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The Formation of the Modern East Asian Economy
This response is first
evident in the higher copper level in both private and
local Japanese government coins than in Ming coins. But,
over the long run, far more decisive was the discovery
and exploitation of great supplies of silver in western
Japan in the early sixteenth century. Henceforth, Japanese
local lords and eventually the central government could
stabilize their currency and free themselves from the
vagaries of Chinese coinage. In addition, silver refinement
methods were improved by two domestic innovations in 1501
and 1521 and even more by the introduction in 1533 of
a Western method of extracting pure silver through ash
filtration.
By the early seventeenth
century, Japan's annual silver production level of about
150,000 kilograms accounted for roughly 40% of the world's
silver output. This metal not only vastly increased imports
of Chinese commodities, but also let the Japanese government
improve its currency resources. For its silver was used
to buy gold. During the latter half of the sixteenth century,
the ratio of 1 oz of gold to 8 oz of silver in China,
the Philippines, and the rest of mainland East Asia compared
with a 1 to 5 rate in Japan. In the 1620s, the rate elsewhere
in East Asia was 1 to 13, and so throughout the world
vessels headed for Japan to wet its appetite for gold
and return with their holds filled with Japanese silver,
at the estimated annual rate of 280,000 kgs, principally
to China. The newly established Tokugawa government desired
high quality metals, like foreign gold, to strengthen
its currency system, and used silver to account for 80%
of its exports.
The year 1601 marks then
a third, and final, stage in the pre-modern history of
Japanese currency. For it was during this year that the
newly established Tokugawa shogunate set up the first
currency system in Japanese history which was independent
of Chinese sources. One may note many parallels, and imitations,
of the Chinese model, as in the official insistence that
the state's legitimacy and proper operation were represented
by its having its own successful currency. Known as the
"Three Currencies System," this Tokugawa coinage system
was essentially a tri-metallic system of gold-cash, silver-cash,
and copper-cash, operating at a fixed official exchange
rate of one gold tael being equal to 187.5 grams of silver
or 4,000 strings of copper cash. Paper money circulated
within local domains, backed by local governments and
merchants. A final touch to this system was applied in
1772, by the official coinage of 98% silver numeraire
as subsidiary to gold coins.
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