--'The law for the establishment of those banks was promulgated soon after the abolition of the feudal system. It was modelled after the national banks of America. In the course of time a large number of them came into existence in different parts of the Empire. They were private undertakings, except that they enjoyed the privilege of issuing their own notes, and were subject to Government superintendence. At first the notes were to be convertible into specie, but a modification was introduced in the law by which they could issue notes with Government bonds as security and convertible in Government paper money. Therefore the notes were in reality incontrovertible ones from the point of view of hard money. Previous to that, the Government loan bonds, amounting to one hundred and seventy million yen, were issued for the capitalisation of the feudal lords and their retainers in consideration of their feudal incomes, after the feudal system had been abolished. These bonds were used widely for establishing the banks. The banks enjoyed special privileges of issuing paper money, but in lieu of it they did good service in encouraging and stimulating local industry and commerce, so that we do not regret that those banks were once instituted. Besides, they led to the foundation of the modern monetary system of Japan. You must have observed the efficiency of the monetary system of Japan during the Sino-Japanese war. The success of Japan in great wars is due a great deal to that system. I mean to say that because we have that system, the money possessed by the public could easily be made to serve public purposes in time of emergency. Look at China: as far as individuals are concerned, there is a far greater number of people who are richer than the Japanese, and yet they have no sound banking system in close connection with the state. When the Chinese deposit their money, they prefer to do so with foreign banks. The consequence is that the Government cannot fall back upon the wealth of private individuals. Neither is there much likelihood of home loans being popular in China. Of course there may be some other reasons for this. In Japan nothing but regular taxes and dues regulated by law are levied. No illegal exaction is or could be made. In that respect there exists a perfect understanding between the Government and the people, who know that if they respond to the Government call for loans their dues would be made good in future. No such confidence and usage exist in China, still less in any other part of the East.' --'You told us that in the beginning of the Imperial Government, the Imperial troops were supported at the expense of the clan governments,' said one. 'Will you tell us a little more about it?'