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Why have the guilds, which play an influential socio-political role and are ready to cooperate economically with the government, fallen out of favor …? [T]he constitution of political forces relates to various and shifting bases of social solidarities, but crucially, these varieties and shifts often result from changes in political and economic conjuncture, including state structures and policies … . Chapter 3 outlined the change in the form of governance in the Tehran Bazaar and demonstrated that the cooperative hierarchies of the prerevolutionary era have given way to coercive hierarchies. In the process of elucidating this transformation it also pointed to the symptoms and immediate causes of this shift – political uncertainty, the increased use of cash, the acute problem of bounced checks, the rise of smuggling activities, the change in composition of bazaar members, and the demise of network producers such as brokers. These proximate causes and effects can be explained by generally accepted economic theories and straightforward political logic. When import monopolies are created and licenses are distributed, one expects rent seeking, corruption, and smuggling; when state institutions are up for grabs, especially in the case of a rentier state, it is unsurprising that competition over their design and the control of organizations that distribute power and wealth will ensue. What still remain as questions are what underlies the shifts in the Bazaar's governance and what propelled these dynamics to take place specifically in the postrevolutionary era. [ABSTRACT FROM AUTHOR]

How can we explain the puzzling pattern that Chapter 3 found to exist? On one hand, that chapter's exhaustive study of party strength established that parties were in many ways quite strong in Russia as President Vladimir Putin moved into his second term in office. Collectively, they had cultivated distinctive positions on important issues, developed sizable populations of loyalists, and proven capable of significantly enhancing their candidates' chances in parliamentary elections. These findings appear to contradict widespread suppositions that Russian parties were consistently incapable of providing meaningful support for their candidates or were unable to communicate clear policy positions. On the other hand, we also saw that this party development had largely stalled by the late 1990s after progressing markedly in the middle of that decade; while some growth reemerged with the 2003 election, it was unbalanced, with one party (United Russia) accounting for a disproportionate share while some other key parties appeared to be in decline. Moreover, we found that parties had penetrated some organs of power more fully than others. These latter observations seem contrary to the anticipation of many theorists that the incentives provided by electoral competition would inevitably and smoothly lead to the prevalence of party politics in some form. The logic of electoral markets sketched in Chapter 1 supplies us with some explanatory leverage on this puzzle. If candidates are treated as consumers of goods and services that help them get elected, parties can be seen as suppliers who emerge to meet this candidate demand. [ABSTRACT FROM AUTHOR]

Immediately after the collapse of communism in Europe, many students of international relations predicted a return to balance-of-power politics among the great European powers. Others foresaw new balancing between the United States and Europe as the international system moved from a bipolar order to a multipolar world. A decade later, the distinguished observer Joseph Joffe argued that Western Europe and Russia might join together to offset American power: “Ten years after victory in the cold war, the United States is still No. 1 by any conceivable measure. But the lesser actors – Russia, Europe, China – are beginning to make true what history and political theory have predicted all along: Great powers will generate ‘ganging up.’ Nos. 2, 3, and 4 will seek to balance against Mr. Big.” And a recent book by a leading Europe scholar, Charles Kupchan, predicts that a united Europe will emerge as America's main long-term strategic challenger. Joffe, Kupchan, and other realists like John Mearsheimer and Kenneth Waltz eventually may be right. Perhaps the German, French, and Russian coalition during the 2003 Iraq war is just the beginning. In the future, realpolitik and balance of power may return as the organizing principles of international politics on the European continent. Someday, the “lesser” powers may seek to balance against the United States. To date, however, what is more striking is how wrong these realist predictions since 1989 have proven to be. [ABSTRACT FROM AUTHOR]

