UNIVERSITY OF CALIFORNIA 
 AT LOS ANGELES 
 
 GIFT OF 
 
 CARNEGIE ENDOWMENT 

 
 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.CL. 
 
 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 
 
 BY 
 
 GIICHI 0N0 
 
 Councilor of Finance Department 
 
 
 NEW YORK 
 
 OXFORD UNIVERSITY PRESS 
 
 AMERICAN BRANCH: 35 W«si :i:'sn sireet 
 LONDON, TORONTO, MI-LB. n KM- AM) BOMBAY 
 
 1922
 
 COPYRIGHT 1922 
 
 BY THE 
 
 CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 
 
 PRINTED IN THE UNITED STATES OF AMERICA 
 AT THE RVMFORl) 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. 
 
 <M 
 
 ^ The process of warfare itself is now so unlike that of former 
 
 9j= 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 
 
 lo chemical engines of destruction have decided the result and 
 
 S3 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- 
 
 z Tments will far surpass in destructiveness those which made 
 
 . the late war so deadly, and to a soldier of the future the order 
 
 g pto march into a cloud of poisonous gas and a whirlwind of 
 
 S missiles will resemble an order to plunge into tin- rapids of 
 
 ^ Niagara. This is one central and obvious fact which the 
 
 •^ war has taught us and it has many corollaries, sonic of which 
 
 2 have to do with the increased costs of war an< 1 t he 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 
 
 v 
 
 L5J/»J(SH
 
 N1 NOTE Bl mi- DIRE( TOR 
 
 ;ul ,i , ,| and interlaced the claims of other states that 
 
 Borne w riters, then and afterwards, pronounced the war inevi- 
 table. It we a— imic 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, 
 gi> ing 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- 
 al >Ie. 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 
 nomic facts and principles with wmich 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 vii 
 
 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 1914. 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 1 >y t he 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 tin- 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
 
 viii NOTF. BY THE DIRECTOR 
 
 them makes i<* future peace and so does even the conserva- 
 tive element in the second, while all else in the series means 
 certainty of en il strife and danger of international war. 
 
 The fad thai 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- 
 ii.iii.Mi.il system the meaning of which is profoundly signif- 
 icant, though he who runs can not so easily read it. There 
 .ne 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. 
 
 I >v a c< >mpulsi< >n 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 Avith 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 w r ar 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 2?, IQ20.
 
 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, tor the first time, 
 realized the latent power which she had been conserving since 
 the restoration, and henceforth Japanism as opposed to the 
 Europeanism of the ante-bellum period has been encouraged, 
 and the nation has constantly planned for the <lr\ el< ipment of 
 this national power to the fullest extent. Now this new 
 national consciousness may be considered as the internal effeel 
 of the war. At once Japan made remarkable progress in all 
 directions. The enlightened measures adopted, together with
 
 x PREI \i I 
 
 the resulting economic development, furnish materials for a 
 \ aluable discussion of the effects of the war and for an authen- 
 tic history of the nation's developmenl in modern limes. As 
 for the external effed 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 Furope 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 
 eai h 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 
 f< >r 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- 
 
 ged in work relating to money circulation and finance. 
 The t luu res 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 Ki ii< in, Treatise on the Fluctuation in Prices of Commodi- 
 ties in Japan sine- the Meiji Restoration, and the Cause thereof 
 I Meijilshin igo ni okeru Wagakuni Bukka no Hendo oyobi Sono 
 den in ron) 1912. 
 
 Ci rrj N( v 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. 
 Reporl of Financial Readjustment after the Sino-Japanese War 
 
 {Xijit shichi hachinen eki Sengo Zaiseishimatsu Hokoku), 1900. 
 Comparative Table of Figures for Forty-one Years relating to 
 
 Foreign Trade of Japan (Dainihon Gaikoku Boeki Shijii 
 
 ichinen Taishohyo), 1909. 
 Animal 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. 
 
 [NABA, Kin/ax, Complete History of the Ching Dynasty (Shin did 
 Zenshi), 191 4. 
 
 KOBAYASHI, Ushisaburo, Treatise of x^djustment of Finance 
 (Zaisci Sciri Ron), 1912. 
 
 Oriix i \l Kconomics Publishing Co., Finance and Economy after 
 the Sino-Japanese War (Niju shichi hachinen Sengo no Zaisei 
 oyobi Kcizni), 1 903. 
 
 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, Xos. 1-34 (Nikon teikoku Tokei Nenkan), 
 1882 1911. 
 
 Taki/.wy \, NAOSHICHI, Treatise on History of Japanese Money Cir- 
 culation [Nippon Kinyu Skiron), 1912. 
 
 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 1 , 1897, the gold standard system 
 was legally adopted. The figures necessary to ascertain the value of Japanese 
 currencies are given below: 
 
 (1) 1 gold yen (according to Coinage Law of 187 1) contains 1.5 gramme pure gold. 
 
 (2) 1 gold yen (according to Coinage Law of 1897) contains 0.75 gramme pure gold. 
 
 (3) 1 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: 
 
 1874. 
 
 1875- 
 1876. 
 1877. 
 1878. 
 
 1879. 
 1880. 
 1881. 
 
 s. d. 
 
 
 4.02.0 
 
 1882 
 
 4.00.8 
 
 1883 
 
 3. II. 2 
 
 1884 
 
 3"-7 
 
 1885 
 
 3 °9-4 
 
 1886 
 
 3.08.0 
 
 1887 
 
 3.08.9 
 
 1888 
 
 3.08.4 
 
 1889 
 
 s. 
 
 d. 
 
 
 3.08.8 
 
 1890 
 
 3 
 
 07.9 
 
 1891 
 
 3 
 
 07.9 
 
 1892 
 
 3 
 
 06.0 
 
 1893 
 
 3 
 
 03.2 
 
 1894 
 
 3 
 
 02.0 
 
 1895 
 
 3 
 
 01 .0 
 
 1896 
 
 3 
 
 01 .1 
 
 1897 
 
 d 
 04 
 
 s. 
 
 3 
 
 2.02. 
 2. 10. 
 
 .06. 
 
 .01 
 
 .01 
 
 .02.0 
 
 .00.4 
 
 (5) The value of 1 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: 
 
 s. d. s. d. s. d. 
 
 1877- 
 1878. 
 
 1879- 
 
 3. 10. I 
 
 1880 
 
 3 05.6 
 
 1881 
 
 300.3 
 
 1882 
 
 s. 
 2.06 
 
 2 02 
 
 2 . 04 
 
 I883. 
 I884. 
 
 I885. 
 
 S. 
 
 2. IO.7 
 
 3 04-3 
 3 03.7 
 
 (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 1 yen. 
 
 Chronological Table 
 
 Meiji 1st 
 2d 
 
 " 3d 
 
 4th 
 
 5th 
 
 6th 
 
 7th 
 
 8th 
 
 9th 
 
 " 10th 
 
 " nth 
 
 " 12th 
 
 " 13th 
 
 " 14th 
 
 1868 A. D. M 
 
 -iji 15th 
 
 1869 " 
 
 ' 16th 
 
 1870 " 
 
 ' 17th 
 
 1871 " 
 
 ' 1 8th 
 
 1872 " 
 
 19th 
 
 1873 " 
 
 ' 20th 
 
 1874 " 
 
 2ISt 
 
 1875 " 
 
 ' 22d 
 
 1876 " 
 
 23d 
 
 1877 " 
 
 ' 24th 
 
 1878 " 
 
 ' 25th 
 
 1879 " 
 
 ' 26th 
 
 1880 " 
 
 ' 27th 
 
 1881 " 
 
 ' 28th 
 
 1882 A 
 
 [884 
 
 1885 
 [886 
 
 1887 
 1888 
 1889 
 1890 
 1891 
 1892 
 
 1893 
 1894 
 
 1895 
 
 1). 
 
 xm
 
 \ \ 
 
 EXPLANATORY TABLES 
 
 CHRONOD »GICAL TABLE — (Continued) 
 
 19th 
 
 [896 A. D. 
 
 30th 
 
 " 
 
 " 1 
 
 " 
 
 j2d 
 
 (899 " 
 
 " 33d 
 
 1900 " 
 
 " 34th 
 
 [901 " 
 
 " 35th 
 
 1902 " 
 
 " 36th 
 
 1 1 11 . ; 
 
 j7th 
 
 [904 
 
 (8th 
 
 [905 
 
 39th 
 
 11,1,1, 
 
 40th 
 
 1907 " 
 
 Mciji 41st 
 
 1908 A. D 
 
 42d 
 
 1909 
 
 " 43d 
 
 1910 " 
 
 " 44th 
 
 191 1 " 
 
 " 45th \ 
 Taisho 1st J 
 
 1912 " 
 
 2d 
 
 1913 " 
 
 " 3d 
 
 1914 " 
 
 4th 
 
 1915 " 
 
 " 5th 
 
 1916 " 
 
 " 6th 
 
 1917 " 
 
 Weights, Measures and Money 
 
 With English, American, French and German Equivalents 
 
 Great U. S. of 
 
 Japan Britain America France Germany 
 
 Rl = : f\! !"a„ I 2.44030 2.44029 3-92727 392727 
 
 = 2.100 A, » Miles Miles Kiloms. Kiloms. 
 = 12,900 Shaku. ... 1, 
 
 ... Marine / l ■ I 5 I 52 I-I5I5I I -85318 I.85318 
 
 Kl (Marine) j MUes Miles Kiloms. Kiloms. 
 
 c rll . ir , ,,,- /5-95505 5-955oi- I5-42347 I5-42347 
 
 bc l liari lu \ Sq. Miles Sq. Miles Km. Carres Quadrat Km. 
 
 Uw Z !!L 7 s' ." {2.45064 2.45062 99. 17355 99-17355 
 
 - IO "-' Acres Acres Ares Ar. 
 
 = 3,000 Bu [ 
 
 Tsubo= 10 Go / 3 .95369 3 95367 3 -30.S79 3-30579 
 
 = 100 Shaku.. . . \ Sq. Yards Sq. Yards Centiares. Quadratm. 
 
 Koku= 10 To ( (4765389 1. 80391 1. 80391 
 
 = 100 Slid I 4.96005 J Gallons (Liq.) Hectolitres Hectolitres 
 
 = 1 ,000 Go I Bushels | 5 . 1 1902 
 
 = 10,000 Shaku . . I [ Bushels (Dry) 
 
 Koku (Capacity offi/ioof 1 10 of 1/10 1/10 
 
 ship) \ one Ton one Ton de Tonne Tonne 
 
 ■ - 1 000 A Tnmmr [ 8 ■ 26 ~™ 8 - 2 6/33 3-75000 3 75000 
 
 11 32277 1.32277 0.60000 0.60000 
 
 2K»- 160 Momme. ...I J*; <£"*■> 1 T bs ;^. voir) Kilogs - Kil °^ 
 
 ] I .60754 ! 60754 
 
 [ lbs. (Troy) lbs. (Troy) 
 
 ""irsSft, i^.o.ssa 0.4984 2.583 2.0924 
 
 = I'^oilo 1 s - d - Do11 - Francs Mark.
 
 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
 
 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 fraction- have been disregarded.
 
 CHAPTER I 
 
 INTRODUCTION 
 
 ( ALSES OF THI-2 WAR 
 
 What 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 lime, 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 m \ er has existed any 
 really independent government in Korea, as tin- 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 Mil SINO-JAPANESE WAR 
 
 dered the country a menace to the peace and welfare of Japan 
 and the whole of the Far East. 
 
 I vi ;i 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 from 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 effect 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- 
 ( »us schemes for crushing their rivals. Thus, both the national 
 and international affairs of the country were left to go their 
 own 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. 
 h o\ 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 t he- 
 treaty. Having long maintained a footing in Korea, China 
 now assumed an aggressive and menacing attitude, contrh ing 
 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, has ing 
 their common roots in similar doctrines as to government, 
 nature of civilization, law, art, literature, religion and moral- 
 ity. In former times Japan had in main- 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 contenl to learn. Meanwhile, ( Ihina 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 EXPENDIT1 RES 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 
 thai could accomplish nothing great. Thus estrangement 
 grew ever more pronounced as the two countries fell further 
 and furt Ikt 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 ii]) 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 pe 
 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
 
 I \i'l \|.i i I R] S OF I HI SINO-J IPANESE WAR 
 
 has been the bridge by which Japan lias always sought access 
 to the continenl of Asia; and at the same time she lias always 
 irded 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, I lideyoshi 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 Griffis 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 t he peninsula without mercy. Modern intimate 
 relation- 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 \"V 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 poss 
 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 tw<> 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 al><> to renew friendly relations, the 
 Koreans (being stirred up by China), suspected Japan's 
 motives, and treated the embassy with disdain. In [872 
 Japan brought to an end the practice of sending a tribute- 
 bearing vessel from the Tsushima elan and proclaimed free 
 commercial intercourse, stationing an official at Fusan for 
 this purpose. Bui Prince Heung-Sun offered an unwarranted 
 official insult which created universal indignation in Japan, 
 where there arose a general demand for the chastisemenl «>t 
 Korea. In the following year Count Soejima was dispatched
 
 [0 EXPENDITURES 01 THE SINO-JAPANESE WAR 
 
 to < liin.i to requesl explanation of the offense and to ascertain 
 definitely the exact relation between ( 'hina and Korea; where- 
 upon the Chinese Governmenl 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, 
 i s 7 5 , 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 
 K( >rean 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 
 ( roko, 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 (1) Korea was to remain an independent 
 kingdom and enjoy relations with Japan on equal terms; 
 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 I I 
 
 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, tin- 
 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, 
 when some natives of Miyako Island, Loochoo, who had been 
 ashore in Formosa, were murdered by the natives, tin- 
 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, endeav ored 
 to fight shy of responsibility, denying that she had any auth< >r- 
 ity over the island. But alarmed by the overwhelming vic- 
 tory of the Japanese expedition to Formosa, involving, as it 
 did, the surrender of numerous clan chiefs, China demanded 
 the withdrawal of the Japanese force-. Japan refused to 
 comply with the demand but after various n« gotiations agreed 
 to evacuate on condition that China recognize Japan'- -
 
 12 l XPENDIT1 RES OB THE SINO-JAPANESE WAR 
 
 ereignty over the Loochoo Islands and pay an indemnity of 
 500,000 taels. 
 
 In consequence of the increa Ing influence of Japan in 
 Korea and the intimacy thai now marked their relations 
 alter 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 Towers 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- 
 ern Towers 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 hat i'd everything foreign and began an intrigue 
 inst the Japanese and the Progressive party. The Mins, 
 who wire members of the family of the Queen of Korea, had 
 for main' years tilled 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 1 >f t n « »] is 
 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 Augusl 30, [882. By this agreemenl the 
 Korean < Government had to apologize to Japan, and to permit 
 the presence of Japanese troops in Seoul to protect the li 
 ii<>n ; 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 wire
 
 I I EXPENDITURES 01 THE SINO-JAPANESE WAR 
 
 given permission to travel in the interior. It is significant 
 thai a1 this time Japan again acknowledged the independen< e 
 oi Korea, and consented to use in the treaty the date of the 
 Korean i alendar, which was the lour 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 lime 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, 
 barked 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, 
 1 ro ing 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 15 
 
 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. Tin- 
 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 purp< 
 Prince Itom, then Marquis, was di>patched 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 tin- treaty provided (1) that China 
 should withdraw all her troops from Korea, and Japan her 
 legation guards, the withdrawal to take place within four 
 months from tin- signing of the agreement, under pain of con- 
 flict. The Chinese troops wen- to withdraw by way of M,h- 
 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 tin- purpose, neither country to send officers 
 to fill the positions. (3) In tin- 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 EC >rea, 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.
 
 [6 EXPENDITURES 01 THE SINO-JAPANESE WAR 
 
 li was further stipulated thai 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 
 ( .\.>kii Kin, the leader of the pro-Japanese faction, was assas- 
 sinated about thai time, during a quarrel between the sailors 
 of a Chinese warship and some citizens of Nagasaki, and the
 
 INTR0D1 I 1 EON 17 
 
 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 Cholla 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 1 >iet at the time, China assumed that it 
 would not be easy for Japan to take much interest in foreign 
 complications. Under pretexl of guarding a tributary nation 
 in her habitual manner, China sent troops into Korea, and 
 tli is action she made known on June 7 to the Tokyo Govern- 
 ment through her minister there. Japan at once denounced 
 China's pretension- to suzerainty in Korea, and. in ai o irdance 
 with the treaty of Tientsin, informed China of her intention 
 to dispat<h tones to guard her legation and interests in the 
 peninsula. Japan at once sent her troop- from the 9th Army 
 Division under Major-General Oshima, which, on accounl of 
 3
 
 I- i \n NDIT1 Rl - 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 otlnr 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 
 • m t he 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 
 s< < ins. 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 In- 
 die 226 instant, Japan will proceed to carry out reform in 
 Korea, even if she lias 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 with 
 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 were under way in Seoul, China 
 was trying to smuggle her Asan troops aboard a chartered 
 English transport vessel and a Chinese warship, the K 
 shing and the Tsao-Kiang. The Tsi-yuen and the Kwang-yi 
 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. Tin 
 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 main' 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 
 tin' 29th, while the Chinese troop- at Asan escaped without 
 exchanging a shot. On August 1 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 tlu- Orient. The following is ~in extract:
 
 20 EXPENDIT1 RES 01 THE SINO-JAPANESE WAR 
 
 Korea is an independenl tati I he i ountry was firsl introduced to the comity 
 ,,l union- on the advice ol and under the guidance of Japan. It has, however, 
 been the li. 1 1 >i t of China to regard Korea as a dependency of her own, and both 
 openl) and secretly to interfere in her affairs. At the time of the recent civil 
 disturbance in Korea, < hina dispatched troops thither, alleging the purpose to 
 be tliat 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 
 military force to be senl to that country. Desiring to procure for Korea freedom 
 from the calamity of perpetual disorders, and thereby to maintain the peace of 
 tlic Far I 'ast in general, Japan in\ ited the cooperation of China to that end. But 
 China, advancing various pretexts, declined the proposal. Thereupon Japan 
 ,\>\\ ised 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 independenl state abroad. Korea had already consented to under- 
 take the task. Bui 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 anil lit ions 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 
 thai 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- 
 nentb 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, 1S94, 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 2 1 
 
 independent of foreign interference, peace being restored on 
 April 17, 1895. 
 
 It will now be in order to give a brief review of the progri 
 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-yang 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 war-hip-, the 
 Yoshino, a cruiser of 4,267 tons, the Akitsushinia, 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 2^, 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 anc ^ tnc Kwang-yi, a gunboat 
 which came from Chemulpo, came into view. As a state oi 
 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 tire. 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 forAsan. While the Akitsushima was capturing 
 the Tsao-kiang, the Naniwa ordered the Kow-sking to stop, 
 at 9.15 a. m.. but the land force (.n the vessel compelled the 
 captain to continue the course back to Tako. The older to 
 stop and follow the Japanese vessel was repeated ses era! time-, 
 but, as the Kow-shing took n<> notice of it. the Naniwa pursued 
 and sank her at 1 p.m. The captain and others were rescued.
 
 EXPENDITURES OB ill!. SINO-JAPANESE WAR 
 
 Another battle al Songhwan was fought on July 29. In 
 accordance with the requesl 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, 
 s< ime ma enteen 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 
 nun 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 1, 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. Lieutenant-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 1, 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, Lieutenant- 
 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 I )i\ ision 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 « »f the castled forts. 
 
 Against these fortresses and defense works the Japai 
 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 16th, the Japanese having lost 180 
 killed and 500 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-
 
 2 | EXPENDITURES < >!■ THE SINO-JAPANESE WAR 
 
 wai. w hile <><><> were taken prisoners. Thus in two (lays Japan 
 completely demolished China's foothold in Korea. 
 
 On sea the anus of Japan were also decisively victorious. 
 On September 12 the Japanese squadron got wind of the 
 present e 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 Fuso, the Itsuku-shima, the Hiyei and the Ilashidate, 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 Chokai, 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 
 act ion 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-yucn, 
 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 11 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 [3 to 22 knots, equipped with 246 guns, 44 below 
 33 c. m., [90 quick-firers below 15 c. m., 29 machine guns and 
 37 torpedo tubes. Thus the Japanese fleet was superior in 
 tonnage, -peed 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 
 
 ^0 
 
 while the Yang-wei 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 casualtii 
 
 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 progn iss 
 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 Arthur 
 
 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 Firsl Army Corps, so called 
 to distinguish it from the other at Pyenyang. General < K ama 
 was appointed commander-in-chief of the Second A run ( )orps 
 on the day the welcome tidings of victory reached Imperial head- 
 quarters, and the two army corps were organized as follow s: 
 First Army Corps 
 Commander-in-chief: General Count Yamagata 
 Third Provincial I division 
 Fifth Brigade 
 
 Sixth and Eighteenth Regiments 
 Sixth Brigade 
 
 Seventh and Nineteenth Regiments
 
 26 EXPENDIT1 RES OF THE SINO-JAPANESE WAR 
 
 Fifth Pro incial I >i\ Lsion 
 Ninth Brigade 
 
 Eleventh and Twenty-First Regiments 
 Tenth Brigade 
 
 Twelfth and Twenty-Second Regiments 
 
 Second Army ( )orps 
 
 Commander-in-chief: General Count Oyama 
 First Provincial I )ivision 
 
 First Brigade 
 
 Firsl 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) 
 
 h 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 2J 
 
 troops, with 8 1 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 Divisi. m 
 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, Vihile 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 
 tired was 1,383 and rounds of ammunition (.5,241. 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 I XPENDIT1 RES 01 THE SINO-JAPANESE WAR 
 
 a in. . I For much attention to be given them. Consequently, 
 the Firsl Army was allowed to proceed with its mission alone, 
 and the Firsl 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 tlif 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 1 latteries 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 1 [uayuankow 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 21. 
 
 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 
 [2,000 troops the fortress was well protected. Indeed the 
 place seemed almost impregnable. 
 
 The First Division of the attacking force was ordered to 
 assail torts 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 [.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
 
 IN 1 RODIN i [ON 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 226 the flag of the Rising 
 Sun floated over the battlements of Port Arthur. 
 
 The forees which accomplished this great achievement con- 
 sisted of 15 infantry battalion- 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 Yingkotu and the 
 Pescadores 
 
 During the siege of Port Arthur the enemy made repeated 
 attacks upon Kinchow-ching, which was a Japanese suppi irting 
 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 tied 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 Firsl Division of the Second Anns- Corps 
 captured Poolanteen and Foochou on December 6, while the 
 First Brigade oi the Firsl Division took Kaiping on January 
 10, previous to which the Third Division of the Firsl Army 
 had taken Haicheng, on December [3. Thus during the 
 firsl half of January, [895, the Third Division of the hirst 
 Army Corps maintained full control of Haiching; and the 
 Firsl Brigade ol the Second Army Corps at Kaiping swept 
 the whole southeast area. As the Chinese forces were driven
 
 30 EXPENDIT1 RES 01 THE SINO-JAPANESE WAR 
 
 Lack toward the line of Yingkow, Niuchwang and Tien- 
 chwangtai w it li Liaoyang at the right flank, they concentrated 
 i heir nun 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 
 fortes 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 
 I Y< >\ incial 1 )i\ ision 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 1. 
 
