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lir. Benjamin Strong and the Restoration of the Cold Standard.
t

(A rough translation of an article by Eigo Fukai, Vice-Governor of
the Bank of Japan, published in the Tokyo Nichi Nichi, October
23rd and 24th, 1928, and later incorporated in his book "Lifting
of the Gold Embargo as a Currency Problem.")

Mr. Benjamin Strong, Governor of the Federal. Reserve Bank

of New York, passed away on the 16th October, 1928.

The late

Mr. Strong was called to the governorship of the Federal Reserve
Bank upon the organization of that institution in 1914.

As he

played a prominent part in the field of international finance
in the post-war period, there should be others more competent
than I to recount his achievements.

For my part, I have some

personal recollections which I can scarcely repress.

Between the Federal Reserve Bank of New York and the Bank
of Japan there early developed a friendly relationship, thanks
to the efforts of the late Baron Megata and of Yr. Hamaoka
of the Bank of Japan, then stationed at New York.

On the occasion

of Governor Strong's visit to this country in 1920, I saw him
nearly every day during his stay in Tokyo.

I accompanied him

to hakone and there we had the whole day to ourselves, chatting.

Lr. Inouye and I also took him to Nikko, there talking endlessly
on various topics for two whole days and evenings.

During my

visit in New York in 1922 on my way to the Economic Conference
in Geneva, I saw Governor Strong often at his office in the
Federal Reserve Bank.

I passed an evening at his home and a

day at one of his clubs, talking by ourselves.

On these

occasions our conversation became intimate enough that




we ventured to talk about personal matters.

From what I

personally heard from Mr. Strong I wish to record here a few
things which may serve to show what manner of man he was.
At the time of my visit in New York, referred to above,

Governor Strong was being accused in some quafters of being
partial to foreign requirements to the neglect of the needs of
agriculture and industry at home.

Some went so far as to

charge him with idly staying in office in his physical
incapacity.
demanded.

In political circles even his resignation was
Er. Strong told me then with heroic determination

that as he had a mission to performhe would never resign, but
would keep on striving as long as his health permitted.

One of

the tasks which Governor Strong set to himself was properly
to work out the functioning of the Federal Reserve System.

The

laws were there, but the actual conduct of the System was
largely left to the judgment and ability of the management of
the Reserve Banks.

In the United States, where attempts

previously made to centralize and unify note issues had ended
in failure, the new Federal Reserve System was, at its inception,
far from gaining the confidence of the public.
were pessimistic with regard to its future.

Indeed, some

Although the

Federal Reserve Board at Washington is the controlling centre
of the System, the actual operations are conducted by the twelve
Reserve Banks, of which the one in New York is admittedly the
most important.

Upon the successful conduct of the Federal

Reserve Bank of New York, therefore, largely rested the fate of
the entire System.

Yr. Strong relinquished the presidency of the

Bankers' Trust Company to become the Governor of the Federal
 Reserve


Bank.

He accepted the call in his enthusiasm for the

new duties, although the change meant to him no small sacrifice

111

in the way of remuneration.

In order to give his critics no

10

occasion to question his integrity and impartiality in the
conduct of the Bank's affairs, Yr. Strong parted with all
his holdings in various stocks.

Referring to this conscientious

act of his, he once jokingly remarked to me that had he retained
his holdings he would have easily gained a veritable fortune in
the war-time boom.

As in the early years of its existence the Federal Reserve
System did not yet command the confidence of the public that it
enjoys today and as Governor Strong himself was comparatively a
junior among leaders of the financial circles, his work in those
days was, so I am told, rendered particularly difficult.

When

the Federal Reserve Bank insisted that the parties to the bills
presented for purchase or discount at the Bank should produce
their balance-sheets, a well-known merchant vehemently resented
this procedure, saying that his reputation was too well established
for it and that he had never been asked by his bankers for balancesheets.

To this Governor Strong said in reply that whether to produce

a balance-sheet or not was entirely at the choice of his client,
but that the Reserve Bank held itself perfectly free in deciding
what papers were eligible for accommodation.

A short time

afterward the old merchant produced his balance-sheet.

certain trust company got into difficulties, a strong combination
of financial interests, which was to undertake the reorganization
of the company, saw it safer first to have the position of the
trust company examined by the Federal Reserve Bank.

So by slow

degrees the New York Federal Reserve Bank attained its place
of importance.




And while this was largely owing to the prominent

part the Federal Reserve Bank played in the war-time finance,
it was no doubt due also to the attitude, the judgment and
the determination of the management of the Bank presided over
by Ur. Strong.

From what Mr. Strong told me on various occasions I
gather that the keynote of his monetary policies was the
maintenance of the soundness of the currency.

Accordingly,

he regarded liquid commercial credits as the water-main
in the currency-supplying system, although during the war it
was incumbent on the Federal Reserve Banks to take such
measures as would facilitate the raising of national loans.
In the post-war years Mr. Strong was concerned in checking
the expansion of currency following upon the inflow of gold.

For this purpose he adopted, on the whole, a policy of
deflation.

However, knowing, as he did, that it would serve

no useful purpose to raise interest rates unduly in utter
disregard of urgent needs for fands, he judiciously abode
in the golden mean.

Besides, he was mindful of the undesirable

effects high money rates in the United States might have on
the rehabilitation of the currencies of the world.

This is

perhaps why the policies followed by the Federal Reserve Bank
appeared to some to be not thoroughgoing enough.

Rigorous

monetary theorists charged the Reserve Bank with being lax,
while others eager for immediate conveniences complained of
its being too strict.

There existed, however, a fair accord

between the Federal Reserve Board on one hand and Governor
Strong and the management of the rest of the Reserve Banks
on the other, and the monetary policies of the United States
were put into execution through their concerted efforts.



