures 
for new construction of, 105-6; con- 
struction of, in Formosa,! 1 1, 261 ; vol- 
ume of goods transported by (1893- 
1903)* 227; capital invested in (1896- 
1 903) . 257 ; extension of private ( 1 893- 
1903). 261 ; passenger, freight, income 
etc. of government (i 893-1 903), 265, 
of private (i 893-1 903), 267, of For- 
mosan (i 897-1 903), 269; revenue, 
disbursements and profits of govern- 
ment ( 1 893-1 903), 266, of private 
(1893-1903), 268. 

Receipts: monthly government (1874- 
1876), 59; from war loans, 63, 72, 

I 13-4.. 

Redemption: of war loans, 64, 66, 68, 
75 et seq., 89, 113; Chinese indemnity 
used for, of war expenses, 121 ; of na- 
tional bank notes, 162, 167; of gov- 
ernment notes and bank notes, 189 
et seq. 

Regulations for issue of war loans, 64 
et seq. 

Revenue: budget of, for war purposes, 
47-8, (1894-1896), 56, (1893-1903), 
87-8; monthly, for war purposes, 52- 
3 ; from occupied territory, 55 ; for ex- 
penditures for war, 58; for expendi- 
tures after 1896, 90; for post-bellum 
enterprises (i 896-1 903), 92; increase 
of, 94; ten year plan for (i 896-1 905), 
95; from telegraph system, 13 1-2, 
137; from tobacco monopoly, 132, 
137; expansion of, of local communi- 
ties ( 1 893-1903), 142; excess of, 
over expenditures (1893-1903), 143; 
of government railways (1893- 1903), 
266; of private railways (i 893-1 903), 
268; from customs duties, 291. 

Rewards, for war fund contributors, 43. 

Rice: area under cultivation (1893- 
1903). 275; average price of (1893- 
1903), 281. 

Rintsushin, 23. 

Russia: Port Arthur leased to, 7, 320; 
interference of, in Liaotung Penin- 
sula, 33-4. 

Ryuzan, 23. 



INDEX 



329 



Sake, tax on, 90, 126, 129, 289. 
Sanitation, expenditures for (1893- 

1903), 151- 
Sasebo, 31. 

Scrip, war, issued, 55 et seg. 
Seoul: 10; Japanese legation at, 11; 

Treaty of, 15. 
Shanghai, steamship service from, 108. 
Shanhaikwan, capture of, 32. 
Shantung: 30; fighting in, 35. 
Shashih, opened to commerce, 33, 232. 
Shimonoseki: 10; Treaty of, 33, 35, 109, 

118; telephone extension in, 264. 
Shiojiri, 105. 
Shipbuilding: subsidies for, 84, 89, 109, 

254, 262; increase in, 210, (1893- 

1903), 256. 
Sino-French War, 7. 
Sinonoi, 105. 
Soejima, Count, 9; Japanese envoy to 

Formosa, 11. 
Songhwan, battle of, 19, 22, 49. 
Soochow, opened to commerce, 33, 232. 
Soshojo, 22. 
Soshimori, 8. 
Specie: prevention of diminution of, 

56-7; effect of war on reserve, 155; 

decrease of reserve, 171. 
"Spheres of Influence", 321. 
Steamship lines: 107-8; subsidies to, 

108-9, 263; statistics of, 270 et seq. 
Stock exchange, effect of currency re- 
form on, 165. 
Subsidies: for shipbuilding, 84, 89, 109, 

254, 262; to banks, 103, 107, 120, 

(1897-1903), 179, 182; to Waka- 

matsu Harbor Construction Co., 104; 

to steamship companies, 108-9, 263. 
Sugar, imported from Formosa, 229. 
Sujin, Emperor, expedition of, to Korea, 

8. 
Susano-no-Mikoto, 8. 

Tal-Wonkun, 9. 

Takezoe, Shinichiro, Japanese Minister 
to Korea, 14. 

Takushan, 27. 

Taiko, HIdeyoshi, expedition of, to 
Korea, 8. 

Tamushan, naval battle at, 24. 

Taohotsuon, battle at, 27. 

Tariff rates, 233-4, 290. 

Tatungkow, capture of, 27. 