 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 
 Kiuliencheng, 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 gun-. 
 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 fleel was 
 no more and Japan was master of the ( lull" 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-
 
 j2 EXPENDITURES OF THE SINO-JAPANESE WAR 
 
 .sushi mil, the Hashidate, the Itsukushima, the Chiyoda, the 
 Yoshino, the Naniwa, the Takachiho, the Akitsushima and 
 the Zstt&i. 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 
 ( omparison of numbers. 
 
 11. 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 [3, 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 defei t 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 Shimonoscki 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 ( nina 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 by 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, 011 April 23, on 
 tin- pari of Russia, Germany and France, in being obliged to 
 abandon the Liaotung peninsula, on the pretexl 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 son-, but she was compelled to 
 relinquish it for nothing. So potenl a three-fold interferes e 
 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 Hag would prove a constanl source of trouble in
 
 34 EXPENDIT1 RES OF THE SINO-JAPANESE WAR 
 
 Eas1 Asia. Japan yielded and abandoned the Liaotung pen- 
 insula on May [0 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, 
 [898, Russia leased Port Arthur and Talien on March 27 of 
 the same year, and on June 1 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 miles north and south, covering about 
 14,280 square miles of battleground in Manchuria, 18,445 
 square miles in Korea, 892^ 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 235,866.0.^ 
 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 [903, which 
 will be accounted for later on. The total may be tabulated 
 under (1) 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 l>y 2,47s, ^54 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 1, 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, 1894-1903" 
 
 Fiscal 
 years 
 
 Extraordinary 
 
 military 
 
 affairs 
 
 After-war 
 adjustments 
 
 Compilation 
 of war 
 history 
 
 Grant of 
 lump sum 
 
 Total 
 
 1894 \ .... 
 
 1895/ •••• 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 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 
 1-^5,197 
 
 82.4M, 
 
 123,689 
 37,108 
 28,070 
 
 1 'r /: 
 164,520,37] 
 
 2O.4i5.279 
 
 5,915.563 
 
 3,025,960 
 
 254.421 
 
 173.742 
 
 78,754 
 71,915 
 
 Total . . . 
 
 193.904,171 
 
 121,710 
 
 219.483 
 
 396,550 
 
 194,641,914 
 
 a Between the years 1904 and 1913 additional expenses in relation to the war were incurred as 
 follows: 
 
 1 
 
 Compilation of War History and Statistics 
 
 Grant of lump sum 74. 1 -'4 
 
 Total U5.55I 
 
 When this outlay is added to tin- total outlined above, the grand total for the Wai 1 >ffice will be 
 194.777,468 yen. 
 
 J^ /'{MS 

 
 ; V S EXPENDITURES OF THE SINO-JAPANESE WAR 
 
 Expenditures of Naval Office, i 894-1902 
 
 Fiscal 
 years 
 
 Extraordinary 
 
 war funds 
 
 Compilation of 
 war history 
 
 Lump sum 
 grant 
 
 Total 
 
 1895 1 
 
 1896 
 
 Yen 
 
 35.955.137 
 
 [,449.76o 
 
 608,260 
 
 3H.744 
 122,585 
 
 253.513 
 1,602 
 
 Yen 
 3.094 
 
 Yen 
 
 34.327 
 
 i,43i 
 
 205 
 
 1,101 
 
 30 
 
 Yen 
 35,955,137 
 1,449,760 
 
 1897 
 
 608,260 
 
 1898 
 
 349WI 
 
 1899 
 
 124,016 
 
 1900 
 
 256,812 
 
 [QO] 
 
 2,703 
 
 1 902 
 
 30 
 
 
 
 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 
 
 
 Yen 
 32,603,214 
 91,979,606 
 
 4i,37i,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 
 
 Supplies for troops 
 
 Transportation of troops and pro- 
 
 95,959,685 
 42,680,125 
 
 Accessories to cost of war 
 
 29,516,573 
 9!3,485 
 
 
 
 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 
 
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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-Japanesc War was 
 2 478»354 yen> disbursed as follows: 
 
 Yen 
 
 Foreign Office 307,831 
 
 Home Office 414,564 
 
 Treasury Office 1 ,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 Mil. SI NO-JAPANESE WAR 
 
 Expenses of Foreign Office 
 
 Items 
 
 1894 
 
 1895 
 
 Total 
 
 
 Yen 
 
 18,981 
 
 8,432 
 7.174 
 
 3.240 
 
 11,125 
 
 1,461 
 194,065 
 
 )'< n 
 
 6,927 
 
 6,013 
 
 12,941 
 
 2,016 
 
 23.472 
 
 1.550 
 
 3.455 
 6,979 
 
 Yen 
 25,908 
 
 
 14,445 
 
 1 lispatch of police to Korea. . . 
 Allowance to diplomats and 
 
 20,115 
 5,256 
 
 Reconstruction of legation in 
 
 34,597 
 
 Repairing annex to legation in 
 Korea 
 
 1,550 
 
 Reception of Chinese peace 
 
 4,916 
 
 
 201,044 
 
 
 
 fota] 
 
 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 
 
 Legation in China 
 
 1,016 
 
 Legation in Korea 
 
 40,180 
 
 Consulate at Hongkong 
 
 Consulate at Tientsin 
 
 Consulate at Chefoo 
 
 35 
 
 1,297 
 
 160 
 
 Consulate at Shanghai 
 
 Consulate at Fusan 
 
 2,716 
 3.534 
 
 Consulate at Seoul 
 
 9,139 
 8,255 
 
 Consulate at Gensan 
 
 937 
 
 
 
 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 
 
 [898 
 
 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. 22~ 
 
 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 
 
 1 1 ,969 
 
 Yen 
 11.687 
 
 12,241 
 
 r. n 
 
 38,897 
 
 
 
 Korean affairs: 
 (A) Cabinet 
 
 Dispatches to Imperial head- 
 
 14.022 
 93i 
 
 4.S79 
 4.099 
 5. 351 
 
 414 
 
 2.422 
 852 
 350 
 
 29.350 
 
 4.792 
 1.683 
 1,690 
 
 1,150 
 
 12,812 
 
 5,058 
 
 2,258 
 
 1,241 
 
 1.378 
 
 242 
 
 6.175 
 
 
 
 18.814 
 1.683 
 
 
 
 (B) Treasury Office 
 
 Dispatches to Imperial head- 
 
 5,729 
 
 
 Dispatches to China and Korea . 
 (C) Dispatch of Privy Council to Impe- 
 
 10,409 
 
 (D) Dispatch to the front of auditors of 
 
 3.663 
 
 
 
 
 
 (G) Manufacturing of military and com- 
 
 35,525 
 
 
 
 Total 
 
 62.370 
 
 38.479 
 
 
 
 
 
 
 
 
 349,779 
 
 
 
 
 
 
 Extraordinary session of the Imperial Diet: 
 
 22,412 
 25.794 
 
 
 
 
 
 
 
 
 
 Total 
 
 48,206 
 
 
 
 
 
 
 
 Furnishing of temporary Diet building: 
 
 12.729 
 12.386 
 
 
 
 
 
 
 12.386 
 
 
 
 Total 
 
 25.115 
 
 
 
 
 25,1 15 
 
 
 
 Rewards: 
 
 (A; Manufacturing of extra decorations 
 
 (B) Manufacturing of extra prize cups. 
 
 28,348 
 
 286,399 
 
 65.876 
 
 157.134 
 
 380.623 
 193.207 
 
 
 28.348 
 
 286.399 
 
 101,949 
 
 157.134 
 
 
 
 
 Managing allowance extra war funds 
 
 
 76,121 
 
 
 2,504 
 
 78.625 
 
 
 18,104 
 
 319.597 
 
 45.66s 
 
 2.890 
 
 3S6.256 
 
 
 
 1.082,345 
 
 162.301 
 
 
 1.601,558 
 
 
 
 Expenses of manufacturing public loan 
 
 
 
 
 
 *> 12.688 
 
 
 
 » The expenditure of the Treasury t ion to the v. hlch sum In- 
 
 cluded ull e erning the busim 
 
 which were Legally l>ui nominally 
 
 i the fiscal year of 1898 was for rewards and the makin g of pi . amounting 
 
 15.94 yen, and for printing public loan bonds in the same year: the following 
 
 I m 1000: j.. 
 b For the two ti^c.il years [899 and 
 
 Judicial Office 
 
 Fiscal year 1895 

 
 46 EXPENDITURES OF THK SI. \( (-JAPANESE WAR 
 
 Communications Office* 
 
 ( !ommunica1 inns office 
 
 Administrative office of light houses. 
 
 I I )] : DOSl 
 
 .1 " 
 
 Nagasaki 
 I [iroshima 
 
 oy a 
 Kumamoto 
 
 fotal 
 
 iikI uh 
 
 graph office. 
 
 Yen 
 
 90,523 
 
 4i,4i5 
 
 2,094 
 
 2,985 
 
 4 
 
 2,337 
 
 837 
 
 754 
 
 140,949 
 
 i he outlay l>y the Communications Office during 1804 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; hut 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 
 
 
 Budget 
 
 Fixed amount 
 as receipt 
 
 Amount 
 received 
 
 First section, war funds 
 
 First subsection, war funds. . . . 
 
 Yen 
 
 25,000,000 
 25,000,000 
 
 Yen 
 
 225,230,128 
 225,230,128 
 
 Yen 
 
 225,230,128 
 225,230,128 
 
 KXI'HNDITI'RKS 
 
 First section, war funds. . . . 
 First subsection, war funds. 
 
 Budget 
 
 Yen 
 
 25,000,000 
 25,000,000 
 
 Mixed sum by 
 Imperial 
 sanction 
 
 )V/7 
 2iO.973.697 
 210,973,697 
 
 I'.i\ tnenl 
 ordered 
 
 Yen 
 200,475,508 
 200475,508 
 
 Of the expenditures above mentioned, the amount trans- 
 ferred to General Budget Account was 9,037,494 yen, the 
 
 47
 
 jS EXPENDITURES OF rHE S1NO-JAPANESE WAR 
 
 unused portion of budget was 40,486,998 yen, and the unused 
 portion of sum allowed by I mperial sanction was 1,460,698 yen. 
 'lhc total fixed sum of the above revenue stood as follows 
 (details of expenditures to lie given later): 
 
 Yen 
 Treasury < Iffice 219,361,977 
 
 War ( Iffice 5.093.917 
 
 Naval 1 >ffice 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 war 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 
 
 1,519,305 
 
 Receipts from occupied territory (War Office) 624,425 
 
 Receipts from Formosa and Pescadores Islands . . . 935,680 
 
 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 
 he 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 Xo. 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. 1 low- 
 ex er, the cost proved so enormous that the second reserve was 
 insufficient. Thereupon in June it was decided by Imperial 
 
 sanction to utilize for war expenses a surplus of 26, >,000 
 
 yen in the Treasury, 3,000,000 yen of which, as may be seen 
 from details already given, was a loan t<> the Korean < rovern- 
 inent. As the Chinese forces in Korea could not be put 
 down by tin' troops of the Fifth Division, after the battles 
 fought on July 25 and 20. at Phung Island and Songhwan 
 respectively, mobilization took place, and the Imperial 
 Declaration of War was issued on August 1. after which the 
 Third Division was dispatched t<> the- front and the First 
 Army Corps organized, thus extending the sphere of operations 
 and increasing the outlay beyond the resources of tin 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 
 w .1- 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 
 notation 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; and 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 5 1 
 
 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 1 >f 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: ' 
 
 1 Table docs 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, ihe 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 yen — 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.
 
 .s- 1 
 
 I MM NDITURl s nl Mil. SLNO-JAPANESE WAR 
 
 iO iO N o ^o O 
 
 nOOCO iO 
 
 pi C i - 
 
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 SUPPLY OF WAR FL'XDS 
 
 53 
 
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 >-*-»< J5 

 
 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 . 
 
 Public 
 loan 
 
 Total 233,618,653 
 
 Yen 
 
 2,500,000 
 
 500,000 
 
 5,241,000 
 
 7,241,300 
 
 2,795,ooo 
 
 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 
 
 Contributed 
 to war 
 funds 
 
 Yen 
 
 100,000 
 60,800 
 
 Contributed 
 
 to relief fund 
 
 of army and 
 
 navy 
 
 160,800 
 
 321,600 
 
 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 
 
 239.5i7.736
 
 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 
 
 1 19,086 
 
 23.439.086 
 
 Miscellaneous 
 receipts 
 
 Yen 
 
 1,806 
 10.566 
 
 83,202 
 
 5.045 
 
 11,361 
 
 1 1. 216 
 
 19,670 
 
 32.743 
 
 146,969 
 
 50,293 
 
 99,5i4 
 
 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 
 
 1 en 
 
 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 
 
 440.380,000 
 
 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 
 32.412.10.1 
 31.534.407 
 28,710,373 
 
 34.930,525 
 4I,773.o6l 
 26,7 ' 0, !'■-• 
 [6,107,780 
 3,102,036 
 
 438,252,092 
 
 Transfers 
 from spe- 
 cial ac- 
 count fund 
 
 Yen 
 
 9.020,000 
 52.020.000 
 . - 
 
 7.665.676 
 4.613.948 
 1,356.585 
 
 78,957.165 
 
 War scrip 
 issued 
 
 3.780.000 
 3.780.000 
 3.780.000 
 3.780,000 
 
 1. 886.816 
 1.293.606 
 
 820.168 
 
 104 
 
 104 
 '"4 
 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 tomeet deficits, and aitei Ai>ril 1. t8o6, 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 024,425 
 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 ha> e 
 occurred, money was borrowed from the Bank of Japan, or
 
 5<) I XPENDITURES OF THE SINO-JAPANESE WAR 
 
 Mom in. \ Revenue and Expenditures, 1894-1896 
 
 Date 
 
 [894 
 June 6 J 11 1 > 30. 
 
 August 
 
 September 
 
 October 
 
 November 
 
 December 
 
 1895 
 
 January 
 
 February 
 
 Match 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September 
 
 October 
 
 November 
 
 December 
 
 1896 
 
 January 
 
 February 
 
 March 
 
 April-November 
 
 Total 
 
 Reven uc 
 
 Yen 
 26,000,000 
 
 3.395-5^5 
 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. 4<>7 
 
 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 
 
 7,35i,52i 
 
 976,652' 
 
 164,520371 
 
 Yen 
 
 474,606 
 1,705,441 
 i.795. OI 3 
 3.27L294 
 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 
 i9,339,8oi 
 
 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,i43 a 
 
 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 issue of 
 war scrip; and these temporary measures were repaid after 
 April 1, 1896, 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 
 
 Bank notes and copper coin 
 
 Silver dollars 
 
 Subsidiary silver coins 
 
 Silver bullion 
 
 Mexican dollars 
 
 Sycees 
 
 War scrip 
 
 Total 
 
 183,981,744 
 
 11,651,482 
 
 2,60I,028 
 
 300,000 
 850,000 
 
 1.099.293 
 IO4 
 
 200,483,651 
 
 91.8 
 
 5 - 
 ■ i 
 2 
 0.4 
 5 
 
 With 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 Tri \m ry and i hi 
 Temporary Making Up of Deficits 
 
 The budget for army and navy 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 [893, 
 the transfer of indemnity and other sources of income being 
 comparatively of minor importance, as shown in the following 
 table :
 
 58 I XPENDITURES OF THE SINO-JAPANESE WAR 
 
 Yen Percentage 
 I reasurj surplus, fiscal year 1893 23,439,086 10.4 
 
 Public loans 116,804,926 51 .9 
 
 I ransferol 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 the 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 1 14.908,535 
 
 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 \\ as a deficit.
 
 SUPPLY OF WAR FUNDS 
 Monthly Receipts and Disbursements, i 894-1 896 
 
 59 
 
 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 a 
 
 Total 
 
 Receipts 
 
 Yen 
 
 26,000,000 
 
 3.395.5 6 5 
 6,579.153 
 7,588,052 
 
 ,161,151 
 805,365 
 
 .992,033 
 ,201,408 
 422,961 
 780,339 
 ,289,459 
 
 152.984 
 151.841 
 
 346.675 
 
 239,680 
 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 
 i9.339.8oi 
 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,i43 b 
 
 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. 
 
 b 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:
 
 60 I XPENDITURES OF THE SINO-JAPANESE WAR 
 
 Means ob 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.I44-798 
 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 
 
 Temporary loan 
 
 from Bank of 
 
 Japan 
 
 914,076,670 
 
 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 
 
 438,252,092 
 
 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 
 
 449,380,000 
 
 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 
 
 404.7H 
 104 
 104 
 104 
 102 
 
 26,444,578 
 
 After June, 1896, there was no further shortage.
 
 SUPPLY OF WAR FUNDS 
 
 6l 
 
 Ratio of Means of Meeting Deficit^ in War Fund, [894-1896 
 
 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 
 
 4'4 
 29.0 
 
 44 9 
 503 
 41 3 
 28.1 
 
 100 o 
 
 Loans from 
 Bank of 
 Japan 
 
 70.1 
 58.6 
 71 .0 
 
 52 
 
 5* 
 43 
 37 
 33 
 32 
 34 
 29 
 
 37 
 1- 
 50 
 58 
 
 Issue of war 
 scrip 
 
 8.1 
 8.1 
 9.0 
 9 7 
 9i 
 6-5 
 3-8 
 2 .2 
 
 13 
 1 .2 
 
 0-5 
 
 As may be seen from the above, the temporary deficit was 
 
 met by transfers from the Treasury and loan- from the Bank 
 of Japan. So much then for the summary of war finance. 
 
 Issue of Public Loan- 
 
 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 124,920,0003^ 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, as 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
 
 02 
 
 EXPENDITURES OF THE SINO-JAPANESE WAR 
 
 "O 41 
 O 3 
 
 
 A 
 
 1- 
 
 3 
 tn 
 
 L. 
 
 js c 
 
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 a*a 
 
 
 
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 Bought by Bank 
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 cial regulations 
 
 -o C 
 c o 
 
 rt • - 
 
 is 3 
 cj bfl 
 
 Imp. Ord. No. 144, 
 Aug. 15, 1894 
 
 Laws Nos. 25 and 
 195, Treas. Dept., 
 Oct. 23, 1894 
 
 Law No. 8, Mar. 2, 
 1895; Ord. No. 
 2, Treas. Dept., 
 Mar. 4, 1896 
 
 Ord. No. 3, Treas. 
 Dept., Mar. 4, 
 1896 
 
 Imp. Ord. No. 137, 
 Oct. 2, 1896; 
 Ord. No. 3, 
 Treas. Dept., 
 Oct. 4, 1896 
 
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 it 
 
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 8; Sept. 20, 1894- 
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 7; Dec. 25, 1894- 
 June 30, 1895 
 
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 Amount 
 
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 50,000,000 
 10,000,000 
 
 25,000,000 
 10,000,000 
 
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 Sept. 10-13, l8 94 
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 Mar. 16-21, 1896 
 
 
 
 
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 3d Subscription (4th issue) .... 
 
 4th Issue 
 
 V 
 
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 5
 
 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 lime 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 
 limes 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 Xo. 66 of the year IT" 
 
 The subscriptions received on the above basis comprised 
 the first war loan; and the method of subscription was an- 
 nounced 1»\ 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 tip in seven instalments from November 16, 
 1894, to the end of June, 1895.
 
 SUPPLY OF WAR FUNDS 65 
 
 Method of Payment fob Bonds of First War Loan 
 
 Payments 
 
 [894 [895 
 
 Yen 
 
 First 
 
 to September 20 
 < l( tober 16-31 
 
 \u\ I'llll n I" H1-3O 
 
 February n> 28 
 March 16-31 
 April 16-30 
 \l.i\ [6-3I 
 June 16-30 
 
 
 Second 
 
 
 Third 
 
 
 Fourth 
 
 10 
 
 Fifth 
 
 
 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, 1 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 \m> 
 
 Osaka 
 
 
 
 1 !lassification of 
 
 amount loaned 
 
 on security 
 
 Modi hs 
 
 Tok\o 
 
 Osaka 
 
 1 [ighest 
 
 1 owes! 
 
 Average 
 
 1 Iigh< -1 
 
 1 OWI -! 
 
 \\ erage 
 
 Yen 
 
 
 Per 
 
 Per 
 
 Per 
 
 Per 
 
 Per 
 
 Per 
 
 
 
 cent 
 
 criil 
 
 cent 
 
 ccni 
 
 cent 
 
 ecu! 
 
 IO0 1000 
 
 Vug. 
 
 1 [27 
 
 959 
 
 1 034 
 
 1 351 
 
 1 i;,j 
 
 I ^41 
 
 
 Sept. 
 
 1 [07 
 
 971 
 
 1 056 
 
 1 J So 
 
 1 010 
 
 I [22 
 
 1,000-10,000 . . . 
 
 Aug. 
 
 1 076 
 
 923 
 
 1 003 
 
 I 278 
 
 1 050 
 
 1 [32 
 
 
 Sept. 
 
 1 051 
 
 934 
 
 1 003 
 
 1 [63 
 
 96] 
 
 I 059 
 
 Al"i\ c m.ooo . . . 
 
 Aug. 
 
 987 
 
 ,, 882 
 
 926 
 
 1 J.J1 
 
 I 059 
 
 I 132 
 
 
 Sept. 
 
 98] 
 
 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 Bond-. 
 
 Date 
 
 I-oans 
 
 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 y en - 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 P ut 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 
 
 6? 
 
 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 
 
 1 894- 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* 
 
 
 10 
 
 Third . 
 
 10 
 
 Fourth 
 
 10 
 
 Fifth 
 
 20 
 
 Sixth 
 
 *5 
 20 
 
 
 
 
 » 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 meel 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
 
 us 
 
 I M'l MMTURKS 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 16 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 
 
 I0 a 
 
 
 10 
 
 Third 
 
 20 
 
 
 10 
 
 Fifth 
 
 10 
 
 sixth 
 
 20 
 
 
 10 
 
 Eighth 
 
 10 
 
 
 
 a 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 
 1 1578,050 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- 
 stant ly in the air. but no one of course knew as yet just what 
 would lie 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 
 
 6 9 
 
 
 
 
 
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 _ 
 
 
 
 
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 c 
 
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 EXPENDITURE OI- Till-: SI \< (-JAPANESE WAR 
 
 
 
 
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 SUPPLY OF WAR FUNDS 71 
 
 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 7,3 1 3.7 1 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 shown in the table on page 72. 1 
 
 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 tor by 
 extraordinary special issue based upon Article VI, paragraph 
 
 1 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, 6oyen 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. .1- there was 
 a case in which only the security money was paid and not 0.30 yen ol the difference 
 mentioned previously, a fractional Bum of 0.30 yen did not go into the actual receipt.
 
