No. 90 June 1, 2005
Japanese Government Bonds
100 Years Ago
Toshiki TOMITA
NRI Papers No. 90
June 1, 2005
Japanese Government Bonds 100 Years Ago
Toshiki TOMITA
I
Credit Rating of Japanese Government Bonds in the London Market
1
2
3
4
5
II
Why We Study Japanese Government Bonds Issued 100 Years Ago
British Government Bonds as a Benchmark throughout the World
Susceptible Government Bonds of Peripheral Countries
Risk Premium Required for Japanese Government Bonds
A Reduction of Risk Premium on Japanese Government Bonds
Path towards the Adoption of the Gold Standard
1
2
3
4
5
Confrontation Concerning the Issue of Foreign Bonds
Paper Money Reform and Accumulation of Specie
Conversion of Government Bonds to Silver Coins
Conversion into Lower Interest Rate Government Bonds
Shift to the Gold Standard by Reparations from China
III Russo-Japanese War and Issue of Foreign Bonds
1
2
3
4
5
Selling 5-Percent Interest Bonds and Issuing 4-Percent Bonds in London
Using Foreign Bonds to Finance the Russo-Japanese War
Consolidation of Government Bonds Also Relied on the Issue of Foreign Bonds
Confrontation after 40 Years over the Japanese Government Bonds in Francs
Changing to a Capital Export Country after World War I
T
oday, capital can be moved internationally on an unrestricted basis. Despite this free movement of
capital, overseas investment by the private sector in Japan has been extremely subdued, creating a
huge amount of excessive savings. Partly because of this, we are insensitive to the fact that a risk premium
is required for Japanese government bonds.
One hundred years ago, the savings of each country were freely exchanged across country borders. An
amount of foreign bonds three to four times the amount of British bonds was traded on the London Stock
Exchange, and the interest rate was determined according to the risk involved in each country. In order to
enable the issue of government bonds with a lower risk premium, countries imposed restrictions on their
economic policies and pursued adoption of the gold standard.
The Meiji government continued an environment of austerity finance to control inflation caused by the
Seinan War. Government notes were redeemed by a fiscal surplus, and the price of government bonds was
directed towards the recovery of face value from early 1881. The conversion of government notes to silver
coins started in 1885. In 1886, high-interest government bonds started to be converted into low-interest (5percent) government bonds. In 1897, Japan adopted the gold standard based on reparations received as a
result of the Sino-Japanese War.
Through the adoption of the gold standard, the credit rating of Japanese government bonds improved on
the London capital market. In 1899, 4-percent interest-bearing government bonds with a maturity period of
55 years were issued in London. This was Japan’s first issue of foreign bonds in 26 years since the issue of
7-percent interest-bearing government bonds in 1873. Following this, even though investors in London had
a favorable impression to the Anglo-Japanese Alliance, the spread (risk premium) between Japanese government bonds and British government bonds at the end of January 1902 was 1.86 percent, largely exceeding 0.75 percent, which was applied to Russian government bonds.
During the Russo-Japanese War, 40 percent of war expenditures were financed by issuing foreign bonds.
Until Japan gained victory in the Battle of the Japan Sea, a large risk premium was required for Japanese
government bonds. Through the efforts made by Korekiyo Takahashi, a government representative on a
special mission, Japanese government bonds were issued not only in London but also in New York, Paris
and Hamburg. After the war, 4-percent interest-bearing government bonds were offered in London and
Paris in order to convert 5-percent interest-bearing government bonds issued in Japan during the war.
Copyright 2005 by Nomura Research Institute, Ltd.
1
NRI Papers No. 90
I
June 1, 2005
GDP (gross domestic product) reached 30 percent in
England, 30 percent in Germany and 16 percent in
France. Moreover, during the period from 1871 to 1915,
as many as 36 million people emigrated from Europe to
other countries.
As such, economic interdependence among countries
was accelerated. This trend can also be confirmed by
looking at the international movement of capital.
In accordance with the country’s stage of economic
development, etc., each country generated a major
imbalance between savings and investment. However,
this imbalance was covered by the outflow and inflow
of funds to and from overseas, and each country could
continue with considerably imbalanced ordinary
accounts. In other words, if a closed economy were
adopted where the outflow or inflow of capital is
restricted, domestic investment is possible only to the
extent of the same amount as that of domestic savings.
However, if capital can be moved freely, decisions on
investments in each country are based on factors envisioned by investors such as the expected rate of return,
regardless of the extent of savings in each country.
Because of this, until the period before World War I,
considerable imbalance was seen in ordinary accounts
among major countries.
However, from 1930, after World War I, to 1980, the
imbalance of ordinary accounts grew small as if it were
almost a closed economy. Because of these circumstances, it becomes important to review the situation
before World War I in order to understand today’s issues
of international finance.
Credit Rating of Japanese
Government Bonds in the
London Market
1 Why We Study Japanese Government
Bonds Issued 100 Years Ago
We are now in the 21st century where capital can be
moved freely on a global basis. Nonresidents own 20
percent of listed stocks in Japan, and stock prices have
been substantially affected by the investments of these
nonresidents. In contrast, little movement has been seen
in overseas investments by individuals in the private sector, resulting in a huge amount of savings remaining
within the country. For this reason, most government
bonds that have reached an extraordinarily enormous
amount in total are possessed within the country, while
the rate of ownership of Japanese government bonds by
nonresidents is only 4 percent.
Since the end of the 20th century, a risk premium has
been required of the interest rate of Japanese government bonds in the international financial market.
However, almost no one recognizes the seriousness of
this issue because fund-raising capabilities in other
countries are limited and overseas investment is slow,
with excessive savings within the country having been
the norm.
Throughout the world 100 years ago, funds were
freely moved across national borders. Japan was striving to maintain balanced finance and implement reasonable financial policies so that it could raise its credit
rating in the international financial market and could
issue bonds at the lowest possible interest rate.
It might be another story if the isolation policy were
adopted for finance as was done in the period from
World War II to the early years of the 1980s. However,
excessive savings can by no means justify relaxation of
fiscal and financial discipline to an unlimited extent. In
order for us to awake from the financial isolation that
lasted for a long time, this paper considers international
finance and Japanese government bonds 100 years ago
and discusses the discipline of economic policy required
by the market.
The period from the middle of the 19th century until
the outbreak of World War I was an era of global economy where goods, funds and labor were freely exchanged
beyond national borders and across the Atlantic Ocean.
Before this period, the reduction of customs was only
implemented in England. However, after the conclusion of the Anglo-French Free Trade Agreement in
1860, such moves spread throughout Europe.
Because the number of countries adopting the gold
standard increased after 1870, leading to currency risk
hedging, international trade was vitalized. In 1913,
immediately before World War I, the ratio of imports to
2 British Government Bonds as a
Benchmark throughout the World
Until the outbreak of World War I, England continued
exporting an extremely large amount of capital. On
average, capital exports during the period from 1870 to
1914 accounted for 5 percent – 6 percent of GDP and,
in particular, reached as much as 9 percent during the
period from 1911 to 1913. The outstanding capital
increased from 1.0 billion to 1.2 billion pounds in 1875
to 4.0 billion pounds in 1914, or 1.6 times the GDP.
Foreign as well as domestic securities were listed on
the London Stock Exchange and actively traded by
investors in England and other countries. With the number of hours required for settlement of securities trading
on both sides of the Atlantic being reduced to several
hours, the London Stock Exchange, together with the
Paris Stock Exchange, etc., began to play the role of
linking capital moves among European countries, the
new continent and the Far East.
The Times quickly introduced local information in the
Far East, etc., via international telegraph networks.
Furthermore, investors could learn detailed information
from The Economist, etc., concerning the promulgation
of the constitution and the adoption of the gold standard
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
2
NRI Papers No. 90
June 1, 2005
in Japan, debt trends in Egypt, gold mines in South
Africa, etc., in addition to the trends of the government
bond market in England.
While the outstanding amount of British government
bonds listed on the London Stock Exchange in 1875
was 0.71 billion pounds, that of foreign government
bonds was 2.34 billion pounds. In 1905, the outstanding
amount of foreign government bonds amounted to 3.22
billion pounds vis-à-vis that of British government
bonds, which was 0.64 billion pounds. This suggests
how large the portion of foreign government bonds was
on the London market.
In investing in foreign government bonds, investors
require a high interest rate that would offset the risk
involved, i.e., a risk premium. A standard is required in
order to measure such a risk premium. The government
bond that was regarded as the benchmark was the
British government bond that established predominance over the government bonds of other major countries.
England’s budget was controlled by Parliament, and
interest payments for government bonds were guaranteed by taxes determined by Parliament. In other words,
the credit of British government bonds was backed by
democracy rather than by absolute monarchy, which was
adopted by major countries on the European continent.
In addition, because diverse formats of government
bonds were consolidated into consolidated bonds (consols) (perpetual bonds with no maturity period while
early redemption is possible), the trading of British government bonds was extremely easy. It is considered that
because of these reasons, the interest rate of British government bonds was able to play the role of benchmark
for determining the risk premiums for government bonds
of other countries.
Under these circumstances, debtor countries strove to
introduce the system that had been established in
England that consisted of parliamentary budget control
and the adoption of the gold standard. This was because
funds could be obtained at lower interest rates through
reducing the risk premium, and because the adoption of
the gold standard had led to a reduction in trading
expenses required for foreign trade. Furthermore,
whether a debtor country had adopted the gold standard
was regarded by investors as important data in deciding
whether to invest.
However, after shifting to the gold standard in 1897,
Japan depended upon overseas markets not only for
war expenses but also for converting into lower interest
rate bonds, and issued a huge amount of foreign currency bonds. These funds were not only procured from
the London capital market, but also from New York,
Paris and Germany.
From the end of the 19th century to the early years of
the 20th century, countries such as France, the United
States, Germany and the Netherlands in addition to
England issued government bonds in the international
market in their own currencies, rather than the currency
of the place of issue, and without a gold clause that
provided for the payment of principal and interest by
gold parity. These countries can be called the “central
countries” of the international financial market.
In contrast, Japan was issuing government bonds in
pounds and/or selling domestic government bonds with
a clause guaranteeing the payment of principal and
interest in pounds in order to raise funds overseas.
Unlike the central counties of the international financial
market, as defined above, Japan adopted a representative method as one of the “peripheral countries.”
How had Japanese government bonds been evaluated
by investors in the London capital market at that time?
In order to know this, it would be useful to compare
Japanese government bonds with those of other peripheral countries that could not issue bonds in their own
currencies in the international financial market.
At that time, peripheral countries were introducing the
gold standard one after another. The adoption of the gold
standard was necessary as a “seal of approval” to access
the international financial market and as a means of
imposing restrictions on domestic economic policies to
avoid running into debt crises.
Peripheral countries issued government bonds in the
markets of central countries to promote the development
of social capital, etc. While the payment of principal and
interest was made in the currency of the place of issue
such as in pounds, investors required an interest rate that
was higher than that applied to their own government
bonds in order to offset the default risk of the peripheral
countries. Accordingly, the risk premium can be considered as a spread between the interest rates on the government bonds of the peripheral countries and those of the
central countries.
Then, to what extent was a risk premium required?
The following section examines this point based on the
journal1 written by Paolo Mauro, et al. of the International
Monetary Fund (IMF) wherein a detailed analysis was
made concerning government bonds of 16 countries
from among foreign government bonds traded on the
London capital market during the period from 1877 to
1913.
The outstanding government bonds in these 16 countries was 0.6 billion pounds in 1875 and 1.2 billion
pounds in 1905, which respectively accounted for 55
3 Susceptible Government Bonds of
Peripheral Countries
In the Meiji era, the Japanese government restrained
the issuance of foreign currency bonds since it first
issued government bonds in pounds in 1870 (Meiji 3)
and 1873 in London. It may be closer to the truth to say
that the Meiji government could not issue foreign currency bonds under the worldwide trend of silver depreciation because it had adopted the silver standard.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
3
NRI Papers No. 90
June 1, 2005
ring within each country. This point offers a pronounced
contrast with the fact that the spreads between the government bonds issued in dollars by countries called
emerging economies in the 1990s and US government
bonds were strongly affected by the financial situation in
the United States and the crisis in Russia, and fluctuated
as a whole in a synchronized manner.
For example, spreads between the government bonds
issued by Egypt, Sweden and Hungary and consols
declined nearly consistently during this period. However,
while such spreads involving many other countries
declined as a result of the adoption of the gold standard,
these spreads increased if a war or financial crisis
occurred. As such, substantial fluctuations were repeated
due to factors specific to each country.
