Yokohama Specie Bank

Background

Following the signing of the Japan-U.S. Treaty of Amity and Commerce in 1859, Yokohama was opened as a port for foreign trade and quickly grew in importance. Through the New Currency Act of 1871, Japan implemented a policy of convertibility with 1 yen corresponding to 1.5g of pure gold. Silver coins were also issued for trade with Asian countries who favoured silver as a currency, thus establishing a de facto gold-silver standard. Japan experienced high inflation in the late 1870s, however, caused by the 1877 Satsuma Rebellion and the outflow of a large amount of silver due to increased imports, generating a large discrepancy between government-issued banknotes and specie coin. This became a source of trouble for the merchants in Yokohama, as specie rather than banknotes came to be demanded for foreign trade.

Establishment and early history

The creation of the YSB was initiated by statesman Ōkuma Shigenobu in alliance with Yokohama merchants, and submitted in November 1879 to the chief minister of the imperial government or Daijō-kan. Its concept was first advocated by early Meiji intellectual luminary Fukuzawa Yukichi, and its design inspired by the Hongkong and Shanghai Banking Corporation, which had a great influence on Japan's overseas trade and foreign exchange at the time. The bank was incorporated as the Japanese government approved the request on 28 February 1880. It was created by a syndicate of 22 individuals with the support of Fukuzawa and Inoue Kaoru on the basis of the National Bank Act, aiming to ensure the availability of specie for the trading community. The bank had an initial capitalization of three million Yen, of which one million was invested by the Ministry of Finance. The new bank opened an agency in New York and a branch office in Kobe, both also in 1880. The next year, the bank opened a sub-branch in London, which was upgraded to a branch in December 1884 after the bank was appointed by the Ministry of Finance to manage Japan's foreign exchange.

During the 1880s, the YSB came under increasingly direct control of the ministry of finance. Ōkuma's successor Matsukata Masayoshi engineered the dismissal of its first president Nakamura Michita in June 1882 and his eventual replacement in March 1883 by an ally, Hara Rokuro. In July 1887, the government promulgated the Yokohama Specie Bank Ordinance, which stipulated that branch offices be established everywhere that was regarded as important to Japanese foreign trade and authorized that an administrator from the Ministry of Finance would be assigned to monitor the bank's operations. This ordinance was revised in 1889 to authorize the Japanese government to overrule any decision by its directors, and if deemed necessary, to replace the directors with others of its choosing.

The YSB opened an office in Shanghai in 1893, its first in China. In 1894 it opened a branch in Bombay. In 1899 it upgraded its offices in Shanghai, Tianjin and Hong Kong to fully-fledged branches. By 1900 it also had branches in Beijing and Lyon, and its foreign lending was four times that of all the Zaibatsu banks together. In 1895, the Chinese indemnity for the Sino-Japanese War, set at 230 million silver taels, was deposited to the YSB's account at the Bank of England, providing the basis for the Bank of Japan's gold reserve.

Wartime development and establishment of the Bank of Tokyo

The bank continued in its role as the paymaster for the Imperial Japanese Army during the Second Sino-Japanese War and Pacific War, assisted by its widespread branch office network. Its assets in New York and Honolulu were seized by the United States government in the year 1941. In 1947, following the surrender of Japan, the bank's operations were reorganized into the Bank of Tokyo as part of anti-zaibatsu ordinances issued by the American occupation authorities. The legal entity of the former YSB was eventually liquidated in 1963.