Transition and the Agricultural Economy Consider now the similarities and the differences among the three transitions toward modernization in general, the structural transformations they called forth, the changes they set in motion within the different frameworks in which they arose, and the conceptions advanced during their unfolding by the reformers who proposed the measures. In the pursuit of the same goal, namely “catching up” with the continually developing countries of Western Europe, the three Russian transitions toward modernity called forth many valid proposals and set in motion methods of changes; yet all ultimately yielded only limited results. Poor and underdeveloped Tsarist Russia aimed quite decisively from the 1890s on to surmount its backwardness, notably by supporting the expansion of some of Russia's industries oriented toward export, and forcefully developing Russia's railway network with substantial help from foreign capital. Yet, the succeeding Soviet Russia still inherited a backward, war-ravaged economy that in its turn tried to develop by emphasizing from 1928 on the rapid growth of heavy industry (oriented primarily toward military production), deliberately neglecting the civilian needs, and rejecting the import of foreign capital. After all this, however, Soviet Russia also failed to “catch up” and, as its leaders had pretentiously sought, to “surpass” the West. Finally, the patrimonial state of Boris Yeltsin and then of Vladimir Putin inherited the largely obsolescent Soviet industry within the limits of a former empire shattered in all its structural components. [ABSTRACT FROM AUTHOR]

Size and Structure of the Budget The General Government Budget of the Russian Federation includes the federal government budget and the subnational budgets – that is, the regional and local budgets – as well as the main social extra budgetary funds comprising the Pension Fund, the Employment Fund, the Social Insurance Fund, and the Federal Medical Insurance Fund. The federal and the subnational budgets are jointly designated as the consolidated budget. As can be seen in Table 26-1, between 1994 and 1998, at the core of the system, the federal revenues declined from 11.8 percent of the GDP in 1994, after various rises from 1995 to 1997, to only 10.7 percent by 1998. Outlays, moving on a higher level, contracted from 23.2 percent of the GDP in 1994 to 16.6 percent in 1998. All this left a federal deficit amounting to 5.9 percent of the GDP. I will examine further on in detail the multiple causes of the general decreasing trends. For now, let me note only that the critical reasons of the contractions have been, on the one hand, the continuous fall in profitability throughout the economy and, on the other hand, the manifest incapacity of the government to limit spending. Consider now the structure of the budgetary system. The capital instrument of budget receipts, taxation, has been continually hampered by the excessive number of taxes and by the granting of numerous exemptions that have encouraged tax evasion. [ABSTRACT FROM AUTHOR]

The Monetary System For comprehension of the Russian monetary system prevailing after the Crimean War, a brief recap of its origins and evolution may prove helpful. The basic features of this system were established under Peter the Great. At the time, the state issued gold rubles, silver rubles (at the exchange rate of 13.8 silver rubles to 1 gold ruble), and small copper change. By 1755, under the Empress Elizabeth, the state issued a new set of gold pieces – so-called imperials and semi-imperials – at a high rate of exchange against the silver rubles. Finally, under Catherine II in 1759, paper money made its appearance under the name of assignat rubles. The price of the assignat was set almost equal to that of the silver currency. The number of assignats increased sharply afterward, particularly during the war with Napoleon, and their value declined appreciably. By 1810, under Alexander I, Russia finally decided to reduce the amount of paper rubles in circulation, increase their value, and ensure the country's monetary stability. To do so, the state adopted as a monetary basis silver monometallism, that is, it made the silver ruble the country's basic monetary unit. At the time, it had also been projected to give to the assignant a precise value in relation to silver, but the project was not carried out. The metallic money and the assignants continued to circulate jointly but at a high premium of exchange for the silver ruble. [ABSTRACT FROM AUTHOR]

A few years ago, while preparing a review article on Marxist interpretations of the French Revolution, I realised how lonely someone looking at that debate from the Napoleonic end, the ‘other’ end as it were, could feel. If the historiographical consensus which passed as the orthodox view of the Revolution from the 1930s to the 1950s could be called ‘Marxist’, granted a good deal of diversity within its fraternity, its main focus was on the revolutionary period itself, or on what were considered ‘strategic’ parts of it. Since the mounting attack on received Marxist lore, first in the Anglo-Saxon countries, and then in France itself, the limelight seems to have shifted from the years 1789–94 to the old regime, in other words to the ‘causes’ or ‘origins’ of the Revolution. That indeed is now the main area of pragmatic research on the subject. Few historians, whether for or against the ‘bourgeois revolution’ of the Marxist paradigm, would now insist that the Year II was the strategic or exemplary year of the Revolution. If anything, it is seen as an aberration, as an atypical phase. Whatever else it has done, the debate on the Marxist interpretations has made us all much more aware of the empirical continuities of French social and economic history, and especially of the constancy of landed relationships. Yet Marxists have never abandoned their fundamental concept of the French Revolution as a ‘bourgeois revolution’, even if some among them have redefined the term in the light of more recent factual evidence. [ABSTRACT FROM AUTHOR]