5

IMO

And Er. Strong was a dominating influence among his colleagues.
When I met him in 1922, Er. Strong told me that he had very




nearly succeeded in properly fixing the modes of functioning of
the Federal Reserve System so far as its domestic operations were
concerned, though latterly the concord has seemed at times
to be jarred somewhat.

Another task which Governor Strong felt himself called upon

to carry out was the restoration of the gold standard in the world
As a means of realizing this object, he aimed at bringing about
the co-operation among the central banks.

Mr. Strong believed

that in view of her international position the United States
should endeavour to help on the work of currency restoration
and that eventually that was to her own good.

In this

influential persons in financial circles in New York shared
Mr. Strong's views.

Abroad, Governor Norman of the Bank of

England, enthusiastic for the restoration of the gold standard
and the co-operation among the central banks, acted in unison
with Er. Strong.

These ideals found expression in the

resolutions on currency adopted at the Genoa Conference.

Owing

to a strong distaste shown by the United States for all
financial policies savouring of internationalism, the
collaboration among central bankers has not since made a headway
as was desired by Mr. Strong and Er. Norman.

But the work of

the restoration of the gold standard has steadily progressed,
and a number of countries have received assistance from the
United States in the form of credits.

In 1925, when Great Britai

effected the removal of all restrictions in regard to gold
shipments, Yr. Strong wrote to me telling me how glad he was

to see a universal restoration of the gold standard so auspicious







7

S

8

bearing on the international finance aiming at the rehabilitation
of the currencies of the world, lir. Strong did not engross

himself in controversies on these problems to any great extent,
believing that in the main they must be settled politically.
Quite independently of the fate of these problems, therefore,

he was solely concerned with the more practical measures and
bent his energies to the task which he believed to be his
mission.

He made public almost no stirring views, but attracted

the attention of the world simply because his action was vitally
related to practical issues.

Poorly blessed with health, and not unfamiliar with life's
sorrows, Yr. Strong nevertheless left behind him brilliant
achievements in the post-war economic reconstruction of the world.
His success, however, was not easily won.

On the contrary,

he fought to the end for his convictions, against difficulties
and paying dearly.
a heroic life.




It may not be too much to say that his was




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RECEIVED
THE BANK OF JAPAN

DEC 3 0 1926

T01.. YO

G_ L. H.
December 14, 1926.

Dear Mr. Harrison,

Remembering your kindly showing me over the new
building of your Bank then in construction, when I visited
your office in 1922, I appreciate warmly your letter of
November 5th and thank you for paying your attention to
my letter addressed to Mr. Strong and informing me of his
illncL;s.

I have written to him and expressed my sympathy.

I can imagine how hard he worked in Europe at the expense
of his health.

It is some relief to learn that he is already

on the road to recovery and I hope he will be able to
resume his work before long.

I take this opportunity to express the gratitude
we of this bank always feel for the kindness you and your
colleagues show to members of our staff who are in New York.
With kind regards,

Believe me

Yours faithfully

Yr. George L. Harrison,
Federal Reserve Bank,
New York.







July 9, 19.P.

My-dear'

.

In the dDsence of Governor Strong, I take pleasure in
acknowledging receipt of your letter of June 2.2, in which you

have briefly discussed prevailing business conditions in Japan.
I also have for acknowledgment your letter of June 93,
in which you have written Governor Strong regarding reaction in
Japan to the resumption of gold payment in London.
As Governor Strong will be away for some few weeks,

.rid

as I know that he is always interested in hearing from you, I am
to-day forwarding to him copies of both letters for his information.
Sinterely yours,

L. F. SAILER,
Deputy Governor.
Mr. Eieo Fukai,
The Bank of Japan,
Tokyo, Japan.

COPY
June 23, 1925.
111116.

4IhDear Mr. Strong:

Your letter of June 1 reached me after I mailed my note to you yesterday.
am very grateful to you for disclosing to me your most interesting observations
on the economic and financial situation of your country.
rs you seem to be particularly anxious to hear from me what the reaction has been in Japan to the resumption of
gold payment in London, I hasten to write you these following lines.

When I discussed currency problems of the world with you and Mr. Norman in
1922, it appeared Japan would be in a position to take a concerted action with Great
Britain if and when the latter should decide to resume gold payments.
Our situation,
however, underwent a great change becuase of the disaster of 1953, the balance of
international payments turning heavily against us.
The gold embargo has been a subject of bitter controversies in this country especially since the marked decline in
our foreign exchanges began in the spring of 1924.
The opinion has been rather widely
held especially among politicians and publicists that the embargo should be raised at
once as the only means of rectifying the exchanges.
Of those who held this opinion,
some did not go far enough into the ouestion of the balance of international payments.
They seem simply to have thought it strange that our exchanges should be allowed to
fall when we had a respectable amount of gold in stock.
Others went deeper into the
question and seem to have thought that the efflux of gold and the consequent shrinkage
of our note-issue would lead to the recovery of the balance of international payments
iz favour of us.
The latter way of thinking is theoretically cogent, I think.
But
a policy based on it should involve a very severe deflation, and it was thought to be
risky in practice.
After a great deal of public debates and private investigations,
the conclusion reached by the majority of the nation seemed to be that the embargo
could not be safely raised until the balance of international payments so far improved
as to bring the exchanges near par and that every effort should be made to effect the
improvement as soon as possible.
I think this conclusion was confirmed and strengthened
by the British policy cautious in conception as well as in execution.
There are among us a few inflationists who see a boon in v depreciating currency and falling exchanges as a stimulus to trade and industry.
There are also
nominalist doctrinaires who are impatient of the trammels of a metallic standard and
dream of an ideal "managed currency".
These tendencies of thought appealed with some
effect to certain sections of the people, though not very large or influential.
Their votaries either saw little need of hurrying the raising of the embargo or were
out for a fundamental reconstruction of the monetary system.
They found a support in
the example of Great Britain as long as she maintained the embargo.
In the sphere
of practical considerations, they were dealt a blow by the announcement of the British
policy.
Now that the gold standard prevailed in America and the British Empire,
it must be the goal of all self-respecting countries, whether it be ideal or not.
The Japanese nation, as a whole, will henceforth strive with a single aim for the
resumption of an effective gold standard.
And I think I may say that there are signs
of a steady improvement in our balance of international payments, although ebbs and
flows may be inevitable yet for some time to come.
Perhaps remembering what passed
in his chat with me three years ago, Mr. Norman courteously caused an exchange of
views between the Bank of England and the Bank of Japan.
As a result, the former
understood the changed situation of Japan.
With kindest regards,

Benjamin Strong, Esq.,

Governor, Federal Reserve Bank of New York,
http://fraser.stlouisfed.org/
New York. N.
Federal Reserve Bank of St. Louis Y.

