The coinage had not only been seriously debased during the closing years of the Tokugawa regime, but large quantities of paper currency had been issued and circulated, both by many of the feudal lords, and by the central government itself, as a temporary expedient for filling an impoverished exchequer.
This large increase is to be accounted for by the fact that during the Napoleonic rgime the government steadily refused to issue inconvertible paper currency or to meet war expenditure by borrowing.
Tolman, History of Higher Education in Rhode Island (Washington, 18 94); Henry Phillips, Jr., Historical Sketches of the Paper Currency of the American Colonies (2 vols., Roxbury, Mass., 1865-1866); Thomas Durfee, Gleanings from the Judicial History of Rhode Island (Providence, 1883); and the works of Field, Richman and Mowry (see History, Bibliography).
During these years of fiscal prosperity the country suffered much from financial crises caused by industrial stagnation, an excessive and depreciated paper currency and political disorder.
Finally, usage of paper money was restricted to the capital only, and in 1842 this partial reform of the paper currency was followed by a reform of the metallic currency, in the shape of an issue of gold, silver and copper currency of good value.
Until 1893 the juridical status of the Banks of Issue was regulated by the laws of the 3oth of April 1874 on paper currency and of the 7th of April 1881 on the abolition of forced currency.
A supplementary act of 1906 also created a new national banking institution, called the Banco Central, which is made a depository of the public revenues and is charged with a considerable part of their administration, including payments on account of the foreign debt and the conversion of the paper currency into coin.
There is also a large paper currency in the form of notes issued by the Chartered Bank of India, Australia and China, the Hong-Kong and Shanghai Banking Corporation and the National Bank of China, Limited.
Matsukata showed the government the danger of the situation, and urged that the issue of further paper currency should be stopped at once, the expenses of administration curtailed, and the resulting surplus of revenue used in the redemption of the paper currency and in the creation of a specie reserve.
The copper coinage (113,000,000 piastres) and the paper currency (kaime) (1,600,000,000 piastres) referred to in the above sketch were withdrawn in 1880 by repudiation.