Hitherto in Japan there has been no law which regulated the mortgaging of a railway, or a mining enterprise, or a factory, together with its working system, as a corporation, that is to say, mortgaging the whole system of a railway, a mining enterprise, or a factory as an economic whole, comprising not only each particular material object but also all the organic components of its working system as the subject matter of mortgage. A radical change has now been effected in the matter. According to the Japanese laws there are two methods for a commercial company in contracting a debt. One is the ordinary borrowing of money from a creditor, and the other is borrowing in the shape of debentures by public subscription. Now in ordinary borrowing of money the liability may be secured by mortgage, but the debentures could not be secured by mortgage, although of course the liability extends to the whole property of the company. The first effect of the new change is the provision which enables companies to guarantee debentures by mortgage, and the second effect is the provisions which relate to the creations of economic corporations of railways, mining works, or factories for the special purpose of instituting mortgages of their economic entity. To make the matter easier to comprehend, I will first explain it with regard to railways. The permission of the Government originally given to the company is in the nature of a licence or concession which is to be viewed more in the light of a personal matter of the original company, and therefore it could not be a subject matter of a public auction, and therefore according to the old law, if a railway company becomes bankrupt, all the material property, either movable or immovable, would go to new hands, but the licence itself cannot but become extinct with the dissolution of the original company, viz. the original grantee. This being so, if a railway company fails to fulfil its liability for debenture and goes into bankruptcy, the ultimate result would be that the railway system would be broken up, and the creditors would get their satisfaction only from the sale of each piece of the material property sold by public auction. Even in the case of ordinary debt, whereby all the material property can be mortgaged, the result would be practically the same. All these inconveniences have now been removed by a series of new laws passed by the last session of the Imperial diet and promulgated on March 13, 1905, by the Imperial Government. The articles of the laws are very numerous and minute, so that it would be unnecessary to dwell upon them here in detail, but the more important parts may be summarised as follows: _(a)_ The economic entity of a railway company may be constituted a special economic corporation for the purpose of mortgage.[2]