 ;j EXPENDITURES OF THE SINO-JAPANESE WAR 
 
 Receipts from War Loa\> 
 
 
 First issue 
 
 Second issue 
 
 Third issue- 
 
 Total 
 
 Subscription: 
 
 Amount issued 
 
 " deferred 
 
 Yen 
 30,000,000 
 2,200 
 
 Yen 
 50,000,000 
 1,300 
 
 Fen 
 10,000,000 
 
 Yen 
 90,000,000 
 3,500 
 
 Total 
 
 29,997,800 
 
 30,065,227 
 
 i,855 
 
 49,998,700 
 
 47,639,822 
 970 
 
 10,000,000 
 10,001,258 
 
 89,996,500 
 
 Receipts: 
 
 Amount received 
 
 " deferred 
 
 87,706,307 
 2,825 
 
 Total 
 
 30,063,372 
 3,134 
 
 47,638,852 
 4,044 
 
 10,001,258 
 134 
 
 87,703,482 
 
 Amount received: 
 
 Interest on deferred 
 
 7,312 
 
 
 Total 
 
 30,066,506 
 
 47,642,896 
 
 10,001,392 
 
 87,710,794 
 
 
 2, of the amendment to the regulations with regard to con- 
 solidated 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 Loan, 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, ,,lr 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 
 
 1 50,000 
 
 100.20 
 
 150,300 
 
 u 
 
 Oct. 30 
 
 40,000 
 
 100 30 
 
 40,120 
 
 ii 
 
 Oct. 31 
 
 30,000 
 
 100.30 
 
 30,090 
 
 " 
 
 Nov. 8 
 
 400,000 
 
 100.30 
 
 401,200 
 
 " 
 
 Nov. 14 
 
 50,000 
 
 100.70 
 
 50,35O 
 
 a 
 
 Nov. 19 
 
 262,500 
 
 101.10 
 
 265,388 
 
 il 
 
 Nov. 28 
 
 328,000 
 
 101.90 
 
 334.232 
 
 ii 
 
 Dec. 9 
 
 60,000 
 
 1 02 .60 
 
 61,560 
 
 " 
 
 Dec. 13 
 
 250,000 
 
 102.50 
 
 250,250 
 
 ii 
 
 Dec. 25 
 
 2,037,000 
 
 101 50 
 
 2,067,555 
 
 ii 
 
 Dec. 27 
 
 350,000 
 
 101.40 
 
 354,900 
 
 
 1896 
 
 
 
 
 ii 
 
 Apr. 2 
 
 50,000 
 
 98.90 
 
 49.450 
 
 " 
 
 Apr. 6 
 
 30,000 
 
 98.90 
 
 29,670 
 
 
 June 29 
 
 500,000 
 
 100.20 
 
 501,000 
 
 II 
 
 Sept. 26 
 
 300,000 
 
 98.70 
 
 296,100 
 
 1 1 
 
 Dec. 16 
 
 500,000 
 
 98.36 
 
 491,800 
 
 
 1897 
 
 
 
 
 II 
 
 Feb. 26 
 
 300,000 
 
 99-49 
 
 298,470 
 
 " 
 
 .Mar. 3 
 
 600,000 
 
 99.04 
 
 594,240 
 
 " 
 
 Mar. 26 
 
 400,000 
 
 99.14 
 
 396,560 
 
 1 1 
 
 Oct. 14 
 
 600,000 
 
 95-83 
 
 574-98o 
 
 
 Dec. 21 
 1898 
 
 1 ,000,000 
 
 93-15 
 
 931,500 
 
 " 
 
 Feb. 7 
 
 45.000 
 
 9348 
 
 42,066 
 
 " 
 
 Mar. 12 
 
 1 ,200,000 
 
 91.32 
 
 1,095,840 
 
 " 
 
 Mar. 30 
 
 3,000 
 
 89.94 
 
 2,698 
 
 " 
 
 Oct. 24 
 
 48,000 
 
 92.51 
 
 44.405 
 
 
 Dec. 28 
 1899 
 
 57-750 
 
 92.98 
 
 53.696 
 
 ii 
 
 Mar. 15 
 
 28,000 
 
 95-84 
 
 26,751 
 
 " 
 
 Mar. 28 
 
 130,000 
 
 94.81 
 
 123,253 
 
 
 Oct. 13 
 
 20,000 
 
 95 8 
 
 19,096 
 
 
 1900 
 
 
 
 
 ii 
 
 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 
 
 ^4,924.250 
 
 34,728,205
 
 SUPPLY OF WAR FUNDS 
 
 /0 
 
 from the Bank of Japan, the amount being used for extraor- 
 dinary war expenses. By virtue of Law Xo. 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 20,260,006 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, and 
 No. 8, 1895, are as follows: 
 
 Loan Based on Law Xo. 25, 1894 
 
 Date of issue 
 
 Amount 
 
 Annual rate 
 of interesl 
 
 Hate of 
 redemption 
 
 Nov. 15, 1894 
 
 Nov. 26, 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, 1S95 
 
 Dec. io, 1894 
 
 <■ 
 
 Dec. 15, 1894 
 
 Feb. 1, 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, 1895 
 
 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 
 
 1 >ec. 2, 1895 
 
 Dec. t,, i8qs 
 
 >• 
 
 Dec. 9, 1895 
 
 " 
 
 Dec. 12, 1895 
 
 » 
 
 Dec. 18, 1895. . 
 
 «< 
 
 Dec. 25, 1895 
 
 <■ 
 
 Dec. 26, 1895 
 
 " 
 
 Dec. 28, 1895 
 
 
 Jan. 22, 1896 
 
 Mar. 31, 1896 
 
 Jan. 28, 1896 
 
 Mar. 5, 1896 
 
 " 
 
 Mar. 27, 1896 
 
 << 
 
 Mar. 31, 1896 
 
 "a 
 
 Mar. 31, 1896 
 
 June 30, 1896 
 
 Apr. 1, 1896 
 
 Apr. 1, 1896 
 
 •1 
 
 Apr. 6, 1896 
 
 " 
 
 
 
 Total 
 
 20,260,000 
 
 
 
 
 
 » Date of redemption prolonged to June 30, 1S96, 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 Xo. 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 
 
 Apr. 18, 1895 
 
 May 1, 1895 
 
 May 15, 1895 
 
 Feb. 3, 1896 
 
 Yen 
 
 3,000,000 
 
 2,000,000 
 
 3,000,000 
 
 920,000 
 
 1,310,000 
 
 4,130,000 
 
 1,300,000 
 
 440,000 
 
 700,000 
 
 160,000 
 
 2,020,000 
 
 1 ,460,000 
 
 :n,:t 
 
 )0,000 
 
 Yi n 
 
 3,000,000 
 
 2,000,000 
 
 3,000,000 
 
 920,000 
 
 1,310,000 
 
 4,130,000 
 
 1,300,000 
 
 440.000 
 
 7' ".000 
 
 1 60,000 
 
 2,020,000 
 
 2 1. 7^0, OOO 
 
 Feb. 8, 1896 
 
 Mar. 2, 1896 
 
 Mar. 26, 1896 
 
 Mar. 26, 1896 
 
 Mar. 31, 1896 
 
 Apr. 22, 1896 
 
 May 14, 1896 
 
 May 20, 1896 
 
 Total 
 
 20,500,000 
 
 20 26« non 
 
 4<),760,000 
 
 
 
 
 The payment of interest for the loan stood as follows: 
 
 I iscal years 
 
 l'.\ law No. 25 
 in 1894, 5', 
 per annum 
 
 By law No. 8 
 in 1895 
 per annum 
 
 Total 
 
 1894 
 
 1895 
 
 1896 
 
 Total 
 
 Yen 
 304.384 
 505.274 
 144.366 
 
 954,024 
 
 Yen 
 
 40.685 
 359.549 
 
 400,234 
 
 Yen 
 
 304,384 
 
 545.959 
 
 503.915 
 
 [ ,354 
 
 Employmeni 01 Indemnity 
 
 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 follow-:
 
 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 
 
 fotal 
 
 82,171,650 
 
 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, 210, 000 yen was used 
 during the tw r o 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 war may be studied. The first includes 
 the effects upon the ordinary life 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, how (Acr, — that it was the first international war in the 
 history of modern 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 tin-; 
 quarter of a century therefore can not be considered a strictly 
 normal period. .Main- serious financial problems were wait- 
 in- 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 
 <»f 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 ECONOMK EFFECTS OF NIK 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 modern 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 250 
 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 (1) 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 the 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 pri< 
 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 i<> leave 
 their homes and flock to cities or manufacturing town-. 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 t< > 
 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 concern- 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 li\ ing conditions. Yet this 
 state of affair- 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 .1- 
 international diplomatic relations of Japan assumed more 
 importance, with the Si no- Japanese War as the Starting point, 
 and as it was this war which exposed the weakness of China 
 and thereby encouraged the Western Tower- 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 OX PUBLIC FINANCE 
 
 The effects of the Sirio-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, t< 1 [903, 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, 1893-1903 
 
 Fiscal Year 
 
 Ordinary 
 
 Extraordinary 
 
 1893 
 
 i894 
 
 1895 
 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 Total 
 
 Yen 
 
 85,883,080 
 
 89,748,454 
 
 95,444,652 
 
 104,904,501 
 
 124,222,964 
 132,869,336 
 
 192,170,081 
 202,035,100 
 221.240,408 
 224,180,699 
 
 Yen 
 27,886,300 
 
 8,421,574 
 22,988,069 
 82,114,022 
 
 102,167,159 
 87,184,792 
 76,925,996 
 
 103,684,787 
 
 72,323,950 
 
 76,101,016 
 
 10,059 
 
 650,027,803 
 
 : 
 
 \wi m. Expenditures, 1893-1903 
 
 Fiscal 
 
 1893 
 
 1895 
 
 1896 
 
 1897. 
 
 1898. 
 
 1899. 
 
 1900 
 
 1 901 . 
 
 1902. 
 
 1903 
 
 Total. 
 
 < Irdinary 
 
 Yen 
 
 '■4.545.599 
 60,421,346 
 '■7.1 |.8,007 
 [00,7I2,8l6 
 [07,695,127 
 1 19,072.144 
 1 $7,590,418 
 
 1 iw.i.vi.i": 
 [60,363,583 
 171,05 
 169,761,91 1 
 
 307.5" 
 
 Extraordinary 
 
 Yen 
 20,036,273 
 
 I7.7<>7. 2 97 
 18,169,173 
 68,3 ; 
 
 1 [5.983.717 
 
 100,(1*5,42 i 
 1 16,575,120 
 [43,615,892 
 106,493,241 
 
 1 18, K>(i. <,J3 
 14.217 
 
 Total 
 
 Vtii 
 1 1 $,769,380 
 98,170,028 
 118,452.721 
 187.oiw.125 
 226,390.125 
 220,054,128 
 254,254,524 
 295,854,868 
 274.359.050 
 297,341,424 
 260,220 758 
 
 
 Total 
 
 Yen 
 
 84.581,872 
 
 78,128,643 
 
 85,317,180 
 
 168,856,508 
 
 223,678,844 
 
 219.757.568 
 
 254,165,538 
 
 292,75 
 
 26,731 
 249.596,131 
 
 1. 2 1 2, (j 1 5.898 
 
 87
 
 8S 
 
 ECONOMIC II I 1 .< TS 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 
 
 1 is al j ear 
 
 1893 
 1894 
 
 1895 
 
 !*(,(, 
 
 1897 
 I898 
 I899 
 I900 
 I90I 
 I902 
 1903 
 
 k<-\ enue 
 
 1 >rdinary 
 
 100. o 
 
 104.5 
 1 r 1 . 1 
 
 122 
 
 144 
 
 154 
 206 
 223 
 235 
 257 
 261 
 
 Extraor- 
 dinary 
 
 100. o 
 30.2 
 82.4 
 
 294 5 
 
 366.4 
 312.6 
 
 275-9 
 
 371 8 
 
 259 -4 
 272.9 
 
 129.2 
 
 Total 
 
 100. o 
 86.3 
 104. 1 
 164.4 
 199.0 
 
 193-4 
 223.5 
 260. 1 
 241 .2 
 261 .4 
 228.7 
 
 Expendit ures 
 
 Ordinary 
 
 1 00.0 
 93-6 
 
 104.0 
 156.0 
 166.9 
 184.4 
 
 213. 1 
 231 .1 
 248.5 
 265.0 
 263.0 
 
 Extraor- 
 dinary 
 
 90. 
 34° ■ 
 578. 
 502 
 58l 
 716. 
 
 531 
 
 589- 
 
 398. 
 
 Total 
 
 
 
 100. 
 
 4 
 
 92. 
 
 7 
 
 100. 
 
 1 
 
 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 OX PUBLIC FIXAN< I 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 hut 
 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 — 
 
 (1) 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 bond-. 1 
 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 f 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, 
 
 1 Amount of bonds issued, 124,920,750 yen; amount actually received, [22,437,- 
 
 687 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 earn,- 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 1 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 I 1 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 
 
 1894 
 
 1895 
 
 1896 
 
 1897 
 
 1898 
 
 Yen 
 
 2,827,)'.; 
 
 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,i37.<x>5 
 
 Yen 
 
 78,128,643 
 
 85,3i7.i7'» 
 168,856,509 
 223,678,844 
 
 2i9.757.569 
 254,165,528 
 292,750,059 
 266,856, 82 \ 
 289,226,731 
 249,5.)'.. 1 p 
 
 Per cent 
 3.62 
 6.19 
 
 17-35 
 38.02 
 
 43 M 
 44.09 
 
 40.53 
 36.83 
 26. 27 
 26 90 
 
 1899 
 
 1 900 
 
 1901 
 
 1902 
 
 1903 
 
 Total 
 
 689,356,7 s '' 
 
 2,128,334,017 
 
 28.29* 
 
 ' Av. I 
 
 In order to secure t His 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: 8 
 
 1 Post, p. 141. 
 
 2 The figures for the revenue from ne\vl\ established taxes were taken from the 
 actual receipts and the figures for the old taxes whos< rates were raised were 
 taken from the estimate of the expe< ted incn 
 
 The revenue from the bond issues me. ms the revenue from the bonds issued for 
 the railways, the industries, the Hokkaido railways and the Formosan enterpi
 
 92 ECONOMK I I M< IS OF THE SINO-JAPANESH WAR 
 
 Revenue foh Post-bellum Enterprises 
 
 I iscal year 
 
 Kc\ enue from 
 
 increase oi 
 
 taxes 
 
 Transfer of 
 indemnity 
 
 fund 
 
 Issue of 
 bonds 
 
 Total 
 
 1896 
 
 ' 897 
 
 [898 
 
 [899 
 
 1900 
 
 1 90 1 
 
 1902 
 
 1903 
 
 Yen 
 
 i,s,7<>8.589 
 29,701,472 
 35.6i7,ioo 
 63,810,962 
 85,710,491 
 90, 104,052 
 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 
 
 36,389.8/4 
 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 
 
 H7,i56,977 
 131,614,271 
 155090,230 
 143,009,243 
 122,229,085 
 1 16,469,164 
 
 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 1 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- 
 
 1 Post, p. 142.
 
 EFFECTS ON PUBLIC FINANCE 93 
 
 merit 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 Anally 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 win- 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 alter the war, [896, was twice as 
 large as that for the year before the war, [893, and three 
 years after, in [899, it was three times as large. This tendency
 
 94 I < ONOMIC 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 1 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. 2 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.m. ■ Pt. I, Chap. ill.
 
 EFFECTS ON PUBLIC FINAN< I 95 
 
 (1) 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 fob Period 1896-1905 
 
 Expansion of means of defense: Yen Yen 
 
 Army 205,802,866 
 
 Nav y 145,572,264 
 
 ~ _ . , . 351.375.130 
 
 Extension ot enterprises: 
 
 Iron foundry 4.095.793 
 
 Railway to be built between Sorachita and Asahig- 
 
 awa i,i 78,330 
 
 Improvement of existing government railway lines 26,553,000 
 
 Extension of telephone exchange system 12,802,102 
 
 I irsl 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 ol administrative expenditure: 
 
 Principal and interest payments on loans 1 10,401,056 
 
 Annual salaries of soldiers, rewards and pensions. . . 1 12,940,810 
 
 Expense of collecting increased taxes I2 >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.Jiw 
 
 Total 687.340,204 
 
 The complete ten-year plan for revenue t<> meet the Ion- 
 going items of expenditure is as follows: 
 
 rEN-YEAF Rj \ INI B PLAN, 1896 [905 
 
 Yen 
 
 Natural increase of annual revenue 147,698,97] 
 
 Increased taxes and adjustment <>i ia\ system 2 j<>.- 
 
 Fund to pay off the expenses of guards at Weihaiwei 
 
 War indemnity 40,093, $87 
 
 '* on ' is ■ • 133.048,889 
 
 Profits from bonds for railway and telephone enterpi ises 1 1 ,680,4 '4 
 
 Total 584.914.742
 
 ()(> ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 2 I 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 
 
 \,i\ \ expansion . 139,157,096 
 
 1 stablishment of iron foundry 579,762 
 
 Fund for special war expenses, transportation, 
 
 communication, 1897 3,214,485 
 
 I99-733-053 
 
 Total 278,690,217
 
 EFFECTS OX PUBLU 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 
 navv asked for (4. 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 t< 
 tablish additional divisions and to construct fortresses, etc., 
 and for the navy to increase it- 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 iu time of war. 
 According to the new plan >ix 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 
 navy 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 OX 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 th< 
 great plans for expansion had been laid, is shown in the foll< >\v- 
 ing tables: 
 
 Expenditures for Defense, 1 893-1903 
 A r»i v 
 
 Fiscal year 
 
 Ordinary 
 
 Extraordinary 
 
 Total 
 
 1893 
 
 Yen 
 
 12,419,829 
 7,828,074 
 8,410,212 
 22,613,590 
 28,746,263 
 32,562,072 
 35,577.3io 
 36,123,892 
 
 37,433.9" 
 
 39,169,669 
 
 39.355.388 
 
 Yen 
 
 2,301,397 
 2,580,862 
 1,605,723 
 
 30,628,934 
 
 31,401,725 
 
 2i.335-58i 
 16,973,888 
 38,714,309 
 20,947,869 
 10,272,390 
 7.529. '74 
 
 Yen 
 14,721,226 
 
 1 894 
 
 10,408,936 
 
 10,01 5 
 
 53,242.524 
 
 60,147,988 
 
 1895 
 
 1896 
 
 1897 
 
 1898 
 
 53.897.< : 
 52,551,] 
 
 74,838,201 
 
 1899 
 
 1900 
 
 1 901 
 
 58,381,7 
 49,442 ,< ■ 
 
 1 902 
 
 iqoi 
 
 46,884,562 
 
 
 Total 
 
 300,240,210 
 
 184,291,852 
 
 484,532,062 
 
 
 Navy 
 
 Fiscal year 
 
 ( Ordinary 
 
 Extraordinary 
 
 Total 
 
 1 893 
 
 Yen 
 
 5. 1 4 1. 475 
 4,573.605 
 4,913,244 
 7.35L330 
 9.54 
 
 1 1. km. 475 
 I4.577.li4 
 [6,91 1,000 
 
 19.484.953 
 21,063,345 
 
 21,530,237 
 
 Yen 
 
 1,549 
 8,607 
 
 12,1 ; . 
 
 40,850,645 
 
 47.338,427 
 
 47,084,496 
 
 41,363 I 
 24.494,375 
 
 14.587,620 
 
 ) \ n 
 8,100,921 
 
 [894 
 
 [895 
 
 1 896 
 
 10,253,154 
 [3,520,269 
 
 
 
 1898 
 
 1899 
 
 1900 
 
 02 
 
 61 ,66i ,6io 
 58,274,895 
 
 1901 
 
 1902 
 
 43,979,3 
 $26,188 
 
 36,117,857 
 
 1 903 
 
 
 Total 
 
 136,281 .667 
 
 749 
 
 397,164,416
 
 [00 ECONOMIC Mil' rS OF THE SINO-JAPANESE AVAR 
 
 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: 1 
 
 Increased Expenditures for Army and Navy, Due to Plan of Expansion, 
 
 1 896-1 903 
 
 
 Army 
 
 Navy 
 
 Total for 
 
 Fiscal 
 year 
 
 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 
 i3,U5.759 
 13,149,013 
 
 I3,423.344 
 
 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 1896 
 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: 
 
 1 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 \\ eihaiwei. 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 FINAN< I. 
 
 IOI 
 
 Budget of Extraordinary 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- 
 
 Yen 
 
 14,071.894 
 
 17.334.891 
 
 8,486,767 
 
 2,949,108 
 479.376 
 
 Yen 
 6,460,520 
 
 19.363.747 
 9.854.338 
 
 3.542 
 2,679,790 
 
 Yen 
 
 ' 9.829,134 
 
 8,220,583 
 
 Yen 
 5,208,478 
 
 Yen 
 
 27,010,197* 
 
 7.699 
 18,341.30s 
 
 2,949,108 
 
 118 
 j. 790 
 
 Expansion of plant in 
 
 Expenses of Army Con- 
 Deficit 
 
 
 Total 
 
 43.322,236 
 
 38,362,137 
 
 18,049,717 
 
 5,208.478 
 
 •I.2I7 b 
 
 
 Navy: 
 
 Ship construction 
 
 Manufacture of arms 
 
 Construction expenses. . . . 
 
 47. 154. 576 
 33.75I.l63 
 13.870,507 
 
 78,893.399 
 33,176,330 
 6.25 
 
 
 
 125,169,547° 
 
 66,35 
 
 - 5.497 
 
 Total 
 
 94,776,246 
 
 118,324,719 
 
 
 
 
 
 
 
 138,098,482 
 
 156.686.855 
 
 18,049,717 
 
 5.208.478 
 
 3l3.24l.333 b 
 
 
 » The difference in exchange rate, 3.35I.35I yen, has been deducted. 
 b The difference in exchange rate has been deducted. 
 c 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 tabic: 
 
 Extraordinary Expansion Expi 
 Army 
 
 
 
 Repairs and 
 
 
 
 
 Fiscal year 
 
 Construction 
 
 initial pur- 
 
 Manufacture 
 
 
 
 of fori ; 
 
 chase of 
 
 of arms 
 
 Additional 
 
 Total 
 
 
 
 arms 
 
 
 
 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 
 
 1,291,730 
 
 5.739,279 
 
 934.o6i 
 
 472,192 
 
 17,262 
 
 1897 
 
 3,157,624 
 
 [2,601 ,55 s 
 
 19,205 
 
 5.515.1.15 
 
 21 ,914,002 
 
 1898 
 
 2,970, I'M 
 
 7,4<>4.5PO 
 
 2,492,243 
 
 [,97 1 
 
 tf,021 
 
 1899 
 
 3.465.359 
 
 6,928,578 
 
 3.541.755 
 
 1 20, 1 9 2 
 
 I4,< 
 
 1900 
 
 5,616,9] 2 
 
 9.309.375 
 
 4,216,945 
 
 59 - 
 
 [9,21 
 
 1901 
 
 4.433.293 
 
 4.482,973 
 
 2,706,436 
 
 46 • 
 
 [i,6 
 
 1902 
 
 1,591,202 
 
 2,756,393 
 
 I .M 0,659 
 
 44 I 
 
 6,2< 
 
 1903 
 
 2,919,341 
 
 [,697,81 1 
 
 
 10,957 
 
 4,62 
 
 Total . 
 
