Currency Museum Bank of Japan
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Latter half of the19th century- First half of the 20th century Modern Times

Modern Times

The Meiji government implemented measures to develop modern industries and to increase military strength (known as the "Fukoku Kyohei" policy), in order to strengthen Japan to the same level as Europe and America. To this end, the government needed to establish a modern monetary system. Accordingly in 1871, the government enacted the "New Currency Act" to change the currency units from traditional "ryo" "bu" and "shu" to "yen" "sen" and "rin." In 1881, Masayoshi Matsukata became finance minister and insisted on the need to establish a central bank. The Bank of Japan was established in October 1882.

Latter half of the 19th century
—from 1868 to the first half of the 1870s

Currency system established by the Meiji government
—Birth of the yen

The Meiji government initially allowed the circulation of gold, silver and copper coins, and also clan notes (hansatsu) used in the Edo Period, and the government themselves issued "ryo"-based coins and notes. To reform the confusing monetary system, the government enacted the "New Currency Act" in 1871 to adopt the new currency units "yen" "sen" and "rin" based on the decimal system, and issued new gold, silver and copper coins using Western manufacturing technology.


Based on the New Currency Act, the gold standard system was adopted (1.5 g of gold= 1 yen, and 1 yen = 100 sen = 1,000 rin).

The government issued paper money such as Dajokan-satsu and Meiji Tsuho-satsu notes.
Due to the lack of gold and silver in Japan, however, the issued government notes were not exchangeable for gold or silver coins.

Latter half of the 19th century
—the latter half of the 1870s

Issuance of "national bank" notes and a decline in the value of paper money

In order to collect the inconvertible government notes and to supply funds for the development of modern industries, the Meiji government enacted the "National Bank Act" in 1872 allowing private banks to issue convertible banknotes. According to the law, banknotes were issued by private banks called “national banks,” but following the revision of the law in 1876, the banknotes became inconvertible.

The government additionally issued inconvertible notes to cover the cost of the Seinan Civil War (1877). This caused a sharp decrease in the value of paper money and the public lost trust in those notes.
The price of rice measured by paper money doubled during the war. The value of paper money also decreased sharply against the silver coins.

Latter half of the 19th century—the 1880s

Birth of the Bank of Japan

In 1881, Masayoshi Matsukata was inaugurated as finance minister, and he implemented measures to solve the declining value of paper money caused by the excessive issuance of inconvertible notes. He absorbed inconvertible notes in circulation using the surplus brought by fiscal austerity. In order to establish both a convertible banknote system and a modern monetary and financial system, he also made preparations for the founding of a central bank, and the Bank of Japan began operating in October 1882.


The Bank of Japan issued its first note (Daikoku-satsu) in 1885, two and a half years after its opening, following recovery of the value of paper money. The notes were initially exchangeable for silver coins, which were used as specie money in Japan. The minister wanted to establish a gold standard system like other major Western countries, but because Japan reserved silver coins as specie money, the country adopted the silver standard system.

The Bank of Japan notes were circulated smoothly, while circulation of notes issued by "national banks" and government were invalidated at the end of 1899.

From the end of the 19th century to the beginning of the 20th century
(from the 1890s to the 1910s)

Establishment of the gold standard system

Major Western countries shifted from the silver standard system to the gold standard system in the latter half of the 19th century. In 1897, Japan enacted the “Currency Act” to introduce the gold standard system, and stipulated that 0.75 g of gold was equivalent to one yen. The government used reparations paid from China following the Sino-Japanese war as the gold reserve. Through establishing the gold standard system, Japan was integrated into the global economic and financial system.




In 1897, the convertible Bank of Japan notes, which had been exchangeable for silver coins, were revised to be exchangeable for gold coins.
During the economic boom of the World War I(1914-1918), demand for Bank of Japan notes increased.

First half of the 20th century
—the 1920s

Outbreak of the financial crisis

After the end of World War I, as European countries gradually recovered from the damage caused by the war, exports from Japan decreased, resulting in an economic downturn. To make matters worse, in 1923, the Kanto region was hit by a mega-earthquake, which also imparted serious damage to Japan’s economy. Amid these events, in March 1927, the country faced a financial crisis.

The Bank of Japan issued a large number of banknotes in an effort to mitigate the worries of depositors. Meanwhile, the government declared a three-week moratorium.
Worried depositors, however, rushed to banks to withdraw their money resulting in a shortage of Bank of Japan notes. In response, the Bank of Japan quickly printed and issued 200-yen notes, leaving the back side of the notes blank in their haste.

First half of the 20th century
—the 1930s

From the gold standard system to the managed currency system

The stock plunge that began on Wall Street in New York in 1929 caused the world financial crisis, forcing the United Kingdom to abandon the gold standard system in September 1931. Other European countries followed this movement, and Japan also stopped the exchange of banknotes for gold coins in December of the same year. Subsequently in 1942, the Bank of Japan law was promulgated and the country formally shifted its monetary system to the managed currency system, which continues to this day.

Under the managed currency system, Bank of Japan notes were no longer exchangeable for gold coins and the issuance of banknotes was controlled by the central bank.
The "convertible" statement printed on the obverse side of the banknote was deleted, and the Bank of Japan notes became inconvertible.