It became clear that the result of the over-issue of the Government notes could not be corrected through the national banks, and still more clear that under such a banking system the need of the time could not be supplied. The necessity of revising the Bank Act was therefore demonstrated. There was one more important reason for the revision j and to explain this, we must go back to the issue of a Government loan to the amount of more than 174,000,000 yen to payoff feudal pensioners who gave up their hereditary rights in exchange for Government bonds.t How to keep up the price of
these bonds, for the benefit of their owners, was a problem which the kind~ hearted policy of the Government of that time recognized. An Idea entered the head of Count Okuma, the Minister of Finance, which was embodied in the Revised National Bank Act, promulgated by Law No. 106, in August, 1876. According to this act, bank notes of I, 2, 5, 10, 20, 50, 100, and 500 yen denominations being legal tender except for the payment of customs duty and interest on Government bonds, became convertible Into Government paper money instead of into standard gold, and the newly issued pension bonds were used as a basis for these notes. Besides, the amount of the bonds to be deposited in the Treasury by the banks was increased from sixty to eighty per cent. of the capital, and the kind of bonds was made optional so long as it bore four per cent. interest. The most important change consisted In a gold reserve of forty per cent. of the capital ("s of the issue) being transformed into a paper money reserve of twenty per cent. of the capital (~ of the issue). Thus the American system was at last adopted nearly in its entirety. The idea of metallic conversion was given up, and the fall in price of the bonds was somewhat retarded, the owners of the bonds becoming shareholders of national banks to the extent of seventy per cent. of the whole. This radical change made the banking business remunerative, and many new national banks sprung up, five being organized during 1876, twenty-three in 1877, ninety-eight in 1878, and twenty-seven in 1879, making, in all, 15).