 25,445,862 
 
 (0,467 
 
 [8,341,304 
 
 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 
 
 202,962735 
 
 Li crease oj 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 
 
 I33.i73,58i 
 
 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 
 
 83,2 1 ^ 02 6 
 
 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 OX PUBLIC IT NAN' I 103 
 
 Ratio of Public Debt, Defense and Administrative Expenditures 
 
 Fis tl year 
 
 1893 
 1894 
 1895 
 1896 
 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 1903 
 
 Public debts 
 
 
 2 2 
 
 24 
 27 
 
 17 
 u 
 
 12 
 
 13 
 
 1 1 
 
 14 
 
 26 
 
 14 
 
 I >efenses 
 
 Per cent 
 26.7 
 25- 
 
 27 
 42 
 47 
 49 
 45 
 45 
 38 
 29 
 33 
 
 ( .incral 
 Administration 
 
 7 
 
 29 
 
 1 
 
 45 
 
 6 
 
 39 
 
 8 
 
 39 
 
 6 
 
 57 
 
 
 
 4i 
 
 5 
 
 42 
 
 3 
 
 47 
 
 7 
 
 44 
 
 3 
 
 52 
 
 Per d at 
 50.6 
 9 
 3 
 7 
 5 
 9 
 5 
 6 
 
 4 
 o 
 o 
 
 It will be seen from Table IV at the end of this chapter 1 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: (1) 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 <>I [RON 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 mean- for national de- 
 fense it was plain that, as iron was the principal material used 
 in building warships and manufacturing arms, in case oi 
 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 [898, 6,474,056 yen more were 
 
 1 Post, p. 144.
 
 K>4 ECONOMIC EFFECTS OF THE SIXO-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 1 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 
 
 1 901 
 
 1 902 
 
 1903 
 
 Total. 
 
 Establishment 
 of iron foundry 
 
 Yen 
 
 157,529 
 709,224 
 
 L747.572 
 3,011,008 
 7,126,198 
 5.853.335 
 490,117 
 820,011 
 
 19.914.994 
 
 Supplementary 
 appropriation 
 
 Yen 
 
 322 
 
 495 
 
 20 
 
 762 
 
 429 
 
 454 
 
 838,645 
 
 Investigation 
 
 Yen 
 
 17.942 
 
 17.942 
 
 Total 
 
 Yen 
 
 157,529 
 709,224 
 
 L747.572 
 3,011,008 
 7,126,198 
 6,176,097 
 1.003,488 
 840,465 
 
 20,771.581 
 
 ^00,000 yen wore for harbor construction at Wakamatsu, and 4,000,000 yen a 
 reserve to be used as operating capital.
 
 EFFECTS ON PUBLIC FINAN< 1 IO5 
 
 CONSTRUCTION' AND [MPROVEMENT OF RAILWAYS 1 
 
 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 it- 
 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 ot 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 1 
 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 [897 there was need of an increase in the fund tor c<>n- 
 struction expenses between Tsuruga and Toyama.and between 
 llachioji and Nagoya. Thus, in that year 8,103,381 yen were 
 added, and in 1899 the fund tor construction expenses between 
 Tsuruga and Toyama and between Sinonoi and Shiojiri was 
 increased by 5,133,28] yen, bringing the total amount up to 
 73. 1 58,325 yen. Then, in [900, [9,529,886 yen were added in 
 connection with the construction ot" the line between Fuku- 
 
 1 See Table Y at the end of this chapter, post, p. 1 +5.
 
 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 yen. 
 
 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 1 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. 
 
 l Post, p. 145.
 
 EFFECTS OX PUBLIC FINANCE 
 
 107 
 
 The following tabic 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 Teli phone Exi hange Extension 
 
 Fiscal year 
 
 Cost 
 
 Sources of ordi- 
 nary annual 
 revenue 
 
 Bonds issued 
 
 Total revenue 
 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1 900 
 
 1 901 
 
 1902 
 
 1903 
 
 594,196 
 2,473.420 
 
 1,896,1 19 
 
 1,781,655 
 2,349,786 
 1,807,587 
 I. ''1 5.532 
 268,556 
 
 Yen 
 
 437. < s 75 
 72,790 
 
 Yen 
 
 594,196 
 2,473,420 
 
 1 ,89(1,1 19 
 1,781,655 
 2.34" 
 1,807,587 
 1,177.657 
 195.766 
 
 Yen 
 
 594.196 
 N.420 
 1 ,896,1 19 
 [,781 
 
 2,349 
 
 1,807 
 1,615,532 
 268,556 
 
 Total .... 
 
 t2.786.851 
 
 510,665 
 
 12,276,186 
 
 12,786,851 
 
 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 
 year 
 
 Hypothec 
 Bank 
 
 Agricultural 
 and Indus- 
 trial Bank 
 
 I [okkaido 
 
 ( lolonial 
 
 Bank 
 
 Formosa 
 
 Colonial 
 Bank 
 
 Industrial 
 Bank of 
 Japan 
 
 Total 
 
 1897... 
 1898.. . 
 1 899. . . 
 1900. . . 
 1901. . . 
 1902. . . 
 1903- • 
 
 Yen 
 
 55,052 
 30,010 
 30,873 
 
 Yen 
 991,625 
 
 1,983.355 
 
 1,990,008 
 
 1,996,010 
 
 940,224 
 
 213,901 
 
 5,000 
 
 Yen 
 
 250,000 
 250,000 
 
 200,000 
 200,000 
 
 Yen 
 250,000 
 . ^0,000 
 
 6 
 
 Yen 
 +.541 
 
 1.046,677 
 2,013,365 
 
 2.520,881 
 jfi.OIO 
 
 [,140,22 \ 
 
 728,442 
 
 5.000 
 
 Total 
 
 "5,935 
 
 8,120,123 
 
 1111(1,000 
 
 5< 10,000 
 
 64,54' 
 
 9,700,599 
 
 EN( nt K \«,| \tl\i OF NAVIGA1 ION 
 
 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
 
 108 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 that company to institute regular sendee between Yokohama 
 .iihI 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 OX PUBLIC FINANCE 
 
 109 
 
 1900, to September, 1905. To the Yangtze-Kiang, the Shang- 
 hai-Soochow, and the Shanghai-Hankow steamship lines, a 
 certain amount of subsidy was to be given every year to 
 enable them to maintain regular sen ice. 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 
 
 1 900 
 
 1901 
 
 1902 
 
 1903 
 
 \ t n 
 
 [34.775 
 
 538,702 
 
 67 1, 3 2 1 
 
 896,898 
 
 4,205,729 
 
 5.554.440 
 
 6,387,713 
 
 6.332,44« 
 
 880,000 
 
 708,384 
 
 2,580,802 
 
 3,957,31s 
 
 I. INS. 71. J 
 906,203 
 676,300 
 802,431 
 
 Yen 
 
 13."") 
 213,875 
 [87,380 
 [52,930 
 
 581,094 
 4H,348 
 
 437.' s «<» 
 
 Yen 
 
 [,01 1.775 
 
 1 ,260,195 
 
 3,46s 
 
 5,041,593 
 
 5.547,421 
 
 7.041.737 
 
 7.475.361 
 
 7.572,689 
 
 Total.. . . 
 
 24,722,026 
 
 1 1 ,700,197 
 
 1,997,546 
 
 38,419.7 
 
 SUNDRY EXPENDITURES l\ CONNECTION Willi FORMOSA 1 
 
 Formosa came into our possession as a result of the Treaty 
 of Shimonoseki. The various expenses incurred in connect ion 
 
 'Especially those in connection with special undertakings in Formosa and in 
 Weihaiwei.
 
 HO 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 OX PUBLIC FIXAXCE III 
 
 Formosa was being led on to self-support, at the same time 
 necessary enterprises in the new possessions could not he 
 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. 
 
 (1) 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. Ik-sides, 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 lan< 1 
 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, 
 that it became a matter of urgenl necessity to reconstruct tin- 
 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 
 I ormosan 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 1 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 1900 amounted to nearly 300 million yew. 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. 
 
 1 Post, p. 146.
 
 EFFECTS OX PUBLIC I I\ \\< 1 
 
 II 
 
 Bonds and indemnity 
 
 BON1N 
 
 (i) War Bonds — The bonds issued to pay off the expei 
 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 122,457,687 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 Issle * 
 
 Fiscal year 
 
 Redemption of principal 
 
 Interest paid 
 
 Total 
 
 Face value 
 
 Amount paid 
 
 1894 
 
 1895 
 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1 900 
 
 Yen 
 
 ^,300 
 940,300 
 
 2,235,200 
 
 4,889,300 
 
 [08,516,650 
 
 Yen 
 
 8,001,558 
 912,255 
 
 2,151,128 
 
 4,986,746 
 
 108,739,883 
 
 Yen 
 
 7 s -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. 7'") 
 5,792,879 
 5,701,388 
 5,779,263 
 5,674,934 
 5.677.813 
 2,721,485 
 
 Yen 
 223 
 2,937,055 
 
 5.431 
 
 2,643 
 6,206,077 
 [4,096,347 
 5,8i 
 
 5,219 
 6,697,681 
 5.779.344 
 5.774.769 
 5.792 
 5.701 
 
 1,263 
 7,826 
 
 [0,664,559 
 1 1 1,461, 
 
 1901 
 
 1902 
 
 1903 
 
 1 904 
 
 1905 
 
 1906 
 
 1907 
 
 1908 
 
 1 909 
 
 1910 
 
 
 Total 
 
 [24,920,750 
 
 124,791,570 
 
 87,162,1 Bo 
 
 211,953,75' 
 
 » A word should be said regarding the amount paid for redemption of t he principal The amount 
 paid was only 78,452,300 yen or the amount of the fai e value of the bonds redui ed, by purchase and 
 exchange, by 46, 339, 271 yen. Thus the amount paid for redemption and the fa< e value of the bonds 
 
 did not coincide. 
 
 The net receipts were, as before stated, [22,437,687 yen, 
 so that after all the amount paid in for redemption exceeded 
 
 9
 
 114 ECONOMIC EFFECTS 01 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 
 
 Amount 
 
 Remarks 
 
 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. . . . 
 
 Yen 
 
 26,553,000 
 
 1,178,330 
 3,516,031 
 
 12,802,102 
 
 12,213,550 
 77.458,907 
 
 1,278,080 
 
 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 y en - 
 
 Afterward 163,007 yen, 
 i.e., a decrease of 1,115,- 
 073 yen-
 
 EFFECTS OX PUBLIC FINANCE 115 
 
 Law No. 93, promulgated May 13, 1896, for the building of 
 the Hokkaido railways, provided for the construction of the 
 line from Asahigawa, Ishikari 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 Xemuro 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 Xayoro 
 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 Xo. 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, Xos. 
 1 1 and 12, issued in March, 1895, revised LawXo. 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 
 Xo. 13, issued in February, 1899, providing for special ac- 
 counts for these three loans. Afterwards these bonds wen 
 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 cla 
 of bonds may be summarized a- shown in the following table. 
 
 By these immense bond issues, the government tried to 
 carry out the aforesaid plans lor 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
 
 IK) ECONOMK llll< IS OF Till. SINO-JAPANESE WAR 
 
 - of bonds 
 
 First authorization 
 
 Subsequent substitute 
 authorization 
 
 
 Yen 
 
 135,000,000 
 
 33,000,000 
 
 60,000,000 
 
 35,000,000 
 
 Yen 
 
 148,991,834 
 
 33,000,000 
 
 1 1< ik kaido Railway 
 
 
 94,844,459 
 
 Formosan industrial 
 
 35,000,000 
 
 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 million 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 VII 1 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 VIII 2 gives the manifold purposes of the 
 industrial bonds for the same period, and Table IX 3 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: 4 
 
 1 Post, p. 147. 2 Post, p. 148. 3 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 OX PUBLIC FIN AN* I. 
 Interest Paid on Bonds 
 
 I I 
 
 Year 
 
 Imperial 
 
 5 per cent 
 
 bonds 
 
 Formosan 
 
 industrial 
 
 bonds 
 
 4 per cent 
 
 British sterling 
 
 bonds 
 
 Total 
 
 1 893-1 895.. .. 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 Yen 
 
 325,626 
 375,ooo 
 1,287,979 
 2,840,368 
 2,840,408 
 3,031,241 
 3,276,790 
 4,127.194 
 5,967,454 
 
 Yen 
 
 39,215 
 160,812 
 347,283 
 443,018 
 
 Yen 
 
 3,913,203 
 3,907,816 
 
 3.907.934 
 3,916,066 
 
 Yen 
 325,626 
 
 - 000 
 1,287,979 
 2,840,368 
 2.^40,408 
 6.983.659 
 7,345.418 
 8.382.41 1 
 10.326,538 
 
 Total. . . . 
 
 24,072,060 
 
 990,328 
 
 15,645,019 
 
 4".7"7.407 
 
 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 Percent Yen Percent 
 
 general accounts 76,4851178 ' 
 
 Indemnity transferred [74,875,542 38 75 
 
 Amount secured from bond issues: 
 
 [ndusl rial bonds 138,846,215 ,v>77 
 
 Railway bonds 56,106,884 12 13 
 
 Hokkaido railway bonds ... 4,967,900 1.10 
 
 199,921,000 \\ .;" 
 
 As shown in the foregoing table, the percentage obtained 
 from the various bond issues i<> the total needed \\.i- 44-,v> 
 per c.nt, the balance having been transferred from the in- 
 demnity (38.75 per cent) and from the general account 
 (16.95 per cent ), but these bonds were not all issued at home. 
 About half of them, that is, 83,96] ,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 YIII of the 
 Shimonoseki Treaty of Peace, as mentioned before, which 
 reads thus: 
 
 China agrees to 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 tads [Raping 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 
 
 
 Taels 
 200,000,000 
 
 ;><>,ooo,ooo 
 
 I o< 10,000 
 
 Yen 
 
 311,072,865 
 
 Compensation for the return of the Liao- 
 
 44. ( ' (, 7.499 
 
 Expense of guards at Weihaiwei for three 
 
 2,380,103 
 
 
 
 Total 
 
 2.; 1.500,000 
 
 $,360,467 
 
 Interest for the use of the indemnity fund 
 
 -.-- \ 
 
 
 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 
 
 (1) 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 139,157,097 
 
 I Expenditure for establishing an iron foundry 579,702 
 
 (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 FINAN< E 121 
 
 The details of the revenue and expenditures are shown in 
 Table X and XI at the end of this chapter. 1 
 
 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- 
 Japane^e 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 tor 
 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 aboul to introduce a bill to 
 that effect in the National Diet, when the Diet with a unan- 
 imous vote passed a resolution of it-- own accord to present 
 
 1 Post, 1 1. 150.
 
 122 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 tli is 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 government 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 
 
 
 Fundfor 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 
 1 1 
 11 
 
 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 thcundertakings forwhichthe 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, 1 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 ( >urg< >ld a >ins were minted from 
 this, therel >y rendering practical >le the plan < >f estal dishing the 
 gold standard. Here, however, we must explain clearly that 
 
 1 Infra, p. I 59.
 
 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 jew, issue price 10,168,636 jew) 
 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-
 
 I i i l< is o\ 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 follows: 
 
 No. 
 
 Date 
 
 Total 
 
 amount of 
 
 loan 
 
 Private 
 
 subscription 
 
 Absorbed 1>\ 
 indemnity 
 accounts 
 
 Total 
 issue 
 
 1 
 2 
 3 
 4 
 5 
 
 April 11-22, 1898 
 April 25-28, 1898 
 fune 8-13, l8 98 
 Oct. 1-10, 1898 
 April 1-30, 1899 
 
 Total 
 
 Yen 
 
 1 ,000,000 
 1 ,000,000 
 1 ,000,000 
 2,000,000 
 1 ,000,000 
 
 Yen 
 
 477. ''5" 
 44.750 
 12,750 
 
 i.H.C'ioo 
 305,620 
 
 Yen 
 
 519.45" 
 955.250 
 987,250 
 586,100 
 694,380 
 
 IV;; 
 17.100 
 
 1 .' H >O,000 
 I .000,000 
 2,000,000 
 1 ,000,000 
 
 
 6,000,000 
 
 2,254.07.. 
 
 3.742,430 
 
 5,997,IOO 
 
 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 circumstance - 
 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 ot the bonds. The 
 result was very successful, so that in October of the same year 
 the money market was gradually relieved and the interesl 
 rate of the Bank of Japan was reduced. Therefore on ( October 
 10, the order to purchase the bondswas 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 lace value between April 21 and June 1 
 of the same year. 
 
 We have so far described how the government purchased 
 the negotiable instruments for the purpose of relieving the 
 money market. Weshallno'w shou 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 
 
 S 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 
 13,910 150 
 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 sa he 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 1 27 
 
 Estimated receipts 
 Yen 
 
 Registry tax (new) ("in force from April 1, 1 896; 6,423,993 
 
 Business tax (new) in force from January I, 1897) 7.551.377 
 
 Sake tax (increased) (in force from October 1, 1896) 9,284,544 
 
 Leaf tobacco monopoly (newly established) (in force 
 
 January 1, 1898) 10,316,379 
 
 Total 33.576,293 
 
 Decrease from abolition of certain taxes 7.55 2 .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 1, 1899) 8,475,958 
 
 Income tax (in force from April 1, 1899) 1,494,516 
 
 Sake tax (in force from January 1, 1899) 22,556,409 
 
 Tonnage tax (in force from August 4, 1899) 237,986 
 
 Registry tax (in force from April 1, 1899) 1,846,759 
 
 Leaf tobacco monopoly receipts (in force from April 1, 1899) . 2,145,550 
 Tax on convertible bank notes (in force from April I, 1899) . . 1,159,560 
 
 Soy tax (in force from March 1, 1899) 1.598,387 
 
 License to sell tobacco (in force from April 1, 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 a- 
 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 taxrs, it i> seen t<> 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 ine< >me 
 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 [895 and 1900: 
 
 Year 
 
 Direct 
 
 Indirect 
 
 
 Per cent 
 
 Per cent 
 
 1895 
 
 53-8 
 
 46.2. 
 
 1900 
 
 44.2 
 
 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 OX PUBLIC FINAN< 1 129 
 
 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 tin- 
 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-JAPANKSK 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), 
 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 ;yew were 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 indemnity 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 and 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 1 1 ,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 • ',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 37,0.-50,000 
 
 Excess of revenue 1 .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 services, 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 thai 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 <>f shipping 
 
 routes 3,790,462 
 
 Sundrj expenses in Formosa 12,121,597 
 
 Army expenses ■ .-75 3 10 
 
 Navy expenses ,v57~ 
 
 Army expansion 5,1 (.0,798 
 
 I emporary repair of warships and torpedoes \ )<> ).;- 
 
 Sundry expense- in connection with revision ol treaties and execu- 
 tion of laws in pracl ice 1,961,425 
 
 Sundry expenses for education 1 508,310 
 
 Increase in expenditure of various government departments 6,141,562 
 
 fotal 35.95
 
 132 ECONOMIC II I l< IS 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., (1) 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 FIN AM I 1 33 
 
 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 , 
 1 90 1 . 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 tariff 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-Japancse 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 tin- 
 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
 
 [34 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 1 
 (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 jew. 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 1, 1898, in accordance with 
 Leaf-Tobacco Monopoly Law No. 35, promulgated on March 
 27, 1896. 
 
 1 Article 12, Leaf-Tobacco Monopoly Law Xo. 35.
 
 EFFECTS OX 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 1 ief< »re January 
 I, 1898, which was the date of the execution of the new law, 
 was to be governed l>y 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. l Unscrupulous merchants often took advantage 
 of this right and thus the desired result of the monopoly 
 system could not be obtained. Therefore, on January 1 , 1 899, 
 the tariff law was reformed and the existing evils removed, as 
 by Law No. 28, issued on March 1, 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 manufactures, 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 at 22 sen per 100 
 momme (1 momme = 58 grains troy). From this four sen, four 
 rin, and two mo of stamp tax was deducted, ><> that the net 
 market price was fixed at 17.5s sen. Since 100 momme of 
 manufactured tobacco requires 14.S0" momme of leaf tobacco 
 as material, at the aforementioned market price loo momme 
 of leal tobacco would be worth 12.157 sen. The rate of 
 revenue for the government from this was fixed at 55 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 lived at 5.084 sen per 100 
 
 1 Article 1^, Leaf-Tobacco Monopoly I aw No. 35.
 
 I,V> I ( ONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 momme. The following table will show the basis of monopoly 
 
 ]> rices: 
 
 Sen 
 
 Profit of the treasury (35 per cent.) 4.248 
 
 ( ommission for brokers for transportation (1 1 per cent.) ....... 1 .026 
 
 Sundry manufacturing expenses (about 20 per cent.) 2 .000 
 
 Profit of the manufacturers and of the dealers (33 per cent.) . . . . 4 .027 
 
 Total 16.385 
 
 If this total is compared with the price of leaf tobacco, that 
 is 12.137 sen > 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 1 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 en > 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 
 
 1898 
 
 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 
 0.730 
 0596 
 0.580 
 0.671 
 
 1899 
 
 1900 
 
 1901 
 
 1902 
 
 0.726 
 0-755 
 
 1903 
 
 
 Total 
 
 63,651,566 
 
 63.5u.855 
 
 42,303.422 
 
 
 
 
 1 1 kwan = S\ 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 1899 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 
 
 779 
 
 86.2 
 
 94.0 
 
 88.1 
 
 158.8 
 
 178.8 
 
 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 y en 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-Japancse War, so the expenditure of the local 
 governments for educational and industrial development 
 expanded proportionately, to keep pace with the national
 
 I38 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 
 
 1 893 
 
 1 00.0 
 106.0 
 101 .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 ° 
 589-7 
 
 100. 
 