Yours sincerely,

(Signed) Eigo Fukai
111




['V(

1

Of those who held this opinion, some did not go far
enough into the question of the balance of international
payments.

They seem simply to have thought it strange

that our exchanges should be allowed to fall when we
had a respectable amount of gold in stock.

Others

went deeper into the question and seem to have thought
that the efflux of gold and the consequent shrinkage of
our note-issue would lead to the recovery of the balance
of international payments in favour of us.

The latter

way of thinking is theoretically cogent, I think.

But

a policy based on it should involve a very severe
deflation, and it was thought to be risky in practice.
After a great deal of public debates ana private investigations, the conclusion reached by the majority of the
nation seemed to be that the embargo could not be safely
raised until the balance of international payments so
far improved as to bring the exchanges near par and that
every effort should be made to effect the improvement
as soon as possible.

I think this conclusion was con/A--

firmed and strengthened by,British policy cautious in
conception as well as in execution.

There are among us a few inflationists who see
a boon in a depreciating currency and falling exchanges
as a stimulus to trade and industry.

There are also

nominalist doctrinaires who are impatient of the
trammels of a metallic standard and dream of an ideal



"managed currency".

These tendencies of thought appealea

with some effect to certain sectionjof the people, though
not very large or influential.

Their votaries either saw

little neea of hurrying the raising or the embargo or were
out for a fundamental reconstruction of the monetary system.
They founa a support in the example of Great Britain as
long as she maintained the embargo.

In the sphere of

practical considerations, they were dealt a blow by the
announcement of the British policy.

Now that the gold

standard prevailed in America and the British Empire, it
must be the goal of all self-respecting countries, whether
it be ideal or not.

The Japanese nation, as a whole, will

henceforth strive with a single aim for the resumption of
an effective gold standard.

And I think I may say that

there are signs of a steady improvement in our balance of
international payments, although ebbs and flows may be
inevitable yet for some time to come.

Perhaps remembering

what passed in his chat with me three years ago, Yr. Norman
courteously caused an exchange of views between the Bank of
England and the Bank of Japan.

As a result, the former

understood the changed situation of Japan.
With kindest regards,
Yours sincerely,

&-7)
Benjamin Strong, Esq.,
Governor, Federal Reserve
Bank of New York,
New York, N. Y.



COPY

THE BANK OF JAPAN
Tokyo

June 99, 199.

Dear Mr. Strong:

Your note of May 95 has just reached me.
kindly forwarding my letter to Mr. Wadsworth.

I thank you for

I thank you also for

your kind thought in sending me words of sympathy in regard to the
Psychologically it was a

recent earthquake in the San-in district.

hard blow to come in such a short interval after the great catastrophe.
But the recent earthquake affected only a small area, and its severity
was not to be compared with that of 1993.

Although the residents of

the affected district suffered much, the material effect on the economic
condition of the country is quite insignificant.

Our foreign exchanges have shown a weak tendency in the last
few weeks.

The disturbances in China, together with the feeling of

uneasiness produced by the earthquake, seem to have interfered a little
with the optimism) which had prevailed for several months past.

At the

same time, the end of the import of cotton drawing near, the activity
in dealings in belated cotton bills has been a feature of our exchange
market.

But the rates now remain steady, because we are already entering

the sewn of the export of this year's silk.
With kindest regards,
I remain,

Yours sincerely,
(Signed) Figo Fukai
Benjamin Strong, Esc.
Governor, redeTel hestrve Bank of New York,
New York, N. Y.




di

THE BANK OF JAPAN
TOKYO

(4,

i

'v

V

June 22, 1925.

Dear Mx. Strong,

Your note of May 25 has just reachea me.
I thank you for kindly forwarding my letter to
Mr. Wadsworth.

I thank you also for your kind

thought in sending me words of sympathy in regard
to the recent earthquake in the San-in district.
Psychologically it was a hard blow to come in such
a short interval after the great catastrophe.

But

the recent earthquake affected only a small area,
ana its severity was not to be compared with that
of 1923.

Although the residents of the affected

district suffered much, the material effect on the
economic condition of the country is quite
insignificant.

Our foreign exchanges have shown a weak
tendency in the last few weeks.

The disturbances

in China, together with the feeling of uneasiness
produced by the earthquake, seem to have interfered
a little with the optimism which had prevailed for




several months past.

At the same time, the end of

the import of cotton drawing near, the activity in
dealings in belated cotton bills has been a feature
of our exchange market.

But the rates now remain

steady, because we are already entering the season
of the export of this year's silk.
With kindest regards,
I remain,

Yours sincerely,

Benjamin Strong, Esq.,
Governor, Federal Reserve
Bank of New York,
New York, N. Y.




0




M/y 2b,

Dear Mr. Fuksis

Your card of May 8, together with the letter
aadreesea to kr. Eliot Wadsworth, reached me today, and I
am sending your letter to Mr. ladaeorth by courtesy of
Leland Herriuon tcaay. !!r. adazorth
in Washington, and I believe *ill be there for a. few weeks
before bailing for Europe.
I have been very much distreesed to learn of
the revere earthquake and conflagration which you have recently experiencea in Jrpan.
Surely Jzan has sufiereo
almost beyuhd endurance, but now I hope that these great
rorcee of nature have exhauster themeelvas ana that you will
have before you many years of tranquillity and comfort without this menace bl,Gye at hand.