The risk premium applied to government bonds issued
by Argentina was reduced to about 2 percent by the suppression of a civil war in April 1879. However, when a
default occurred in 1890, the premium rapidly increased
and reached as high as 6.5 percent. After 1896, this spread
started to decline through the improvement of fiscal balance and the recovery of convertibility in 1899. During
the period from 1903 to 1915, the Argentine economy
was supported by an inflow of a huge amount of capital,
which led to the achievement of high growth known as
“belle époque” in later times.
The spread of Brazilian government bonds as compared to consols also increased to 4 percent in October
1890 due to the impact of the interest bearing crisis that
resulted from the default by Argentina. Further, it rapidly,
percent and 66 percent of all government bonds traded
on the London Stock Exchange. The prices of these government bonds were indicated daily in The Times.
As peripheral countries had all been connected to the
international telegraph network in the 1870s, local information regarding debtor countries was immediately conveyed to London. The Economist carried comments not
only on the trends of the London foreign bond market
but also on the political and economic trends of debtor
countries. For example, the impact on Japan of an incident in China was reported in terms of both economic
and military aspects.
The first column of Table 1 indicates the difference in
interest rates between those applied to 16 countries and
those applied to consols, which represents the average
value at the end of each month from May 1877 to
December 1913. This difference can be considered as
the risk premium of each country during this period.
While the interest rates applied to government bonds
issued by Canada and Sweden were higher than the consols in England by about 90 basis points (1 basis point =
0.01%), premiums as high as 9 percent and 10 percent
were required respectively of government bonds issued
by Greece and Turkey. A premium of about 3 percent
was required of Japanese government bonds as well as
of those issued by Argentina and China.
While the risk premium of each country had generally
followed a declining trend before 1913, the premium of
each country separately encountered substantial fluctuations by being strongly affected by phenomena occur-
Table 1. Spreads as Compared to British Government Bonds (1877 – 1913)
Argentina
Brazil
Canada
Chile
China
Egypt
Greece
Hungary
Japan
Mexico
Portugal
Queensland
Russia
Sweden
Turkey
Uruguay
British
government bonds
Spread as
compared to
British
government
bonds (basis
points)
Fluctuation
coefficient of
spread at left
309
245
88
245
310
137
877
181
288
720
447
104
177
93
1,030
650
0.42
0.34
0.22
0.34
0.35
0.53
0.80
0.52
0.28
1.11
0.81
0.16
0.45
0.35
1.73
0.84
2.90%
0.07
Correlation
coefficient as
compared to
interest of
Japanese
government
bonds
Correlation
coefficient as
compared to
interest of
Brazilian
government
bonds
Issue amount of
government
bonds in
London (million
pounds)
0.71
0.27
0.22
0.29
0.80
0.50
0.23
0.44
1.00
0.40
0.26
0.51
0.40
0.65
0.37
0.53
0.40
1.00
0.43
0.46
0.12
0.02
0.24
– 0.09
0.27
– 0.05
0.09
0.61
– 0.33
0.18
– 0.16
0.10
40.8
55.1
86.8
28.2
48.3
22.8
17.2
N.A.
64.0
13.7
N.A.
214.9
50.6
N.A.
23.7
8.7
– 0.31
– 0.70
—
Notes: (1) Interest-related data are based on the average figure at the end of each month from May 1877 to December 1913. (2) The issue amount of
government bonds in London is the total amount for 1865 – 1914. The total amount of colonial government bonds is used for Canada, and the total amount
of colonial government bonds of Australia is used for Queensland. (3) Bp = basis point (1 bp = 0.01%).
Source: Paolo Mauro, Nathan Sussman and Yishay Yafeh, “Emerging Market Spreads: Then Versus Now,” Quarterly Journal of Economics, Vol. 117, No. 2,
May 2002.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
4
NRI Papers No. 90
June 1, 2005
but temporarily, increased to 6.5 percent in the early
months of 1898 due to turmoil in domestic politics.
However, the spread was reduced to 1 to 2 percent after
the resumption of the conversion to gold in 1906.
The spread of Chilean government bonds increased
temporarily to 6 percent as affected by the war against
Bolivia and Peru in 1879. While it again increased rapidly
to about 4 percent due to a civil war in 1888, it started to
follow a declining trend after a shift to the gold standard
in 1895. The spread remained at around 1.5 percent in
the 1910s.
The spread of Canadian colonial bonds repeated fluctuations centered on 100 basis points up until 1911.
However, in 1912 when the political party supporting
the Conservative Party of England won the election, the
spread was reduced to 20 basis points at a single stroke.
The spread of Queensland’s colonial bonds increased to
140 basis points due to a bank crisis in 1893. However, it
later rapidly declined.
In March 1891, Portugal abolished the gold standard.
Because of this, Portugal was required to bear as high a
spread as 12 percent and was forced to take major risk
premiums until debt negations were settled in 1902.
However, following such settlement, the spread returned
to around 2 percent.
A 4-percent spread was added to the Russian government bonds due to its bank crisis in April 1877. However,
after the adoption of the gold standard in 1897, the
spread gradually decreased and became 75 basis points
early in 1902. Following this, when tensions were
heightened with respect to the relationship with Japan
concerning Manchuria and Korea, the spread started to
increase. With the outbreak of the Russo-Japanese War
in February 1904, the fall of Port Arthur and defeat in
the Battle of the Japan Sea, the spread increased to 2
percent. While it decreased as a result of the Peace
Treaty in September 1905, it amounted to 2.5 percent at
the end of 1906.
In London, China issued pound-denominated 8-percent
interest-bearing government bonds worth 327,000
pounds with an issue price of 95 percent of face value in
1875 and 6-percent interest-bearing government bonds
worth 2.25 million pounds with an issue price of 98 percent of face value in 1885 through the Hongkong and
Shanghai Banking Corp.3 Although the risk premium
required for the 6-percent interest-bearing government
bonds was about 3 percent in 1885, it increased to as
high as 4.5 percent immediately after China’s defeat in
the Sino-Japanese War (August 1894 – April 1895). In
the London capital market, to raise funds to pay reparations, China issued 5-percent interest-bearing government bonds with an issue price of 98.75 percent of face
value in March 1896 and 4.5-percent interest-bearing
government bonds with an issue price of 90 percent of
face value in March 1898 for a respective issue amount
of 16 million pounds each on the security of revenues
from customs. Following this, the spread temporarily
exceeded 3 percent in 1901 due to the Boxer Rebellion,
but was reduced to 1.6 percent by the end of 1913.
4 Risk Premium Required for Japanese
Government Bonds
The risk premiums required for Japanese government
bonds are said to have followed the transitional path that
is most analogous to that of Chinese government bonds,
with the highest correlation coefficient with spreads
between the interest rates of Chinese government bonds
and consols.1 The following section discusses in detail
the risk premiums required for Japanese government
bonds and the issue of foreign bonds.
Figure 1 shows the transition of the risk premiums
required for Japanese government bonds in pounds at
that time. It compares the interest rates of consols with
those of 9-percent interest-bearing government bonds
issued in 1870, 7-percent interest-bearing government
bonds issued in 1873 and 5-percent interest-bearing government bonds sold in 1897.
The interest rate of the pound-denominated 9-percent
interest-bearing government bonds issued in April 1870
declined from 9.35 percent at the end of June to 8.10
percent at the end of 1872. As compared to the consols,
the spread also declined to 4.8 percent. In particular,
major declines of interest rates were recorded from mid1871. The coinage of gold coins through the promulgation of the New Currency Ordinance at the end of June
1871 is considered to have contributed to these declines.
In January 1873, 7-percent interest-bearing government bonds in pounds were issued with a maturity date
of July 1897 and an issue price of 92.5 percent of face
value. If the interest rate is calculated simply by adopting the consol method, the interest rate would be 7.567
percent, which is 160 basis points less than the issue
interest rate of the above-mentioned 9-percent interestbearing government bonds issued by applying the same
method. Regarding this decline, Sussman and Yafeh of
the Economic Department of the Hebrew University2 consider that the second public issue was no longer affected
by the high risk premium that was usually applied to a
first public issue. However, if the fact that these 7-percent
interest-bearing government bonds were equal payment
redemption bonds with an average remaining period of
15.3 years is taken into account, the issue interest rate
becomes 8.098 percent or a compound interest rate of
10.386 percent. Accordingly, it must be noted that the
interest rate was higher than that of the 9-percent interestbearing government bonds issued in 1870.
Despite the fact that major structural reforms were
implemented one after another in Japan, the interest rate
of the 7-percent interest-bearing government bonds in
pounds hovered in the range of 6 percent – 7 percent
from issue to maturity.
For example, The Economist carried an article giving the
impression to investors in London that Japan’s intentions
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
5
NRI Papers No. 90
June 1, 2005
Figure 1. Transition of Interest Rates of Japanese Government Bonds in Pounds and Consols
(%)
10
9
8
Japanese government bonds in pounds
7
6
5
4
Consols
3
2
1
0
1870
75
80
85
90
95
1900
05
10
(Year)
Notes: (1) The interest rate is calculated by dividing the coupon rate by the government bond price at the end of each month as indicated in The Times. (2)
The interest rates for 9-percent interest-bearing government bonds issued in 1870 with a maturity of 13 years are shown from June 1870 to February 1873,
the interest rates for 7-percent interest-bearing government bonds issued in 1873 are shown from April 1873 to June 1897, and the interest rates for 5percent government bonds with a maturity of 53 years sold on the London capital market in June 1897 are shown for August 1897 and thereafter. (3) The
interest rates for consols are based on NBER Macrohistory, m13041b and c of the US National Bureau of Economic Research; the interest rates for 3percent interest-bearing consols are shown up through December 1888, 2.75-percent are shown from March 1888 through March 1903, 2.5-percent are
shown thereafter.
Source: Interest rates for Japanese government bonds in pounds are provided by Professor Yishay Yafeh of the Hebrew University.
the impact of the promulgation of the Constitution on
the interest rate of government bonds. However, they
noted that the promulgation seemed to have no effect on
the spread.2
No reaction was shown to Japan’s victory in the SinoJapanese War in terms of the spread of interest rates
between the 7-percent interest-bearing government
bonds and consols. Because the price of 7-percent interest-bearing government bonds converged into face value
as they neared the maturity date of July 1897, the interest rate calculated by the consol method also increased
toward 7 percent. Because of this, the spread of the interest rates between 7-percent interest-bearing government
bonds and the consols no longer served as an indicator
of the risk premium.
to implement reforms were resolute by introducing the
suppression of the rebellion by the group opposing
reforms, i.e., the Seinan War, which occurred from
February to September 1877. However, the price of 7percent interest-bearing government bonds did not seem
to be affected by this article. The cause for the lack of
response is considered to be the acceleration of inflation
within Japan as influenced by the Seinan War and the
continued decline of kinroku public bonds.
The establishment of the Bank of Japan in October
1882 was introduced by The Economist as having significant meaning in the formation of Japan’s banking system.
Nevertheless, the risk premium of Japanese government
bonds did not decline.
However, in mid-1885, the interest rate of 7-percent
interest-bearing government bonds gradually started to
decline and fell below 6 percent at the end of 1886,
resulting in the spread as compared to consols being
reduced to 3 percent. It is thought that the issue of a
Bank of Japan note in May 1885 and the announcement
that its conversion to sliver coins would start in early
1886 contributed to this decline.
Furthermore, from February to March in 1889, The
Times carried detailed articles on five occasions concerning the Meiji Constitution. While these articles introduced the independence of justice as an epoch-making
reform, a critical tone was seen in the report regarding
the divine nature of the Emperor’s status and the limited
accountability of the Cabinet to the Diet. Sussman et al.
used not only monthly data but also daily data to analyze
5 A Reduction of Risk Premium on
Japanese Government Bonds
At the end of May 1897, 5-percent interest-bearing government bonds issued in Japan were sold on the London
capital market with a provision guaranteeing the payment of principal and interest in pounds. Because the
redemption period of these bonds was long (53 years),
almost no problem arose in obtaining the spread as compared to consols by calculating the interest rate by the
consol method and in regarding such spread as the risk
premium. If the consol method is used to calculate the
offer price of this government bond, the interest rate was
4.93 percent, with the spread from consols being 248
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
6
NRI Papers No. 90
June 1, 2005
rate of 5-percent interest-bearing government bonds
showed a stable transition, reducing the spread as compared to consols to 167 basis points at the end of 1913.