On 1 March 1801, the Abbé Solier was executed in Le Vigan (Gard) for ‘crimes committed against the Republic’. Solier, one of the most notorious ‘political brigands’ operating in the south of France during the period of the Directory, had commanded his bande d'égorgeurs, based along the borders of the departments of the Gard, the Hérault and the Ardèche, from 1795 to his death in 1801. He is by no means one of the forgotten heroes of catholic royalist resistance against the Revolution. The protestant writer, André Chamson, chose Solier as the hero of his latest ‘roman dans l'Histoire’. Philippe Senart has recently devoted two articles in the Revue des deux-mondes to an appreciation of Solier's contribution to the cause of catholic royalism, confronted in the Cévennes region by a powerful tradition of protestant republicanism. Senart notes how, through the medium of the veillées, his grandmother would transmit accounts of the good abbé giving the first communion to catholic children in remote caves and woods; celebrating mass secretly during the worst bouts of persecution; dying a martyr for le bon roi et les bons prêtres. Through the works of Chamson and Senart, we are conducted along the tortuous paths of Cévenol folklore where les étrangers, then as now, are well advised to tread cautiously. However, it was not only in the Cévennes – la terre sainte of protestantism – that the égorgeurs of the south-east operated. Radiating outwards from traditional areas of revolt and particularism, catholic royalist brigandage was to affect many regions within the former provinces of Languedoc and Provence. [ABSTRACT FROM AUTHOR]

The Royal Academy of Sciences will continue to remain under the protection of the King and will receive his orders through the particular Secretary of State, to whom his Majesty assigns the task. It is by science that we have been vanquished [in the Franco-Prussian war]. The reason for this lies in the regime which has oppressed us for 80 years, a regime which subordinates men of science to politicians and administrators. Since the first days of August [1914], our Academy has only had one thought: to help the government in the defence of the motherland and of liberty. Government control of the Academy? The relationship between the Academy and the government was always a rather delicate one. Although Condorcet had used the expression ‘fonctionnaires publiques’ to describe members of the Institute which he planned, when the National Institute came into being in 1795 its members were not civil servants. Yet in so far as the National Institute was a government-sponsored body, its members obviously had a certain connection with the state, both in fact and in the public mind. They represented ‘official’, that is to say, government-sponsored science in a way the Royal Society never did, being ‘Royal’ in name only. [ABSTRACT FROM AUTHOR]

Integration, 1946–1954 By the end of March 1948, under the Financial Institution Reconstruction Act of October 1946, the disastrous losses of all wartime bank advances were liquidated. The amount thus eliminated totalled ¥24,800 million, of which nearly two-thirds belonged to ordinary banking. A series of antitrust measures and enactments by the end of 1947, which dissolved the zaibatsu, nullified the bank agreements on interest rates. Urgent action was needed and, with the aid of advice from SCAP, the Temporary Rate Regulation Act was promulgated in December 1947. Under the Act, any rates of interest, from Bank of Japan Rates to call market and mutual loan rates, were to be subject to the directive of the Bank of Japan governor in consultation with a Rate Regulation Committee. A comprehensive Financial Business Bill, together with a Financial Institution Accountancy Bill, proved, by the middle of 1949, to be abortive. They were overtaken by a surge of policy changes brought about by the Dodge Line. Before the breaking apart of the two bills, the Finance Ministry tried hard to put the system together and base it on a more sound foundation. In the autumn of 1946, the government started surveying and reviewing the branch network of banking and other financial institutions. By the spring of 1952, due to the designation of all offices, other than the head office, as ‘branches’, the number of branches increased by more than 1,000. Looking at the American examples, the government had earlier, in the autumn of 1947, presented an outline of deposit insurance, which developed into the ‘Outlines for Deposit Insurance Act’ in October 1949. [ABSTRACT FROM AUTHOR]