With kindeet regards to you and to my other friends
in the Bank, I beg to remain,
Sincerely yours,

Mr. Eigo Fukai,
bank or Japan,
Tokyo, Japan.

crl




Union

CA




THE BANK OF JAPAN
TOKYO
January 13th, 1925.

Dear Mr. Strong,

I must now thank you for your kind thought in
sending me the New Year's greetings.

The turn of the year

revives in me all the pleasant recollections of my contact

witn you and I tender you the very beat wishes on my part
for your continuing and increasing happiness and prosperity.
The last year was an eventful one for my country
from the economic and financial point of view.
dollar exchange

The fall

altogether remarkable.

It was,

indeed, the first experience we had since the establishment
of the existing monetary system of the country.

I may say,

however, that the confidence in our currency is fundamentally
unshaken and the fall in the exchange is merely the result
of the adverse balance of international payments very
largely caused by the seismic disaster.

This observation

is borne out, I think, by the fact that the decline in our

dollar rate stopped in the early summer with the seasonal
increase in our export of silk and began anew in the

autumn with the resumption of forward negotiations for the
import of cotton.

These negotiations commenced earlier

than usual; but the fact was certainly due to the proper
caution on the part of cotton importers.



There is another

2

fact worthy of note as throwing light on the currency
situation, i. e. the rise in the level of internal prices
is much smaller than the fall in the foreign exchange, the

former being about 12% and the latter about 23% as compared
with the pre-earthquake figures.
Since the advent of the decline in the foreign
exchange, there have been advocates for the raising of the
embargo on gold as a measure of immediately recovering the
exchange.

Our stock of gold and foreign balances is no

doubt adequate for the immediate purpose.

But it is thought

more cautious to wait and see the course of our international payments, of which there are many signs of improve-

ment, the low exchange being a check on the import and a
stimulus on the export.

The internal depression and the

policy of retrenchment of the Government will also subdue
the import.

The ephemeral activity, excited by huge

proposals for the reconstruction, has already subsided,

and the economic circles as well as the people in general
seem now to be seriously confronted with the hard facts
growing out of the post-war reaction and the earthquake.
In the mean time, the Government and the Bank of

Japan are prepared to release the holding of gold and
foreign balances in due proportions, when there are

pressing needs, with a view to steadying the immediate
prospect and allowing time for gradual and sound recovery
of our exchange situation.






f$

January 12, 12b.
My dear Mr. Fucii:

It is some time since I have had one o:

interestint; letters

from you advising somthin4; of conditions in Japan and something of the outlook.

I have w,tence luta a good deal or interest the iiures of the Bank of Japan
and the figures as to your import end export trade and other revelant matters.

But ali of these figures are colorless without some interpretation
of views.

expression

111,, I would value very much it you could give it Lc) me.

As to our own conditions at home, we have been through h long
period, e,y six or eiEnt months,

ease

coney rates, but have

had the benefit or a goon crop on the whole (except ue to corn), which hue been

solo at very Min pricea.

me have htd eomethini, like a billion enc. a quarter

of foreign loans placed in this market in the course of the past year, and
these f:xtors of easy xontiy and liberal creaite to the reet of the world have

facilitated the export of our varplus tam proauce, have resulted in some reaajustment or investment security values to tdic lower level of interest rates,

and as well, we have tern some flow of fluid capital back to birope, and an
increase in the values of forei6n currencies in terms of the dollar.

In fact

this process has gone to the point Where we are now exporting A Eoorl deal of
gold.

While the speeulstion in stocks is not altoi;ether a comfortable develop-

ment, it ij one of those inevitable things accompanying an improvement in trade
ana production awl a lowering of interest rates, and can hardly be regarded as
an unnixel evil.
Ths outlook fax this year's bueinesi:., on the Whole, is good.



But

2

124

Mr. Fukai

we must be careful that t e traditional spirit of over -optimism, ehich
usually develops in this oountry, does not result in an unsound ex:.ansion of
business and .,,rices;

that, indeed, being a matter w'ic"i re are _atcAng vit.1.,

t..e gre_test care.

Of course te lore conservative result of t'le elections abroad and
Mr. apOlidge's sweeping victory in t'-is c-untry, rhio`l gives '-im a majority in

both houses of 6oagress, has .d a prcfounJ influence upon business 1-eo;.le
generally and 1-,as added to te general Peeling cf o:,timism.

Aith the exception of some difficultiee in the State of Iowa,
rkhere t-ey suffered almost a comlete loss of t'le corn lrop, whicl) is so
essential to t'.8 farmers t',ere for fattening sto.3k, it looks as t'-.oug. tle

:orst of our bankin

treubles in t`.e agricultural Eecution were over.

ere rather severe last year an,i gave rise to suite a little uneasineue.
I hope you had oi:,.ortunity for a g cd visit :dth Mr. Greene.

He is a :arm friend of mine, and I have a very high regard for him.
,on't you t.res, nt my reEyect to your asecciates, and pith

kindest regards to you, I beg to remain,
Sincerely yours,

Mr. Ligo Fukai,
Director, Bank of Japan,
Tokyo, j&y:11.




They

ex

0




Estimated Amount of Expenditure for the Fe- construction
of the Capital of Japan.

1. Administration expenses for the Re-construction Board

22,931,000. Yen

6,879,000 Yea

Salary

Sundry Administrative items

14,652,000

Investigation and Research

1,400,000.

2, Expenditure of Re-construction
For

448,570,000. Yen
402,793,000.Yen

City of Tokyo

1. Roads & Streets
2. Canals
Parks

362,323,000. Yen
28,570,000.
11,900,000.