 IIO.O 
 
 119. 7 
 
 134-3 
 170.2 
 
 193-5 
 223.3 
 263.0 
 296.6 
 
 311 5 
 
 3164 
 
 100. 
 
 1894 
 
 1895 
 
 92 
 100 
 199 
 
 283 
 
 259 
 300 
 
 346 
 315 
 342 
 295 
 
 4 
 9 
 
 1896 
 
 9 
 
 1897 
 
 4 
 
 1898 
 
 8 
 
 1 899 
 
 5 
 
 1900 
 
 1 
 
 1901 
 
 5 
 
 1902 
 
 
 
 1903 
 
 1 
 
 
 
 
 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. 1 
 
 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, 
 
 1 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 139 
 
 Ratio of Expenditures of 1904 and Rate of Increase over 1895 
 
 
 Prefectural 
 expenditure 
 
 City expenditure 
 
 Town and village 
 expenditure 
 
 
 Percentage 
 
 Rate of 
 
 Percentage 
 
 Rate of 
 increase 
 
 Percentage 
 
 Rate of 
 increase 
 
 
 16.15 
 31-55 
 12.30 
 
 2.90 
 
 6.79 
 3.88 
 
 26.70 
 
 101 .2 
 148.9 
 659.1 
 
 8130 
 
 4104 
 102.9 
 
 14 32 
 22.05 
 
 0.36 
 
 4.81 
 
 13-53 
 
 8.49 
 
 0.58 
 
 35-87 
 
 721 .6 
 385 9 
 
 257 4 
 795 3 
 
 8051 
 
 278.4 
 
 58.7 
 
 427.5 
 
 16.51 
 35-82 
 
 1 .21 
 5 94 
 
 s'65 
 23.16 
 
 1.08 
 10.63 
 
 
 
 
 
 250.1 
 
 Encouragement of in- 
 
 504- 1 
 
 
 5466 
 
 Prison expenses for pre- 
 
 
 
 1.2694 
 
 Office 
 
 112. 
 
 
 62.3 
 
 
 979-2 
 
 Total 
 
 100.00 
 
 145.6 
 
 100.00 
 
 4897 
 
 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 1 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 item- of expenditure, such as the expense oi 
 
 1 Post, p. 151.
 
 I40 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 OX PUBLIC FINANCE 
 
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 150 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 Table X. — Revenue for Post-bellum Enterprises and Annual Balance 
 
 
 
 
 Interest on 
 
 
 
 
 
 
 Compensation 
 
 
 
 
 
 Fisc 
 
 al War expense 
 
 for return of 
 
 
 Total 
 
 Amount 
 
 Balance 
 
 yea 
 
 r indemnity 
 
 Liaotung 
 Peninsula 
 
 increase and 
 decrease 
 
 revenue 
 
 expended 
 
 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 1805 
 
 . . 74,143,054 
 
 44,907,499 
 
 93,624 
 
 119,144,177 
 
 78,957,165 
 
 40,187,012 
 
 1896 
 
 83,719,110 
 
 
 
 911.65-2 
 
 84,630,762 
 
 11,789,389 
 
 113,028,385 
 
 18Q7 
 
 . . 34,869,189 
 
 
 
 7,071,097 
 
 41,940,286 
 
 40,360,796 
 
 114,607,875 
 
 1898 
 
 . . 118,341,511 
 
 
 
 1,341,450 
 
 119,682,961 
 
 66,187,071 
 
 168,103,765 
 
 1899 
 
 
 
 
 311,277 
 
 311,277 
 
 82,636,90s 
 
 85,778,137 
 
 1900 
 
 
 
 
 
 
 661,313 
 
 661,313 
 
 31,240,140 
 
 55,i99,3io 
 
 1901 
 
 
 
 
 
 
 1,705.783" 
 
 1,705,783° 
 
 20,883,427 
 
 32,610,100 
 
 1902 
 
 
 
 
 
 
 155.337 s 
 
 155.337 s 
 
 13,866,937 
 
 18,587,826 
 
 1903 
 
 
 
 
 
 
 147,073 
 
 147,073 
 
 9.S14.215 
 
 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 
 
 To 
 
 tal 311,072,864 
 
 44,907,499 
 
 8,888,224 
 
 364,868,587 
 
 360,690,217 
 
 4,178,370 
 
 B Decrease. 
 
 Table XI. — Expenditures for Post-bellum Enterprises 
 
 
 Redemption 
 
 
 
 
 Extraordi- 
 
 Amount 
 transferred 
 
 
 
 of Sino-Jap- 
 anese War 
 
 
 
 Estab- 
 
 nary war 
 expendi- 
 
 
 Fiscal 
 year 
 
 expenses, 
 and transfer 
 
 Army 
 expansion 
 
 Naval 
 expansion 
 
 lishment 
 of iron 
 
 ture and 
 expenses of 
 
 perial house- 
 hold and to 
 
 Total 
 
 
 to General 
 
 
 
 foundry 
 
 communi- 
 
 
 
 Accounts 
 
 
 
 
 cation 
 
 funds 
 
 
 
 Fund 
 
 
 
 
 bureau 
 
 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 1895... 
 
 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.. . 
 
 12,000,000° 
 
 8,932,554 
 
 25. 151. 519 
 
 39,302 
 
 63.696 
 
 20,000, 000 b 
 
 66,187,071 
 
 1899.. • 
 
 
 6,053,980 
 
 26,582,925 
 
 
 
 
 
 50,000,000° 
 
 82,636,905 
 
 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. 
 
 b Imperial Household. 
 
 Various Funds.
 
 EFFECTS OX PUBLIC FINANI E 
 
 LSI 
 
 X 
 
 
 
 
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 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 MAKKI-.I 153 
 
 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 place- < >1 
 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. 1 
 
 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 31,1 894 
 
 January 31, 1895 
 
 April 30, 1895 
 
 December 31, 1895 
 
 Comparison with J u ne 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 
 141.736,358 
 149,813,700 
 142,756,092 
 132,839,984 
 180,336,815 
 
 84,515,404 
 79,632,988 
 81,718,291 
 80,924,075 
 68,532,320 
 60,370,797 
 
 62,856,795 
 62,103,370 
 68,095,409 
 61,832,017 
 64,307,664 
 119,966,018 
 
 4.197.549 
 55.083,148 
 
 8.077.342 s 
 38,600,457" 
 
 2,085,303" 
 I9,262,i9i b 
 
 5.992,039" 
 57,862,648" 
 
 5,499,640" 
 56,385,239" 
 
 1 Post, p. 196. 
 
 » Increase. 
 
 b Decrease. 
 
 Reserve 
 power of 
 
 issue 
 
 Yen 
 
 299,973 
 1,302,091 
 
 2,547,265 
 7,618
 
 EFFECTS OX THE MONEY MARKET 1 55 
 
 Judging from the foregoing table, we find the specie re- 
 serve was not greatly affected 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 resent 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 fad s, 
 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 1 »e gr\ en as the principal 
 reasons why this was possible: 
 
 (1) The war itself was a stimulus to the mind- 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 tol he financial 
 future, and idle capital increased, because owing to the pre- 
 cautions of business men lucrative ways of disposing of it
 
 I56 ECONOMIC EFFECTS OF THE S1NO-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. 
 
 \\ lien the Sino- Japanese War, the only international war
 
 EFFECTS ON THE MONEY MARKET I 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 incn 
 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 Nihon, 
 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 pe< »ple 
 owing to the expanded financial program of the government. 
 
 However, the depression in economic circles caused by the
 
 I58 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 ret recession 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 
 born 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 MARK! I 1 59 
 
 quently the national movement for progressive enterprises 
 whieh arose after the war was cheeked, and the high spirits of 
 the nation were depressed, and finally the finan< ial 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-J a] tanese 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 anion- 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 lasl 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, 1871, a new currency law- 
 was promulgated, thereby laying the basis for the gold-stand- 
 ard system. According to this law, the yen, containing t.5 
 grams of pure gold about 900 and i| grams of alloy was
 
 l6o 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 
 
 (1) 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.' 
 
 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 
 
 10 ryo, 5 ryo, 1 ryo,i 
 bu, 1 shu. 
 
 2 bu, 1 bu, 2 shu, 1 shu. 
 
 (4) Convertible Notesby Colonial 
 Department, Jan. 14, 1872- 
 Mar. 31, 1872 
 
 2,500,000 
 
 10 yen, 5 yen, I yen. 
 
 10 yen, 5 yen, 1 yen, 50 
 sen, 20 sen, \osen. 
 
 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 issued. 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 1 
 were revised, so that bonds bearing 4 per cent intercut 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 tin- 
 notes, and, after the establishment of the Bank of Japan in 
 June, 1882, ordering that bank to issue convertible silver 
 banknotes 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 
 
 1 These were authorized for the purpose of replacing the government notes then 
 in circulation.
 
 [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 
 hank 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 1 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 1 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 
 
 Pa 
 
 ris 
 
 Berlin 
 
 
 
 
 
 
 
 
 Highest 
 
 Lowest 
 
 Highest 
 
 Lowest 
 
 I tighest 
 
 Lowest 
 
 
 s. d. 
 
 5. d. 
 
 /• 
 
 /• 
 
 VI. 
 
 m. 
 
 1886. 
 
 
 3.04.04 
 
 3.00.13 
 
 4.21 
 
 3-79 
 
 3 35 
 
 3 03 
 
 1887. 
 
 
 3.03.80 
 
 301. 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 
 
 3 i- 
 
 1891. 
 
 
 30519 
 
 3.01.32 
 
 4-33 
 
 3 
 
 93 
 
 3 \" 
 
 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 
 
 ^■77 
 
 2 36 
 
 1894. 
 
 
 2.03.50 
 
 1 . 1 1 . 50 
 
 2.87 
 
 2 
 
 45 
 
 2 31 
 
 
 i«95- 
 
 
 2.02.88 
 
 1. 11. 13 
 
 2.83 
 
 2 
 
 43 
 
 - -7 
 
 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 Un- 
 economic effects which the fluctuation in the prices of gold 
 and silver produced in Japan, and if their was such nerd, 
 what system should be adopted. The committee by a ma- 
 jority vote decided to adopl the gold-standard system.
 
 1 64 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 1 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 
 
 650 
 
 Introduction in 
 House of Commons: 
 
 Feb. 26 
 
 March I 
 
 Rise 
 
 79-50 
 
 81 .30 
 
 1 .80 
 
 98.80 
 99.80 
 
 1 on 
 
 55 10 
 
 56.40 
 
 1 -30 
 
 61 .40 
 
 62.00 
 
 0.60 
 
 •i 00 
 386.00 
 
 10.00 
 
 Approved by Special 
 Committee of the 
 1 louse: 
 
 Previous day 
 
 March 6 
 
 Rise 
 
 7570 
 
 77 30 
 1 60 
 
 95.80 
 97 -30 
 
 1 50 
 
 55 00 
 
 55 20 
 
 0.20 
 
 6i .60 
 
 (>2 . IO 
 O.5O 
 
 369 9 1 
 
 ;,:<>. 00 
 
 9 50 
 
 Passed by the House: 
 
 Previous day 
 
 March 12 
 
 Fluctuation 
 
 76.90 
 
 76.60 
 
 . 30 
 
 97-50 
 
 98. ID 
 O.6O 
 
 55 00 
 55.60 
 
 0.60 
 
 61 .10 
 
 386.00 
 
 Passed by Peers: 
 
 Previous day 
 
 March 23 
 
 Fluctuation 
 
 76.90 
 
 76.60 
 
 030 
 
 99 30 
 
 101 . 10 
 
 1.80 
 
 55 30 
 
 55-70 
 
 .40 
 
 62.10 
 62. 10 
 
 385.00 
 
 402 .00 
 
 17.00
 
 166 economic effects of the sino-japanese avar 
 
 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. 1 
 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 
 
 1 Article 2 of the same decree.
 
 EFFECTS ON Till-; MONEY MARKET 
 
 Redemption of Bank Notes 
 
 167 
 
 Not< s 
 
 Government notes. . 
 National bank notes. 
 Total amount of vari- 
 ous notes 
 
 Date 
 
 Feb. 28, 1878 
 Feb. 28, 1879 
 
 Jan. 31, 1880 
 
 1 [ighest 
 amounts of | Amount 
 various notesjune 30, 18 
 in circulation 
 
 Yen 
 
 141,274,862 
 
 28,347,876 
 
 i7o.i57.477 
 
 Yen 
 
 49.337.248 
 28,059,486 
 
 77.396.733 
 
 Decrease, 
 
 June 30, (888 
 
 compared 
 
 Yen 
 
 9i.937.6i5 
 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. 1 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 <>n the 
 amount of the issue, after the permit of the Minister of 
 Finance had been obtained. 2 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 .1- .1 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 1. This was due to the fact 
 that at that time, owing to the rise in the price of rice, the 
 
 1 Of this amount, 27 million yen was issued gradually, with the amount of the 
 redempl ion ol the nal tonal bank notes since January 1 . 1889, .1- the limit. 
 1 This was the securitii - rea rve issue.
 
 [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 1 891 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> 2 7 2 >7 21 
 yen), to January 12, 1895, the highest amount was 4,197,549 
 yen at the end of December, 1894, and the average amount 
 was 2,211,054 y en - 
 
 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 (i,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 25,044485 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 1), 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: 
 
 1 titration 
 
 Average 
 
 Maximum 
 
 Dec 29 1894— [an 12 1895 
 
 Yen 
 
 22,11 1,054 
 29,100,731 
 
 25.044.4 
 3.287,195 
 
 1.45L' tt 
 : ,165 
 
 Yen 
 
 4.10; 
 
 May 31 1895-May 19 1896 
 
 55.083,147 
 
 July 24 1897— Sept 14 1898 
 
 47.312,65; 
 
 Oct 26 1 898-Nov 7 1 898 
 
 8,110,818 
 
 Nov 27 1898-Dec 1 1898 
 
 1,667 
 
 Dec 16 1 898— I* i-1 > 21 1899 
 
 24,016.- 
 
 
 
 
 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 1 shows the amount of 
 bank note issues since 1894, when the extra-limit issue first 
 appeared, and Table III 2 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. * Post, p. 198.
 
 EFFECTS OX THE MONEY MARKET 
 Paper Money in Circulation, i 893-1 899 
 
 171 
 
 At end of year 
 
 1893 
 
 1894 
 
 189s 
 
 1896 
 
 1897 
 
 1898 
 
 1899 (Feb.) 
 1899 (Dec.) 
 
 Total. . . 
 
 Government 
 notes 
 
 Yen 
 
 16,407,000 
 13.404.547 
 11,129,224 
 9.376,172 
 7,451,09s 
 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 
 
 1.866,563 
 1,684,065 
 
 90.407. 94S 
 
 Convertible 
 
 notes of Bank of 
 
 Japan 
 
 Yen 
 148,663.128 
 149.813.700 
 180,336,815 
 198.313.896 
 226,319.058 
 I97.399.90i 
 181,218,176 
 250.562,040 
 
 1.532,626.714 
 
 Total 
 
 Amount 
 
 Comparison 
 with 1893 
 
 Yen 
 187.826.247 
 185,000,044 
 212,262,825 
 224.i87.9S7 
 238.794.885 
 204,678,100 
 188,195.965 
 254.687.823 
 
 1.695.633.936 
 
 100. o 
 98. 5 
 113 o 
 H9-4 
 127 . 1 
 109.0 
 100.2 
 I3S 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 cud of this chapter. 1 
 
 1 Post, p. I
 
 172 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 Extra-Limit Issues of Convertible Notes 
 
 At end of 
 
 Specie 
 reserve 
 
 Decrease 
 
 compared 
 
 with month's 
 
 end, from 
 
 standard 
 
 Bank note 
 issue 
 
 Extradimit 
 issue 
 
 1895 
 
 April 
 
 May 
 
 (June-Nov. omitted) 
 Dec 
 
 1896 
 
 Jan 
 
 Feb 
 
 March 
 
 April 
 
 May 
 
 (June-Dec. omitted) 
 
 1897 
 (J an. -May omitted) 
 
 June 
 
 July 
 
 (Aug.-Nov. omitted) 
 Dec 
 
 1898 
 
 Jan 
 
 Feb 
 
 Mar 
 
 (April-July omitted) 
 
 Aug 
 
 Sept 
 
 Oct 
 
 Nov 
 
 Dec 
 
 Yen 
 68,532,320 
 66,199,000 
 
 60,370,797 
 
 54,890,176 
 54,589,146 
 55.347.oo2 
 
 55.574.499 
 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 
 
 Standard 
 2,333,320 
 
 8,161,523 
 
 13,642,144 
 
 13,943,174 
 13,185,318 
 12,957,821 
 37,776,329 a 
 
 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 
 
 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 
 
 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 
 
 a 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 OX 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 al a premium and 
 this would have serious effects upon finance. Then, again, 
 our financiers and economists, drunk with tin ulnry <>i" vietory 
 after the Sino-Japane>e War, were aboul to make great 
 strides ahead when Japan was obliged t<> return the Liaotung 
 Peninsula. The people suddenly bee, mie pessimistic. So 
 the government adopted .1 liberal policy and ordered the 
 Bank of Japan to lower the rate <>t' interest. 1 This was done 
 in order to en< ourage the people, so that optimism might be 
 gradually restored and the people realize that they need no 
 longer remain depressed. They accordingly took courage 
 
 1 At that time the discount rate was ^ sen 1 tin per diem, that is 7.665 per cent, 
 which was changed to I sen 9 nn per diem, thai is 6 935 per cent.
 
 IJ4 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 i j 5 
 
 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 1 and savings bank regulations, 2 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 gnat lack here. 
 
 Consequently the government made endeavors t<> impr 
 monetary facilities, and thus meet the metis 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.
 
 \-J() ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 allowed them either to increase their capital or to increase the 
 amount of the securities reserve issue, 1 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, and 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. 2 
 
 (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 
 
 1 By Law No. 55, March 9, 1899, the amount was increased from 85 million yen 
 to 120 million yen as before described. 
 
 2 Cf. section on expansion of issue capacity of convertible notes, p. 166.
 
 EFFECTS ON THE MONEY MARKET 
 
 / / 
 
 after the Sino-Japanese War might be designated as the 
 period for 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 1, 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), at .Wu- 
 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 ease 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
 
 I78 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 .... 
 
 Hank 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 
 
 1 
 
 46 
 1 
 
 Yen 
 10,000,000 
 
 28,370,000 s 
 
 3,000,000 
 
 Yen 
 2,500,000 
 
 22,923,485 b 
 
 1,050,000 
 
 Aug. 2, 1897 
 First on Feb. 
 I, 1898, and 
 last on Aug. 
 17, 1900 
 
 April 1, 1900 
 
 Average per bank, 616,739 yen. 
 
 b 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. 1 
 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 Hanks 
 
 
 Subsidy to 
 
 Subsidy to Banks 
 
 Subsidy to 
 
 
 War 
 
 Hypothec Bank 
 
 of Agriculture and 
 
 Colonial Bank 
 
 Total 
 
 
 of Japan 
 
 Industry' 
 
 of 1 lokkaido 
 
 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 1897 
 
 55.052 
 
 I,i38,320 a 
 
 
 1. 193.372 
 
 1898 
 
 30,010 
 
 6,2i6,68o a 
 
 
 6,246,690 
 
 1899 
 
 30,873 
 
 688,620 s 
 
 250,000 
 
 969.493 
 
 1900 
 
 
 1 55,000* 
 
 250,000 
 
 405,000 
 
 1901 
 
 
 5,000 
 
 200,000 
 
 205,000 
 
 1902 
 
 
 5,000 
 
 200,000 
 
 205,000 
 
 1903 
 
 
 5,000 
 
 
 5.000 
 
 Total 
 
 U5-935 
 
 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 subsidii 
 
 The establishment of bank-- 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 mean-- of bond issues 
 amounts several times larger than the capital of the 1 Links. 
 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 181 
 
 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. 1 
 
 In accordance with the purpose for which they were es- 
 tablished, the loans were made with real property as security, 2 
 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 ease of the Banks of Agriculture 
 and Industry. The reason why the value- were fixed so low 
 was because thus the banks might be able to gather in -mall 
 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- 
 
 1 The registry ..i" residence means registry in the locality where is kept the book 
 
 ristry hi' the family <>i" which one is a member. 
 1 Public corporations were exempted from furnishing this security.
 
 [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 1 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 OX Till- MONEY MARKET 
 
 183 
 
 were steadily made and a great service was thn^ 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, 1897-1903 
 
 Year 
 
 Agriculture 
 
 Industry 
 
 Public 
 corporations" 
 
 Public 
 associations 1 " 
 
 Total 
 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 Yen 
 
 1897 
 
 342,709 
 
 816,600 
 
 10,000 
 
 206,703 
 
 I,376,oi2 
 
 1898 
 
 1,426,257 
 
 4.477.939 
 
 313.593 
 
 488,945 
 
 6,706,734 
 
 1899 
 
 2,328,762 
 
 4,886,682 
 
 539.425 
 
 i,oi9,973 
 
 8,774.842 
 
 1 900 
 
 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 
 
 1 902 
 
 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 
 
 2i,795,394 d 
 
 » Includes loans to prefectures, counties, cities, towns and villages. 
 
 1 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. 
 d 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 tabic 
 They were as follows: 
 
 Year 
 
 1899 
 
 1900 
 1901 
 1902 
 1903 
 
 Face value 
 
 Yen 
 142,280 
 1 75,580 
 
 239.390 
 442,610 
 
 Price 
 
 Yen 
 
 137.344 
 170,644 
 
 234.454 
 
 KJ7.799 
 565,401 
 
 Now, by examining the Banks of Agriculture and Industry, 
 we find the amounts of the bonds of those banks reached 
 7,033,430 yen 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. 1 
 
 1 Post, p. 202.
 
 [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. 1 
 
 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 1 
 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 1, 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 
 
 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 
 
 1901 
 
 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 
 
 
 M34.740 
 
 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 
 capital 
 
 Reserve 
 
 Percentage 
 of dividends 
 
 Loans 
 
 Year 
 
 Total in 
 year 
 
 Balam 
 end of year 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 }'( n 
 1 ,(.50,00(1 
 2,098,406 
 2,100,000 
 2, 700,000 
 
 Yen 
 
 2,343 
 
 15.248 
 
 76,400 
 
 106,600 
 
 7.0 
 
 : 
 
 s ,, 
 
 8.0 
 
 Yen 
 
 723.435 
 1,911,118 
 
 3.532, 080 
 
 5.287,744 
 
 Yen 
 
 703.544 
 
 1 .501 
 
 2,102,857 
 2,646,278 
 
 Total . . . 
 
 7,0 p, |oo 
 
 200,, SO I 
 
 
 ii.454.377 
 
 6,954 
 
 Bank oj 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.
 