On 30 August 1945, that is, fifteen days after the Emperor's radio broadcast on 15 August 1945, General Douglas MacArthur, the commander-in-chief of US forces, who had a day before the Japanese surrender been appointed the Supreme Commander for the Allied Powers (SCAP), landed at Atsugi air base near Tokyo. The Allied Powers' General Headquarters, known inevitably as GHQ, which became one of the most popular western words in post-war Japan, was accommodated appropriately in the magnificent building of Daiichi Seimei, or First Life Insurance, facing the palace, the seat of the Emperor, just beyond the moat. On 2 September, the Japanese ambassador plenipotentiary, Mamoru Shigemitsu, on board the US battleship Missouri, signed the surrender document accepting the terms of the Potsdam Declaration of 26 July 1945. From then on a series of directives started to stream out from the office of SCAP at GHQ, which, in spite of its title, in effect represented and consulted only the Washington government. As John Foster Dulles later recalled, the Japanese were unexpectedly complacent as directions poured out of MacArthur's office. The Japanese banking system was also subjected to directives from the Americans although, as will be seen, without real understanding. They could readily be outmanoeuvred. It became a priority for the Americans to destroy the war-related monetary and banking system. On 30 September 1945, MacArthur issued the first directive on banking, stating: 1. You will immediately close and not allow to reopen, except at the direction of this headquarters, the head offices, branches and agencies in Japan of the banks and other financial institutions enumerated in Inclosure, attached thereto. […] [ABSTRACT FROM AUTHOR]

The Americans felt that the colonial banks and the Yokohama Specie Bank had been part of the Japanese war economy and they therefore insisted that they close down and that the Specie Bank convert itself into a small harmless Bank of Tokyo. The three remaining industrial banks, the Industrial Bank of Japan, Hypothec Bank and Hokkaido Development Bank, although still in existence, were vulnerable. SCAP first required the special banks to decide their own future by opting to become ordinary banks or debenture-issuing institutions. Two months later, in August 1948, SCAP issued a memorandum on ‘Overall Revision of Banking Structure’, which was designed to erase any traces of special banks reregistered themselves as ordinary banks, though the Industrial Bank did in fact soon discover a way to resume its old business. The prohibition of new advances by the Reconstruction Finance Cash Office, in addition to the suspension of special banking, was particularly unfortunate because demand for long-term borrowing strengthened as tension on the Korean peninsula was developing in early 1950. In these circumstances the government, with American consent, promulgated the Act of Issuing Bank Debentures in March 1950. The Industrial Bank was included. This heralded the start of the recovery. What was the government to do? The government's approach to the problem was hesitant as, fearful of American disapproval, they laid down two moderate financial schemes to encourage the setting up of small businesses and consumer finance corporations. Small industries had been severely hit during the war and consumer goods were in very short supply. In any case the government only had the resources to remake smaller institutions. [ABSTRACT FROM AUTHOR]

Towards the end of 1945, after the American operations to clear the war machinery and tackle the grave situation that faced the banks had begun, the Finance Ministry started to work out reconstruction plans. In October 1945, a Preparatory Committee for Revisions of the Bank of Japan Act was appointed, and in December that year it produced a report for the Ministry of Finance. The outgoing Preparatory Committee was immediately succeeded in December 1945 by a Commission on the Financial System, a post-war version of the 1926 Commission and the first of those Commissions which later became an authoritative counselling organ for the Finance Ministry whenever crucial questions arose. This first post-war Commission promptly drafted a report on the overall plan for remaking the Japanese banking system, including the revisions in the Bank of Japan Act, based upon one prepared earlier by the Preparatory Committee. The report included a plan for a ‘Finance Agency’. According to this, the Agency, headed by the Finance Minister assisted by the Bank of Japan governor and the chief of the finance department of the Ministry, was supposed to ensure the supervision of management of national funds and adjustment of interests between industry and finance. The Agency would, according to the plan, be placed in the Ministry of Finance, but the secretarial office would be installed in the Bank of Japan. The ‘Finance Agency’ was to become a focus of Japanese banking as will shortly be disclosed. The Finance Ministry appointed the second Commission on the Financial System in December 1946 to work out a more detailed plan for the future. [ABSTRACT FROM AUTHOR]