As such, the risk premium on Japanese government
bonds on the London capital market was reduced substantially by a shift to the gold standard. Although investors
in London had shown no marked response to the major
economic reforms implemented in Japan that had eventually led to such a shift, they reacted to this final shift to
the gold standard in the form of a significant reduction
of the risk premium.
Adoption of the gold standard can be expressed as the
final stage of a variety of domestic reforms, and can be
expected to play a controlling role in Japan’s fiscal and
financial policies. It can be said that the gold standard
served as a very simple indicator for investors to show
these situations in a comprehensive manner.
basis points. Because it was considered certain that
Japan would adopt the gold standard in relation to reparations by the Qing Dynasty, it was possible to sell
bonds at such a low risk premium.
However, because 7-percent interest-bearing government bonds were close to maturity, as stated previously,
it was not known exactly how much the interest rate of
the Japanese government bonds in pounds would be
reduced and how much the risk premium would shrink
by adoption of the gold standard. Nevertheless, the
adoption of the gold standard no doubt brought about a
significant reduction in the risk premium.
At the end of October 1897, when the shift was made
to the gold standard, the risk premium was 236 basis
points, which represented almost the same level as that
when the 5-percent interest-bearing government bonds
were sold on the London capital market. Similarly, the
risk premium was also stable at 226 basis points when 4percent interest-bearing government bonds in pounds
(formerly referred to as the first 4-percent interestbearing public bonds in British currency) were issued.
Following this, the London capital market favorably
accepted the Anglo-Japanese Alliance concluded on
January 30, 1902. The interest rate of 5-percent interestbearing government bonds was slightly reduced from
4.96 percent at the end of 1901 to 4.73 percent at the end
of May 1902, narrowing the spread from consols to 186
basis points.
However, with a rise in tension between Japan and
Russia, the interest rate of 5-percent interest-bearing
government bonds started to increase significantly at the
end of 1903. This increase may be attributable to the
recognition of London investors that Japan was a weak
country with a slim chance of victory. In March 1904,
immediately after the outbreak of the Russo-Japanese
War, the interest rate of 5-percent interest-bearing government bonds was increased to 6.51 percent, expanding
the spread from consols to 360 basis points.
Following this expansion, the interest rate of 5-percent
interest-bearing government bonds as well as the resulting spread fluctuated in accordance with the progress of
the war. After the occupation of Port Arthur in January
1905 and the Battle of Mukden in March, the interest
rate of 5-percent interest-bearing government bonds
gradually decreased, and the spread from consols
decreased to 218 basis points in May just after the Battle
of Tsushima.
At the end of September 1905, when the Russo-Japanese
Peace Treaty was concluded in Portsmouth, the interest
rate of 5-percent interest-bearing government bonds
decreased to 4.87 percent, with the spread also being
reduced to 210 basis points. Nevertheless, the reason that
the risk premium was not reduced to the pre-war level is
considered to be attributable to the accumulation of the
enormous amount of government bonds issued to finance
the Russo-Japanese War. While the interest rate of consols followed an increasing trend thereafter, the interest
II Path towards the Adoption
of the Gold Standard
1 Confrontation Concerning the Issue of
Foreign Bonds
The following section examines Japan’s path towards the
adoption of the gold standard.
In only ten years after the Meiji Restoration, the Japanese
government achieved a primary surplus, i.e., a fiscal surplus if redemption of debt principal and interest is
excluded. However, due to the aftereffects of the Seinan
War, inflation had accelerated. This acceleration resulted
from the fact that the government issued a large amount
of paper currency during the Seinan War, implemented a
reduction in land taxes to deflect dissatisfaction of the
shizoku (former samurai) and actively made public
investments by issuing government bonds.
Concerning the method to bring an end to this inflation, a major confrontation of views had arisen within the
government between Shigenobu Okuma and Matsukata
Masayoshi. This confrontation had continued from
around 1875 when it became difficult to convert national
bank notes to gold coins due to the outflow of gold coins
overseas before the Seinan War.
In January 1875, Okuma, the Minister of Finance,
made a proposal under the title of “establishing the foundation of financial accounting by purifying the source of
revenues and expenditures.” In this proposal, he noted
that while it was necessary to establish tariff autonomy,
the possibility of achieving this goal at an early stage
was low, and that “efforts should be made to promote the
production and commercial and industrial activities in
the country and to prevent harm caused by a reckless
outflow of currency by restraining imports of miscellaneous foreign goods.”
In contrast, Matsukata prepared a “proposal to prevent currency outflow” as instructions to high-ranking
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
7
NRI Papers No. 90
June 1, 2005
dent. Grant traveled around the world after retiring from
the presidency and stayed in Japan for slightly more than
two months. Grant met with Emperor Meiji in August
1879. The fact that he stated that “see Egypt, Spain or
Turkey and a thought should be given to their miserable
situation; Japan should never again issue foreign bonds”
was included in the records of Japan.19
This advice of Grant seems to stem from the government of the Confederate States issue of cotton bonds in
Europe and England’s tendency toward supporting the
Confederate States. Partly because of such advice,
Emperor Meiji communicated to Finance Minister
Matsukata through his Grand Chamberlain in April 1894
to “firmly establish the foundation of finance and don’t
issue foreign bonds,” in addition to his opposition to the
plan of issuing foreign bonds proposed by Okuma.
Okuma, whose plan to issue foreign bonds was dismissed, submitted a “proposal for fiscal reform” in
September 1880 in cooperation with members of the
Fiscal Examination Committee including Hirofumi Ito
and Finance Minister Sano. As this proposal incorporated
Matsukata’s assertion of redeeming notes by generating a
surplus fiscal balance, it was immediately implemented.
Government notes worth 7 million yen and government
bonds worth 4.18 million yen were redeemed in fiscal
1881 through an increase in taxes and a reduction in
expenditures.
Under the circumstances where the price of government notes vis-à-vis silver coins was reaching bottom
with the start of such austerity policies, Okuma, jointly
with Ito, submitted a “proposal for establishing a bank
by newly offering public bonds” in July 1881 by saying
that “there are still two more vital measures necessary to
achieve the goals.” Specifically, this proposal included
requiring the use of notes to subscribe to new government bonds worth 50 million yen, using specie to
redeem them in 50 years, permitting foreigners to subscriber to these bonds, accumulating specie by establishing a shokin (specie) bank and issuing convertible bank
notes.
Relative to the approval of this proposal, Matsukata
submitted a “fiscal proposal” to the prime minister on
September 6, 1881. Under his recognition that “the
nation will eventually be on the wane for certain if no
fiscal reform is implemented” and his belief that “the
ultimate purpose of fiscal policies is the establishment of
a central bank,” Matsukata noted that specie had to be
accumulated to redeem government notes, and proposed
the abolition of government notes and national bank
notes to determine the “core of currency management”
and establishing a Japanese Imperial central bank.
Furthermore, Matsukata severely criticized Okuma’s
thoughts by saying that “we may face a situation where
we have no choice but to simply do nothing even if the
country’s situation changes and it runs into a disastrous
situation as in Egypt, Turkey and India” if funds are borrowed from foreign countries.14
officials of the Ministry of Finance in September 1875.
In his proposal, he attributed the cause of specie outflow
to the excessive issue of non-convertible notes and recommended the following in addition to the recovery of
tariff autonomy and restraint of imports of foreign products: (1) payment of customs duties in gold coins, (2)
redemption of paper currency and conversion to specie
and (3) redemption of foreign bonds by money acquired
by exports.17
The trends seen at that time included not only the
acceleration of inflation but also an increase of democratic movements. Accordingly, in order to avoid criticism,
the government separated the state councilor and the
minister, and changed the Minister of Finance from
Okuma to Tsunetami Sano. Following his transfer,
Okuma, as the state councilor for the accounting department, noted that “the system of the circulation of paper
currency is not wrong, but is only disadvantageous in the
times of unbalanced exports and imports” with respect to
the reform of the currency system in May 1880. He
again showed his recognition that the depreciation of the
value of notes was due to an appreciation of silver coins,
and that the causes for such appreciation consisted of
excess imports and underdeveloped industries. As
“specie circulation measures,” he proposed the redemption of government notes by issuing 7-percent interestbearing government bonds amounting to 10 million
pounds because gold and silver coins were in short supply within the country.
In contrast, Matsukata, the Minister of Internal Affairs,
criticized that radical note redemption measures would
be a future source of calamity and recommended measures of gradual redemption under his proposal titled
“Zaisei kanki gairyaku” in June 1880. He opposed the
issue of foreign bonds proposed by Okuma by making
the following specific suggestions: (1) redeeming government notes worth 10 million yen by reserves and
exchanging government notes worth 15 million yen for
kinsatsu exchange public bonds, (2) providing loans on
the security of export goods to promote exports, (3)
strengthening specie reserves through the monopolization of rice exports by the government and (4) vesting
government projects in fields falling under the category
of private businesses in private ownership.
According to Volume 1 of Nihon ginko hyakunen shi
(the Hundred-Year History of the Bank of Japan), Okuma’s
proposal of issuing foreign bonds was dismissed through
deliberations made in response to the Emperor’s order
that “Although I, of course, know that accounting is not
in a favorable situation, I recognize that foreign bonds
are most inappropriate at this time. Last year, Grant
made statements about the advantages and disadvantages
of foreign bonds. (Omitted.) Deliberate carefully with
the Cabinet ministries and report the results to me.”17
Grant, whom Emperor Meiji referred to, was Ulysses
S. Grant, the General of the Union Army during the Civil
War in the United States and who later became presi-
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
8
NRI Papers No. 90
June 1, 2005
2 Paper Money Reform and Accumulation
of Specie
tion of such reform, Matsukata as well as two ministers,
Sanetomi Sanjo and Tomomi Iwakura, who were asked
to accompany Matsukata, were received in audience by
the Emperor, and were granted a guarantee by the
Emperor of not changing policies as long as paper money
reform is under way. Matsukata wrote, “if the reform is
abandoned because of difficulties, this would mean the
same as not implementing the reform from the outset. I
reported to this effect and explained the advantages and
disadvantages in detail to the Emperor, and the Emperor
fortunately accepted my opinion.”14
In January 1882, Matsukata first dealt with the disposal of Type-II government notes. These notes were
issued to temporarily raise funds for the National
Treasury. As the issuance of these notes had become continuous, the balance had reached 14.5 million yen by the
time Matsukata took office as the Minister of Finance.
Accordingly, Matsukata abolished the advance payment
system for expenses of ministries and prefectural offices
and changed the procedures so that tax revenues paid in
each area were paid directly to the Cashier’s Department
of the National Treasury.20
Subsequently, in December 1883, Matsukata submitted a proposal for issuing treasury bills, rather than government notes, in case of an unavoidable temporary fund
shortage of the National Treasury. Through the Treasury
Bill Ordinance in September 1884, Matsukata decided to
issue for public subscription or offer for sale bearer
interest-bearing bonds with maturities of three, five, six
and nine months for the purpose of “temporarily using
Due to a political change in October 1881, Shigenobu
Okuma resigned his government post and Matsukata
assumed the post of both state councilor and minister of
finance. With his assumption of these posts, Matsukata
finally had the opportunity to implement his longstanding assertions consisting of the redemption of government notes by a fiscal surplus and the accumulation
of specie through the management of reserves.
While it is frequently argued that Matsukata’s financial
policies brought about rapid deflation, inflation had
already peaked at the time Matsukata became the Minister
of Finance through the implementation of Okuma’s “proposal for fiscal reform.” The volume of notes in circulation reached a peak in January 1880, and the rice price
reached a peak in December of the same year. As shown
in Figure 2, government bonds and government notes
recorded the lowest prices, respectively, in January and
April 1881. Subsequently, prices recovered.
Nevertheless, government notes were significantly
depreciated vis-à-vis silver coins. In addressing this situation, Matsukata dealt with the paper money reform
under the basic policy of “making every effort to redeem
as many excessive notes as possible and, at the same
time, accumulating specie in preparation for the exchange
of these notes.”