 [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 1, 1899, 1 (1) 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) 1 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 1 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 1 yen and upward. As to regula- 
 
 1 Concerning a subsidy to the Bank of Formosa.
 
 EFFECTS OX THE MONEY MARKET 
 
 I8 7 
 
 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. 
 
 
 1 
 
 Specie Resen, 
 
 e 
 
 
 
 Date 
 
 
 
 
 Guarantee 
 
 Total 
 
 
 
 
 
 
 
 
 reserve 
 
 
 
 Gold 
 
 Silver 
 
 Total 
 
 
 
 
 Yen 
 
 Yen 
 
 Yt>i 
 
 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. 834.91 7 
 
 
 1,834.917 
 
 Dec., 1900 
 
 494.276 
 
 1.577.5*5 
 
 2,071,861 
 
 1 511.529 
 
 1.390 
 
 Dec, 1901 
 
 
 [,829,358 
 
 1.829,358 
 
 1.370,371 
 
 3.199.729 
 
 Dec, 1902 
 
 
 3,35^.7"' 
 
 3.352,719 
 
 1,74(1,447 
 
 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 
 
 14,552,81s 
 
 6,810,336 
 
 21,363,151 
 
 Again, the average annual amounts of issue at the month's 
 
 end were as follows: 
 
 Yi .ir 
 
 Spo ie reserve 
 
 Guarantee 
 
 < rve 
 
 Total 
 
 Gold 
 
 Silver 
 
 Total 
 
 1 899 
 
 Yen 
 
 352,134 
 -".548 
 
 614.368 
 
 Yen 
 
 1,2] . 
 
 2,017 
 
 [,92« 
 
 2.799.*N> 
 2,027,593 
 
 Yen 
 1,214,338 
 2,369,702 
 1,976,232 
 
 2.799.**<> 
 2,64I,96l 
 
 Yen 
 
 -.707 
 [,486,970 
 1 ,650,9 \o 
 2,222,150 
 
 Yen 
 
 1,21 
 
 3.837409 
 3,463,202 
 4,450,820 
 4,864,1 1 1 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 Total 
 
 1 .1117,050 
 
 9,985,063 
 
 I I,0O2,] 13 
 
 7,767 
 
 17.^29,880
 
 1 88 FXONOMIC EFFECTS OF THE SINOJAPANESE WAR 
 
 As shown 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 1 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. 20 5.
 
 EFFECTS OX 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 t lie hands of 
 the Bank. 
 
 Table XI at the end of this chapter 1 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. Bui at that time our country exported 
 gold and silver, especially gold, to an enormous amount. The 
 price of gold coin rose, so thai there came to be a difference 
 between gold certificates and gold coin, 2 and the national banks 
 
 1 Post, p. 206. 
 
 2 Between July 1873 and 1876 the highest dilTerence was 4.9 per cent, in March, 
 1876.
 
 I«)0 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. 1 06 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; 1 from 1884 convertible 
 bank notes were issued. 2 Again the government, by Law 
 No. 14, of June, 1885, decided to begin the conversion of 
 government notes into silver coins in January, 1886. 3 In 
 regard to these banks, it must be added that the government 
 revised the national-bank regulations on May 5, 1883 4 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- 
 
 1 Law No. 32 of 1882. 
 
 2 Law No. 18 of May, 1884. 
 
 3 At the end of 1885 the government notes amounted to 88,345,096 yen. 
 
 4 Law No. 14.
 
 EFFECTS OX THE MONEY MARKET I9I 
 
 thermore, it was decided to redeem the bank notes, amount- 
 ing to 31,812,880 yen, 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. 
 
 (1) 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 [0,738,982 
 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, 1 883-1 895 
 
 Year 
 
 Estimated price 
 of bonds 
 
 Rate of 
 interest 
 
 Actual price of 
 bonds 
 
 Rate of 
 interest 
 
 188"? 
 
 Yen 
 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 
 
 Per cent 
 7 
 
 7 
 7 
 7 
 7 
 7 
 7 
 7 
 7 
 7 
 7 
 7 
 7 
 
 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 
 
 99,703 
 
 Per cent 
 
 7 
 
 1884 
 
 7 
 
 188s 
 
 7 
 
 1886 
 
 7 
 
 1887 
 
 5 
 
 1888 
 
 5 
 
 1889 
 
 5 
 
 1 890 
 
 5 
 
 1891 
 
 5 
 
 
 5 
 
 180-1 
 
 5 
 
 1 8qa 
 
 5 
 
 t8q<; 
 
 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 I 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 with 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 Agrirulture 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 
 
 IN 
 
 Number of 
 
 Banks, 
 
 1 893-1903 
 
 
 
 
 Main Banks 
 
 Total 
 
 Branch Banks 
 
 
 Year 
 
 Special 
 banks 
 
 Ordinary 
 banks 
 
 Savings 
 banks 
 
 Special 
 banks 
 
 Ordinary S, 
 banks t 
 
 ivings 
 >anks 
 
 Total 
 
 1893..- 
 
 135 
 
 545 
 
 
 23 
 i a 
 
 703 
 
 162 
 
 165 
 
 12 
 
 339 
 
 1894.. . 
 
 135 
 
 700 
 
 
 30 
 
 i a 
 
 865 
 
 188 
 
 196 
 
 30 
 
 414 
 
 1895-- • 
 
 135 
 
 792 
 
 
 ' 86 
 6 a 
 
 1,013 
 
 193 
 
 277 
 
 107 
 
 577 
 
 1896.. . 
 
 123 
 
 1,005 
 
 
 149 
 
 , 44 a 
 
 1,277 
 
 180 
 
 428 
 
 224 
 
 832 
 
 1897.- • 
 
 61 
 
 1,223 
 
 
 221 
 , 91* 
 
 1,505 
 
 83 
 
 651 
 
 270 
 
 1,004 
 
 1898.. . 
 
 48 
 
 1,444 
 
 
 260 
 
 ,i58 a 
 
 i,752 
 
 18 
 
 912 
 
 453 
 
 1,383 
 
 1899.. . 
 
 49 
 
 1,561 
 
 
 333 
 l 198* 
 
 i,943 
 
 30 
 
 1,069 
 
 631 
 
 1,730 
 
 1900. . . 
 
 51 
 
 1,802 
 
 
 419 
 262* 
 
 2,272 
 
 32 
 
 1,374 
 
 814 
 
 2,220 
 
 1901.. . 
 
 51 
 
 1,867 
 
 
 441 
 
 ,273 s 
 
 2,359 
 
 33 
 
 i,457 
 
 ^542 
 >337 a 
 
 2,032 
 
 1902.. . 
 
 52 
 
 1,841 
 
 
 431 
 270* 
 
 2,324 
 
 34 
 
 1,470 
 
 536 
 ,33i a 
 
 2,040 
 
 1903- • • 
 
 52 
 
 1,754 
 
 
 469 
 
 L 2I9 a 
 
 2,275 
 
 35 
 
 1,441 
 
 58b 
 291" 
 
 2,062 
 
 •Ordinary banks conducting savings business so their number waa not included in the total 
 figures. 
 
 Table XII at the end of this chapter 1 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 : 2 
 
 l Post, p. 207. 
 
 2 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 
 of Japan (after 1902).
 
 EFFECTS ON THE MONEY MARKET 
 Bank Deposits and Loans 
 
 195 
 
 
 Deposits 
 
 Loans 
 
 Year 
 
 Amount 
 
 Percentage 
 (1893=100) 
 
 Amount 
 
 Percentage 
 (1893=100) 
 
 1893 
 
 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. 
 
 1894 
 
 116. 9 
 165.2 
 
 278.9 
 256.8 
 
 332.5 
 452.6 
 508.8 
 
 472.3 
 508.2 
 536.8 
 
 1895 
 
 1 896 
 
 1897 
 
 1898 
 
 1 899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 
 
 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 activity of economic circles after the war, but 
 the reconstruction of the national 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.
 
 I96 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR 
 
 3 
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 c 
 
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 ■ c 
 
 
 
 
 
 
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 EFFECTS ON THE MONEY MARKET 
 
 197 
 
 
 Percentage 
 compared 
 with issue 
 
 t^. o^o o> 
 
 O O « « >t<C* 
 
 
 
 
 « 3 
 
 4) in 
 
 ha- 
 rt— 
 
 s <* 
 
 "*• POOO «« M 
 P< 1-1 U0\O 00 T»-00 
 00 lOOO ONOO 00_ pO 
 
 .*> POOO m mOMO 
 
 O*. C*- POOO* c> 0" «f 
 pj rO »*o 00 00 O 
 
 <-o 
 
 N 
 pO 
 
 00* 
 pO 
 
 °- 
 PO 
 
 
 
 
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 -7 3 
 m <o 
 
 2 .— 
 
 C>00 NOMO 
 
 ■ iAh • \o "2» 
 
 8 ! r". PO ! P* vO >-" 
 
 ^ . OOO . •- ~ <N 
 « 0_ PO 0_ r-» 
 
 00 
 t^ 
 
 pO 
 *? 
 
 
 Reserve 
 
 strength of 
 
 issue 
 
 Yen 
 
 1,121,922 
 
 3,598,064 
 
 O 
 00 
 Ch 
 
 c*- 
 
 
 T3 t) 
 
 C 3 
 
 c"rt 
 
 >°0 
 2 * J 
 
 00 m^o 00 « 
 
 <N O « 0>W O •*■ 
 
 m t^oq_oo_ o_ cr> o_ 
 
 Jl, O_00 rttON «1C 
 
 00* c". O* 00" 0' ^ 0" 
 
 -+• -1-00 0>N OMO 
 — - >-• >- (N M N 
 
 00 
 
 pO 
 
 "2 
 
 00" 
 
 PO 
 
 10 
 w 
 
 
 Month-end 
 
 guarantee 
 
 reserve issue 
 
 P< O^OO •*■ ID P» •-• 
 
 m O - OOOiO N 
 
 \0 <tO N lOvO 00 
 
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 202 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
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 204 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
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 206 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
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 Yen 
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 CHAPTER IV 
 EFFECTS ON INDUSTRIES 
 
 Following the crisis of 1890, came business depression, 
 which lasted for three years, from 1891-1893. 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 
 
 
 Year 
 
 Number of 
 companies 
 
 Authorized 
 capital 
 
 
 
 Reserve 
 
 
 
 
 
 
 Amount 
 
 Increase 
 
 
 
 
 Yen 
 
 Yen 
 
 Per Cent 
 
 Yen 
 
 1896. 
 
 
 1.367 
 
 I43.6i7.530 
 
 89,900,900 
 
 100. 
 
 7,404,980 
 
 1897- 
 
 
 1,881 
 
 165,332,633 
 
 105,381,106 
 
 1 17.2 
 
 7.58i,535 
 
 1898. 
 
 
 2,164 
 
 183,657,046 
 
 1 22,066,653 
 
 135-8 
 
 11,64 
 
 1899. 
 
 
 2,253 
 
 222,673,634 
 
 1 17.; 
 
 164.4 
 
 13,467,802 
 
 1900. 
 
 
 2,554 
 
 216,766,903 
 
 158,851,730 
 
 17" 7 
 
 17,697.540 
 
 1901 . 
 
 
 2.477 
 
 2 l' 1.249,806 
 
 K><),2i)3,oi>3 
 
 185.O 
 
 24,057,360 
 
 1902 
 
 
 2,427 
 
 222,120,693 
 
 1 73, 
 
 192.7 
 
 24,794.154 
 
 1903- 
 
 
 2,441 
 
 214,404,088 
 
 170,346.340 
 
 1895 
 
 29,966,661 
 
 Tot 
 
 al . 
 
 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 lour 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, 1 it will 
 
 1 Cf. table, p. 210. 
 
 is
 
 210 ECONOMIC EFFE( fS 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 
 
 Year 
 
 Indus- 
 trial com- 
 panies 
 
 Agricul- 
 tural com- 
 panies 
 
 Commer- 
 cial com- 
 panies 
 
 Communi- 
 cation com- 
 panies 
 
 Total 
 
 Ratio of 
 
 industrial 
 investment 
 to the total 
 
 1896 . . 
 
 1897 . . 
 
 1898 . . 
 
 1899 . . 
 
 1900 . . 
 
 1901 . . 
 
 1902 . . 
 
 1903 . . 
 
 Per 
 100 
 117 
 
 135 
 164 
 . 176 
 - 185 
 192 
 189 
 
 :ent 
 
 
 
 2 
 
 8 
 
 4 
 
 7 
 
 
 
 7 
 5 
 
 Per 
 100 
 
 134 
 141 
 
 139 
 157 
 159 
 154 
 192 
 
 :ent 
 
 
 5 
 
 
 
 8 
 
 7 
 
 
 9 
 
 Per cent 
 
 100. 
 I35-0 
 155-7 
 
 174. 1 
 201 .9 
 216.5 
 228.4 
 234-4 
 
 Per cent 
 100. 
 
 145-5 
 174.2 
 
 I75-0 
 202.0 
 214.8 
 232.0 
 231.7 
 
 Per cent 
 
 100. 
 I34-0 
 
 1564 
 172.0 
 196.0 
 208.7 
 
 221 . 1 
 223.3 
 
 Per cent 
 22.6 
 19.8 
 19.6 
 21 .6 
 20.4 
 10. 
 19.7 
 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 
 
 Grain refining 
 
 Sake brewing 
 
 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 . . . 
 
 das works 
 
 Printing 
 
 Paper milling 
 
 Tanning and manufac- 
 turing of leather 
 goods 
 
 Nets and rods 
 
 Petroleum boring and 
 refining 
 
 Cement making. 
 
 Fertilizer manufacturing 
 
 December 
 31. i*99 
 
 Yen 
 
 344,668 
 
 2,056,895 
 
 (unknown) 
 
 325.392 
 1,474,106 
 
 1, H3.°99 
 
 (unknown) 
 28,770,847 
 (unknown) 
 
 3.869,877 
 
 (unknown i 
 
 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) 
 
 1.2 55.978 
 6, 1 33.°44 
 2.756.940' 1 
 
 928,460 
 
 2,419,968 
 
 11,320,965 
 
 (unknown) 
 
 30,313.054 
 
 5.I95.89I 
 
 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 
 
 636,4*5 
 648,410 
 
 14,241,109 
 
 4,078,085 
 
 660,560 
 
 December 
 31. 1903 
 
 Yen 
 
 i,4<>8,426 
 
 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 
 
 4.4')7.743 
 3.767.374 
 1,850,462 
 
 ise of 
 190^ 
 [896 
 
 Per Cent 
 
 435 
 182 
 
 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 
 
 1 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 • • 
 
 1894 . . 
 
 1895 • • 
 
 1896 . . 
 
 1897 • • 
 
 1898 . . 
 
 1899 . . 
 
 1900 . . 
 
 1901 . . 
 
 1902 . . 
 
 1903 . . 
 
 3.019 
 5.985 
 7J54 
 7.640 
 7.287 
 . 7.085 
 6,699 
 7,284 
 
 7.349 
 7,821 
 
 8,274 
 
 1 00.0 
 
 198.7 
 237.0 
 
 253- 1 
 241.4 
 
 234 7 
 221 .9 
 241.3 
 243-4 
 259- 1 
 274.1 
 
 2,080 
 4,020 
 4.989 
 5.459 
 5.88o 
 
 5.172 
 4.093 
 3.977 
 4.551 
 4,808 
 5.226 
 
 100. 
 193-3 
 239-9 
 262.5 
 282.7 
 
 248.7 
 196.8 
 191 .2 
 218.8 
 231 .2 
 251-3 
 
 32,811 
 
 41.031 
 61,252 
 
 64.429 
 63.434 
 79,016 
 76,885 
 95,392 
 
 91,585 
 100,901 
 102,797 
 
 100 
 
 125 
 186 
 196 
 
 193 
 240 
 
 234 
 290 
 279 
 307 
 
 313 
 
 
 1 
 
 7 
 4 
 3 
 8 
 
 3 
 7 
 
 1 
 
 5 
 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 1 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 
 
 l Post, p. 218.
 
 EFFECTS OX INDUSTRIES 213 
 
 Ratio of Capital Invested, Factories and Factory Hands, 1893 
 
 
 
 
 
 
 No. of factory hands 
 
 
 Paid-up 
 
 capital 
 
 No. of 
 factories 
 
 Xo of 
 
 
 
 
 
 Year 
 
 engines 
 
 power 
 
 Male 
 
 Female 
 
 Total 
 
 1893 . . . 
 
 
 100. 
 
 100. 
 
 1 00.0 
 
 (unknown) 
 
 (unknown) 
 
 (unknown) 
 
 1894 ••• 
 
 1895 • • • 
 
 (unknown) 
 
 198.2 
 
 193-3 
 
 125. 1 
 
 (unknown) 
 
 (unknown) 
 
 (unknown) 
 
 (unknown; 
 
 2370 
 
 239-9 
 
 186.7 
 
 (unknown) 
 
 (unknown) 
 
 (unknown) 
 
 1896 . . . 
 
 IOO. 
 
 253-0 
 1 00.0 
 
 262.5 
 100. 
 
 196.4 
 1 00.0 
 
 100. 
 
 100. 
 
 100. 
 
 1897 • ■ • 
 
 II7- 2 
 
 241.4 
 95- 4 
 
 282.7 
 107.7 
 
 190.6 
 98.5 
 
 105-5 
 
 97-5 
 
 100.7 
 
 1898 . . . 
 
 135.8 
 
 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 
 H9-3 
 
 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 . . . 
 
 18S.O 
 
 243-4 
 96.2 
 
 218.8 
 834 
 
 279.1 
 142. 1 
 
 90.6 
 
 98.2 
 
 95-2 
 
 1902 . . . 
 
 192.7 
 
 259- 1 
 102.4 
 
 231 -2 
 
 88.1 
 
 307 -5 
 1566 
 
 106.3 
 
 119. 6 
 
 H4-3 
 
 1903 ■ • ■ 
 
 189. s 
 
 274-1 
 108.3 
 
 251-3 
 95-7 
 
 313 3 
 159.6 
 
 104.4 
 
 1 15 ■ 1 
 
 no. 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 tin- Japa- 
 nese people to a great extenl . yet it was >till too early tor any 
 elaborate reorganization of the industrial world. The go's em- 
 inent was too busy with work such a- the administration of 
 state finances, the reform of the currency system, adjustment 
 of the money market, preparation of armaments, etc. A- 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 1 gives the figures for the 
 years 1 896-1 903. 
 
 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 
 
 1 Post, p. 219.
 
 EFFECTS OX INDUSTRIES 215 
 
 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. 1 
 
 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. 2 
 
 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. 3 
 
 Percentages as to average daily wage of adult factory 
 hands in the principal branches of industry (such as flour 
 milling, yarn 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. 4 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 independenl 
 
 1 Post, p. 220. 2 Post, p. 221. t, p. 222. 4 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. 1 
 
 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. 225.
 
 EFFECTS OX INDUSTRIES 2IJ 
 
 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.
 
 218 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 
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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 Japan 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 
 
 [894 
 
 1895 
 
 Notes handled by Tokyo 
 associated banks: 
 Receipts 
 
 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 
 
 Expenditures 
 
 Negotiable paper handled 
 by Tokyo Clearing 
 House: 
 
 Amount presented 
 
 Amount cleared 
 
 188,591,742 
 
 148,018,870" 
 
 227,767,017 
 
 i85.597,502 b 
 
 356,841,068 
 
 289,102,425° 
 
 Negotiable paper handled 
 
 by Osaka Clearing 
 House: 
 
 63,600,661 
 
 67,543,806 
 
 79,654,118 
 
 
 Foreign Trade: 
 China and Korea: 
 
 9,015,663 
 19,095,414 
 
 57.933.054 
 
 46,4s j, 956 
 
 1 1 , 1 79,099 
 19,694,820 
 
 7*1,825,062 
 67,608,724 
 
 12, 966, 586 
 25,910,544 
 
 94.327.59o 
 75.543.047 
 
 
 Europe and America: 
 
 Imports 
 
 
 Total 
 
 177,970,038 
 
 220,728,042 
 
 265,372,754 
 
 
 » 78. s per cent of amount presented. ; 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 infirm 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 1 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. 2 
 
 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 (1) 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 
 
 1 Post, p. 239. 2 Post, p. 240.
 
 EFFECTS ON COM M I k< I 
 
 227 
 
 war upon the domestic commerce and foreign trade of the 
 country. 
 
 Domestic ( < >m m i r< i 
 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 brie In- 
 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. 1 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 
 railway s 
 
 Private 
 railway s 
 
 Total 
 
 Vear 
 
 Tonnage 
 
 I'l-r. entage of 
 incn 
 
 1893 
 
 1894 
 
 1895 
 
 [896 
 
 1897 
 
 1898 
 
 1899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 Tons 
 1 ,<>;(, ,(,S(, 
 1,018,298 
 1 , 1110,059 
 1,266,119 
 1,558,194 
 1.793,896 
 
 2,391.471 
 
 2,806,560 
 J. (..S9.602 
 
 3.1 83,720 
 3,492,622 
 
 Tons 
 2,41 4.394 
 3.265,404 
 4.23L353 
 
 5.579.1 12 
 
 7.070,315 
 8,122,230 
 9,428,563 
 1 [,594,960 
 1 [,750,150 
 [2,938,951 
 1 (.,268,690 
 
 Tons 
 3,491,083 
 4.283,702 
 
 5.33 '.4 1 - 1 
 6,845,231 
 8,628,509 
 9,916,] ji. 
 1 1 ,820,03 \ 
 
 1 \. |"I ,520 
 ' 1,409.752 
 [6,122,67] 
 17.701,312 
 
 100. 
 122.7 
 [52.7 
 
 iwi. 1 
 •'17 - 
 1 
 vvS.6 
 412.5 
 412 
 461 
 508.8 
 
 Total... . 
 
 22,347,230 
 
 90,664,122 
 
 1 [3,011,352 
 
 
 » Prepared and published by Imperial < .ova anient Railwaj - 
 
 1 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 1 promulgated in March, 1896, and enforced on January 1 
 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 Post, 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 1 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. x 
 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 897-1 903 
 
 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 
 3,723J2i 
 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 
 
 4,36i,35i 
 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 OX 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 yen 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. 1 
 
 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 2 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 8 show; the value of exports 
 was doubled in 1898, and trebled in 1902, while tin- 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 <>l exports 
 and imports, advanced greatly year by year, especially after 
 the war. And this progress was largely due t<> 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 
 (1) commercial activity, arising from the starting of various 
 
 1 Post, p. 244. 2 Post, p. 245. i Post, p.
 
 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 1 ; (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 1 893. 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 1 to 15^, it fell to 35A d. or 1 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 1 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 whether the silver standard was advisable for 
 the country after all. Finally, the government, disregarding 
 the immediate minor losses which it might incur, adopted tin- 
 gold standard on October 1, 1897. And this reform to no 
 small extent laid the foundation for the healthy progi 
 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 
 
 1 A fall in the price of silver, when this i> the material for the unit coin, is always 
 
 accompanied l>\ 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 1 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 l was promulgated in 1 897 and enforced on 
 January 1, 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 P er 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 
 
 1 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 an d 
 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. 1 
 
 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 was silver, so that any fall in 
 the price of silver in those days no doubl benefited exports 
 rather than imports in Japan. But after the war tin- govern- 
 ment revised the currency system, adopting in 1897 the gold 
 standard. Thus she lost the benefit that she had been 
 
 1 In 1898 the excess of imports over exports reached about 1 12 million yen, but 
 this must be regarded .is ail exception, for a large amounl 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 suffer 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, 1893- 
 Exports 
 
 -1895 
 
 
 
 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. 
 