The Great Earthquake of 1923, metropolitan banks in ruin, 1923–1926 On 1 September 1923, at 11.58 a.m., a severe earthquake of 7.9 on the Richter scale hit the Pacific coast of Japan at Tokyo Bay in the area known as the southern Kanto district. This was the Great Kanto Earthquake, the most serious natural disaster ever to fall on Japan. The number of people affected was 3.4 million, of whom more than a hundred thousand died out of a total Kanto population of 11.8 million. Deaths were particularly heavy in Tokyo and Yokohama, which accounted for 65 per cent and 32 per cent of the dead and for 82 per cent and 17 per cent of the missing respectively. The government later estimated the aggregate amount of assets destroyed to be ¥4,570 million, which was 38 per cent of the national income of 1923. More than a third of these were burnt to ashes in the Great Earthquake. The disastrous earthquake had major consequences for the Japanese banking system. On the day of the Great Earthquake, there were 542 bank offices in Tokyo comprised of 168 head offices and 374 branches, of which 285 offices, or 63 per cent, were burnt down. In Yokohama, where most of the banking offices in Kanagawa prefecture were concentrated, all forty-two offices, save for the Specie Bank head office, disappeared completely. In Tokyo, of the eighty-four member banks of the Tokyo Bank Association there survived only eight banks without serious damage including the head offices of the Hypotech Bank, Industrial Bank and Mitsubishi and the Tokyo branches of the Specie Bank, Bank of Taiwan and Sumitomo. [ABSTRACT FROM AUTHOR]

The lengthy debates on when and how to resume specie exports or to return to the full working of the gold standard resulted in a library of monetary literature, which, because of its bulk, the bank historian can only dip into. The Minister of Finance, Junnosuke Inoue, in addressing the Diet, argued that lifting the specie embargo and returning to the gold standard with the old par value of yen to pound sterling and dollar would have deflationary effects upon the economy and would lower the price level, thus enhancing Japan's international competitiveness and eventually giving strength to the economy. This unjustified ministerial optimism proved to be very damaging. The specie embargo was lifted in January 1930 but had to be reimposed in December 1931. During these two years, the specie outflow was the worst in history, amounting to ¥417 million in 1931. All this was aggravated by rampant speculation as some banks were buying in dollars and pounds sterling especially in the autumn of 1931 when it was clear that the embargo would have to be reimposed. The specie reserve, at ¥1,343 million at the end of 1929, was reduced to ¥557 million at the end of 1931. The decrease of ¥786 million was larger than the total specie reserve in 1916. The Finance Minister, Inoue, was replaced by Korekiyo Takahashi on the very day of the reimposition of the specie embargo, which marked the final Japanese departure from the gold standard. [ABSTRACT FROM AUTHOR]

Banking controversy, 1870–1872 Although the prestigious ryogae financial houses resisted the government scheme of organising them into joint-stock companies, they did not object in principle to the idea of transforming themselves into modern banking houses. Witnessing the collapse of the ill-fated exchange companies, enterprising ex-ryogae merchants thought that the opportunity had arrived for them to set up their own bank institutions. The movement became quite fashionable from the summer of 1871 when Mitsui took the initiative. In the prospectus submitted to the Finance Ministry, Mitsui designated themselves as ‘Mitsui Gumi Bank’. They proposed to issue their own gold-convertible banknotes which they would support by 75 per cent gold reserves. These notes would circulate alongside the government notes. They also claimed that their ‘bank’ would follow the principles of note-issuing pursued by the Bank of England. There followed a series of bank prospectuses. In January 1872, enterprising merchants in Tokyo, supported by the new city corporation, submitted a prospectus of a ‘Bank of Tokyo’, which was to be engaged in supplying funds for developing the new capital city. In February, the house of Ono, another great ryogae house, ranking with Mitsui among the Edo ryogae community, proposed to establish themselves rivalling Mitsui as ‘Ono Gumi Bank’. Then in April, the proprietors in Otsu Exchange Company decided to set up their own bank to be designated as ‘Goshu Bank’ in order to supply monetary resources to the locality of Lake Biwa north of Kyoto, where there were several commercial centres in the Edo era. [ABSTRACT FROM AUTHOR]