45,,77,000,Yen

For the City of Yokohama
1. Roads & Streets

38,206,000. Yen

2. Caneis

5,612,000.

3. Parks

1,959,000.

3. Loans to Local Governments for Re-construction purposes
To Tokyo Prefecture
To Kanagawa Prefecture

15,325,402.Yen
12,749,698.Yen
2,575,704.

4.Subsidy to Re-construction Works

89 ,225,917.Yen

1.Subsidy to constructive works within the Fire defense zone

20,0J0,000.1en

2.Subsidy to Local Government for re-construction purposes

69,225,917.

5.Subsidy for interest on re-construction loans of local Governments

21.694.73011en
597,747,049.Yen

Total

a

is

Estimated Amount of National Revenue and Expenditure for
the Fiscal Year of 1924 and thereafter.

Fiscal Year

193

1929

1931

Yen

Yen

Yen

Yen

Yen

Yen

Yen

Yen

1928

1927

1926

1925

1924

Revenue

1,293,114,411 1,305,571,084.

1,280,593,813.

1,298,879,883

1,315,125,376

1,316,582,275

1,213,429,079

1,311,526,839.

Expenditure

1,276,415,182 1,269,805,022.

1,256,141,328.

1,215,484,853.

1,269,849,559.

1,171,387,973.

1,167,082,770.

1,161,050,278.

24,452,485.

83,395.030.

45,285,819.

147,194,302.

146,346,309.

Excess of
Revenue

14,699,228

15,766,061.

Balance of Revenue
Surplus for fiscal

82,742,82E

0

0

0

0

0

0

0

year 1922
Total Surplus of
Revenue




97,442,054

15,766,061.

24,452,485.

83,395,030.

45,285,819.

147,194,302.

146,246,309.

150,476,561.

4;1
TRANSLATION OF INCWING CABLE

11111-1/1
Tokio,

rec. 12, 194.

Governor Strong
?ederal Res,:)rve Bank,

New York, N. Y.

Am delighted to welcome my old friend Greene and have
advised your friends of his visit and your introduction.




Fukai.

Form 1256

Charge to the account of
SERVICE DESIRED

CLASS

Full

'

*late

Deferred

Cable Letter
Week End Letter

Petrone should mark an X opposite
the Bass of service desired; OTHERWISE THE CABLEGRAM WILL BE
TRANSMITTED AT FULL RATES.

Benj. Strong,

WEST
CAB
NEWCOMB CARLTON. PRESIDENT

33 Liberty Street, New York

UNION
RAM

Number

Number of Words

Time Filed

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

Send the following Cablegram, Subject to the terms
on back hereof, which are hereby agreed to
December 11, 19E4

Tukai
Bank of Jbpan
Tokyo

Giving Jerome Greene of Lee Higginson and Company lettere to you Inouye
Ichiki

Sumitomo

Will appreciate your advising them

Nipress of Russia due January first




Strong

He sails

March 11, 1924.

Gear Mr. Fukait

Your letter of February lk has been received and read with very greet
interest.

It is, of course, resssuring to me to have your very explicit ex-

planation of policy aaa to feel the assurance which I sm sure we can that the
influence of the bank sill be in the direction of avoiding inflation.

._ eesrse,

when the last *ors is said on this subject, noWing but a belanced F.overnmental

budget by adequate taxation on the one hand and economy on the other and a
sound policy r.y the bank of issue can be relied upon to avoid inflation.

In

financing the cork of reconstruction growins out of your earthquake catastrophe
the temptation of Finance Ministers will oe so strong to rely sore upon loans

than upon taxes - just as was the case with many nations during the war in meeting war expenditures - than one cannot avoid burmibing just what policy 'ill be
sdopted.

In general, I think the impression in this country is altogether
favorable es to the record of Jcpcneee fintsace through the war and poet -war
period.

That certainly is my impression.

Lut you must realize boa your

friends are watching cevelopnents, eepecially when the situation becsme so
complicated by political developments.

The Jspenese loin 0:bo I bslieve, very eacceesfully placed in this
market.




I hear men)/ reports of side distribution.

The loan is selling et

March 11, 1924.

2

Kr. Fukai

*bout

the issue price now or slightly above, and so far as terms go I can see

0 nothing vhich can fairly be criticized.

Of coursetwe did hear of the criticism

which developed in Japyn, but one muet realize that bankers do not fix the terms
at which a large loan can be eold.

That is fixed by the market.

Once the time,

rate of interest, and security is agreed upon, the prioe must depend upon public
estimation of the obligation, y,nd there is little indeed the negotiator can do

beyond agreeing upon commissions and methods of distribution which will make the
These bonds were marketed very close to the basis on which

sale successful.

the existing issues could be purchased, end the commissions, in my opinion, were
not excessive.

(p if the distribution

as as satisfactory as it ie reported to

be with the market price as it is, I hardly see how eny criticism can be made.
When I last rro-t Mr. Mori he told me exactly whst had been done follow-

ing our first conversations,

7.1n771

I was cretified to feel that the Commission

hed pursued almost exactly the lines thYA we hae indicated as desirable, i.nd I

think no mall part of the success of the operation wee due to the skill with
which he handled it und to the most favorable impression which he made upon the
This I hove heard from a number of them and it in just as 1.611 that

bankers.

you should knot it.

You may be sure that I am looking foreJard with the greatest pleteure to

seeing Mr. Inouye, and I hope to have the opportunity to entertain him and make
him ao4usinted with some of my friends here.

Just now, as you hive read in the newspapers, we are hrvin7 some very
unpleasant political developments.

It seems to be s fact that there was some

irregularity in connection with the letelm7 of oil lends owned by the '.7overnment,

but growinE out of this there hes developed the usual me!F of er=gf,eration and

rumor and suspicion vhich is harmfUl to the countr7 end involves eeriou? hardship
and suffering upon a good many innocent people tho have not been ,Tuilty of eny




Mr. Fakai
dil
wrongdoing whatever.

