Post-Russo-Japanese War Subsidiary Coinage Reform — The 'Monetary Cleanup' That Supported the Meiji State

The Russo-Japanese War, fought from Meiji 37 (1904) through Meiji 38 (1905), dramatically elevated Japan's international standing, but the price paid was beyond imagination. War expenditures incurred by Japan in this conflict are estimated at approximately 1.7 billion yen. Compared to the national budget of the time—for example, the expenditure budget for Meiji 37 of approximately 260 million yen—this was an enormous sum amounting to more than six years' worth of spending. These colossal war costs were funded mainly through the issuance of domestic and foreign bonds, tax increases, and military scrip issued during wartime, but postwar finances were plunged into a state of extreme tension.

As part of postwar settlement, the government was kept busy restructuring these short-term bonds and military scrip, but in the process it was made to realize that the very foundations of Japan's monetary system were beginning to waver. What was viewed as particularly problematic was the maintenance of the gold standard established in Meiji 30 (1897). Yoshirō Sakatani, who served as Finance Minister at the time, believed that upholding the gold standard was indispensable to preserving Japan's international creditworthiness. However, global silver prices were fluctuating sharply, and there arose the possibility that the bullion value of subsidiary coins such as the 10-sen and 5-sen pieces—minted in silver—would exceed their face value. If the bullion value of silver coins were to surpass face value, the coins might be melted down and flow abroad, triggering what is known as Gresham's Law: 'bad money drives out good.' In fact, in Meiji 37 (1904) the silver price surged, and there were instances in which the bullion value of the 10-sen silver coin temporarily exceeded its face value.

Under the Katsura Tarō Cabinet, the Ministry of Finance felt acutely the need to review the materials and fineness of subsidiary coinage as an urgent task. This was because if the subsidiary coins indispensable for small transactions remained in an unstable state, they could cause serious disruption to the lives of the people and to economic activity. A policy was settled upon to make maintaining the gold standard the top priority and to eliminate silver from subsidiary coinage. This was not merely a change of coin materials, but a strategic decision to make the economic foundations of the state unshakeable. For details on silver coins of the Edo period, please see Details on Edo Silver Coins.

In response to the national imperative of maintaining the gold standard and avoiding the risks posed by silver price fluctuations, the Meiji government in Meiji 39 (1906) amended the Coinage Law and carried out a change in the materials used for subsidiary coins. Under this amendment, the 10-sen and 5-sen coins were to be switched from silver to cupronickel, and the 1-sen and 2-sen coins from copper to bronze. At the center of this major project stood the Mint Bureau, located in Osaka.

The Mint Bureau of the time had assembled skilled technicians who supported the manufacture of Japan's modern coinage. They applied themselves to understanding the properties of the new materials—cupronickel (75% copper, 25% nickel) and bronze (95% copper, 4% tin, 1% zinc)—and to developing the technology needed to manufacture high-quality coins in a stable manner. Cupronickel had the advantage of a beautiful color resembling silver while also being highly wear-resistant, resistant to rust, and above all having a bullion value below its face value, greatly reducing the risk of melting and outflow abroad. The new 10-sen cupronickel coin was minted with a diameter of 22.12 mm, and the new 5-sen cupronickel coin with a diameter of 19.09 mm; while maintaining nearly the same sense of scale as the old silver coins, stable supply was achieved through the change of material.

The designs of the new coins were also deliberated upon. The 10-sen cupronickel coin adopted a rising sun and cherry blossoms, and the 5-sen cupronickel coin adopted paulownia leaves and cherry blossoms, expressing Japan's traditional aesthetic sensibility alongside the strength of a modern state. These designs followed the designs of the old silver coins while taking care to make the new-material coins readily accepted by the public. Simultaneously with the issuance of the new coins, a plan for the phased withdrawal of the existing silver subsidiary coins—namely the 10-sen silver coin and 5-sen silver coin—was also formulated. The Mint Bureau established a system for mass production of the new coins and, by supplying the new cupronickel and bronze coins throughout the country, proceeded with the smooth exchange of the old silver coins. This entire operation was not only a technical challenge but also an important process for restoring national credibility.

Following the Major Subsidiary Coinage Reform of Meiji 39 (1906), new cupronickel and bronze coins began to circulate in the market. At first, some bewilderment was observed among the public toward coins made of unfamiliar materials, but the government and the Mint Bureau worked to spread the new coins through active public relations efforts and the withdrawal of the old silver coins. In particular, unlike the conventional silver coins, the cupronickel coins emitted a somewhat duller luster rather than the characteristic brilliance of silver, but their durability and convenience in daily use gradually came to be accepted by the public.

This monetary cleanup played an extremely important role in bringing stability to the postwar Japanese economy. The Russo-Japanese War had temporarily driven up prices—rice prices in particular showed a sharp rise from Meiji 37 (1904) through Meiji 38 (1905)—but the stable supply of subsidiary coinage contributed to curbing market confusion and facilitating small transactions. With the gold standard maintained, Japan's international creditworthiness was preserved, making it easier to attract investment from abroad. This was an indispensable element for postwar recovery and industrial promotion.

The reactions of the people varied. The switchover to the new coins took time especially in rural areas, and some confusion over exchange rates at shops was also reported in places. However, the government set a period for the withdrawal of the old silver coins and promoted smooth exchange through banks and post offices. For example, old 10-sen silver coins and 5-sen silver coins were exchanged at par with new 10-sen cupronickel coins and 5-sen cupronickel coins, with care taken to avoid any disadvantage to the public. The lives of ordinary people during this period, while buffeted by the waves of the 'boom' and 'reactionary recession' following the Russo-Japanese War, steadily proceeded along the path of modernization under the new monetary system. For a deeper understanding of the actual circulation of coinage in this era, a comparison with past monetary systems such as that covered in Details on Edo Silver Coins is also of interest.

The Major Subsidiary Coinage Reform of Meiji 39 (1906) did not merely represent a temporary change of coins; it exerted a long-lasting influence on Japan's subsequent monetary system. The framework of 'small-denomination coins = cupronickel and bronze' established by this reform continued to function as the standard for Japan's small-denomination coins through the early Shōwa period. This can be said to be proof that the strong will of the Meiji government to uphold the gold standard and ensure the credibility of the monetary system remained in tangible form.

Following this reform, the subsidiary coins of 10 sen and 5 sen issued in Japan were essentially made of cupronickel, and those of 1 sen and 2 sen of bronze. For example, the 'Chrysanthemum 10-Sen Cupronickel Coin' and 'Rice Stalk 5-Sen Cupronickel Coin' issued during the Taishō period were direct successors of the coins from the Meiji 39 reform, and the decisions made at that time are strongly reflected in their choice of design and material. These coins continued to support the Japanese economy until the severe inflation of the Second World War era caused their materials to change. The old silver coins were phased out of the market through exchange for the new coins, but some of them survive to this day as rare collector's items.

In the modern history of coinage, this Meiji 39 subsidiary coinage reform is highly regarded as an important turning point that made Japan's economic foundations as a modern state unshakeable. This monetary reform—carried out to overcome the national crisis of the Russo-Japanese War and achieve the two major goals of fiscal reconstruction and maintenance of the gold standard—can be said without exaggeration to have laid the groundwork for Japan's subsequent economic development. Without this historic decision, Japan's modernization might have been greatly delayed. Understanding the historical background of the coinage of this era will serve as a key to reading deeply into Japan's modern history. For those wishing to learn more about the value of old coins, please also refer to Standards for Old Coin Grading.