Private banking: adaptable ryogae, 1875–1881 The 1876 revisions of the National Bank Decree allowed would-be bankers to use the title ‘bank’, but it was only Mitsui who could immediately take this opportunity to establish themselves as a western-style modern bank. As was seen, Mitsui had earlier in 1872 planned to set up their own bank but were persuaded to support the government scheme of bringing about the national bank system. In addition to this earlier willingness, there was another reason for Mitsui to make efforts to renew their proposal. When it was established, the First National Bank was accommodated in premises specially built by Mitsui for their own banking purposes. As has already been explained,1 Mitsui had unwillingly joined the house of Ono in launching the First National Bank. When at the end of 1874 the house of Ono collapsed, Mitsui considered its position. Mitsui wrote to Shibusawa, chief auditor of the First Bank, detailing fifteen complaints including their shareholdings, use of Mitsui premises as the First Bank offices and withdrawal of bank clerks who had been Mitsui employees. Shibusawa, who was intending to take over the management of the Bank, remained unmoved, rejecting most of the complaints and concluding: As far as the institution [First Bank] has been established carrying ‘the bank’ as its title, I think that the issue department [for the Ministry of Finance] would not ignore the fact that Mitsui Gumi have treated the Bank as their branch shop. As the situation might be considered to cause certain inconveniences, the Bank should, I think, be put in a position free from such shortcomings when the revisions of the National Bank Decree would be made. [ABSTRACT FROM AUTHOR]

Banking casualties and emergency measures, 1919–1922 The wartime boom in Japan was inevitably succeeded by recession. The turning point was 1919 and towards the end of the year foreign trade became sharply depressed. During the first quarter of 1920, imports exceeded exports by ¥260 million. This was a heavy blow, suggesting comparisons with the deficit year of 1905 when, during the Russo-Japanese War, the largest deficit during the first decade of the twentieth century was recorded. Japanese exports had ceased to sell abroad. Textiles were seriously hit and even silk, usually in steady demand, was by January 1920 unable to find good markets. The Japanese mercantile marine was badly affected as shipping rates fell by nearly two-thirds during the course of the year. The collapse of foreign trade affected the holdings of specie reserve which in Japan between 1919 and 1922 decreased from ¥2,045 to ¥1,830 million, an 11 per cent fall. More worrying, specie kept abroad, chiefly in London, which reflected most closely Japan's foreign trade position, fell 54 per cent, from ¥1,343 to only ¥615 million during the same period. Japan's disappearing specie was a matter for serious concern. Bank of Japan interest rates, which had been at their lowest ever at 5.11 per cent in March 1917, were twice raised in an attempt to cure heated money markets and soaring prices and by March 1918 were at 6.57 per cent. In October and November 1919 the rates were further raised, eventually to 8.03 per cent, where they remained for more than five and a half years, a record. [ABSTRACT FROM AUTHOR]

The depression, amalgamation and securities investments, 1927–1937 The 1927 bank crash in Japan was followed by several depressions exacerbated and prolonged by the Black Thursday collapse on the Wall Street securities market at New York on 24 October 1929. The wholesale price index (1934–6 = 1) fell from 1.075 in 1927 to 0.748 in 1931; thereafter a slow recovery started, with the price rising to 1.036 in 1936 and further to 1.258 in 1937. Industrial production was severely hit, but the recovery, stimulated by demands for war materials, accelerated during the mid-1930s to 1937 when industrial production reached 190 per cent of the 1931 level. During the decade up to 1937, there was a steady fall in the total number of banks, including special banks, from 1,425 to 462, with a reduction of paid-in capital from ¥1,886 to ¥1,455 million. Advances fell continuously from ¥11,145 million in 1927 to ¥9,969 million in 1934 but then recovered to ¥12,328 million in 1937. Deposits and debentures showed more flexibility, being between ¥11,000 and ¥16,400 million and between ¥1,740 and ¥2,300 million during the decade respectively. The situation of the banking system was a reflection of general economic depression following the 1927 banking crisis and the commencement of world depression. It was also a reflection of a particular factor in the system, that is, the bank amalgamation movement. The two elements formed the basis of banking performances in the decade from 1927. The progress of the movement to absorb the prefectural Agri-Industrial Banks continued apace. [ABSTRACT FROM AUTHOR]