 114 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 
 134 4 
 
 19.4 
 14.9 
 17.8 
 
 1,999,000 
 2,183,000 
 2,925,000 
 
 100. 
 109.7 
 146.3 
 
 2-3 
 
 2.3 
 
 Consequently, Japanese exports to these countries were all 
 in a favorable state, the principal of these exports being 
 matches, cotton yarn 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. 1 
 
 As these tables show, the principal exports during these 
 years were raw silk, tea, copper, coal, matches and cotton 
 yarn, while the principal imports were raw cotton, rice, 
 Hour, kerosene oil, iron, sugar and woolen manufactures. In 
 
 1 Post, pp. 247-253.
 
 2; V S IXONOMK I.IM.< IS 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 
 
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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, 1896-1903 
 
 
 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 
 175 
 202 .0 
 214.8 
 232.0 
 231.7 
 
 Yen 
 
 6,259,011 
 6.551.967 
 7.302,391 
 
 ■s.i 133^4 
 
 14.s77.726 
 
 14,221,810 
 18,587,260 
 24,004.444 
 
 334 
 454 
 536 
 583 
 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, i 893-1903 
 
 Year 
 
 1893 
 1894 
 
 1895 
 1896 
 
 1897 
 1898 
 1899 
 1900 
 1 901 
 1902 
 1903 
 
 Mileage of railways 
 
 Government 
 
 Allies 
 
 558 
 
 58i 
 
 593 
 
 632 
 
 662 
 
 768 
 
 833 
 
 950 
 
 1,060 
 
 1,227 
 
 1.345 
 
 Private 
 
 Miles 
 1,381 
 1,537 
 1,697 
 i,875 
 2,287 
 2,652 
 2,806 
 
 2,905 
 2,967 
 
 3,on 
 3,i5i 
 
 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 
 109.2 
 118. 1 
 129.3 
 152. 1 
 176.4 
 187.7 
 198.8 
 207.7 
 218.6 
 231.9 
 
 Increase in Shipping, 1893-1903 
 
 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,n8 
 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 
 7ii,773 
 
 Rate of 
 increase 
 
 Per cent 
 100. o 
 I4I-7 
 172.5 
 185-7 
 215-5 
 313-4 
 411. 8 
 
 453-1 
 486.9 
 
 502.9 
 5217 
 
 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, 1 896-1903 
 
 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 
 
 i55,9H,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. 1 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, and 
 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 
 
 1 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 
 1 >v 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 
 ihr 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 
 1 »e called trunk lines. This does 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 1 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 2 , 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 yen 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. 3 Then the govern- 
 ment planned to build railway lines on the island of Formosa, 
 
 1 Law Xo. 4. 
 
 2 Public Works Loan Regulations, Law No. 59, promulgated March 29, 1896. 
 
 3 Hokkaido Railway Construction Law, Law No. 93, promulgated March 13,
 
 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. 1 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, 1893-1903 2 
 
 Construction of railway lines, 1 893-1903, built with pro- 
 ceeds of government railway loans: Yen Yen 
 
 Fukushima-Aomori line 2 °i773i993 
 
 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 21,0 (7,422 
 
 Shinyetsu line 1 ,039,545 
 
 Street railway line in Tokyo : 2,763,340 
 
 Yokohama harbor line 28,41 ' J 
 
 Kobe harbor line 7° 1 • 7' \S 
 
 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, 1899-1903, from proceeds of 
 
 Formosan Railway Construction and Improvement 
 
 Appropriation 14,894,227 
 
 Total 1 19,892,486 
 
 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 1893-190,}.' 
 
 'Formosa Public Works Loan Law, Law No. 75, promulgated March 20, 1899. 
 
 2 Fractions over 5>> sen Air counted .1- whole yen; fractions under ~ 
 disregards I. 
 
 3 Railways built in Formosa dining 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 °7 
 
 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. 1 
 
 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. 2 
 
 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. 
 
 1 Post, p. 265. 2 Post, p. 266.
 
 TRANSPORTATION AND COMMUNICATION 
 Extension of Private Railways, 1893- 1903 
 
 26l 
 
 Year 
 
 No. of 
 com- 
 panies 
 
 Authorized 
 capital 
 
 Paid-up 
 capital 
 
 Reserve 
 
 fund 
 
 Loans 
 
 Average 
 working 
 mileage 
 
 1893.- • 
 1894.. . 
 
 1895- •■ 
 1896.. . 
 
 1897.-. 
 1898.. . 
 1899.. 
 1900.. . 
 1901.. . 
 1902.. . 
 1903- • • 
 
 15 
 20 
 24 
 26 
 32 
 42 
 43 
 41 
 40 
 41 
 41 
 
 Yen 
 
 63,145,000 
 
 80,290,200 
 
 99,228,000 
 
 120,015,000 
 
 175,396,000 
 
 213,886,150 
 
 227,799,300 
 
 238,042,550 
 
 242,585,000 
 
 251,675,000 
 
 256, 575.°°° 
 
 Yen 
 
 48,869,515 
 59,176,637 
 71,626,301 
 89,010,597 
 
 122,542,091 
 
 153,924.70;, 
 
 i69.9W.444 
 181,267,472 
 192,811,305 
 202,603,626 
 208,285,567 
 
 Yen 
 
 517,975 
 1,322,085 
 1,161,682 
 
 1,587.045 
 2,169,267 
 2,681,711 
 3,374,353 
 3.635.854 
 4,401,343 
 5.155.920 
 6,038,419 
 
 Yen 
 5,680,000 
 5,778,000 
 5,552,000 
 5,350,000 
 5,410,000 
 
 10,174.365 
 10,640,400 
 11,017,800 
 12,839,000 
 12,852,600 
 18,364,400 
 
 1,338 
 1.457 
 1,617 
 1,698 
 2,027 
 2,466 
 
 2,725 
 2,841 
 
 2,944 
 2.978 
 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. 1 
 
 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. 2 
 
 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 3 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. 
 
 l Post, p. 267. *Post, p. 268. l Pcst, p. y 9
 
 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 l on March 24, 1896, and for the latter the Law to 
 Encourage Overseas Navigation 2 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. 3 An encouragement 
 
 1 Law No. 16. 
 
 2 Law No. 15. 
 
 s The rate of subsidy given in accordance with this law was \2 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 1 ,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. 1 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 io nautical miles per hour, the rate was 25 sen i>er ton of 
 gross tonnage for each 1,000 nautical miles of the voyage. This rate of subsi.lv 
 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 6,0( 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. 1 
 
 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 1890. 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 yen, in 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 
 
 1 900 
 
 Yen 
 2,349,786 
 
 1897 . . 
 
 1901 
 
 1902 
 
 1,807,587 
 
 1898 
 
 1,615,532 
 
 1899 
 
 1903 
 
 268,556 
 
 
 
 Further than this there is nothing of importance to state 
 about the systems of communication in Japan in these post- 
 bellum years. 
 
 1 Post, pp. 271, 272.
 
 TRANSPORTATION AND COMMUNICATION 
 
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 272 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 
 
 
 
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 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 sericulture] 
 training institutes, the enlargement of those already in exist- 
 ence, etc. Furthermore, the government established such 
 1 Full particulars arc given in Chapter II. 
 
 19 273
 
 274 ECONOMIC EFFECTS OF THE S1N( )-JAPANESE WAR 
 
 banking systems as the Japan Hypothec Bank of Tokyo, and 
 the hanks 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 1 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, 1898-1903 
 
 Year a 
 
 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 
 17,1114,710 
 
 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 
 i4,97o,95i 
 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, [893-1903 
 
 
 Rice 
 
 Wheat 
 
 Year 
 
 Area under 
 cultivation 
 
 Price 
 (per koku) 
 
 Area under 
 cultivation 
 
 Price 
 (per koku) 
 
 1893 
 
 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 11 
 9.84 
 II.32 
 11.47 
 12 .07 
 13.68 
 
 Cho 
 
 1,744,010.3 
 C753.409 -8 
 1,774,159.8 
 1,767,043.2 
 
 1. 74'). 571- 7 
 1,806,667.4 
 1,809,822.6 
 1,806,668.6 
 1,816,200.8 
 1,804,938.0 
 1,799.346.1 
 
 Yen 
 
 3 T* 
 
 1894 
 
 1895 
 
 3 
 3 
 3 
 4 
 6 
 
 4 
 4 
 4 
 4 
 6 
 
 75 
 80 
 
 1896 
 
 1897 
 
 1898 
 
 57 
 88 
 
 04 
 46 
 74 
 07 
 45 
 [8 
 
 1 899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 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. Vet to some extent we may see by these figures 
 the progress made by their aid. 
 
 In addition, the governmenl 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 a1 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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 EFFECTS ON PRIMITIVE INDUSTRY 
 
 277 
 
 
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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 modern 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 in the 
 
 Prices of Commodities in Japan from 1873 to [912 
 
 Year 
 
 Index-numbers 
 
 Year 
 
 Index-numbers 
 
 1873 
 
 100.0 
 
 100 
 
 102 .O 
 
 101 O 
 
 I02.0 
 I04 O 
 
 109 ,0 
 
 108.0 
 
 103 
 
 IOI O 
 
 103 O 
 
 106 O 
 I IOO 
 
 107 
 1 09 
 1 1 5 . 2 
 
 1 1 9 . 2 
 122.2 
 117 «» 
 122.3 
 
 1893 
 
 126. 1 
 
 1874 
 
 1875 
 
 1876 
 
 1877 
 
 1878 
 
 1879 
 
 1880 
 
 1804" 
 
 i8<)5 :l 
 
 1896 
 
 1897 
 
 135 8 
 143-5 
 154 9 
 174 1 
 182.7 
 182.5 
 195 2 
 [86 3 
 182. 1 
 195-a 
 200 .9 
 
 1898 
 
 1899 
 
 I'JOO 
 
 1881 
 
 1882 
 
 1883 
 
 1884 
 
 1 90 1 
 
 I'll' 1 
 
 1903 
 
 1904 
 
 1885 
 
 1886 
 
 1905 
 
 1906 
 
 221 6 
 
 230 3 
 
 248 8 
 
 241 3 
 
 220 1 
 
 1887 
 
 1888 
 
 "'"7 
 
 1908 
 
 1909 
 
 [910 
 
 1 889 
 
 1 890 
 
 1891 
 
 1892 
 
 235 6 
 2478 
 265 1 
 
 191 1 
 
 1912 
 
 
 » War time.
 
 280 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 
 city of Tokyo, of about 16 different commodities in the city 
 of Osaka and of about 31 principal articles of export (prices 
 at place of export). 1 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 I 9°3> prices of commodities went up 
 69.1 per cent, or 6.9 per cent a year, and in the nine years 
 from 1904 to 1912, 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 1 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- 
 
 1 All these investigations were made from 1872 to 1893.
 
 SOCIAL EFFECTS 
 
 28l 
 
 tainly rice is the staple food of the country — the people in 
 general live on rice. 1 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, 1893-iw";, 
 
 Year 
 
 Trice (per koku) 
 
 Percentage 
 
 1893 
 1894 
 
 1895 
 1896 
 
 1897 
 1898 
 
 1899 
 1900 
 1901 
 1902 
 1903 
 
 Yen 
 
 7.08 
 
 8-34 
 
 8.21 
 
 9. 16 
 
 11. 81 
 
 13 11 
 9 84 
 1132 
 11.47 
 12.07 
 13-68 
 
 100. o 
 
 117. 8 
 
 115. 9 
 
 12') 4 
 166.8 
 185.2 
 139.0 
 
 159-9 
 l62 O 
 I7O.4 
 193 - 
 
 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, aboul 70 per cenl live on rice, so far as I 
 li.i\ e been able to ascertain.
 
 282 ECONOMH 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 1 : 
 
 Year 
 
 Tokyo 
 
 Prices 8 Wages 
 
 Osaka 
 
 Prices Wages d 
 
 1893 
 1894 
 
 1895 
 1896 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 1903 
 
 100 
 101 
 107 
 119 
 133 
 139 
 145 
 159 
 148 
 
 145 
 148 
 
 IOO. o 
 
 109.2 
 118. 6 
 129. 1 
 140.2 
 145-8 
 147.8 
 167.2 
 169.7 
 170.6 
 170.2 
 
 1 00.0 
 106.0 
 in .9 
 126.7 
 144 3 
 159-3 
 
 156. 1 
 
 173-7 
 173-5 
 1730 
 181. 8 
 
 IOO o 
 
 I II .9 
 
 1323 
 
 141. 7 
 161. 6 
 168.6 
 169.4 
 183.6 
 
 179 3 
 182.3 
 199.0 
 
 • Average prices of 31 different commodities. c Average prices of 14 different commodities. 
 b Average prices of 26 different kinds of labor. d Average prices of 43 different kinds of labor. 
 
 These figures speak eloquently of the growing increase in 
 the income of middle and lower-class 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 Restoration 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. 
 
 1 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, and 
 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-Japatiese 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 ii i i < is of the sino-japankse 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. 1 
 
 As the statistics in Table I indicate, the degree of the rise 
 varies with the three classes of commodities, namely, food- 
 stuffs, 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 
 
 1 Post, p. 303.
 
 SOCIAL EFFECTS 285 
 
 marine companies, in the latter part of June, 1893, f° r 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 out break 
 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 - N 7 
 
 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 1 the index num- 
 bers of the annual average wholesale prices of merchandise in 
 the cities of Tokyo 2 and Osaka, the largest commercial city in 
 Japan 3 , are given for the period 1 893-1 903. 
 
 A comparison of these three tables shows us that the flucl ua- 
 tion in prices of the several commodities differs according to 
 
 1 Post, pp. 304-310. 
 
 2 Investigations of the Bureau of Finance and of the Bank of Japan. 
 
 3 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. 1 
 
 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. 
 
 1 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. 
 
 191 1 . 
 
 Year 
 
 Index number for 
 prices of commodities 
 
 102. 1 
 
 107.9 
 
 in. 7 
 
 1x4.4 
 
 1 10 4« 
 
 1 14.6 
 
 118. 1 
 
 127.2 
 
 134 4 
 
 145 1 
 163. 1 
 
 171. 1 
 
 170.9 s 
 182.8 
 
 174 -5" 
 170.6 s 
 182.8 
 
 193 7 
 213.6 
 
 215-7 
 
 233 -o 
 226.0 s 
 
 214.6 s 
 
 220.7 
 
 232.1 
 
 Percentage 
 
 of cur- 
 
 rency 
 
 in circulation 
 
 (1 
 
 886 = 
 
 00) 
 
 
 100. 
 
 8 
 
 
 105. 
 
 2 
 
 
 in 
 
 
 
 
 103. 
 
 4 s 
 
 
 106. 
 
 2 
 
 
 109. 
 
 2 
 
 
 120. 
 
 1 
 
 
 124 
 
 8 
 
 
 142 
 
 
 
 
 151 
 
 3 
 
 
 166 
 
 4 
 
 
 143 
 
 8 s 
 
 
 169 
 
 6 
 
 
 160 
 
 2 s 
 
 
 154 
 
 5 a 
 
 
 164 
 
 5 
 
 
 166 
 
 8 
 
 
 196 
 
 
 
 
 214 
 
 3 
 
 
 239 
 
 .2 
 
 
 256 
 
 . 1 
 
 
 254 
 
 5' 
 
 
 257 
 
 .8 
 
 
 286 
 
 9 
 
 
 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 1 yen per koku
 
 29O ECONOMIC EFFECTS O] NIK SINO- JAPANESE WAR 
 
 a year in accordance with Order No. 10, issued in May, 1885, 
 bill it was doubled on March 1, 1899. 
 
 (C) The imposition upon tobacco was a stamp duty of 20 
 per cent ad valorem from July 1, 1888, until the manufacture 
 of tobacco was monopolized by the government on January 
 1, 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 1 , which took effect from 
 January 1, 1899. According to this tariff law, the taxable 
 articles in Class No. 1 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 Xo. 14.
 
 SOCIAL EFFECTS 
 
 29I 
 
 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 [889. 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 P er cent for the ten years 1899-1908 which followed the 
 promulgation of the said law. 
 
 Revenue from Customs Di cies, [889 1908 
 
 Year 
 
 Rel urns from 
 import duty 
 
 Value of imported 
 
 article s, upon which 
 <lut v was 1< \ it'l 
 
 Rate of 
 customs duty 
 
 1889 
 1890 
 1891 
 1892 
 
 1893 
 1894 
 
 1895 
 1896 
 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 1903 
 1904 
 
 1905 
 1906 
 1907 
 1908 
 
 Yen 
 
 2,863,576 
 2,932,637 
 2,401,238 
 
 2,745.777 
 3,098,627 
 3,506,500 
 4,238,842 
 4,915,289 
 
 5.295.123 
 6,280,620 
 
 13.251,833 
 16,764,165 
 14,457,526 
 14,727,596 
 16,372,024 
 20,519,938 
 34,298,519 
 41,230,391 
 ^,959,596 
 +4.817.856 
 
 Yen 
 
 63.403,345 
 
 65,795.098 
 
 54,822,790 
 
 6 i,J')9,862 
 
 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 
 
 l68,547.3'»7 
 
 208,450,952 
 
 294,268,906 
 
 281,337,980 
 
 307,358,291 
 
 281,399,648 
 
 Per cent 
 
 52 
 
 4" 
 38 
 
 27 
 89 
 
 4" 
 
 57 
 
 77 
 78 
 80 
 
 7i 
 36 
 75 
 75 
 7i 
 84 
 66 
 66 
 28 
 93 
 
 ■ Mew 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 -land
 
 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* 
 
 Year 
 
 1893 
 1898 
 1903 
 1908 
 1909 
 1910 
 
 Tokyo 
 
 Labor 
 
 100. o 
 145.8 
 170.2 
 196. 1 
 193 9 
 196.5 
 
 Com- 
 modities 
 
 100. 
 139-5 
 148.5 
 186.0 
 176.7 
 180.9 
 
 Rice 
 
 100 
 200 
 176 
 213 
 178 
 179 
 
 Osaka 
 
 Labor 
 
 100. o 
 168.6 
 199.0 
 279.0 
 268.6 
 274.4 
 
 Com- 
 modities 
 
 100. 
 159-5 
 185.3 
 
 224. 1 
 217.7 
 220.2 
 
 Rice 
 
 100. 
 196.4 
 
 194. 1 
 212 .0 
 173-7 
 1763 
 
 »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, 1873-1910 
 
 293 
 
 1873 
 1874 
 
 1875 
 1876 
 
 1877 
 1878 
 1870 
 1880 
 1881 
 1882 
 1883 
 1884 
 1885 
 1886 
 1887 
 1888 
 1889 
 1890 
 1891 
 
 Price of labor 
 
 100.00 
 102.80 
 101.95 
 101.25 
 1 04 . 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 
 
 Year 
 
 1892 
 
 1893 
 1894 
 
 1895 
 1896 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 1903 
 1904 
 
 1905 
 1906 
 1907 
 1908 
 1909 
 1910 
 
 Price of labor 
 
 124 
 
 124 
 135 
 152 
 158 
 166 
 179 
 185 
 194 
 203 
 200 
 200 
 201 
 210 
 219 
 225 
 237 
 233 
 224 
 
 "4 
 92 
 25 
 
 00 
 
 29 
 
 ;* 
 
 75 
 43 
 38 
 
 17 
 08 
 
 50 
 38 
 
 29 
 
 9] 
 
 32 
 
 54 
 
 92 
 
 54 
 
 ( 1 904-1 905), the price of labor did not rise so rapidly as 
 it did after the Sino-Japanese War. It may he 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. 1 
 
 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. 
 
 1 Post, p. 312-315.
 
 2^4 ECONOMIC EFFECTS OF TIN'. SINO-JAPANESE WAR 
 Prices of Labor in Tokyo and Osaka, i 893-1903 
 
 Yi ar 
 
 In Tokyo 
 
 (of 26 kinds 
 
 of labor)" 
 
 In Osaka 
 
 (of 43 kinds 
 of labor)" 
 
 In Tokyo 
 
 (of 24 kinds 
 of labor) b 
 
 Average 
 
 Rate of in- 
 crease com- 
 pared with 
 previous year 
 
 1893 
 
 i8<)4 
 
 1895 
 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1900 
 
 1901 
 
 1902 
 
 1903 
 
 100. 
 109.2 
 118. 6 
 
 129. 1 
 140.2 
 145-8 
 147.8 
 167.2 
 169.7 
 170.6 
 170.2 
 
 100. 
 in .9 
 132 3 
 I4I-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 
 I45-0 
 1528 
 155-2 
 168.8 
 
 170.5 
 171 .0 
 176.6 
 
 9 
 14 
 
 8 
 12 
 
 7 
 2 
 
 13 
 1 
 
 
 5 
 
 8 
 4 
 3 
 5 
 8 
 
 4 
 6 
 
 7 
 5 
 6 
 
 
 7-7 c 
 
 As investigated by Finance Department. b As investigated by Bank of Japan. 
 c 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, 1893-1903 " 
 
 Year 
 
 1893 
 1894 
 
 1895 
 1896 
 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 1903 
 
 Prices of 
 commodities 
 
 100. o 
 105.0 
 in .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 
 I45-0 
 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 
 13.2 
 
 9-4 
 6.2 
 
 4-9 
 6.4 
 
 6.1 
 14. 1 
 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: 1 
 
 
 
 Incomes 
 
 and Income 
 
 Taxes, 
 
 1 893-1903 
 
 
 
 
 
 
 
 Amount 
 
 
 Index 
 
 Year 
 
 No. of 
 
 Per- 
 
 Total 
 
 Per- 
 
 of in- 
 
 IV, 
 
 numbers 
 
 for prices 
 of com- 
 
 tax- 
 payers 
 
 centage 
 
 income 
 
 centage 
 
 come 
 per tax- 
 
 centage 
 
 
 
 
 
 
 pa} 1 1 
 
 
 modities 
 
 
 
 
 Yen 
 
 
 Yen 
 
 
 
 1893. ... 
 
 124,077 
 
 100. 
 
 9i.3i3,447 
 
 100. 
 
 736 
 
 100. 
 