March 11, 19%4.

We have a very cool and level-headed President in Mr.

0 Coolidge, 4nd I believe the country as a shale looks TAth confidence to his dealing with mutters uncretioally Lad successfully.
Our great economic problem is dealing with the continued adcition it)
our

as

of gold.

We cannot keep it out but must absorb it and put it away

temporarily until the world comes to its 6enses _end readjusts its monetary
systems.

it is a menace to U9 in presenting the possibility of inflation.

So

taro the difficulty has been successfully dealt with and I have strong hopes that
it can Cc in the. future.

RUT one cannot overlork that it is a menace to our

3tability anc! in the lest analysis we must rely upon the wood sense of our tAakere
d businees awn to avoid f. repetition of the mistakes of the %talc world in the

yerirs 1919-S2C.

Cur new bank building is approschim7 completion Find when you ne

visit

Us I hope to ,:how you a veil organiaed smooth ranninc bank all under one roof.
;ith warmest regards and every rood wisll to you and to your seeociates,
believe me,

Faithfully ycure,

Mr. Eigo Takata
Bank of Japes,
Tokio, Japan.




ACKN41VVI,EDGED

THE BANK OF JAPAN

LIAR1 1 1924

TOKYO
February 12th, 1924.

Dear Governor Strong,

Your interesting letter of December 24th reached me
some days ago.

on our side.

Since it was written, a great deal has happened
The political and financial situation having

become extremely complicated, I thought I had better observe and
think a little before answering your inquiries and suggestions.

In one respect, I feel sure that the policy contemplated
by the late Cabinet
portfolio of Finance
letter.

the one in which

was along the line suggested in your

After the seismic disaster, there was a pretty strong

inclination, encouraged by the profound sympathy manifested in
America and other foreign countries, to rashly importing foreign
capital for big schemes of reconstruction and economic revival,
which would certainly lead to inflation and ephemeral activity.
The declared policy of the Government was, I think, intended
rather to check this inclination.

Borrowing abroad was to be

limited to the amount required for covering materials purchased
abroad, which in turn were to be restricted to really indispensable proportions in kind and quantity.

meaning of the proposal to finance reconstruction work mainly
by domestic loans and taxation, rather than by borrowing abroad.
The policy of the Government did not preclude borrowing abroad



for covering purchases made abroad, while domestic loans for
41

the purpose of paying for imported materials were out of the
question.

Whether the taxation will be adequate even to meet disbursements at home is really a question.

Domestic loans are

conceived as a means of attracting existing capital and savings
to reconstruction work.

We think they will be a preventive of

inflation, if limited to a due extent.

What you fear is,

I

surmise, that they may be pressed so far as to produce an
inflational effect by forcing the expansion of bank credit.
I agree with you, and am afraid we may be placed in the dilemma
of somehow finding ways and means or cutting down the schemes
for reconstruction and economic enterprise.

I, for one, think

all financial schemes should be adapted to the duly available
capacity of the nation.

On the other hand, there are votaries
But downright inflationists

of a forward financial policy.
are very few in Japan.

Theoretically almost every body admits,

and even urges, the desirability of safeguarding against inflation.
I believe the Government will certainly aim at taking precautionary measures in that direction.

As an explanation of facts that have already come to pass,
I may point out that the increases in our note circulation have
been caused not by borrowing operations of the Government nor by
any direct financing of reconstruction, but by accommodating
those banks whose resources have become temporarily frozen on
account of the catastrophe.

Immediately after the disaster,

we had to lend out liberally in order to prevent the break-down



of the credit machinery.

It seemed to us not well-advised to

* make an abrupt change in our attitude, and we have still to fill
up the gap caused by the contraction of general bank credit.
We shall not fail to take every opportunity to accelerate the
return to the normal condition, but we must proceed gradually
and cautiously.

We have heard about you from Mr. Tatsumi and Mr. Ichinomiya,
and I am glad to learn the improvement of your health.

The

neprotiations for our Government issue in New York and London seem
now to be near the conclusion.

I hope the outcome will be

satisfactory.

I have shown your letter to my associates and Mr. Inouye.

The latter has started on a tour to Europe and America.

Having

resigned office, he is now utilizing his recess to realize his
long-cherished desire.

I expect you will meet him before autumn

in New York.

With kind remembrances and every good wish, I remain,
Yours sincerely,

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank
of New York, New York, N. Y.,
U. S. A.




I.




t-iteihft.
2
r

November 17, 19f3.

Lear kr. isukai:

It gives me pleasure to advise that a shipment of books on

American Banking, as per the appondee list, is today being forwarded
to your goon institution with our compliments.

These books will re-

place those destroyed in the recent earthquake, ana are practically a
duplication of the books sent your library in 191;1.

A number of the books you originally had are now out of print
and unprocurable, so a substitution has been made by adding a fey: tercent

publications which we believe are of particular interest as reference books.
There will be some delay in forwarding our bank reports and bulletins as well
as other miscellaneous material, as we are having the bulletins bound, but v.e

hope to send them off within a couple of reeks.
,43 are glad to have been of some assistance in the restoration of
your library, ant. if th, re is anything further that vs can do in this connection

please call on us.

ith

very warm regaraL., believe me,

Very sincerely yours,

Encl.
1.1r. Eigo Fukal,

c,io Bank of Ja2an,

Tokyo, Japan.




BANK OF JAPAN
TOKYO

Department of Nzonomic Research.

October 8th, 1923.

The violent earthquakes that visited Tokyo, Yokohama and the neighbouring
districts about midday September 1 and the great fires that broke out immediately
thereafter wrought such a havoc in those places that roughly one-half of the City
of Tokyo, including the main business quarters, was ruined to desolation and the City
of Yokohama and the adjacent popular health resorts demolished even more mercilessly,
with immense losses of lives and property and a large number of homeless people.
For a time, street car and local railway traffics, electric light and gas supplies

were stopped; telegraph and telephone systems became unworkable and even mail services were interrupted.

