The Silver Coin Engraved with a Dragon, and War Expenses Paid with Paper

An Experiment in Civilization and Enlightenment

In the village of Kawasaki, on the banks of the Yodo River in Osaka, a brick factory was built. This was the Mint Bureau. It began producing silver coins in the second month of Meiji 4 (1871) and held its opening ceremony on the fourth day of the fourth month.

The machinery was purchased from the closed Hong Kong Mint. The monthly salary of the British man invited to be its director, Thomas William Kinder, was 1,045 yen, exceeding the 800 yen of the Grand Minister of State, Sanjō Sanetomi. The gas lamps lit on the premises that year were Japan's first Western-style gas lamps.

Workers were required to cut off their topknots and wear Western-style clothing. This place was an experimental ground for civilization and enlightenment. It is said that the person who engraved the dragon design onto the steel die was the metalworker Kanō Natsuō. This dragon design was also highly praised by the British.

Stipends Converted to Bonds

In the shadow of the new era, old systems faded away. After the abolition of the han system and establishment of prefectures, the heaviest burden on the government's books was the stipends paid to the kazoku (aristocracy) and shizoku (former samurai). This exceeded 30 percent of annual expenditure and accounted for 37 percent of annual revenue.

On August 5, Meiji 9 (1876), the Act for the Issuance of Kinroku Kōsai (pension bonds) was promulgated. It stipulated that an amount equivalent to five to fourteen years of stipends would be given at once in the form of government bonds, to be redeemed within thirty years.

However, one could not live on the interest alone. The daily interest from a 7% bond amounted to only one-third of the lowest wage for a laborer in Tokyo. Consequently, the bonds were sold. It is said that in Tottori Prefecture in Meiji 15 (1882), 90 percent of the shizoku had already sold theirs. The stipends of the samurai were transformed into capital for banks.

A War Financed by Paper

In the second month of Meiji 10 (1877), the Satsuma Rebellion began.

The government army consisted of 58,558 men and 19 ships. Military expenditures amounted to over 41.56 million yen, as calculated by Keishitsu Teisei, who also noted that this figure varies considerably depending on the source. The government's tax revenue around the same time was about 48 million yen. The civil war, lasting just over half a year, consumed nearly 90 percent of it.

The source of funds was not tax increases, but paper. Government notes and National Bank notes were printed in greater numbers, causing prices to soar. And it was the Fifteenth National Bank, established with investments from former daimyō and the kazoku aristocracy, that lent this paper money to the government. It was the government that decided to pay for the war with paper.

The Era of Silver and Gold Coins

This one-yen silver coin engraved with a dragon was issued for foreign trade. Its fineness was 90 percent silver, and it weighed 26.96 grams. It also circulated in Taiwan, Korea, and China.

The New Currency Act of May 10, Meiji 4 (1871) defined one yen as one and a half grams of pure gold, but in the treaty ports, silver coins continued to be used in practice, creating a bimetallic system of gold and silver. It was not until Meiji 30 (1897) that Japan adopted the gold standard, based solely on gold.