 100.0 
 
 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 
 
 [08 1 
 
 1 1 1 .0 
 
 1896. . . . 
 
 151.041 
 
 121 .7 
 
 127,201), 728 
 
 139 
 
 4 
 
 843 
 
 ■ 1 ) 5 
 
 [23 I 
 
 1897.... 
 
 172,764 
 
 139.3 
 
 147,671.. 5 1) 
 
 161 
 
 7 
 
 855 
 
 [ 1 6 2 
 
 138.8 
 
 1898. . . . 
 
 I95i292 
 
 157 4 
 
 I liN, 480,424 
 
 184 
 
 5 
 
 
 [1 7. 2 
 
 147 9 
 
 1899. ... 
 
 342,721 
 
 276.2 
 
 204,1 17,466 
 
 237 
 
 4 
 
 633 
 
 86.0 
 
 [48.8 
 
 1900. . . . 
 
 43L378 
 
 347 7 
 
 253.251.341 
 
 291 
 
 7 
 
 617 
 
 83.8 
 
 [62.7 
 
 1 901 
 
 510,779 
 
 411. 7 
 
 29] , -\S6,2I3 
 
 33 1 
 
 9 
 
 599 
 
 81 1 
 
 156.4 
 
 1902 . . . . 
 
 580,849 
 
 468.1 
 
 326,230,305 
 
 373 
 
 8 
 
 
 79 9 
 
 1 54 • 2 
 
 1903. 
 
 548.976 
 
 523 .0 
 
 366,931,266 
 
 420.7 
 
 592 
 
 80 1 
 
 161 7 
 
 1 The income t.i\ of I his class is |<\ ied Oil their individual incomes, alter intl 
 
 on public bonds or debentures belonging to them lias been subtracted. In other 
 
 words, it is levied on all incomes excepl those of legal persons, or t hose 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. (1) 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: (1) 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. 1 his 
 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 activity in the economic world winch 
 followed the war, and also to the distribution of monetary 
 gifts by the government among soldiers, sailer-, etc., for then- 
 services in connection with the war. Then, again, the war 
 awakened the Japanese people, and they began t<> adopt 
 many features of Western style to meet the various so< :ial 
 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, tin- cost of living was considerably 
 increased. As stated in the foregoing section-, the prio 
 labor and the incomes <>t" 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. It 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) t 
 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, 1 873-1 893 
 
 Items 
 
 1873 
 
 1877 
 
 1882 
 
 1887 
 
 1892 
 
 1893 
 
 Cost of living: 
 
 Rice 
 
 Bean paste 
 
 Salt 
 
 Soy 
 
 Firewood 
 
 100 
 100 
 100 
 100 
 100 
 100 
 100 
 100 
 100 
 
 hi 
 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 
 179 
 118 
 226 
 221 
 
 154 
 192 
 
 95 
 156 
 162 
 
 Charcoal 
 
 Cotton fabrics 
 
 House rent 
 
 Bath charges 
 
 165 
 124 
 225 
 221 
 
 
 
 Average 
 
 Prices of commodities 
 
 100 
 100 
 100 
 
 119 
 107 
 106 
 
 197 
 
 95 
 90 
 
 142 
 104 
 131 
 
 168 
 122 
 128 
 
 166 
 122 
 
 Prices of labor 
 
 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 KFFECTS 
 
 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 pri< es 
 of some of the daily necessaries in the city of Tokyo are shown 
 in Table IX at the end of this chapter. 1 
 
 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, 1 893-1903 
 
 Year 
 
 Prices 'it labor 
 
 Prices of daily 
 in ' essaries 
 
 I ration 
 
 1893 
 1894 
 
 1895 
 1896 
 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 1903 
 
 100 n 
 109.8 
 
 1 24 2 
 
 132-5 
 145 
 
 152.8 
 155-2 
 [68 8 
 
 1705 
 171 .0 
 
 171. 6 
 
 100. o 
 109 2 
 
 IIS ,, 
 
 [29 1 
 
 [40 2 
 
 145 ' S 
 U7 B 
 1 (.7 2 
 169 7 
 170.6 
 170.2 
 
 1 00.0 
 
 [01 2 
 
 IO5 2 
 
 1 1 I 'i 
 
 133-8 
 1 p t> 
 [87 2 
 [99 5 
 
 21 1 7 
 226.2 
 218 6 
 
 1 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. 2 
 
 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 
 
 l Post, p. 317. 2 Post, pp. 318, 319.
 
 SOCIAL EFFECTS 
 
 30I 
 
 whose population is less than 20,000 each (Class No. 1) ; 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. 1 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 
 
 7L295 
 15,810 
 
 13,947 
 13,224 
 I2,35i 
 
 35,874,298 
 
 37,275,893 
 39,384,980 
 40,974,(121 
 42,430,105 
 
 100. 
 106.0 
 109.0 
 1 11 .0 
 118. 
 
 100. 
 
 1893 
 
 1898 
 
 104.4 
 1 10.6 
 
 1906 
 
 1908 
 
 118. 
 126.0 
 
 Cities Whose Poplxation is 20,000 and Moke but Less Than 100,000 
 
 (Class No. 2) 
 
 Year 
 
 1888 
 
 1893 
 1898 
 
 1903 
 1908 
 
 Number of 
 cities 
 
 SO 
 61 
 
 7- 1 
 80 
 
 95 
 
 Population 
 
 I ,'808,726 
 
 2,270,1 10 
 2,520,151 
 3.098,251 
 -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 
 
 6 
 6 
 
 8 
 
 9 
 10 
 
 2,422,455 
 2,514.973 
 3.497,910 
 4.4<x>,564 
 5.536,835 
 
 100 
 104 
 144 
 185 
 229
 
 302 ECONOMIC EFFECTS OF THE SI NO- 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, an d 
 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 economic 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 "lion 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 1 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 
 
 3-0
 
 CONCLUSION 321 
 
 with the men- 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, (1) 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 [894 
 1895 as the limit, we notice especially that there have been 
 . xtraordinary 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 lite completely 
 changed from ante-war times. Society assumed an entirely 
 new aspect, as if completely revolutionized. In other word-.
 
 322 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR 
 Fiscal Statistics in Annual Percentages, 1887-1905 a 
 
 Year 
 
 Expenditure 
 
 Tax revenue 
 
 Currency in 
 circulation 11 
 
 Average price 
 of commod- 
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 Increase in 
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 1887.. 
 
 100. 
 
 100. 
 
 100.8 
 
 102. 1 
 
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 106.2 
 
 no. 4 
 
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 105-9 
 
 1894° . . 
 
 98.3 
 
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 i895 d • 
 
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 109.3 
 
 1897 •• 
 
 281.5 
 
 143.7 
 
 166.4 
 
 163. 1 
 
 no. 6 
 
 1898. . 
 
 276.6 
 
 155- 1 
 
 143-8 
 
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 1899. . 
 
 319-9 
 
 201 .6 
 
 169.6 
 
 170.9 
 
 112. 8 
 
 1900. . 
 
 368.5 
 
 213. 1 
 
 160.2 
 
 182.8 
 
 1 14.4 
 
 1901 . . 
 
 335-9 
 
 227.1 
 
 154-5 
 
 174-5 
 
 116. 3 
 
 1902 . . 
 
 364.0 
 
 246.7 
 
 I64-5 
 
 170.6 
 
 117. 9 
 
 1903 . . 
 
 3I4-I 
 
 243- 1 
 
 166.8 
 
 182.8 
 
 119. 7 
 
 1904° . 
 
 758.2 
 
 530.7 
 
 256.1 
 
 233-0 
 
 125.0 
 
 1905' . 
 
 736.8 
 
 581.8 
 
 3°6 -3 
 
 232.1 
 
 I3I-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. 
 
 d Ending of Sino-Japanese War. e Beginning of Russo-Japanese War. 
 
 1 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 condition- ol 
 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. Xo 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 economics. 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 ol 
 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 Kankyodo, 
 16; progress in, 89; Bank of Agri- 
 culture and Industry, 90, 04, 107, 
 175, 178 et seq., 193; expenditures to 
 encourage, 139; experimental stations, 
 273; capital invested in (1896-1903), 
 277. 
 
 Amoy, 188. 
 
 Anshantan, captured by Japanese, 31. 
 
 Antung, Chinese evacuation of, 26. 
 
 Aomori, i< <>. 
 
 Army: organization of, corps, 25-6; 
 size of, 35; rehabilitation of, 89-90, 
 <»4 et seq.; four year expansion schei 
 (1895-1899), 97 et seq.; expenditures 
 for (1893-1903), 99-100; extraordi- 
 nary expansion expenditures for 
 -1903), 101; use of Chinese in- 
 demnity for expenditures for, 120. 
 
 Asan, 19, 21-2. 
 
 Bakeuchu, 13. 
 
 Bank notes: 51; issued by Bank of 
 Japan (1894-1896), 55, 166, 286; 
 issued to meet extra expenditures, 56; 
 increased circulation of, 154; redemp- 
 tion of national, 162, [67, 191 2; 
 antee reserve lssui s of, [66, [68 
 et seq., 200; issued by Hank of For- 
 mosa, [86-7; issuance of nal 
 
 ne,| 1 [893 1 -mm 1 , with in- 
 e it decr< ase, 197-8. 
 
 Bank of Japan: 72, 82, 152, 155. 161, 
 [93; loans in government by, 51, 59 
 
 [., 73, 75. 83, [58, [99; v, 
 penses met by note issue of 0< Sn 4: 
 1896), 55, 166, 286; redemption of 
 loans of, 76; enlarged business of, 90, 
 156, 1 75; deposit of 1 hinese indem- 
 nity funds in, [22; purchase <>t bonds 
 by, 125; increased capitalization of , 
 176. 
 
 Banks: Hypothec and Industrial, 83, 
 
 00, 94, 175, 17N et seq., J74; national 
 
 banks, 1 hanged to ordinal 
 on, [93; oi Agriculture and Industry, 
 90,94, i<>7, [20, 274; subsidies to, 90, 
 103, n>7, [20, 170, [82; bonds issued 
 by, 156; regulations concerning issue 
 
 of bank notes by, 161 ; reorganization 
 of, 175 et seq., iv-3 _ 4; development of 
 realty, 178 et seq.; deposits and loans 
 of (1893-1903J, 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, [20, [79; estab- 
 lishment of, 04, 175: business of, [78 
 el seq. (1897 [903), 204-5, 274; re- 
 organization of, 193-4; loans by 
 202, 274. 
 
 Bellenue, Freni h missionary, o. 
 
 lien, Li Sai, Korean Progre-M\e leader, 
 
 12. 
 Bokueiko, Korean Progressivi 
 
 14- 
 
 Bokukeiju, revolt of, 10. 
 
 Boxer Rebellion, 132. 
 
 Budget: of revenue and expenditi 
 47 8, I [893 1 9] J; for army 
 
 and navy, 57, - icpenditures 
 
 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-,^; Tre.ii y of , [3-4. 
 
 ( hilili, IYo\ ince of, 3] 2, 57. 
 
 (holla, Province of, revolutionary 
 
 movements in, 1 7. 
 Chung-( hong, Province of, revolution- 
 movements in, 17. 
 Chungking, opened to conm 
 
 ( ities, town- and villages: increase in 
 annual expenditures for (1893 
 1 $8; ratio "I" increase <>f expenditures 
 for [904 ><\ er t8< icpansion of 
 
 expenditures for, [42; population of, 
 1 . ' 1 B93 [903 ,318 9; increase in 
 
 population [905)1 in annual 
 
 percentages, 322. 
 ( !( >.tl, rise in pi i 
 
 inial Bank of I lokkaido: busi 
 
 of, 175 6, 17 s /at ion 
 
 of, I9374. 
 Communications Office, expenditures 
 
 for (1894-190; \6. 
 
 Conservative party, in Korea, 12 - 
 
 325
 
 326 
 
 INDEX 
 
 Currency: expended for war expenses 
 (1894-1896), 57; scarcity of, 81, 83; 
 inflation of, 84- 5, 154, [96; reform of, 
 system, 118, 161, i<>5, 232, 235; in- 
 ed volume of, 288; in circulation, 
 in annual percentages (1887-1905), 
 322. 
 
 Customs, revenue from (1889-1908), 
 291. 
 
 Disbursements, monthly (1894-1896), 
 59; for government and private rail- 
 ways (1 893-1903), 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 (1894-1903), 91 et 
 seq.; revenue for post-bellum, (1896- 
 1903). 9 2 ! 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 (1893-1903), 
 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 (1896-1903), 
 222. 
 
 Fenghuangcheng, 25; Chinese evacua- 
 tion of, 27. 
 
 Foreign Office: expenditures for (1894- 
 1903), 36. (1894-1895), 43 T 4. 
 
 Formosa: 6; Japanese expedition to, II ; 
 ceded to Japan, 33, 224, 229; fighting 
 in, 35; Bank of, 94, 175, 185 et seq., 
 1 M4, 206; expenses incurred in, 103, 
 109 et seq.; railways of, III, 261; 
 loans for development of, 115-6; ex- 
 penditures for (1895-1903), 146 et 
 seq.: production of sugar in, 229; 
 trade of, with Japan (1897-1903), 
 230; passengers, freight, income, etc. 
 of railways of (1897-1903), 269. 
 
 Fortresses, expenditures for construc- 
 tion of, 98-9. 
 
 Foundary, iron: establishment of, 89, 
 04, 96, 27;,; expenditures for con- 
 struction oi, 103-4: use of indemnity 
 funds for construction of, 120. 
 
 France: occupation of Kwangchow by, 
 
 7, 34, 320; interference of, in Liaotung 
 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 7 , 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- 
 faires at Seoul, II, 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, (1 894-1 898), 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, 1 16; use of, for army expendi- 
 tures, 90, 120; revenue from, 96-7, 
 119-20.
 
 INDEX 
 
 327 
 
 Industry: capital investment in 11896- 
 1903), 209-10, 219, 240, 243; progress 
 of, 2 11. 
 
 Industrial Bank: i<>4; 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), 3 6 . (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. 3?o. 
 
 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 StalT, 32. 
 
 Konwasai, bat tie at, 27. 
 
 Korai, overthrow of kingdom of, 4. 
 
 Korea: population and area of, 3: 
 Chinese and Japanese attitude to- 
 ward, 4 c/ \,(/.; 11 2; Japanese expe- 
 dition to, S; trade with, o, 12, 154, 
 237; independence of, 10, 14, 21 ; dis- 
 turbance in, 13 et seq., 35. 
 
 Kure, 106. 
 
 Kuroda, Kiyotaka, chief of Japa- 
 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 1, 282, 292, 294; pi 
 
 in Tokyo (1873 1910), 293, JI2 1; 
 
 fluctuation of price of i 
 21)4: pricesof, and commodities com- 
 pared with cost <jf living, 298; price 
 of, in Osaka (1893-1903), 314-5. 
 
 Land tax, 1 jo- 1 . 
 
 1 ion- and Consul ites: expenditures 
 of ex- 
 penditure- foi 
 
 Liaotung Peninsula: ceded to Japan, 
 33; retrocession 
 286; compensation for return of, 1 1 8. 
 
 Liaoyang, 25, 27. 
 
 Loans: public, 50, 54, 57-8; of Bank of 
 Japan, 51, et seq., 75, 83, 158, [99; 
 details of " 1- ir>t ", 61 et seq.; n 
 tions for war, 64 
 
 66 et seq.; "Third", 68 et seq.: details 
 of first three, 69 et seq.; receipts from 
 war, 72: extraordinary spe ial, 72 \\ 
 "Fourth", 74; based on laws Num- 
 bers 8 and 25, 75 et seq.; for railway 
 and telephone improvem at, 90, 114; 
 for expenditures for Sino-Japanese 
 War I [894-1910 . 1 [3; for industrial 
 enterprises, 114..' seq.; for Formo6an 
 development ,11- 6; sterling, n6; by 
 Hypothec Bank and Banks of Agri- 
 culture and Industry, 181, 202; out- 
 standing, of Hypothec Bank 
 1903 . [83; of Colonial Bank of Hok- 
 kaido, 1 85; of banks [893 1 103 ,195. 
 
 Loochoo, 6; as a Japani --ion, 
 
 10-1. 
 
 Manchuria, fighting ii 
 
 Merchandise, value of, sold (1898- 
 
 1903), 242. 
 Merchant Marine: subsidies to, 
 
 263, [893 1903), 270 <( 
 
 of, 2 - 
 Min, Prin nation of, 14. 
 
 Miyake, Dr. Yuiiro, cited, 157. 
 Monopolies; leaf tol . [26; in- 
 
 jed revenue from tobai co, 1 32, 
 
 137: workings of, 1 34 1 1 
 Motienling, 
 
 isaki: 1.;, t<>: subsidy for harbor 
 improvement ai lephone ex- 
 
 tension in, 264. 
 
 iya: 105; telephone extension in, 
 264. 
 Naval Office: expenditure 
 
 [903 ,36; ext raordinary expenditures 
 for (1894 |l '"' • : " 
 \.i\ igat ion, subsidies for, [03, loi 
 Navy: rehabilitation and expansion of, 
 •. 04 et seq.; seven yt 
 sion -chei
 
 328 
 
 INDEX 
 
 expenditures for (1893-1903), 99- 
 1 « m 1 ; exl raordinarj expansion expend- 
 itures for (1896-1903), 102; use of 
 Chinese indemnity for, expansion 
 funds, 120. 
 
 Negotiable paper, handled (1893-1895), 
 225, 1 1893 i<K>3),239. 
 
 Ncuchang, 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 ( 1 893-1903), 282, 292, 294; whole- 
 sale prices in (1 893-1 903), 310; 
 prices of labor in (1 893-1 903), 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- 
 1. (1893-1903), 318-9; increase of 
 (1887-1905) 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 (1893-1910), 282, 292; com- 
 parison of, of commodities with cur- 
 rency in circulation (1887-191 1), 289, 
 311; of labor in Tokyo (1893-1903), 
 293-4, 312-3; fluctuation of, of labor 
 
 and commodities (1893-1903J, 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 (1 893-1 903), 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), 
 145, 255-6, 258 et seq.; expenditures 
 for new construction of, 105-6; con- 
 struction of, in Formosa, 1 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 (1893-1903), 265, 
 of private (1893-1903), 267, of For- 
 mosan (1897-1903), 269; revenue, 
 disbursements and profits of govern- 
 ment ( 1 893-1 903), 266, of private 
 (1893-1903), 268. 
 
 Receipts: monthly government (1S74- 
 1876), 59; from war loans, 63, 72, 
 
 U3-4- 
 
 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 (1896-1903), 92; increase 
 of, 94; ten year plan for (1 896-1 905), 
 95; from telegraph system, 131-2, 
 137; from tobacco monopoly, 132, 
 137; expansion of, of local communi- 
 ties (1893-1903), 142; excess of, 
 over expenditures (1 893-1903), 143; 
 of government railways (1 893-1 903), 
 266; of private railways (1 893-1 903), 
 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 seq. 
 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. 
 Miipbuilding: 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, 1 1. 
 Songhwan, battle of, 19, 22, 49. 
 Soochow, opened to commerce, 33, 232. 
 Soshojo, 22. 
 ^o-himori, 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, 20 3; statistics of, 270 el seq. 
 Stock exchange, effect of currency re- 
 form on, 165. 
 Subsidies: for shipbuilding, 84, 89, 109, 
 
 254, 262; to banks, 103, 107, 120, 
 
 ( 1 897-1 903), 179, 182; to Waka- 
 
 matsu Harbor Construction Co., 104; 
 
 to steamship companies, 108-9, 263. 
 Sugar, imported from Formosa, 229. 
 Sujin, Kmprror, expedition of, to Korea, 
 
 8. 
 Susano-no-Mikoto, 8. 
 
 Tai-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, 2 9°- 
 
 Tatungkow, capture of, 27. 
 
 Taxes: in< rease of, 81 et sea., 90, 126 et 
 seq., 280, 289 et srq.; readjustment of, 
 <).s: income from, 127; to defray ex- 
 penditures of Boxer Rebellion, 132- 
 3; business, 228; comparison of, with 
 wages and cost of living ( 1 S<).>— 
 1903), 299; levied (1893-1903), 317; 
 
 iue from, in annual percentages 
 (1887-1905), 322. 
 
 Teijosho, 13. 
 
 Telegraph, revenue from, 131-2, 137. 
 
 Telephone Bystem, extension of, 89, 94, 
 103, 106-7, 255. 264. 
 
 Tienchwangtai, capture of, 30-1. 
 
 Tientsin: 14; Treaty of, 5, 15, 17, 
 steamship service from, 1 
 
 Tobacco: establishment of, monopoly, 
 90, 126; workings of, monopoly, 134 
 el seq.; revenue and profit from, 132, 
 (1898-1903), 136-7; advances in man- 
 ufacture of, 210; rise in price of, 2-1 ; 
 tax on, 290. 
 
 Togakuto Affair, 6. 
 
 Tokyo: 11, 124; interest rates in. I 
 
 extension of telephone service in, 106; 
 prices of commodities and wages in 
 (1893-1903), 2X2-3, 292; price of la- 
 bor in (1873-1910), 293, ( 1 893-1 903), 
 294, 312-3; wholesale prices in (1893- 
 1903), 303 et seq.; prices of necessaries 
 in (1893-1910), 316. 
 
 Tong Haks, revolutionary movement 
 of, 17-8. 
 
 Torpedo boats: number used during 
 war, 35; use of indemnity funds for 
 constructing, 97. 
 
 Toyama, 105. 
 
 Trade: with Korea, 9, 12, 154. 2 
 
 pansion of foreign, 89, 1 58. 230 < / seq.; 
 decrease of foreign, 168; foreign 
 (1893-1895), 225, (1893-1903). 239. 
 (1868-1903), 244 et seq.: between 
 Japan and Formosa (1897-190; 
 
 Transportation: progress in, 254 <•/ seq.; 
 capital invested in (1896 i<><\ 
 
 Treasury Office, expenditures for 
 (1894-1903), 36, (1894-1897), 43, 45. 
 
 Treaties: of Tientsin, 5. '5. 17: "' '876 
 (Korea), 10 et seq.; with western 
 Towers. 12: of Chemulpo [882 . 1 .; - 
 
 4; of Seoul, 15; of Shimorioseki 
 (1895', 33, 35; commercial, 254. 
 
 Tsuboi, Rear Admiral, 21. 
 
 Tsunp, Tai. Emperor, B. 
 
 Tsuruga, 105, 
 
 Ujina, 23, 32. 
 
 United States: < binese treaty with, 12; 
 
 monetary system in, [62;tarifl 
 
 ment with, 233. 
 
 Vladivostok, Bteamship line from, [08. 
 
 rise in, s s: of factory workers 
 compared with, of independent work- 
 ers (1 899-1 903'. 225: of factory
 
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