To strengthen his commitment to paper money reform
through austerity policies and to ensure the implementa-
Figure 2. Changes in Prices of Government Notes and 7-Percent Interest-Bearing Kinroku Public Bonds
(Yen)
110
1.1
7-percent interest-bearing
kinroku seiri public bonds
(right axis)
1.0
100
0.9
90
0.8
80
0.7
70
60
0.6
Government notes (left axis)
0.5
1874
75
76
77
78
79
80
81
82
83
84
85
86
87
88
50
89 (Year)
Notes: (1) The left axis shows an inverse number of the monthly average price of a government note vis-à-vis a one-yen silver coin. Because nibu-kin (gold)
was used through the end of 1873 to trade for Mexican silver coins, data in and before 1873 are omitted. (2) The price of 7-percent interest-bearing kinroku
seiri public bonds is the monthly average of the Tokyo Stock Exchange. (3) The ban on the trading of kinroku public bonds was lifted on September 9, 1878,
and the government purchased such bonds at 82 yen. However, the government abolished such purchases in December 1879. Because of this, the market
could not be opened in November and December 1879. In and after 1887, the redemption of kinroku public bonds was started. As the market price started to
decline toward the face value, it cannot be construed that such a decline reflected the actual status of interest rates at that time.
Source: Nihon kin’yushi shiryo Meiji Taisho hen (Japan’s Financial History Records: Meiji and Taisho Edition), edited by the Research Bureau, the Bank of
Japan, Volume 16, 1957.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
9
NRI Papers No. 90
June 1, 2005
29.27 million yen was achieved for the three years from
fiscal 1882 to 1884. By including a surplus of 10.83 million yen achieved in fiscal 1881 under the leadership of
Finance Minister Okuma, a net surplus of about 40 million yen was used to redeem government notes and
appropriated for reserves.
Credit of government notes was directed toward recovery. The value of government notes that was 58 percent
of silver coins in October 1881 was increased to 95.5
percent in July 1884. Accordingly, a fiscal surplus was
not used to redeem government notes in fiscal 1884 and
fiscal 1885, and the entire fiscal surplus was appropriated for reserves. Instead, kinsatsu exchange bearer public bonds, which were issued from May 1884, were used
to redeem notes.
Since the initial year of Meiji (1868), reserves had
been accumulated for the redemption of government
notes and government bonds, and to prepare for difficulties in the National Treasury. However, during the period
under Okuma’s financial policies, the loans provided for
the purposes of promoting the production and development of industry increased significantly. Reserves
amounting to 55.79 million yen at the time Matsukata
assumed fiscal management consisted of loans amounting to 19.35 million yen, government bonds amounting
to 25.62 million yen and specie amounting to only 8.69
million yen.
Matsukata promoted the accumulation of specie by
the “management of reserves,” rather than by issuing
foreign bonds. In August 1882, he sold government
bonds owned by reserves and used the proceeds to purchase gold and silver.17 In addition, he strengthened the
operation of the export credit (documentary letter of
such funds for accounting needs.” It was in fiscal 1886
that the treasury bills were actually issued.
With respect to Type I government notes that were
issued extending over multiple fiscal years, the outstanding amount of such notes amounted to 105.9 million yen
when Matsukata took office as the Minister of Finance.
It was necessary to generate a fiscal surplus on a continuing basis to reduce this amount.
In February 1882, Matsukata noted, with respect to the
budget compilation for fiscal 1882, that “if these three
years are endured by using the fixed amount for fiscal
1881 as the standard amount, the difficulties will be remedied by reducing the difference in value between notes
and specie,” and submitted a “proposal for keeping the
expenses of each agency at the same level for three years”
in April. In terms of revenue, Matsukata introduced a
patent medicine tax, a stamp duty, a liquor tax and a
tobacco tax in 1882, and a soy sauce tax and a confectionery tax in 1885. Through these tax increase measures,
tax revenues for the three years from July 1882 increased
by 17.4 percent over the preceding three-year period.
Because government bonds were not issued and
progress was being made in paper money reform, the
ratio of outstanding government debts to tax revenues
showed a declining trend beginning in the early 1880s,
as shown in Figure 3. In addition, the ratio of bondrelated expenditures to tax revenues that is shown on the
scale of 1/20 (in Figure 3) also followed a declining
trend despite the fact that all chitsuroku (hereditary
stipends) payments had started to be made by interest on
government bonds.
Although war expenditures had swollen due to the
Jingo Incident in Seoul in July 1882, a fiscal surplus of
Figure 3. Bond-Related Expenditures, Outstanding Government Bonds and Tax Revenues
(%)
(%)
2,000
100
Outstanding government debts/
tax revenues (left axis)
1,800
90
1,600
80
1,400
70
1,200
60
Bond-related expenditures/
tax revenues (right axis)
1,000
50
800
40
600
30
400
20
200
10
0
1868
78
88
98
1908
18
28
38
48
58
68
78
88
0
98 (Year)
Notes: (1) Tax revenues consist of taxes and stamp duty revenues. (2) Outstanding government debts from 1868 to 1899 include government notes.
Sources: Data up through 1965 are based on Meiji iko honpo shuyo keizai tokei (The Key Economic Statistics of Japan in and after Meiji), the Statistics
Bureau of the Bank of Japan, 1966. Data for 1966 and thereafter are based on Financial and Economic Statistics Monthly for each fiscal year, the Research
and Statistics Department of the Bank of Japan and Ippan kaikei sainyu saishutsu kessan (General Account Revenue and Expenditure Statements) for each
fiscal year, the Budget Bureau of the Ministry of Finance.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
10
NRI Papers No. 90
June 1, 2005
credit) system through the Yokohama Shokin (Specie)
Bank established in February 1880, and strove to absorb
specie. The Yokohama Shokin Bank inspected documentary L/C goods and an overseas consulate managed
such goods at export destinations so that the goods were
not delivered until payment was made. He also required
foreign exporters in Japan to use the export loan system
offered by the Yokohama Shokin Bank.
Because such an export financing system was adopted
under the financial austerity policies and a trend toward
yen depreciation resulted from a decline of the silver
price on the international market, the trade surplus for
the four years from 1882 to 1885 reached 28 million
yen. In addition, the excess in the imports of gold and
silver from overseas amounted to 7.92 million yen
according to Shihei seiri gaiyo (Outline of Paper Money
Reform) written by Matsukata during the last years of
the Meiji 30s.14 Consequently, the amount of specie
owned by the government increased to 42.27 million yen
by the end of 1885.
price was 90.063 percent. The third issue was implemented in June 1885. Considering the trend of declining
interest, the issue price was decreased to 95 percent of
face value, and bonds worth 5 million yen were offered.
The highest subscription price was 97.5 percent, and the
average subscription price was 95.681 percent.7
As it was found that more expenses and more time
than planned would be required to construct the
Nakasendo railways, it was decided to prepare a plan
for new construction of the Tokaido railway. Accordingly,
the proceeds from the third issue were used to redeem
10-percent interest-bearing kinroku public bonds before
maturity. This became the precedent for the consolidation of government bonds, which is explained later in
this paper.
Concurrently with the offering of the Nakasendo railway public bonds, the government issued kinsatsu
exchange bearer public bonds to collect and redeem government notes and to acquire specie. Before that occasion, the kinsatsu exchange public bonds were less liquid
because the registered form was adopted and ownership
by foreigners was not permitted. The government promulgated an ordinance in December 1883 that lifted
these restrictive conditions and included a clause that the
issue could be stopped due to fiscal reasons. It was
decided to issue these bonds worth about 10 million yen
for three years from fiscal 1883 as necessary in response
to applications without establishing an offering period.
The specific issue conditions were: 6-percent interestbearing bonds, issuing bonds in exchange for notes at
the face value, and redemption by lottery conducted
yearly for 30 years after a deferment of five years.
While only 36 applications for this bond were received
during the period from 1884 to 1886, the issue amount,
i.e., the amount of notes collected reached 7.76 million
yen. Thus, in 1886, the value of government notes was
recovered to the same level as that of silver coins. As it
became no longer necessary to issue kinsatsu exchange
public bonds, the government ceased the issue of this
bond at the end of January 1886.
In June 1882, the Meiji government promulgated the
Ordinance on the Bank of Japan. From the perspective
of the currency system, although national banks had previously issued convertible notes, the ordinance vested
the right to issue convertible notes in the Bank of Japan
as a monopoly. The reason given was that “it is most
convenient to vest the right to issue notes in a large central bank rather than giving privileges to a number of
small banks to individually issue notes.”20
It is said that Finance Minister Matsukata accepted the
suggestion of Finance Minister Leon Say of France that
“after the establishment of the Bank of Belgium, progress
is being made on a daily basis in the establishment of
order and complete organization,” and used the Belgium
National Bank Ordinance under which the government
has a strong supervisory authority as the basis of this
ordinance.17
3 Conversion of Government Bonds to
Silver Coins
Except for the kinsatsu exchange public bonds issued
in 1880, which were explained in NRI Papers No. 87, it
was decided to resume the issuance of government bonds
after the value of government notes explicitly moved
toward recovery.
In December 1883, Masayoshi Matsukata, the minister of finance, reported to the prime minister the offering
of Nakasendo railway public bonds worth 20 million yen
by aiming at a two-bird-one-stone solution, i.e., railway
construction and the reform of notes by saying that “this
bond would not only be used for railway construction
but also would serve as a means of increasing the price
of notes.” The issue conditions were: 7-percent interestbearing bonds, an issue price of 90 percent of face value,
a price-competitive auction in which subscriptions were
accepted in the order of higher subscription prices,
redemption by lottery conducted yearly for 25 years
after a deferment of five years, and a total issue amount
of 20 million yen. It was decided that the minister of
finance would issue these bonds gradually in accordance
with the progress of the railway construction.
The first issue was implemented in February 1884,
and subscriptions worth some 8.37 million yen were
submitted for the offering amount of 5 million yen. The
highest subscription price was 91.15 percent of face
value, and the average subscription price was 90.008
percent. For the second issue in June, subscriptions
amounting to 15.28 million yen were made, spurred on
by the background of cooled-down commodity prices,
for the planned offering amount of 5 million yen.
Accordingly, the government increased the issue amount
to 10 million yen. The highest subscription price was
92.5 percent of face value, and the average subscription
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
11
NRI Papers No. 90
June 1, 2005
It was on May 9, 1885, when the price of government
notes came close to the price of silver coins that the issue
of the Bank of Japan notes started on which daikokuten
(the god of wealth) was depicted. On June 6, immediately after this, the Decree of the Prime Minister was
announced that “notes issued by the government shall be
gradually converted to silver coins from January Meiji 19
(1886) and exchanged notes shall be eliminated.” The
conversion of government notes into silver coins was
highly evaluated as “a heroic deed since the start of Meiji
and truly a major, praiseworthy event in finance.”17
In this way, government notes and national bank notes
were withdrawn from circulation, and the outstanding
issue amount of the Bank of Japan notes followed an
increasing trend, as shown in Figure 4.
As explained before, the amount of specie owned was
increased and progress was made in the withdrawal and
redemption of government bonds. These circumstances
had led to an increase in the ratio of specie to outstanding government notes from 7.2 percent on October 20,
1881, to 47.8 percent by the end of 1885. This effectively
ended inflation. The wholesale prices of farm products
had dropped by 36 percent and the prices of industrial
products had fallen by 40 percent in the five years from
1881 to 1886. Both of these prices had returned to the
levels they had in 1877.
A half of the capital amount of 10 million yen was
invested by the government. Concurrently with the start
of business in October 1882, the Bank of Japan began
loans on the security of public bond certificates and
commercial bill discounts. However, in order to issue
convertible bank notes, it was still necessary to deal with
government notes and national bank notes.
Accordingly, the National Bank Ordinance was amended
in May 1883. The specific amendments included that (1)
national banks shall redeem all notes issued during the 20year business operation period after a license is granted,
(2) national banks are not permitted to issue notes after
the period of business operation is ended and (3) national
banks shall deposit 25 percent of outstanding notes issued
as reserves for redemption and an amount equivalent to 2.5
percent of outstanding notes yearly in the Bank of Japan by
using government bonds; the Bank of Japan is to use the
investment yields from such bonds to redeem notes. The
government bonds deposited in the Bank of Japan by
this method amounted to 12.46 million yen by the end of
1885, and national bank notes worth 1.6 million yen were
redeemed from February 1884 by the proceeds.
In May 1884, the government promulgated the
Convertible Bank Note Ordinance that stipulated that
convertible bank notes shall be converted to silver coins
and that an amount of silver coins corresponding to the
notes issued shall be set aside for exchange. A Bank of
Japan note was thus guaranteed to be converted to a
one-yen silver coin, which was standard currency.
The reasons for adopting the silver standard rather
than the gold standard appear to be that silver was convenient for trade with Asian countries and that the accumulated specie consisted mostly of silver coins. In June
1885, Matsukata noted that “it would not be possible to
escape criticism if we rush solely into the world of gold
coins by determining gold coins as the standard by
ignoring the actual status.”
