The Closed Country Japan practiced a policy of national seclusion – the "closed country" or "sakoku" policy – aiming at autarky in economical terms, yet it developed a trade deficit resulting in the 1690s in a severe shortage of money. Japan's Edo or Tokugawa period beginning in the early years of the 17th century became a period of stability and growth, yet the developing nation failed to turn the advatageous situation into one of wealth creating more wealth – paradoxes sharpened by the dangerous monetary decisions of the 1690s and early 1700s. Compared with the parallel history of England's monetary decisons following the 1680s one could read the history of money in Japan as one of all the fatal decisions those responsible in London's could not even dream of.

Monetary Politics

Japanese mon, the basic copper coin, as minted between 1668 and 1700 The Edo or Tokugawa period had begun around 1600 with the settlement of the feudal conflicts. The clans had lost power to the central shogunate government. Decisions to create a central currency stood at the beginning of the era. The new money was to have gold, silver and copper units – all exchangeable at fixed rates. The Oban and the Koban gold coins were oblong plates, the smaller Ichibukin little rectangular pieces of minted gold. Silver was hardly minted in the European sense of the word. It was traded in lumps and weighed. The central unit for silver, the momme, was (and still is) a mere unit of weight matching 3.75 g. The lowest unit, the copper mon was influenced by the design of Chinese coins, the only object in the ensemble resembling a conventional coin. The rates between gold and silver were fixed, yet market reates fluctuated. The pattern did not change between 1600 and 1700.

Paper Money of the Clans

Paper money promising a given value of gold, silver or copper, was first issued by merchants of the Uji-, Matsuzaka-, Isawa-, Yamato-shimoichi-, and Settsuhirano-go-regions: the Yamada Hagaki notes. The shogunate's metal coinage and rivalling clan notes issued by the local feudal lords, left, however, no room for a further development of Yamada Hagaki notes. An autonomous administrative body of the Yamada region, the Sanpokai-gosho, was eventually the only authority issuing Yamada Hagaki notes – under permission of the shogunate which thus stabilised the regional power short of money. In the early 18th century, old notes of this production were exchanged for new ones at intervals of seven years to limit the amounts in circulation and the risk of forgeries.

The Unified Currency – Metal Money

The problem of metal money was its open advantage: metal money bearing its value in the coin minted could be traded without any institution guaranteeing its value. The Korean merchant who accepted Japanese money whether gold or silver accepted a certain amount of fine metal within the piece of metal he acquired. Exchanged on the basis of its weight, Japan's money could just as well cross borders in Japan without affording any clan territory to guarantee for the value of the coin circulating. The problem of Japan's metal money was its constant loss in trade abroad. Japan exchanged silver for silk and ginseng – a metal which would not lose its value for goods which were to be lost at home in consumption. Monetary experts could still claim rice to be the nation's real money and wealth – a currency of use in any state of emergency in which metal would turn out to be fundamentally worthless.