Gold and silver bimetallism (金銀複本位制)

The gold and silver bimetallism refers to a currency system where both gold and silver coins are designated as standard money; freedom of minting, importing and exporting such money is maintained; and fixed exchange ratio between gold and silver is maintained

We should note that the fixation of exchange ratio between gold and silver could lead to ignoring production cost and market price. When the proper balance was lost between the market price and the legally fixed exchange ratio between gold and silver, the currency that had more advantageous market price was likely to be kept as dead storage.

In the medieval period, European countries could not provide a stable supply of gold or silver coins by themselves. Therefore, they had no choice but to adopt the gold and silver bimetallism, and had to maintain the balance by reminting coins whenever the balance was lost. In 1816, England successfully changed the system into the gold standard system, and other European countries followed that.

Japan adopted the gold standard system according to the New Currency Act enacted on June 17, 1871 and following the movement in Europe. However, neighboring countries including Qing adopted the silver standard system and Japan was obliged to issue one yen silver coins that were equivalent to foreign silver coins. As huge amount of gold coins fled outside the country, Japan had to issue silver trade coins equivalent to silver trade dollars of the United States in 1875. Furthermore, in the next year, Japan had to equalize the exchange ratio that, in the open ports, had been 100 yen silver coin to 101 yen gold coin, thus choosing a virtual gold and silver bimetallism. On May 27, 1878, Japan formally adopted the gold and silver bimetallism according to the proposal by Okura-kyo (Minister of the Treasury) Shigenobu OKUMA, and designated one yen silver coins and silver trade coins that had been used only in the open ports as legal-tender coins and allowed their unrestricted use. Since then, silver coins were also treated as virtual standard money.

However, due to the inflation caused by the overissue of inconvertible currencies accompanying the Seinan War, both gold and silver coins fled Japan or were kept as dead storage to a great extent and came down to just nominal stanrdard money. Concerned about this situation, Okura-kyo Masayoshi MATSUKATA sought for a way to currency stability through the introduction of a temporary silver standard system. In 1885, Japan issued Bank of Japan notes, a convertible currency based on the silver standard system, and temporarily adopted the silver standard system. Later, Japan again chose the gold standard system through the Currency Act enacted in 1897.

[Original Japanese]