4 Conversion into Lower Interest Rate
Government Bonds
The reform of bank notes was completed by the issue of
convertible bank notes in May 1885, and the withdrawal
of government notes was completed by the conversion to
silver coins starting in January 1886. The cabinet system
was inaugurated in December 1885, and preparations
were underway toward promulgation of the constitution.
As expected, price stabilization and standardization of the
Figure 4. Progress in Paper Money Reform
(Million yen)
300
250
Bank of Japan notes
200
Outstanding
amount
150
Government notes
100
50
0
1868
National bank notes
73
78
83
88
93
98
(Year)
Source: Meiji iko honpo shuyo keizai tokei (The Key Economic Statistics of Japan in and after Meiji), the Statistics Bureau of the Bank of Japan, 1966.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
12
NRI Papers No. 90
June 1, 2005
cent or more, or using government bond instruments
bearing interest of 6 percent or more to subscribe for
adjustment bonds at the time of the public offering of
these bonds as the subscription price. Adjustment
bonds issued from 1887 to 1897 through this method
accounted for more than 70 percent (125.7 million yen
in total) of all adjustment bonds.
The general public offering was implemented by a
price-competitive auction that was adopted since the
issue of Nakasendo railway public bonds. An amount of
10 million yen was offered at the first issue for ten days
starting on November 10, 1886, with the issue price
being 98 percent of face value. To this offer, subscriptions amounting to 16.33 million yen were made. The
highest subscription price was 105 percent of face value,
and subscription prices less than face value (100 yen)
were not accepted. In total, adjustment bonds worth
10.18 million yen were issued. Since then, a total of five
adjustment bond offerings were made up through July
1892, with the issue price being 100 percent of face
value. All of these offerings were successful, and adjustment bonds totaling 30.20 million yen were issued.
A special issue was started by adding the provision
that “Adjustment bonds (seiri kosai) may be issued on an
extraordinary basis with the issue price being determined
in conformity with the market price and granted to the Bank
of Japan” to Article 6 of the Adjustment Bonds Ordinance
in 1888. In order to raise funds to redeem kinroku public
bonds and loans to cover expedition expenses, the government issued adjustment bonds eight times from 1888
to 1897 amounting to a total of 19.09 million yen for the
Deposit Bureau of the Ministry of Finance.
In this way, adjustment bonds were used to convert
about 74 percent of outstanding government bonds worth
230 million yen as of the end of 1886 into 5-percent
interest-bearing government bonds over a period of ten
years. This ten-year conversion led to the yearly reduction of interest payments of 2.93 million yen. Although
the liquidity of the government bonds increased as government bond issues were consolidated, the government
bond market was sluggish from 1894 to around the end
of the 19th century due to the effect of yen depreciation
and an increase in commodity prices.
As pointed out in Meiji zaisei shi (Financial History of
Meiji), Volume 8, the issue of adjustment bonds was
“the core of Japan’s government bond laws” and was
“the outstanding achievement of Japan’s government
bond administration.”20 Hyoe Ouchi also highly evaluated the topic of the adjustment bonds as “something
that forms a great new era in the history of the development of capitalism in Japan” in Nihon zaisei ron: Kosai
ron (Essay on Japanese Finance: Public Bonds).4
The topic of adjustment bonds was no doubt the largescale consolidation of government bonds that stands in
comparison with England’s conversion of consols into
those at lower interest rates implemented in 1750 and
1751. However, although the maturity of adjustment
currency system through the reform of paper currency
had contributed to the establishment of the new state
structure.
To implement the naval shipbuilding plan, which
faced delays due to the shortage of tax revenues, the
Hirofumi Ito Cabinet decided to issue naval public
bonds amounting to 17 million yen over three years, and
promulgated the Naval Public Bond Instrument Ordinance
in June 1886. The issue conditions were: 5-percent interestbearing, redemption for 30 years from the year following a deferment of five years, an offer price of 100
percent of face value, and a price-competitive auction.
The subscription for the first issue of 5 million yen
exceeded three times the issue amount. The highest subscription price was 110 percent of face value, and the
average subscription price was 103.757 percent of face
value, with the proceeds from the issue reaching 5.19
million yen. Including this issue, naval public bonds
were issued a total of four times, i.e., once a year up
through 1889, with a total issue amount of 17 million
yen and total proceeds of 17.24 million yen.
Finance Minister Masayoshi Matsukata who completed the elimination of non-convertible notes took an
active approach to the consolidation of government
bonds, and announced the Adjustment Bond (Seiri
Kosai) Ordinance in September 1886. The purpose of
this ordinance was to reduce the amount of interest by
converting high-interest rate government bonds that
were already issued into lower-interest rate bonds by
reflecting the trend toward declining market interest
rates. In addition, the ordinance was also aimed at standardizing government bond laws that had been established each time bonds were issued. The standardized
law stipulated that government bonds are, in principle,
bearer bonds cum coupon, provided measures for loss of
instruments, and stipulated that the coupons shall be cut
off to receive interest and that the Bank of Japan shall
handle adjustment bond clerical operations.
Because the amount of domestic government bonds
with an annual rate of 6 percent or more was 175.20 million yen from among the outstanding government bonds
of 244.02 million yen, it was decided to gradually issue
adjustment bonds to redeem and consolidate such highinterest bonds within a total limit of 175 million yen.5
The scale of these adjustment bonds was greater than
that of kinroku public bonds of 173.90 million yen that
had been issued since 1878, and was the largest in the
period before the Russo-Japanese War. The issue conditions were: 5-percent interest-bearing and redemption by
lottery for 50 years after a deferment of five years.
However, bond redemption before maturity was allowed
at the discretion of the government.
Adjustment bonds were issued by using three methods: issue by exchange, general public offering and special issue. The method of issue by exchange meant issuing
adjustment bonds in exchange for principal redemption
of matured government bonds bearing interest of 6 per-
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
13
NRI Papers No. 90
June 1, 2005
required to raise funds from overseas markets under the
silver standard.
In March 1897, the government that had received a
total of 230 million tael (about 350 million yen or 38
million pounds) including reparations of 200 million tael
as agreed upon in the Shimonoseki (Sino-Japanese)
Peace Treaty and the Liaotung Peninsula return compensation, announced a shift to the gold standard starting in
October 1897.
The Economist of April 24, 1897, reported about this
shift that “Japan is very enthusiastic about the adoption
of the gold standard. The concept behind the promotion
of this shift is that as the government must raise funds
from other countries, it is possible to raise funds under
more favorable conditions than by continuing the silver
standard, and that because Japan must now be regarded
as one of the leading countries and, for this purpose, the
gold standard should be adopted in the same way as in
other top-ranking countries.”
Thus, in October 1897, Japan again adopted the gold
standard. The parity of 1 yen = 1 dollar that was established by the New Currency Ordinance in 1871 was
devaluated by the same amount as the change amount of
gold and silver parity. Parity was set at 2 yen = 1 dollar
and this parity continued until an embargo on the export
of gold in December 1931. The circulation of government notes and national bank notes within the country
was prohibited at the end of 1899, and convertible notes
of the Bank of Japan became the standard notes of Japan.
With a shift to the gold standard, commodity prices that
had continued rising were stabilized, the international
credit rating of Japanese government bonds significantly
improved, and the interest rate of pound-denominated 7percent interest-bearing government bonds traded in
London was considerably reduced. These circumstances
facilitated Japan’s participation in the international
financial market.
In June 1897, three months after the Coinage Act stipulating the adoption of the gold standard passed the
Imperial Diet, the Treasury Deposit Bureau of the
Ministry of Finance sold 43 million yen of war bonds
owned by this bureau on the London capital market. In
June 1899, 4-percent interest-bearing government bonds
in pounds were issued. This was the first issue of foreign
bonds in 26 years since 7-percent interest-bearing government bonds were issued in pounds in 1873.
bonds was extended, it was determined to be 55 years,
and these measures did not result in the issue of government bonds without a maturity period as seen in England.
Furthermore, at the same time when conversion into 5percent interest-bearing government bonds took place in
Japan, 96 percent of 3-percent interest-bearing consols
worth 560 million pounds were being converted into 2.5percent interest-bearing consols in 1888 by G. J. Goshen,
a banker and statesman in England.
5 Shift to the Gold Standard by
Reparations from China
War expenses for the Sino-Japanese War (August 1894 –
April 1895) reached about 200 million yen, of which
125 million yen were financed by war bonds. War bonds
were issued three times by public offering and bidding
with the issue conditions of 5-percent interest-bearing
and redemption for 50 years after a deferment of five
years. Subscriptions exceeding the planned amount were
made for two biddings conducted in 1894, and bonds
were issued on an above-par basis. However, subscriptions for the third issue in 1896 amounted to slightly less
than 16 percent of the planned amount due to the effect
of the quantitative restrictions of private funds and a rise
in commodity prices.
Because of this, the total issue amount was limited to
slightly more than 80 million yen, and the remaining
amount of war bonds was accepted by the Treasury
Deposit Bureau (now the Trust Fund Bureau of the
Ministry of Finance) at face value in March 1896. These
war bonds accepted by the Deposit Bureau were
endorsed and sold on the London capital market in May
1897, as explained below.
When the war started, the trade deficit grew because
of the purchase of warships and war materiel. Coupled
with the impact of the equal principal and interest
redemption of 7-percent interest-bearing government
bonds, as noted previously, capital outflow increased. In
order to cope with this situation, the government decided
to sell government bonds owned by the Treasury Deposit
Bureau overseas. For this purpose, Japanese government
bonds had to be traded on overseas markets.
According to Meiji zaisei shi (Financial History of
Meiji), Volume 8, the Governor of the Bank of Japan
took the necessary steps in August 1896 to make it possible to publicly trade adjustment bonds on the London
capital market, and trades amounting to 20,000 to
30,000 yen were conducted daily.20 However, according
to Toshio Suzuki of Tohoku University, M. Samuel &
Co. in London told Takaaki Kato, the Japanese
Ambassador to England, at the end of 1896 that it was
difficult to purchase a large volume of government bonds
issued by a country that was adopting the silver standard.3 The abolition of the free coinage of silver coins
by India in 1893 accelerated the worldwide trend toward
silver depreciation. Accordingly, a gold clause was
III Russo-Japanese War and
Issue of Foreign Bonds
1 Selling 5-Percent Interest Bonds and
Issuing 4-Percent Bonds in London
At the end of May 1897, when it had become certain that
Japan would adopt the gold standard, a plan for which
negotiations had been ongoing among the Bank of Japan,
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
14
NRI Papers No. 90
June 1, 2005
In addition, even if the government attempted to issue
public bonds, the domestic financial market was very
tight due to the reaction to the war boom and a shift to
the gold standard. This situation required market liquidity. The Bank of Japan began buying government bonds
amounting to 38.71 million yen at face value during the
period from April to October 1898, and provided funds
of 37 million yen to the market.
Because of such a domestic financial situation, the government had no choice but to rely on the issue of foreign
bonds. In April 1898, in response to an order by Kaoru
Inoue, the minister of finance, Korekiyo Takahashi (deputy
governor of the Yokohama Shokin Bank) confidentially
started a survey on the possibility of issuing foreign
bonds in London. In June 1899, the first 4-percent
interest-bearing government bonds in British currency
(4-percent government bonds in pounds) amounting to 10
million pounds (97.63 million yen) were issued. The
issue conditions were: a 4-percent coupon, an issue price
of 90 percent of face value, the government’s income of
86 percent of face value, maturity at the end of 1953, and
redemption for 45 years after a deferment of ten years.
These bonds were underwritten by a syndicate consisting of the Yokohama Shokin Bank, Parsee Bank,
HSBC and the Chartered Bank. The face of the bond
carried the statement that “all principal and interest of
this bond instrument shall be paid in British currency at
the London branch of the Yokohama Shokin Bank.”
The offering statement indicated the purposes of offering the public bonds were railway construction, iron
plant construction and telephone service expansion. The
fact that Japan’s currency system is based on the gold
standard was also added to this statement. Other items
indicated in the offering statements included the revenue
and expenditure account closing statements for the
period from fiscal 1894 to fiscal 1897, the budgets for
fiscal 1898 and fiscal 1899, the population (42.70 million as of 1896), the amount of trade, and the length of
the railway lines. Also indicated in the offering statement was the fact that the total outstanding amount of
government bonds, loans from the Bank of Japan and
government notes as of the end of March 1899 totaled
41.836 million pounds, and that the per-capita outstanding government bond amount was 18 shillings.9
The reaction of the London capital market to this offer
of the first 4-percent interest-bearing government bonds
in pounds was cool. According to Yokohama Shokin
Ginko shi (History of the Yokohama Shokin Bank), the
subscription amount did not reach even one-tenth of the
issue amount.21
On the London capital market, in that same year, China
issued 5-percent interest-bearing government bonds
worth 2.3 million pounds at 97 percent of face value,
Germany issued 3-percent interest-bearing government
bonds worth 3.79 million pounds at 92 percent of face
value, and Mexico issued 5-percent interest-bearing government bonds worth 3.79 million pounds.
