Before the war with China, Japanese finance was in a most brilliant condition, and the fiscal year April 1st, 1893, to March 31st, 1894, the close of which preceded hostilities by only a few months and which is the last of which accurate accounts have been published, showed a return of £8,588,300 ordinary and £315,913 extraordinary revenue, making a total of £8,904,213, as against £8,458,187 expenditure, the surplus being £446,026, which on a Budget of £10,400,000 was a very creditable but by no means an exceptional result. As a matter of fact, there had been only one deficit, that of 1891–92, resulting from the exceptional expenses incurred by the nation through the disastrous effects of the earthquake of 1891, one of the most terrible on record even in Japan, where these dreadful visitations are of very frequent occurrence. The whole financial tendency of the preceding years is summed up in the statement that at the beginning of the year 1896–97 £3,900,000, derived from accumulated surpluses, was at the disposal of the Treasury, although £2,300,000 had already been withdrawn from this reserve fund to help in defraying the expenses of the war. On the other hand, the National Debt at this period was not higher than £28,350,000, of which £1,570,000 was paper money in circulation. It had therefore diminished since 1890–91 by £2,300,000, of which £1,450,000 was due to the withdrawal of the paper money. These notes had been issued at a period when the new regime was not firmly established, the insurrection at Satsuma still to be suppressed, and the Government unable to obtain cash, even at a very high rate of interest. In 1881 the premium upon silver, the standard currency, had risen to 70 per cent., thanks to the energy of Count Matsukata, the very able Minister of Finance. It fell to 9 per cent. by 1884; in 1886 par was reached. The paper money of the State and the national banks was gradually withdrawn and replaced by notes of the Bank of Japan, payable at sight. In brief, if we compare the figures of the Debt and the Budget with those of the population, 41,500,000, we can only envy the financial situation of Japan on the eve of the war.