Taxes: increase of, %i et seq., 90, 126 et 
seq., 280, 289 et seq.; readjustment of, 
95; income from, 127; to defray ex- 
penditures of Boxer Rebellion, 132- 
3; business, 228; comparison of, with 
wages and cost of living (1893- 
1903), 299; levied (i 893-1903), 317; 



revenue from, in annual percentages 
(1887-1905), 322. 

Teijosho, 13. 

Telegraph, revenue from, 131-2, 137. 

Telephone system, extension of, 89, 94, 
103, 106-7, 255, 264. 

Tienchwangtai, capture of, 30-1. 

Tientsin: 14; Treaty of, 5, 15, 17, 
steamship service from, 108. 

Tobacco: establishment of, monopoly, 
90, 126; workings of, monopoly, 134 
et seq.; revenue and profit from, 132, 
(1898-1903), 136-7; advances in man- 
ufacture of, 210; rise in price of, 281 ; 
tax on, 290. 

Togakuto Affair, 6. 

Tokyo: 11, 124; interest rates in, 65, 75; 
extension of telephone service in, 106; 
prices of commodities and wages in 
(1893-1903), 282-3, 292; price of la- 
bor in (i873-i9io),293, (1893-1903), 
294, 312-3; wholesale prices in (1893- 
1903), 303 et seq.; prices of necessaries 
in (1893-1910), 316. 

Tong Hales, revolutionary movement 
of, 17-8. 

Torpedo boats: number used during 
"^'^r, 35; use of indemnity funds for 
constructing, 97. 

Toyama, 105. 

Trade: with Korea, 9, 12, 154, 237; ex- 
pansion of foreign, 89, 158, 230 et seq.; 
decrease of foreign, 168; foreign 
(1893-1895), 225, (1893-1903), 239, 
( 1 868-1 903), 244 et seq.; between 
Japan and Formosa (i 897-1903), 230. 

Transportation: progress in, 254 et seg.; 
capital invested in (1896-1903), 255. 

Treasury Office, expenditures for 
(1894-1903), 36, (1894-1897), 43. 45- 

Treaties: of Tientsin, 5, 15, 17; of 1876 
(Korea), 10 et seq.; with western 
Powers, 12; of Chemulpo (1882), 13- 
4; of Seoul, 15; of Shimonoseki 
(1895). 33. 35; commercial, 234. 

Tsuboi, Rear Admiral, 21. 

Tsung, Tai, Emperor, 8. 

Tsuruga, 105. 

Ujina, 23, 32. 

United States: Chinese treaty with, 12; 
monetary system in, 162; tariff agree- 
ment with, 233. 

Vladivostok, steamship line from, 108. 

Wages: rise In, 85; of factory workers 
compared with, of independent work- 
ers ( 1 899-1 903), 223; of factory 



330 



INDEX 



workers compared with prices of 
commodities (i 899-1 903), 223; com- 
parison of, with cost of living and 
taxes ( 1 893-1903), 299. 

War funds: extra, 47-8; subscriptions 
to, 54; shortages in (i 894-1 896), 60. 

War Office: expenditures for (1894- 
1903), 36-7; extraordinary expendi- 
tures for (1894-1901), 38^. 

Warships, number engaged in war, 35; 
use of indemnity funds lor construc- 
tion of, 97. 

Weihaiwei: 19, 25; leased to Great 
Britain, 7, 34, 320; attack upon, 30 
et seq.; expenditures for guarding, 97, 
no, 118; use of Chinese indemnity 
for guarding expenditures of, 120. 

Wheat, area under cultivation (1893- 
1903), 275. 



Wiju, attack on, 26. 
Wonsan, 9, 18, 22-3; opened to trade, 
12-3. 

Yamagata, Aritomo, Minister of War, 
10, 23, 25. 

Yingkou, 30. 

Yokaichin, opened to trade, 13. 

Yokohama: extension of telephone 
service in, 106; steamship line from, 
108. 

Yokohama Specie Bank: 90, 173, 193; 
business of, 175; increased capitaliza- 
tion of, 176; development of, 177; 
loans made by (1893-1903), 201. 

Yungching, 30, 

Yungancheng, battle at, 27. 

Zempojun, leader of Tong Haks, 17. 



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