M. Samuel & Co. and the Hongkong and Shanghai
Banking Corp (HSBC). took shape to sell domestic
government bonds on the London capital market.
The government bonds to be sold primarily consisted
of the government bonds accepted by the Treasury
Deposit Bureau in 1895 and 1896 as part of its effort to
raise funds to finance the Sino-Japanese War. These 5percent interest-bearing war bonds of 43 million yen
with a maturity period of 53 years included a provision
stipulating the payment of principal and interest by using
a fixed conversion rate of 1 yen = 2 shillings 0.5 pence
for the face value of 102 pounds per 1,000 yen.
The reverse side of the war bond instrument sold on
the London capital market carried a statement written in
red in English that “(1) when this instrument or coupon
is presented at the Yokohama Shokin (Specie) Bank in
London, payment will be made at the conversion rate of
1 yen = 2 shillings 0.5 pence; and (2) while the principal
of this instrument is not redeemed until 1900, all principal and interest will be redeemed by lottery in 50 years
after 1900.” The seal of the director general of the
Financial Bureau of the Ministry of Finance was affixed
below this statement.20 The Yokohama Shokin Bank was
handling the payment of principal and interest of
Japanese government bonds as an agency of the Bank of
Japan.
Although the interest rate of the government bonds
carrying this endorsement was 5 percent if converted to
pound denomination, these bonds were sold to investors
at the rate of 4.93 percent because they were offered by
an underwriting syndicate at the face value of 103.5
pounds. Subscriptions for this offer reached 6.5 times the
amount offered. While this favorable reaction was partly
attributable to the Bank of England gradually decreasing
the official discount rate from 4 percent in October 1896
to 2 percent in May 1897, it appears that Japan’s adoption of the gold standard had become the major contributor to the decrease in the selling interest rate and the
resulting narrowing of the spread with consols.
After the Sino-Japanese War, Japan adopted the policy
of “armed peace” in preparation for the threat of Russia,
etc., for its post-war administration. The slogan of
“Gashin shotan (sustained determination and perseverance)” used at the time is considered to express the government’s intention to maintain and expand national
defense and military spending.
In March 1895, Masayoshi Matsukata, who assumed
responsibility for the post-war administration, announced
a policy of covering increases in ordinary fiscal expenditures by increasing taxes and allotting reparations
received from China and government bonds to increases
in extraordinary expenditures. However, the confrontation between the government and the Diet caused delays
in implementing any tax increases. Moreover, military
expenses for fiscal 1897 and 1898 reached 110 million
yen each, which were nearly five times greater than
those for fiscal 1895.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
15
NRI Papers No. 90
June 1, 2005
end of October 1902, subscriptions reached close to two
times the planned selling amount.
Such a cool reaction to Japan’s bond offering seems
to have been derived from the fact that the issue interest rate of 4.44 percent compared poorly under the
trends of interest rates of 5-percent interest-bearing government bonds sold in London in 1897 that hovered at
4.71 percent at the end of May and 4.81 percent at the
end of June 1899. In addition, Japan’s issue amount was
larger than were those of the other countries. Besides,
market response might have been affected by the fact
that outstanding government bonds that recorded 39.12
million pounds at the end of March 1899 would sharply
increase by 25 percent and that the bonds were unsecured.
Because of this, in addition to the subscription by the
Bank of Japan for bonds of 2 million pounds as indicated in the offering statement, the government had to
repurchase bonds worth 2.5 million pounds. Reparations
from China were again used as the funds required for
this purpose.
As the signing of the Anglo-Japanese Alliance in
1902 was favorably accepted by the London capital market, an interest rate of 5-percent interest-bearing government bonds sold in 1897 was directed toward a declining
trend. By taking this opportunity, the Japanese government again offered for sale in London 5-percent interestbearing government bonds issued in Japan at the
beginning of October 1902.
These bonds were sold at an interest rate of 5 percent
at a face value of 102 pounds 1 shilling 8 pence per
1,000 yen with a clause stipulating the fixed conversion
rate of 1 yen = 2 shilling 0.5 pence through Bearing
Brothers Ltd. in England, the Yokohama Shokin Bank
and HSBC. Because conditions were better as compared
to the 5-percent interest-bearing government bonds sold
previously whose market interest rate hovered at 4.73
percent at the end of September and 4.78 percent at the
2 Using Foreign Bonds to Finance the
Russo-Japanese War
Expenses of 1.72 billion yen were spent for the RussoJapanese War (February 1904 – September 1905). This
amount equaled 11.7 times the tax revenues for fiscal
1903, and the government had to issue government
bonds for a large part of the expenses.
As it may be assumed from the fact that the total
deposit balance of all banks throughout the country
was only 760 million yen as of the end of 1903, the
issue of government bonds within the country faced
limitation. Furthermore, in light of the fact that approximately one-third of the war expenditure for the SinoJapanese War flowed out of the country, it was predicted
that an outflow of a vast amount of funds was inevitable.
Accordingly, Japan had to begin the war on the assumption of financing a major amount of war expenses with
foreign bonds.
Actually, foreign bonds were used to finance about 40
percent of the expenses for the Russo-Japanese War. As
indicated in Table 2, foreign bonds worth a total face
value of 82 million pounds were issued and a total of
685.95 million yen was raised through two issues of 6percent interest-bearing government bonds in pounds
and two issues of 4.5-percent interest-bearing government bonds in pounds for the period from May 1904 to
July 1905.
Full authority was given to Korekiyo Takahashi, the
deputy governor of the Bank of Japan, who was appointed
as a financial officer of the Embassy of Japan in
England and later as a financial representative of a special mission dispatched by the government to conduct
Table 2. Changes in Issue Conditions of Japanese Government Bonds in London
Coupon (%)
Issue price
(yen)
9.0
7.0
5.0
98.0
92.5
101.5
4.0
5.0
6.0
90.0
100.0
93.5
6.0
4.5
4.5
90.5
90.0
April 1870
January 1873
June 1897
June 1899
October 1902
May 1904
November
March 1905
July
November
March 1907
May 1910
4.0
5.0
4.0
Issue amount
(million
pounds)
1.0
2.4
4.4
10.0
5.1
5.0 (10)
6.0 (12)
90.0
90.0
15.0 (30)
10.0 (30)
6.5 (25)
99.5
95.0
11.5 (23)
11.0
Maturity (year)
Issue interest
rate (%)
Consol interest
rate (%)
9.2
7.6
4.9
3.20
3.26
2.44
4.4
5.0
6.4
2.54
2.96
2.78
6.6
5.0
5.0
2.84
2.74
2.77
4.4
5.0
4.2
2.82
2.92
3.08
13
25
53
55
55
7
7
25
25
25
40
60
Notes: (1) A simplified method of calculating “coupon/issue price” was used to obtain the issue interest rate. Consol interest rates are based on NBER
Macrohistory m13041b and c. (2) Conditions applied to domestic government bonds sold on the London capital market with the guarantee of payment of
principal and interest in pounds are indicated for 5-percent interest-bearing government bonds issued in June 1897 and October 1902. (3) Figures in
parentheses for the issue amounts indicate the total amount of bonds issued simultaneously in multiple markets, i.e., New York, London and Paris. (4) With
respect to the 4-percent interest-bearing government bonds issued in May 1910, these same bonds amounting to 450 million francs were also issued in
Paris at the issue price of 95.5 percent of face value.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
16
NRI Papers No. 90
June 1, 2005
For these first 6-percent interest-bearing public bonds
in pounds, subscriptions amounted to 33 times the
offered amount in London and five times the offered
amount in New York. As to the reason for this popularity, Meiji Taisho zaise shi (Financial History of Meiji
and Taisho), Volume 12 pointed out that customs revenues allotted to the security corresponded to three times
the interest and that Japan was an ally of England.5
According to Takahashi Korekiyo den (Biography of
Korekiyo Takahashi), this unexpected popularity stemmed
from the insertion of an article in newspapers about the
victory of the Japanese forces at the Battle of Yalu River
against Russia on May 1, 1904, immediately before the
start of the bond offering.11 Actually, the price of the
first 4-percent interest-bearing government bond in
pounds that was 63.75 percent of face value on April 12
was increased to 70.5 percent on May 10. During this
same period, the price of 4-percent interest-bearing government bonds issued by Russia in francs dropped from
95 percent of face value to 89.5 percent.
Compared to the situation on the London foreign bond
market in which 4-percent interest-bearing Ecuadorian
government bonds were issued in February 1904 at 68
percent of face value and 5-percent interest-bearing
Cuban government bonds were issued in May at 97 percent of face value, it appears that the interest rate of the
Japanese government bonds was attractive to investors.
The government appropriated the funds raised by the
first 6-percent interest-bearing government bonds in
pounds for repayment of temporary loans from the Bank
of Japan, and the Bank of Japan used these funds as
reserves for conversion. Because the government needed
more funds to wage the war, it instructed Takahashi, a
financial representative of a special mission, to raise 100
million to 200 million yen from overseas markets during
the same fiscal year.
As Takahashi considered that because 5-percent
interest-bearing government bonds were not traded on
the New York market, it would be difficult to determine
the selling price immediately, and he abandoned the idea
of selling existing domestic government bonds with
endorsement. Consequently, it was decided to issue a
second group of 6-percent interest-bearing government
bonds in pounds in November 1904 for the issue amount
of 6 million pounds respectively in London and New
York. While almost the same conditions were applied as
those applied for the first group of 6-percent interestbearing government bonds in terms of maturity, a security clause and underwriting companies, the issue price
was reduced to 90.5 percent of face value and government proceeds were reduced to 86.5 percent of face
value because the lowest price of the bonds in the first
group on the New York market had declined to the 91percent level.
The subscription amount for this second group of 6percent interest-bearing government bonds in pounds
was 13.4 times the planned amount in London and 1.5
negotiations to issue these foreign bonds. Before his
appointment, Takahashi proposed that the free movement of capital should be maintained even during the
war. This proposal was based on his concern that the
prestige of Japan overseas might suffer if an embargo of
the export of gold were implemented, which might make
it difficult for Japan to offer foreign bonds.
The minister of finance issued a letter of proxy and a
written directive to Takahashi with respect to the offering of public bonds worth 10 million pounds in London
or, if such an offer was not possible, the sale of existing
5-percent interest-bearing government bonds of 100 million yen. Takahashi went to London in February 1904 to
carry out this directive. In May 1904, 6-percent interestbearing government bonds worth 10 million pounds
were issued at an issue price of 93.5 percent of face
value. The offering statement specified that this was a 7year bond with maturity in 1911, redemption was possible at any time after 1907 with six month’s prior notice,
and that the coupon and instrument could be used for the
payment of tariffs to the Japanese government at the
fixed conversion rate of 1 yen = 2 shillings 0.5 pence.
The principal points of the negotiations with the bank
group in England to issue these bonds were the issue
interest rate, net proceeds of the government and the
handling of security. The net proceeds of the government, which were initially set at 88 percent of face
value, were increased to 90 percent. During the negotiations, the requirement arose that security would have to
be paid if the payment of principal were delayed 14 days
or more. However, the actual offering statement indicated that the “principal and interest payments are
secured by customs revenues of Imperial Japan on a priority basis; the Japanese Imperial government shall pay
monthly one-12th of the amount required annually for
interest of these public bonds to the HSBC and the
Yokohama Shokin Bank.”
In this way, pound-denominated government bonds
worth 10 million pounds were underwritten by the
Parsee Bank, HSBC and the Yokohama Shokin Bank in
London. Half of the bonds amounting to 5 million pounds
were issued in London. The remaining half of 5 million
pounds were re-underwritten by Kuhn, Loeb & Co. in
Russia headed by Jacob Schiff as president at 90 percent
of face value by accepting them from the underwriting
group in London, and were offered in New York.
During the negotiations, the underwriting group in
London required Bearing Brothers in England to guarantee the underwriting responsibility of Kuhn, Loeb & Co.
