Expenditures of the Russo-Japanese war / by Gotaro Ogawa.

EFFECTS ON MONETARY CIRCULATION

I69

posits were constantly increasing. In the meantime, activity
was gradually resumed in the general industrial circles, owing
to the rousing of the popular mind by the repeated triumphs
of our forces, to the increase of demands for munitions and
other war supplies, and to the rise in purchasing power
among the people through the inflow of foreign capital. From
the spring of 1905 to July or August of the same year business
was prosperous, prices soared high, convertible notes were
issued abundantly, loans at banks increased, encouraging
brisk investment, and the money interest showed some
tendency to rise. Due to our successes in war, our financial
credit in the world was enhanced, so that the exchequer
bonds and other negotiable instruments were purchased
abroad in large amounts, thus greatly adding to the inflow of
foreign capital. In the latter half of I905, however, the
disappointing peace terms were reported from America and
the prospects of the rice crop were unsatisfactory, so that the
demand for capital was on the decline, and there was a general
depression of trade and a slackness in the money market.
After November, I905, the rate of interest fell markedly, and
in I906, though post bellum enterprises were put on foot in
rapid succession, the conditions of monetary circulation did
not improve to any appreciable degree. In I907 the economic
circles were calm at first, but due to there being no further
importation of foreign capital, and to a number of bank
failures after March, through a reaction to the former boom,
the stringency of money reached its climax in May and June,
although the newly organized corporations had been able to
begin business before that.
Such general conditions of the money market resulted in
changes in the rate of interest, in increase or decrease in the
lending of deposit money, and affected the system of conversion. These economic phenomena will be briefly discussed.
Changes in the rate of interest
Under the circumstances mentioned above, there were
fluctuations in the rate of interest, but the waves were not