Many of the Government buildings, banks and leading business

offices were destroyed.

Our Bank building also was partly damaged by fire, the library

and records of the Department of Economic Research having been completely reduced to
ashes.

But we have been fortunate enough to see that the more important parts of the

building remain unimpaired.

Not only has the business of the Bank been carried on

without stopping, but it has since been doubling its activities in supplying the extra
currency needs, in preventing disturbances in the financial market and in restoring
oonfidence in general.

again, while not belittling the country's losses sustained

by the catastrophe, it was fortunate and we may feel some consolation in the fL=ot

that the devastated areas were eoonomioally consumptive centres in the main, so that
the effect on the nation's productive capacity as a whole may be said to have been
relatively slight.

The Government on their part lost no time in taking the necessary steps to
meet the emergency.

The whole affected regions were at once put under the military

rule with a view to preserve peace and order against pillage or riot.
portation of Government-owned rice from Osaka




The trans-

the requisition and distribution




2

1110'
private debtors having residences or places of business within the desolated zone,

Se with

respect to certain debts incurred un or before September 1 which matured within

the month of September, deferring the payments thereof one month forward.

ds to

bank deposits, the payment of Yaw per day for general purposes and the payment for
the purpose of paying salaries and wages were not covered by the moratorium, with a
view to providing the public with small sums of money for daily needs.

AL)ng with this,

utmost assistance was promised by our Bank in providing bankers with the necessary
currency to cover the payment of deposits.

Not only did our Bank take no advantLge

of the moratorium, but our doors were opened even to those banks hitherto having no
business connections with us and a very lenient attitude was taken in granting credit.
All this proved reassuring, and within a weak from September 8 on all the leading
banks in Tokyo were open again.

kany of the banks did not fully avail themselves of the moratorium, paying
their depositors over the limit prescribed by it.

Withdrawals of deposits also did not

amount to anything so big as had at first been anticipated, and there was nothing very
disquieting about it.

in oraer, however, to cope with the financial situation after

the expiration of the moratorium (Sept. s0), the Government deolared its decision to
make good the loss that might be incurred by the Bank of Japan up to and not exceeding
Z100,000,000 as the result of the Bank's discounting bills payable within
lated zone and other specified pre-moratorium bills.

the deso-

It was contemplated under the

plan that traders and business men who had bills outstanding against them and who
suffered big losses financially in consequence of the catastrophe might be given
respite for two years at the outside in which to readjust their affairs, and banks
that had discounted such bills might be relieved of their funds being tied up.

Now

that the way was open for credit to be extended on pre-moratorium bills and in conjunction with it more liberal terms were offered by our Bank with regard to the ills,-

oounts in general, scepticism and apprehension concerning the outlook was allayed,
although bankers' caution still continued.



Beginning with October 1 the clearings

4

ow*
at the Tokyo Clearing House were resumed, and in connexion with it business in call
likp

loans.

In Osaka and

other centres banks having their headquarters in Tokyo or

Yokohama had their deposits withdrawn more or less.

All communications between this

market having been interrupted, they were temporarily out off the usual channel of
getting supplies of funds.

Banks in Osaka had in turn to look after the needs of

other centres, Tokyo included, and big sums were borrowed from our Branch there.

As time went on things were gradually settling down and extreme uneasiness was dispelled.

But, bankers being more occupied in self-protection, there were very few

offerings of long term loans, although day-to-days were rather in plentiful supply at
low rates.

Our Bank return shows how on the top of the end of month requirements previous to the earthquake banks had been seeking accommodations of our Bank.
250

and discounts inoreased

Our loans

yen in September.

A large part

ceeds of these advances having been left with the Bank in deposits, the increase in
At the beginning of

the note circulation was not very much more than 170 millions.

this month, and because of the emergency advances, loans and discounts had seen a
further increase of some 5) millions, but since then the tendency has been toward
some contraction.

With banks provided with sufficient funds to face any contingencies

and with no new money in demand aside from the immediate daily needs, the situation
it seems has been fully met with for the present.

Sept. 15
;1,361,000,000

Sept. 29
g1,460,000,000

Notre droulation

Aug. 30
X1,287,000,000

Loans and discounts

"

346,000,000

"

506,000,000

"

594,0(0 000

Government deposits

"

386,000,000

"

353,000,000

"

331,000,000

Private deposits

"

"

158,000,000

"

125,000,000

38,000,000

Tokyo Stock Exchange remains closed since the earthquake, the Exchange
building itself having been burnt down.

In Osaka

to

pended for a week as uneasiness prevailed in the market.



Exchange business was susBecause of the more or less







FEDERAL RESERVE BANK
OF NEW YORK

MISC 4.1-120 M-1-20

CORRESPONDENCE
_iovernor .Strol%

OATE____aep_t-la,_1SP3 192SUBJECT:

Yr. i3ever

FROM

I learned to-day from Mr. Hoshino, lkIew Yori: representative of the i.3ank of

Japan, that Mr. Otohi }.o Tchiki, the former Minister of Finance, has been appointed
Governo.r of the i3ank of Japan, and that Governor Inouye has been appointed Minister

of Finance.

So far Mr.Hoehino has been unable to get definite news concerning
'Viscount Shibusawa who is still reported is missing.

I an attaching copies of the bank's cableA as well as your personal

e to Governor Inouye, which went forward last Saturday.




.7"

a

COPT OF CABLEGRAV L1COMING

Osaka
Dated Sept. 9, 1923.
Reo'd Septa°, 1923.
Urgent
Federal Reserve Bank,

New York, V. Y.

Telegram reo.Aved will deliver

our sympathetic mfesacm to our Governor

by quickest means for Which wish to express hearty thanks from my part
and advise all essential parts of Tokyo Office are entirely safe and
business carrioc as usual but buildin,7 partly burtly burnt




Hariaoka

j

;Lei

:

-est

a vie,--c.,




COPY

-Jo
A'

YOhK AU-F.AGY, BANK OF JAPAN

120 Broadway
New York City

September 7, 1923.