For bonds offered in the United States, it was stipulated
that if payment were made at the fixed conversion rate of
1 pound = 4.87 dollars and if principal and/or interest
were paid in New York, payments would be made at
this conversion rate for bonds issued in either London or
New York. In consideration of the convenience of
investors, a payment currency selection clause specifying the defined conversion rate was provided.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
17
NRI Papers No. 90
June 1, 2005
lion yen from overseas markets. Consequently, a second
group of 4.5-percent interest-bearing government bonds
in pounds was issued in July under the same conditions
as those applied to the first issue in March.
This second group of 4.5-percent interest-bearing government bonds was issued not only in London and New
York, but also in Hamburg through the participation of
M. M. Warburg and Co. The total amount of bonds
issued was 30 million pounds, with bonds amounting to
10 million pounds each issued in the three locations. The
payment of principal and interest was to be made in
pounds in London, in dollars in New York with the
defined conversion rate of 1 pound = 4.87 dollars and in
marks in Germany with the defined conversion rate of 1
pound = 20.45 marks.
The subscription amount reached ten times the offered
amount in London, 4.5 times in the United States and
ten times in Germany. It is said that German industries
had expectations that Japan would purchase German
products with these funds. According to Nihon ginko
hyakunen shi (The Hundred Year History of the Bank of
Japan), Volume 2, the Japanese government purchased
Germany’s treasury bills to use them as foreign currency
reserves.17
times the planned amount in New York. However, the
issue conditions were by no means satisfactory for Japan
that had made marked military accomplishments against
Russia at the Battles of Liaoyang and the Sand River.
Accordingly, the government looked to the European
continent for the acquisition of war funds.
However, it was difficult to issue bonds in France
because France had concluded the Russo-France
Alliance with Russia in 1891. Because Russia had procured 325 million marks (about 16 million pounds) in
January 1905, Germany took a positive approach to the
issue of Japanese government bonds in Germany in
order to show its neutral stance.
Nevertheless, the issue of Japanese government bonds
in Germany was not realized because of opposition
raised by underwriting companies in London. However,
a strong request by underwriting companies in Germany
to participate in the German market contributed to the
reduction of the issue interest rate and commission. It is
thought that the reduction of the issue interest rate also
stemmed from the fact that Japan had occupied the 203Meter Hill at Port Arthur in January 1905 and that it was
victorious at the Battle of Mukden in March.
The reduction of the official discount rate by the Bank
of England to 2.5 percent on March 9, 1905, served as
one of the triggers for the London market to take a favorable turn. By jumping at this opportunity, the Japanese
government issued pound-denominated government
bonds of 30 million pounds at the end of March, half of
which were issued in London and half in New York. The
issue conditions for this bond were: a coupon of 4.5 percent, an issue price of 90 percent of face value, government proceeds of 85.5 percent of face value, and
maturity in 1925 with redemption possible any time after
1910. Profits from the sale of the tobacco monopoly
were used as security.
The subscription amount for this first group of 4.5percent interest-bearing government bonds in pounds
was 11 times the offered amount in London and 7 times
the offered amount in New York. Subscriptions were
also made by countries in Europe such as in Hamburg,
Germany. Meiji Taisho zaise shi (Financial History of
Meiji and Taisho), Volume 12 evaluated this situation as
“epoch-making under Japan’s foreign bond history.”5
According to Takahashi Korekiyo den (Biography of
Korekiyo Takahashi), these bonds were also offered in
the United States in such places as Boston, Chicago, San
Francisco and St. Louis, and a number of small lot subscriptions were made.11
In May 1905, Japan’s combined naval fleet gained
complete victory over the Baltic Fleet in the Tsushima
Strait. On the advice of President Theodore Roosevelt of
the United States, Japan and Russia moved toward a
peace treaty. In June, by saying “while there are signs of
peace at present, the eventual results cannot yet be predicted,” the Japanese government sent telegraphic
instructions to Takahashi to raise an additional 300 mil-
3 Consolidation of Government Bonds Also
Relied on the Issue of Foreign Bonds
Negotiations towards the conclusion of a Russo-Japanese
peace treaty faced rough going over the issue of the
cession of Sakhalin and reparations. Japan withdrew its
request for reparations and concluded the Treaty of
Portsmouth in September 1905. Although Japan won
the war, the price it had to pay for victory was too high.
The amount of outstanding government bonds increased
rapidly from 540 million yen at the end of fiscal 1903 to
2.2 billion yen at the end of fiscal 1906; bond-related
expenditures also increased from 36 million yen in fiscal
1903 to 150 million yen in fiscal 1906. During this
period, tax revenues almost doubled—from 150 million
yen to 280 million yen—nearing the limit brought about
by tax increases. However, in order to make the victory
in the Russo-Japanese War more absolute, the Japanese
government had to promptly embark on postwar management activities such as expansion of armaments,
nationalization of railways and expansion of the telephone network.
With these urgent tasks facing the government, the
consolidation of government bonds was regarded as the
greatest political challenge. The government had to promote the reduction of high interest rate war bonds
swollen to huge amounts by taking advantage of the risk
premium reduced as a result of victory. On September 8,
1905, the Taro Katsura Cabinet sent telegraphic instructions to Korekiyo Takahashi stationed in London to
commence negotiations to offer new foreign bonds
worth 300 million to 400 million yen in England, the
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
18
NRI Papers No. 90
June 1, 2005
ment bonds in pounds issued in 1899 ran below 90 percent of face value.
Under these circumstances, only the market in Paris
showed a steady tone for the trading of the second 4-percent
interest-bearing government bonds in pounds. Meiji
Taisho zaisei shi (Financial History of Meiji and Taisho),
Volume 12, indicated that the price gap reached as much
as 5 pounds.5 The Paris Stock Exchange made efforts to
stabilize the government bond market by not including
Japanese government bonds issued in other countries in
its quotation list. In addition, when sell orders of Japanese
government bonds were placed on the market, Rothschild
Bank purchased them to maintain their price.
Takahashi commenced negotiations to issue bonds in
Paris at the end of 1906. However, France required Japan
to cooperate in railway construction in China and to
ensure the security of French Indochina in exchange for
the issue of foreign bonds in France. It is reported that
Takahashi considered such measures as issuing 4-percent
interest-bearing government bonds in Paris and 5-percent
interest-bearing government bonds in London. However,
in the era of free movement of capital, it was impracticable to issue government bonds with largely differing
issue conditions depending on the market.
Nevertheless, in order to issue government bonds in
Paris and London under the same issue conditions, the
government bonds issued in London had to be traded in
Paris. However, for the sake of protecting French
investors, the Paris Stock Exchange did not permit the
listing of 4-percent interest-bearing government bonds
issued in locations other than France on the Paris Stock
Exchange. Unless approved by Finance Minister Kaiyo,
the difference in interest rates could not be reduced,
making it impossible to issue 4-percent interest-bearing
government bonds simultaneously in Paris and London
under the same conditions.
Consequently, Takahashi canceled the remaining issue
framework of 4-percent interest-bearing government
bonds. Instead, it was decided to issue 5-percent interestbearing government bonds of 11.5 million pounds each
in London and Paris in March 1907. The purpose of this
issue was to redeem pound-denominated 6-percent
interest-bearing government bonds totaling 22 million
pounds that had been issued in London and New York in
May and November 1904.
The issue conditions of these bonds were: maturity in
1947, redemption at any time after 1922 with six-month’s
prior notice at the discretion of the Japanese government, an issue price of 99.5 percent of face value and
government proceeds of 95.5 percent of face value. For
subscribers in London, a priority was given to switching
the 6-percent interest-bearing government bonds to these
bonds, and it was decided to refund the cash equivalent
of 1.5 percent of face value. For the offering in France, a
fixed exchange rate of 1 pound = 25.25 francs was established. The offering statement issued in London and
Paris stipulated that the payment of principal and interest
United States, Germany and France to consolidate the
fourth and fifth series of 6-percent interest-bearing government bonds worth 200 million yen issued in Japan
and the 6-percent interest-bearing government bonds
worth 22 million pounds issued in pounds in London
and New York.17
In November 1905, Takahashi concluded contracts
with the Rothschild Banks in London and Paris,
Warburg & Co. in Hamburg, Parsee Bank and the HSBC
concerning the issue of government bonds denominated
in pounds in London, New York, Paris and Germany for
a total of 50 million pounds. Of this amount, bonds
worth 25 million pounds were withheld from the immediate issue for future issue for the redemption of the 6percent interest-bearing government bonds issued in
pounds in 1904.
At the end of November, a second series of 4-percent
interest-bearing bonds in pounds amounting to 25 million pounds was issued in the markets of four countries.
The issue conditions were: an interest rate of 4 percent,
maturity in 1931, redemption at any time after 1921 with
six month’s prior notice, no security clause, an issue
price of 90 percent of face value, and government proceeds of 88 percent of face value.
With respect to the bonds issued in countries other
than England, the same fixed exchange rates for pounds
as those used for the previous issues were applied. In
France, the offering statement stipulated that bonds
would be issued as “4-percent interest-bearing public
bonds with a fixed exchange rate of 25 French francs per
1 British pound,” and that if payments were made at the
rate of 1 pound = 25 francs, the payment of principal
and interest would use the exchange rate of the day of
payment with this rate as the lower limit.
Of the amount of 25 million pounds, bonds worth 12
million pounds were underwritten by a syndicate in
Paris and sold directly to their customers. In London,
subscriptions reached 28 times the offered amount of
6.5 million pounds. In New York and Germany, subscriptions reached 5 times and 10 times the amount of
3.25 million pounds offered in each location, respectively.
The contract concluded in November 1905 by and
between the Japanese government and the underwriting
group in Europe included the framework of a remaining
issue of 4-percent interest-bearing bonds worth 25 million pounds. However, because Japan could not receive
reparations through the Treaty of Portsmouth and accumulated an increasingly large amount of government
bonds, overseas investors took a negative view toward
further purchases of Japanese government bonds.
In 1906, London faced an outflow of a large amount
of gold due to the San Francisco earthquake and a boom
in the New York stock market, and the Bank of England
increased the official discount rate to 6 percent in
October. The consol market also showed a weak tone.
The price of the first 4-percent interest-bearing govern-
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
19
NRI Papers No. 90
June 1, 2005
For that reason, Mizumachi, a financial representative
of a special mission, began negotiations regarding the
issue of bonds with Rothschild Bank in Paris. While
Mizumachi required that the bonds be issued concurrently in Paris and London, Rothschild Bank insisted on
a separate issue of franc-denominated government bonds
in Paris from the issue in London. In response to a
request from Japan, the French government decided to
permit the trading of the second pound-denominated 4percent interest-bearing government bonds issued in
London on the Paris Stock Exchange, agreeing to the
issue of franc-denominated 4-percent interest-bearing
government bonds on April 25 under the following issue
conditions.
The issue amount was 450 million francs (approximately 17.81 million pounds), the issue price was 95.5
percent of face value and government proceeds were
91.5 percent of face value. Proceeds from the bond issue
were to be allocated for the redemption of 5-percent
interest-bearing government bonds issued in Japan.
Maturity was in 1970 with redemption for 50 years after
a deferment of ten years. Rothschild Bank was to handle
the payment of matured coupons and redemption payments. Payments of principal and interest in London and
Brussels were based on the exchange rate of each currency against the franc on the date of payment. In Japan,
the Bank of Japan was to make payment at an exchange
rate of 100 yen = 258 francs.
Under these conditions, Rothschild Bank in Paris
formed a syndicate, which announced an offering statement on May 5, 1910, after the issue conditions were
agreed upon in London.
Slightly more than 40 years after the issue of these 4percent interest-bearing government bonds in francs, a
major confrontation arose between France and Japan
over a clause concerning the payment of principal and
interest. The following section describes this conflict
because knowing the background of the conflict is
important in understanding the essence of a clause
attached to foreign bonds.
In 1941, with Japan’s declaration of war against the
United States and England, payments of principal and
interest were suspended for franc-denominated government bonds as well as for other foreign bonds. It was
only after World War II that settlement of the unpaid
portions was started. Negotiations with England and the
United States concluded with an agreement on the settlement of foreign bonds in New York in September 1952.
However, negotiations with France encountered difficulties.
At the end of 1951, the total amount of outstanding
franc-denominated 4-percent interest-bearing bonds was
380 million francs. It was estimated that about 75 percent of this amount was owned in Japan. This was
because a large amount of these franc-denominated
bonds flowed back to Japan due to the effect of the collapse of the franc during World War I because a fixed
in New York would be made in dollars by using the
exchange rate of the day of payment.
