Regulation of national bank (国立銀行条例)
Regulation of national bank is a Japanese law enacted in 1872.
How the law came to be enacted
Until then, Japan had used convertible currency (currency guaranteed to exchange for gold). However, a gold shortage, caused mainly by the outflow, became a serious problem and the conversion system had to be stopped. In 1871, New Currency Regulation was issued and the first modern monetary system was introduced to Japan which designated 'yen (currency)' as Japanese currency. However, this gold standard system caused gold coins to fall short of the requisite amount and silver coins came to circulate more widely instead. Later, Hirobumi ITO proposed the regulation of national bank, for which he had consulted the National Bank System (state law bank system) of the United States of America that adopts the system of issuing bank, and then it was enacted in 1872. Accordingly, Eichi SHIBUSAWA founded First National Bank (currently Mizuho Bank, Limited) in 1873 which is Japan's first national bank (Meiji period). Thereafter, ordinary citizens founded many national banks based on this regulation.
Contents at the time of enactment
The conversion system was stopped.
And then, national banks were put under obligation to exchange the bank notes for convertible coins such as gold coins.
Amendments
After Shigenobu OKUMA assumed office as the Minister of Finance in 1873, he propelled a policy of encouragement of new industry adopting positive fiscal policy so called 'Okuma finances.'
In 1876, national bank system was amended. With this as motivation, projects to build many national banks were promoted and 153 national banks were founded across the nation. Before the amendments, the banks must always keep the amount of convertible coins comparable to the sum of the notes they issued, so the amendments, which abolished this restriction, made a great influence to the monetary system.
Contents after the amendments
Banks were allowed to issue inconvertible notes.
The abolition of the earlier obligation of banks to exchange issued notes for convertible coins
The situation after the amendments
It became easier for banks to issue notes, which resulted in one of the reasons to cause inflation. The amount of Daijokan (Grand Council of State) notes and bank notes increased rapidly and in June 1882, regulation of the Bank of Japan was adopted. In October of the same year, the Bank of Japan started business, followed by the introduction of regulation of convertible bank note. In this way, the Bank of Japan came to be the only one issuing bank in Japan and bank notes were withdrawn. Coupled with that, in 1885, the Bank of Japan issued the Bank of Japan convertible into silver notes (notes guaranteed to be exchanged for the same amount of silver coins) and withdrew excessive silver coins. From then on, the economy became gradually stabilized and in 1897, the Coinage Law was enacted and the gold standard was formalized. Coupled with that, in 1899, the Bank of Japan issued the Bank of Japan convertible notes and they exchanged them for gold coins. At the same time, the government announced that government notes and national bank notes would be stopped to issue and national banks became what they are now. In December 1931, conversion to gold was stopped. In 1942, the old version of the Bank of Japan Law was promulgated, when regulation of the Bank of Japan and regulation of convertible bank note was abolished. On June 18, 1997, the new version of the Bank of Japan Law was promulgated to totally revise the old version and it was enforced on April 1, 1998.