6 - The national bank system: the American influence, 1870–1881

Summary

Banking controversy, 1870–1872

Although the prestigious ryogae financial houses resisted the government scheme of organising them into joint-stock companies, they did not object in principle to the idea of transforming themselves into modern banking houses. Witnessing the collapse of the ill-fated exchange companies, enterprising ex-ryogae merchants thought that the opportunity had arrived for them to set up their own bank institutions. The movement became quite fashionable from the summer of 1871 when Mitsui took the initiative. In the prospectus submitted to the Finance Ministry, Mitsui designated themselves as ‘Mitsui Gumi Bank’. They proposed to issue their own gold-convertible banknotes which they would support by 75 per cent gold reserves. These notes would circulate alongside the government notes. They also claimed that their ‘bank’ would follow the principles of note-issuing pursued by the Bank of England.

There followed a series of bank prospectuses. In January 1872, enterprising merchants in Tokyo, supported by the new city corporation, submitted a prospectus of a ‘Bank of Tokyo’, which was to be engaged in supplying funds for developing the new capital city. In February, the house of Ono, another great ryogae house, ranking with Mitsui among the Edo ryogae community, proposed to establish themselves rivalling Mitsui as ‘Ono Gumi Bank’. Then in April, the proprietors in Otsu Exchange Company decided to set up their own bank to be designated as ‘Goshu Bank’ in order to supply monetary resources to the locality of Lake Biwa north of Kyoto, where there were several commercial centres in the Edo era.