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A History of Coins

1-12 Gold and Silver Coins in the Closing Days of the Tokugawa Shogunate, and Western Silver Coins: An Outflow of Gold Coins

Tempo Ichibu-gin (1837) 24mm(length)×16mm(width) Weight: 8.6g Fineness: 99percent Total weight for three coins: 25.8g

Mexican Silver Dollar (1854) Diameter: 38mm Weight: 26.8g Fineness: 90percent Pure silver content: 24.1g

Ansei Nishu-gin (1859) 28mm(length) ×17mm(width) Weight: 13.5g Fineness: 85percent Pure silver content for two coins: 23.0g

Tempo Koban (1837) 60mm(length)×32mm(width) Weight: 11.3g Fineness: 57percent	Man'en Koban (1860) 36mm(length)×20mm(width) Weight: 3.3g Fineness: 57percent

Toward the end of the Edo Period (1603-1867), the parity between gold and silver in Japan deviated significantly from the international parity as the value of silver appreciated. With the opening of Japanese ports to foreign trade, high-value silver coins came to be exchanged for Mexican silver dollars, which were low in material value but heavy in weight. A substantial amount of gold coins consequently drained out of the country as a result of arbitrage transactions (Mexican silver dollars->ichibu-gin[Japanese silver coins] -> koban [Japanese gold coins] -> Mexican silver dollars.

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With the issue of Meiwa Nanryo Nibu-gin in 1772 marking a turning point, silver coins were gradually transformed from a currency measured by weight into a currency counted by tale denominated in gold coins. Amid the progress of currency unification through gold coins, the Tokugawa Shogunate continued to mint new coins after the start of the 19th century, with silver coins of gold denomination accounting for the majority of silver coins by the mid-19th century. In the case of silver coins, while the pure silver content per one ryo of a silver coin was gradually debased, the actual silver value appreciated significantly; the gold/silver parity deviated greatly from the international standard (1 : 1 5), reaching 1 : 5, as the exchange value for silver coins of fixed weight was set in units of gold coins.       Such a deviation was the result of the shogunate's control of gold and silver and the policy of national isolation. With the end of isolationism and the opening of ports, however, the contradiction became evident, together with the possibility of an outflow of gold coins abroad. Despite stipulations by the shogunate that the exchange rate for gold and silver was to be computed based on the material value, the exchange rate between Western coins (mostly Mexican silver dollars) and silver coins (mainly the Tempo Ichibu-gin) was set at a rate of 100 pieces of one dollar silver coins to 311 pieces of ichibu-gin in accordance with the principle that two coins with the same weight were equivalent. Accordingly, as the parity between gold and silver in Japan at that time was merely one-third of the international party, it was possible to gain large profits at virtually no risk through arbitrage transactions. Namely, Western coins were brought into Japan and exchanged for ichibu-gin. These were then exchanged for gold coins (Tempo Koban) and taken abroad, where they were traded for gold bullion. The gold bullion was then exchanged for Western coins.       Fearing the outflow of gold coins abroad, the shogunate minted a new silver coin known as the Ansei Nishu-gin prior to the opening of Japan's ports in May 1859. The Ansei Nishu-gin was superior to the Tempo Ichibu-gin in terms of weight and fineness, but its worth was set at half the face value to bring its gold/silver parity in line with the international standard. Other countries strongly objected to the measure, however, and the shogunate was forced to terminate the coin's issue shortly after opening the ports.       In February 1860, as an emergency measure to stem the night of gold coins abroad, the shogunate ordered a threefold increase in the exchange value of the Tempo Koban and the Ansei Koban against other silver coins. In April of the same year, moreover, the government decided to reduce by one-third the amount of pure gold content per one ryo of gold coin. This brought the gold/silver parity in line with that of other countries, putting an end to the problem. At the same time, however, the shogunate minted a massive amount of Man'en Nibu-kin gold coins of inferior quality and instituted a premium for its exchange with old coins. By the close of the period of Tokugawa rule, the massive increase in gold in domestic circulation had ignited a sharp rise in prices, negatively affecting the Japanese economy.

Hideki Otsuka: Research Division 3, Institute for Monetary and Economic Studies, Bank of Japan Monetary and Economic Studies 16(2), Bank of Japan, 1998

References Bank of Japan, Economic Research Department, Zuroku Nihon no Kahei (Japanese Money), Vol. 4, Toyo Keizai Shimposha  1973 (in Japanese). Mikami, Ryuzo, En no Tanjo--Kindai Kaheiseido no Seiritsu  (The Birth of the Yen-Establishment of the Modern Currency System), revised edition, Toyo Keizai Shimposha, 1989 (in Japanese). Shimbo, Hiroshi, Kindai Nihon Keizai Shi (Modern History of Japanese Economy), Sobunsha, 1995 (in Japanese). Yamamoto, Yuzo, Ryo kara En e (From Ryo to Yen), Mineruva Shobo, 1994 (in Japanese).