Ordinary versus savings banking: amalgamation, Big Five and overseas business, 1911–1919 Between 1911 and 1919, the number of ordinary banks dropped from 1,613 to 1,340 while savings banks increased in number from 478 to 656. These changes resulted from the revisions in the Savings Bank Decree in 1915 and the Bank Decree in 1916 when the Finance Ministry reinstated the banking department, previously in existence between 1880 and 1891, the main purpose of which was to carry out inspections. This move by the Finance Ministry became ever more urgent because the banking system in Japan was burdened by many small and therefore fragile institutions. However, despite the reinstatement of the banking department, the Finance Ministry failed to institute effective inspections which would have eliminated the malpractices and irregularities of dubious banks. Perhaps the large number of banks discouraged the Ministry? Indeed, from 1916 to 1919, only 131 ordinary and 98 savings banks were inspected by the Ministry, though nearly all special banks were examined. The Ministry clearly preferred supervision to inspections. This attitude of the Finance Ministry was to lead inevitably to a disaster, as will shortly be disclosed. Revisions in the Savings Bank Decree in 1915 enabled the Finance Ministry to keep tighter control and allowed them to impose punishment for mismanagement on the directors of savings banks. At the same time the revised stipulations allowed the banks to accept wider varieties of savings. The relaxation of savings acceptance made it easier for smaller banks to enter the savings banking sector, thus increasing the number. [ABSTRACT FROM AUTHOR]

The Yokohama Specie Bank and foreign trade financing, 1911–1919 The Yokohama Specie Bank enlarged its commitments nearly fourfold in terms of total liabilities/assets from ¥378.3 to ¥1,465.6 million between 1914 and 1919. On the assets side, the figures of buying bills and interest bills grew remarkably from ¥135.2 and ¥36.6 million to ¥538.1 and ¥165.1 million respectively. The growth rates during these five years were 431 per cent and 451 per cent respectively. The aggregate amount for the two items, symbols of foreign trade financing of the Specie Bank, was well over half of the total assets. On the liabilities side, deposits grew by nearly three times to ¥516.6 million. Rediscounting facilities at the Bank of Japan also increased at the same rate to ¥136.1 million. However, in both relative and absolute terms, the growth of inter-bank borrowing was most remarkable, jumping from ¥54.2 to ¥456.3 million from 1914to 1919. It was during these hectic years of 1914 to 1919 that the overseas branch network of the Specie Bank reached maturity. Between 1914 and 1919, the number of branches increased from twenty-three to thirty-six, of which six were in Japan and thirty were overseas. Of these overseas branches fourteen were on the Chinese mainland, including seven in Manchuria, six in the western countries, two in South America, five in the Straits of Malaya and Australia and three in India. There were no branches in Africa. By far the most important branch was that in London, which handled extensive inter-bank borrowing. [ABSTRACT FROM AUTHOR]

In spite of frequent large issues of national bonds on the western markets, primarily on London, specie shortages continued to worry the Japanese financial authorities. Since 1904 and the outbreak of the Russo-Japanese War, the Japanese economy had suffered heavy deficits and trade imbalances because of the large amounts of imports of heavy, engineering and chemical industry products, all of which had to be paid for. The good years were 1907 and 1909 but the worst deficit of ¥324 million was recorded in 1905, being 13 per cent of the national income of that year. In both 1911 and 1912, the deficits exceeded ¥100 million. Between 1906 and 1911, the specie reserve diminished by almost one-third. What could be done to remedy this situation? Between August 1911 and July 1914, the Finance Ministry gave top priority to finding a solution to the specie question and continued to discuss the matter with the Bank of Japan and the Yokohama Specie Bank. In the middle of July 1914, exactly a month before the outbreak of the Great War in Europe, an agreement was reached. Generally the Ministry of Finance, Bank of Japan and the Specie Bank determined that the specie reserve, hitherto largely dependent on the proceeds of issuing national bonds abroad, should be augmented by encouraging economic growth and the increase of exports. Even if this worked it would not be sufficient to meet an emergency, and therefore the Bank of Japan was requested to keep the Rates high so as to keep money inside Japan. [ABSTRACT FROM AUTHOR]