During this period, expansionary financial policies
were adopted in Japan under the Kinmochi Saionji
Cabinet established in early 1906, such as the nationalization of railways. However, as a matter of course, the
government reached a limit in absorbing government
bonds. Accordingly, action was finally started under the
second Katsura Cabinet in July 1908 for consolidating
government bonds that had so far been postponed.
In response to the government bond market’s taking a
favorable turn at the start of 1910 and the price of the 5percent interest-bearing government bonds recovering
face value, the government started negotiations with an
underwriting syndicate to convert 5-percent interestbearing government bonds issued in Japan during the
Russo-Japanese War into bonds with a lower interest
rate. As a result, 4-percent interest-bearing government
bonds of 100 million yen each were issued in February
and March, with maturity in 1969. In addition, 4-percent
interest-bearing government bonds of 76 million yen
were issued in February by means of a method of bond
exchange.
There were still 5-percent interest-bearing government
bonds of 170 million yen outstanding that had to be converted into lower interest rate bonds.4 However, the
banking group did not agree to the underwriting of additional 4-percent interest-bearing government bonds.
Because of this, the government tried to issue foreign
bonds to complete the conversion into lower interest
bonds. Consequently, 4-percent interest-bearing government bonds denominated in francs and pounds were
issued.
4 Confrontation after 40 Years over the
Japanese Government Bonds in Francs
In February 1910, Prime Minister Taro Katsura gave
instructions to Vice-Minister for Finance Kesaroku
Mizumachi to issue 4-percent interest-bearing government bonds in London and Paris. However, because the
interest rate of pound-denominated Japanese government bonds was higher in the New York market than that
in other markets, it was decided to shelve the issue. In
fact, most pound-denominated Japanese government
bonds issued in New York were bought by investors in
London, and the amount owned in the United States was
limited.
In contrast, consol prices in the London market increased
in early 1910 under a peaceful atmosphere, such as the
Moroccan Crisis and the Balkan Crisis coming to a lull
and the visit of Edward VII to Berlin. However, political
conflicts in England intensified over the generation of
fiscal deficits and restrictions on the authority of the
House of Loads, which created a situation in which it
was difficult to immediately accept Japan’s issue of 4percent interest-bearing government bonds.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
20
NRI Papers No. 90
June 1, 2005
exchange rate for payment in yen was provided. It was
also estimated that the total amount of unpaid interest on
bonds owned in other countries was 600 million francs.
In resuming payments of principal and interest, France
took a negative view of payment in francs, which had
declined sharply to as low as 1/115th in 1953 compared
to their value in 1910 and required payment in francs
115 times the original amount by claiming that this government bond was accompanied by a clause regarding
payment in gold parity.
France’s assertion was based on the provision in the
clause that “when the payment of principal and interest
of this bond is made in Japan, the payment will be made
by kin enka (yen) at the rate of 258 francs = 100 yen.”
However, kin enka simply meant yen currency in the
same way as pound sterling meant pound. Neither the
face of the bond nor the issue statement carried a gold
clause. There was only an indication of “in francs.”
France further argued that as these bonds constituted
part of the third 4-percent interest-bearing government
bonds in pounds issued in the same year, fair treatment
should be given to their holders as compared to holders
of pound-denominated government bonds, and required
the payment of principal and interest by using the
exchange rate of franc to pound in 1910, i.e., 500 francs
= 20 pounds. This meant the payment of an amount 39
times the original amount in francs. However, neither the
face of the bond nor the issue statement carried a clause
regarding pound selection.
To handle this situation, Japan proposed extending
maturity by 15 years, and that interest from November
15, 1940, to the new maturity date would be converted to
pounds by using the franc to pound rate at that time and
paid in francs at the exchange rate of the day when the
agreement was concluded. According to Showa zaisei
shi (Financial History of Showa), Volume 7, this proposal meant payment of an amount 5.5 times the originally contracted amount.6
The rough-going negotiations were finally concluded
in July 1956. Maturity was extended by 15 years and an
amount 12 times the face and coupon amount was to be
paid for principal and interest for the period from
November 15, 1940, to May 15, 1965. Interest payments
were resumed in February 1957, and the entire amount
was redeemed before maturity, on November 25, 1962.
those issued in Paris. The only differences from the conditions in Paris were that the issue price was reduced to
95 percent of face value and government proceeds were
decreased to 91 percent of face value.
While the offering of bonds started on the following
day, May 6, the total amount of subscriptions during
the offering period was only 8.5 million pounds. As to
the reasons for this low popularity, Yokohama Shokin
Ginko shi (History of the Yokohama Shokin Bank)
indicated that the issue conditions were not as advantageous as compared to the low price of the pound-denominated 4-percent interest-bearing government bonds on
the London capital market in May, which was 95.75
percent of face value, and that the issue of francdenominated 4-percent interest-bearing government
bonds had attracted investors in England.21 In addition,
the postponement of the offering statement until May 12
because of the death of Edward VII probably affected
this issue.
These third 4-percent interest-bearing government
bonds in pounds were used to refinance 5-percent interestbearing government bonds amounting to 93 million yen
that were sold on overseas markets with a clause specifying that payments were to be made in pounds.
Since fiscal 1908, the Japanese government firmly
adhered to a no-loan policy of not issuing government
bonds to raise funds. Since then, the government did not
issue any foreign bonds until 1924 after the Great Kanto
Earthquake under the circumstances where a huge trade
surplus was generated in relation to World War I.
During this period, Japan changed into a capital export
country. As a means of controlling excessive liquidity
arising from rapidly increasing foreign currency reserves,
4.5-percent interest-bearing British government bonds
(the second group of war bonds by Financial Minister
Reginald McKenna) issued in June 1915 were offered
in Japan. However, according to Nihon ginko hyakunen
shi (The Hundred Year History of the Bank of Japan),
Volume 2, only a small number of foreign residents in
Japan subscribed for these war bonds.17
Starting with the issue of yen-denominated treasury
bills in Tokyo by the Russian government in February
1916, British and French government bonds were also
issued in yen. Using survey data as of April 1918, Kin’yu
jiko sankosho (Reference Book for Financial Issues)
included information on the issue of government bonds
by these three countries in Japan during World War I. In
terms of Japanese currency, England, France and Russia
raised 180 million yen, 77.7 million yen and 230 million
yen, respectively.8
5 Changing to a Capital Export Country
after World War I
The following section goes back to 1910.
Negotiations in London faced difficulties because
Rothschild Bank had withdrawn because the simultaneous issue in Paris was not to be implemented. On May 5,
it was decided among the Parsee Bank, the HSBC and
the Yokohama Shokin Bank to issue pound-denominated
4-percent interest-bearing government bonds worth 11
million pounds under almost the same conditions as
References
1. Paolo Mauro, Nathan Sussman and Yishay Yafeh, “Emerging
Market Spreads: Then Versus Now,” Quarterly Journal of
Economics, Vol. 117, No. 2, May 2002.
2. Nathan Sussman and Yishay Yafeh, “Institutions, Reforms
and Country Risk: Lessons from Japanese Government
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
21
NRI Papers No. 90
June 1, 2005
War), Keizai shirin (The Hosei University Economic
Review), Volume 23, No. 2, January 1957.
14. Nihon kin’yushi shiryo: Meiji Taisho hen (Japan’s
Financial History Records: Meiji and Taisho Edition),
edited by the Research Bureau, the Bank of Japan, Volume
4, Volume 16, Printing Bureau, Ministry of Finance, 1957,
1958.
15. Financial and Economic Statistics Monthly for each fiscal
year, the Research and Statistics Department, the Bank of
Japan.
16. Meiji iko honpo shuyo keizai tokei (The Key Economic
Statistics of Japan in and after Meiji), the Statistics Bureau,
the Bank of Japan, 1966.
17. Nihon ginko hyakunen shi (The Hundred Year History of
the Bank of Japan), edited by the Editing Committee of the
Hundred Year History of the Bank of Japan, Volume 1,
Volume 2, Shiryo hen (Records Edition), the Bank of
Japan, 1982, 1983, 1986.
18. Toru Fujimura, “Meiji 32-nen no 4-bu ritsuki gaikoku
kosai” (The 4-Percent Interest-Bearing Foreign Bonds in
1899), keizairon shu (Economic Journal of Daito Bunka
University), Volume 33, 1982.
19. Taichiro Mitani, “Meiji kokka no gaikoku shakkan
seisaku” (Policy of the Meiji Government on Foreign
Loans), Gaiko shiryo kanho (Diplomatic Record Office
Report), No. 6 (March 1993), the Diplomatic Record
Office, the Ministry of Foreign Affairs.
20. Meiji zaisei shi (Financial History of Meiji), edited by the
Meiji Zaisei Shi Editing Committee, Volume 8, Volume
12, Volume 14, Yoshikawa Kobunkan, 1972.
21. Yokohama Shokin Ginko shi (History of the Yokohama
Shokin Bank), edited by the Yokohama Shokin Bank, 1920.
(Republished by Meiji Bunken Shiryo Kanko Kai in 1976.)
Debt in the Meiji Period,” Economic Department, Hebrew
University, September 1999.
3. Toshio Suzuki, Japanese Government Loan Issues on the
London Capital Market 1870-1913, Athlone Press, London,
1994.
4. Hyoe Ouchi, “Nihon zaisei ron: Kosai ron” (Essay on
Japanese Finance: Public Bonds), in Ouchi Hyoe chosaku
shu (Collection of Books Written by Hyoe Ouchi), Volume
2, Iwanami Shoten Publishers, 1974.
5. Meiji Taisho zaisei shi (Financial History of Meiji and
Taisho), edited by the Ministry of Finance, Volume 11 and
Volume 12, Keizai Orai Sha, 1956.
6. Showa zaisei shi (Financial History of Showa), edited by
the Office of Financial History of the Ministry of Finance,
Volume 7, Toyo Keizai, 1997.
7. Kokusai enkaku ryaku (A Brief History of Government
Bonds), edited by the Financial Bureau of the Ministry of
Finance, Volume 1, 1917.
8. Kin’yu jiko sankosho: Taisho 7-nen 4-gatsu shirabe
(Reference Book for Financial Issues: Survey in April
1918), edited by the Financial Bureau of the Ministry of
Finance, Yushodo, 1994.
9. Honpo gaikasai kankei shiryo (Materials Related to
Japan’s Foreign Currency Bonds), Part 1, the Foreign Bond
Department, the Financial Bureau, the Ministry of Finance,
1955.
10. Ippan kaikei sainyu saishutu kessan (General Account
Revenue and Expenditure Statements) for each fiscal year,
the Budget Bureau, the Ministry of Finance.
11. Takahashi Korekiyo den (Biography of Korekiyo Takahashi), dictated by Korekiyo Takahashi and translated into
modern Japanese by Yukihiko Yajima, Shogakukan 1997.
12. Makoto Takahashi, “Nisshin senso ‘sengo keiei’ no
zaiseishi-teki igi” (Significance of Postwar Management of
the Sino-Japanese War in Financial History), Keizai shirin
(The Hosei University Economic Review), Volume 23,
No. 1, January 1955.
13. Makoto Takahashi, “Nisshin senso ‘baisho kin’ no ichi
kenkyu” (A Study of Reparations of the Sino-Japanese
Toshiki TOMITA is a visiting research fellow of NRI and
Doctor of Economics, Kyoto University. His specialties
include economic policy.
Japanese Government Bonds 100 Years Ago
Copyright 2005 by Nomura Research Institute, Ltd.
22
As a leading think tank and system integrator in Japan, Nomura Research Institute is opening
new perspectives for the social paradigm by creating intellectual property for the benefit of all
industries. NRI’s services cover both public and private sectors around the world through
knowledge creation and integration in the three creative spheres: “Research and Consulting,”
“Knowledge Solutions” and “Systems Solutions.”
The world economy is facing thorough structural changes led by the dramatic growth of IT
industries and the rapid expansion of worldwide Internet usage—the challenges of which
require new concepts and improvement of current systems. NRI devotes all its efforts to
equipping its clients with business strategies for success by providing the best in knowledge
resources and solutions.
NRI Papers present selected works of NRI’s 3,000 professionals through its worldwide research
network. The mission of NRI Papers is to contribute new ideas and insights into business
management and future policy planning, which are indispensable for overcoming obstacles
to the structural changes in our society.
All copyrights to NRI Papers are reserved by NRI. No part of this publication may be
reproduced in any form without the prior written consent of NRI.
Inquiries to: Corporate Communications Department
Nomura Research Institute, Ltd.
E-mail: [email protected]
FAX: +81-3-5533-3230