The expenses being £51,500,000, there would thus remain a surplus of nearly £500,000, thanks to the favourable result of the fiscal year 1896–97. Apart from this financial scheme, however, there was still a war charge which had not been foreseen. It had at first been believed that the island of Formosa would be self-supporting, an illusion which was soon dispelled, and the Government had therefore to grant this new acquisition for a period of years a subvention from the Imperial Treasury of about £600,000, to obtain which various receipts officially described as extraordinary, such as voluntary contributions and restitutions, sales of State lands, and interest on divers funds had to be drawn upon. These receipts generally averaged £200,000, and by the year 1905–6, the time fixed for the conclusion of the expansion programme, will have furnished between £1,500,000 and £1,800,000; for the remainder it will be necessary to have recourse to a loan, and supposing that during this period the subvention of the Japanese Budget to Formosa, which must necessarily diminish year by year, rises to about £4,000,000, another loan of between £2,000,000 and £2,500,000 will have to be raised. Japan would therefore have to borrow about £24,000,000 from 1896–97 to meet the extraordinary expenses she had undertaken. On the other hand, when these were met, her ordinary Budget still remained greatly augmented by the necessity of maintaining an army and navy double what they were before the war. This being the case, two important questions presented themselves. In the first place, was it possible to raise without difficulty a loan of £24,000,000, and from whence was it to be obtained? In the second, was the country sufficiently rich, once the scheme was executed, to maintain this increased expenditure, and by what means would it be able to obtain fresh resources to pay current expenses? The first question contained the principal difficulty. Not only did Japan need to borrow £24,000,000, but she had to borrow most of this without loss of time. Naturally, the Administration decided to carry out with the least possible delay the essential parts of the programme already determined upon, especially those connected with the national defence, and the Budgets of 1896, 1897, and 1898 were therefore most heavily charged with the extraordinary expenses. The extraordinary Budget of the first year reached £10,300,000, that of the second £14,200,000, that of the third £6,000,000. In no case, however, could the surpluses of the previous Budgets and the part already paid out of the indemnity (which was £20,600,000, of which £8,000,000 had been handed over to the War Office) have sufficed to provide such large amounts. It was therefore necessary to borrow in 1896–97 £1,830,000, in 1897–98 £6,880,000, while in 1898–99 a further issue of £4,500,000 had to be made. Now the grave situation which arose was this: the issues of 1896–97 were readily taken up by the