cally
expended, no part of them, except a doubtful surplus, finding its way
to the Imperial treasury. The only resource was an issue of paper
money. Such tokens of exchange had been freely employed since the
middle of the seventeenth century, and at the time of the
mediatization of the fiefs, 1694 kinds of notes were in circulation.

The first business of the Government should have been to replace
these unsecured tokens with uniform and sound media of exchange. But
instead of performing that duty the Meiji statesmen saw themselves
compelled to follow the evil example set by the fiefs in past times.
Government notes were issued. They fell at the outset to a discount
of fifty per cent, and various devices, more or less despotic, were
employed to compel their circulation at par. By degrees, however, the
Government's credit improved, and thus, though the issues of
inconvertible notes aggregated sixty million yen at the close of the
first five years of the Meiji era, they passed freely from hand to
hand without discount. But, of course, the need for funds in
connexion with the wholesale reforms and numerous enterprises
inaugurated officially became more and more pressing, so that in the
fourteenth year (1881) after the Restoration, the face value of the
notes in circulation aggregated 180 million yen, and they stood at a
heavy discount.

The Government, after various tentative and futile efforts to correct
this state of depreciation, set themselves to deal radically with the
problem. Chiefly by buying exporters' bills and further by reducing
administrative expenditures as well as by taxing alcohol, a
substantial specie reserve was gradually accumulated, and, by 1885,
the volume of fiduciary notes having been reduced to 119 millions,
whereas the treasury vaults contained forty-five millions of precious
metals, the resumption of specie payments was announced. As for the
national debt, it had its origin in the commutation of the
feudatories' incomes and the samurai's pensions. A small fraction of
these outlays was defrayed with ready money, but the great part took
the form of public loan-bonds. These bonds constituted the bulk of
the State's liabilities during the first half-cycle of the Meiji era,
and when we add the debts of the fiefs, which the Central Government
took over; two small foreign loans; the cost of quelling the Satsuma
rebellion, and various debts incurred on account of public works,
naval construction, and mi