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The Indemnity That Never Reached Japan

The indemnity from the First Sino-Japanese War was a colossal sum, more than four times Japan's annual revenue. However, this money was never transported to Japan; it was received in London as a figure in a ledger.

The Reparations That Never Reached Japan in 3 Minutes

  1. See it
  2. In numbers
  3. What would you do?
  4. Read more

1See it

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1 / 8

Meiji 28

After winning the war, Qing China agreed to pay reparations to Japan.

231,500,000 taels

About 360,000,000 in Japanese yen

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At the time

That amount was more than 4 times Japan's annual national revenue.

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Receiving the payment

The money wasn't shipped to Japan. It was received as an entry in a London bank's books.

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Meiji 30

This money was used to prepare for a system based only on gold.

1 yen was 3/4 of a gram of pure gold. Half its value in Meiji 4.

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Why gold?

It wasn't for show. It was a requirement to borrow money from other countries.

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June, Meiji 32

They tried to raise a loan in London, but didn't get as much as they'd hoped.

10,000,000 → 8,600,000 pounds

The amount they sought to raise, and the amount actually received.

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Around that time

Qing China also didn't have the money to pay, and paid by borrowing from foreign banks.

The collateral was Qing's customs duties and salt tax.

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From Meiji 35

The yen crossed the sea. Japanese banks began issuing banknotes in the Korean Empire.

2In numbers

360,000,000yen

Approximate value of the reparations in Japanese yen

Japan's annual national revenueAbout 80,000,000 yen
ReparationsAbout 360,000,000 yen

8,600,000pounds

Amount actually received when trying to raise 10,000,000 pounds

Amount sought10,000,000 pounds
Amount actually received8,600,000 pounds

3What would you do?

You're an official in the Meiji government. You need money for the First Sino-Japanese War. Do you borrow from other countries, or raise it at home?

Pick one

Borrow from other countries

The Meiji government was wary of foreign money threatening the country's freedom, and consistently avoided borrowing from abroad. They didn't issue a single foreign bond for this war.

Raise it at home

This is what they actually did. The war was paid for with loans from the Bank of Japan and with government bonds sold within the country.

4Read more

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2026-10-04 Mitsuru Hayama Stories of money
Japan — The costs of the wars with China and Russia / Tokyo, the Finance Ministry

Wealth That Moved on a Ledger

Under the Treaty of Shimonoseki in 1895, the Qing dynasty agreed to pay a war indemnity to Japan. The sum was 200 million Kuping taels, plus an additional amount for the retrocession of the Liaodong Peninsula, totaling 231.5 million taels. This was equivalent to approximately 360 million Japanese yen, a sum more than four times Japan's national annual revenue of about 80 million yen at the time.

However, this indemnity was not transported to Japan. It was converted into British currency and received in London. This was the first time that national wealth was transferred not in chests of gold coins, but as a figure in a ledger.

The Gold Standard as a Qualification

In London, the indemnity, still in British currency, became Japan's specie reserve. The gold was never transported to Japan, instead directly becoming the reserve fund for the gold standard.

The Coinage Act was promulgated in March 1897 and enacted in October. One yen was defined as three-quarters of a gram of pure gold. Since the yen of 1871 had been one and a half grams of pure gold, the par value was exactly halved. This is generally seen not as a devaluation, but rather as an adjustment of the official value to the actual market rate.

So why was the gold standard necessary? It was not for prestige. It was a qualification for borrowing from abroad. Japan had joined the global circle of the gold standard.

Credit for Borrowing

The costs of the First Sino-Japanese War, totaling 233.4 million yen, were covered by loans from the Bank of Japan and domestic war bonds. Not a single foreign bond was issued. Since the beginning of the Meiji era, the government had been wary of foreign capital infringing on its sovereignty and had consistently avoided borrowing from abroad.

However, after establishing the gold standard, Japan issued a 4% sterling bond in London in June 1899. The target was 10 million pounds, but subscriptions were sluggish, and the actual amount raised was only 8.6 million pounds. London bankers remained skeptical about whether Japan could maintain the gold standard.

Incidentally, the Qing dynasty also lacked the funds to pay the indemnity. They paid it by borrowing from Russian-French and Anglo-German banks. The collateral for these loans was the Qing's maritime customs duties and salt tax. The foundation of Japan's gold was thus built on the Qing's customs and salt taxes.

The Yen Across the Seas

Having adopted the gold standard, the yen began to cross the seas. In 1899, the Bank of Taiwan was established and began operations as a special bank issuing currency for Taiwan. Its founding charter stated the goal of expanding business into the regions of Southern Qing and the islands of the South Seas.

From 1902, the Dai-Ichi Bank issued Dai-Ichi Bank notes in the Korean Empire. It obtained the right to issue official banknotes for Korea, effectively becoming its central bank. The portrait printed on these banknotes was that of Shibusawa Eiichi. The 10,000-yen note of the Reiwa era is the second time Shibusawa's face has appeared on a banknote. The first time was on the currency of a country that Japan was about to annex.

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