At the time of the opening of the country to the West, Japan's financial institutions were broadly in the same stage of development as those of China in the days of the Cohong. The largely self-sufficient life of the various feudal territories into which Japan was divided, the fact that most payments were still made in kind, and the virtual absence of overseas trade, were conditions unfavourable for the development of a banking system of a modern type. Nevertheless, the merchant houses which acted as the financial agents of the daimyo conducted banking operations of a kind. They collected the dues and taxes, which were paid in rice, sold part of these in the chief commercial centres, such as Osaka, and transferred the receipts to the feudal treasuries. They accepted deposits, gave loans to officials and local governments, and issued notes against their reserves. The system of the Sankin-Kotai, moreover, stimulated the growth of banking business by making it necessary to provide for the frequent transmission of funds from the provinces to the capital.1 Various types of credit instruments were in use, and the chief houses had a network of branches all over the country. This financial organisation, however, was designed primarily to serve the needs of governments, both local and central. Although some of the concerns, such as Mitsui and Konoike, were later to become leading participants in the modern banking system, they had to reorganise completely their business in the early years of Meiji by reference to foreign models. The currency system, which has already been described, was likewise in urgent need of reform before it could be regarded as adequate to a modern economy.
In China the task of creating a modern monetary and banking system was hardly begun before the end of the nineteenth century, and until the 1930's native banking institutions were scarcely competent to deal with the financial requirements of the developing commerce. Consequently, it was left to foreign institutions to provide not merely for the finance of foreign trade and other international transactions, but also, in some measure, for the actual means of payment within China itself. In Japan, on the other hand, the Government immediately after the Restoration assumed without hesitation the responsibility of modernising the country's monetary institutions, and before the end of the____________________