Mr.D. h. Barrows, Secretary,
Federal heserve bank of New York,
15 Nassau Street, luew York.
Dear Sir:

tter of SeptembElv
the deep sympathy as
n expressing Erlt
Also, I appreciate
ad Office tc the above




COPY

September ', 1923.

Mr. S. Hoehino,"
New York Reixesentative, Bank of Japan,
120 Broadway, New York.
Dear Sir:

The directors of this bank at their meeting yesterday unanimously
adopted a resolution to the following effect;
"R&SOLVED that the directors of the Federal
Reserve bank of iiew York, greatly shocked at the news of
the tragic disaster which Japan has sustained, nereoy direct
tOe officers to send a cablegram to the Governor of the bank_
of Japan, expressing the deepest sympathy of the directors
of the Federal Reserve Bank of New
the
Bank of Japan any assistance which it may Oe in tne power
of the Federal Reserve Bank of New York to render."

I am also quoting for your information the text of a cablegram dispatched yesterday afternoon:
"ban, of Japan,
Osaka, Japan.

Leptember 5, 1923.
(via Shanghai)

Please deliver following message to Governor Bank of
Japan:
Greatly shocked over news of tragic disaster.
We
wish to express to you the deepest sympathy of our directors
and officers and to offer your institution any assistance in
our power.
Federal Reserve bank of New York."

Trusting; sincerely that you have received oy now reassuring news as

to the safety of your family, i remain




Yours very truly,

D. h. mARKOWS,
Secretary.

DOPY

THE B.

OF Jr'.

TOKYO
Department of Statistics & Research.

August

4, 1923.

our business and financial situations remain essentially the same.
General stagnancy was a: gain the feature in the commodity us well Ls in specu-

lative mrkets in July, with perhaps ;the only exception of rice which shot up
again on reports of damages to the growing crop in consequenoe of continued
unseasonably low temperature and flooding rain -falls, only to recede later on

the advent of more normal weather.

In fact, trade has lately be

In the usual midsummer lull, and course of prices on the whole downward.

sales

of summer apparels have been far behind expectations and the textile industries
are reported to be hard hit, giving occasion for more conservatism as to the
winter goods.

This, together with but a poor demand for export and lower

Amer:loan cotton more recently, affected cotton yarn badly.

Small spinners had

again boon suggesting 30% curtailment of production, but so far in vain.

'eak-

ness prevailed in raw silk also, any new business passing having been at considerable price concessions on the part of the sellers.

Hopes for some im-

provement in iron and steel with the passing of rainy season have been contradicted, buyers being more dispose, to wait.

Stock market has been dull, 4uo-

tations fluctuating only within narrow range.

Foreign trade keeps against us in spite of some increased export of
silk and a general falling off in imports, though the adverse balance of 40

million yen for July compare favourably with 98 millions in the previous
month.

Tile our her: York exchange has remained unohange.A at 49, not an in-

considerable amount of our Bank's holdings of funds abroad has been sold to
serve the purpose of supplying in part the necessary foreign exchange to cover
the adverse trade balances under the existing ban on the export of gold.



In

OOPT
-

this conneotion it may be mentioned that, since in last spring the Oriental
Development Company raised $20,000,000 in New York, much talks of financing
abroad have been given circulation to in view of the stiffening money rates
and growing difficulty of bond issues here in contrast with the conditions
in New York or London markets.

But, they had amounted to no more than mere

rumours until recently, when in succession to the Tokyo Electric Light's flo-

tation of 0,000,000 in late June, the South Manchuria Railway concluded
£4,000,000 loans in London.

The remittance of the proceeds of these loans

will be a factor in the exchange market, though they will be divided into
installments extending to september or early October.

We are not yet free from occasional banking troubles as an aftermath of the economic reaction.

Banking circles at Ragoya and its vicinity

were disturbed for a while, in the latter part of the month, because of apTirehensions aroused among nervous del:ositors '17. the disclosure of difficul-

ties and suspensions of payments on the part of small local banks.
large banks there have been affected.

Even

Big sums were borrowed from our Bank

in meeting the situation, thus enabling them to successfully weather the
storm.

Aside from same outflow of funds, there rLs no noticeable influence

felt on the money market here, although the event served to bring home more
caution and there was an inclination with bankers to put out their funds on
short term.

cerned.

Money was relatively easier so far as the short loans were con-

A rapid return flow of funds that had set in since the turn of the

half year more than enabled the market to psy off large amount that was due
to the Bank, the day-to-days coming dorm to and ruling at below 6 1/2-7
and even as low as 5 1/2-5 3/4 having been quoted.

130,000,000 Government

money was also disbursed in connection with the refunding of the Industrial




COPT
...

3 -

Bank debentures.

The strong undertone of the discounts and long term loans

remain unaltered.

Our Bank return follows:

Leto circulation

June 30.
31,371,000,000

Loans and disco4nts

"

363,000,000

"

167,000,000

"

291,000,000

Government deposits

"

371,000,000

"

363,000,000

"

361,000,000

Private deposits

II

49,000,000
49,000,000

July 14.

31,151,000,000

"

July 31.

11.278,000,000

32,000,000

in connection with the maturing, on sept. 1 of 486,000, 000 Exchequer

Bonds, the Government announced a refunding offering on .august 8 of 180,000,000
7 year b;,., 1.;xchequer Bonds at 6.8% basis, while holders of the original bonds

will be given conversion privilege at 6.9%.
7.hat may perhaps be termed the biggest banking merger thus far here

has been decided upon by 12 banks controlled by the Yasuda family comprising
Yasuda Bank, The Third Bank, The Shinano Bank, The 130th Bank, and others.
It will not be until some time in the fall that all the legal formllitios

necessaryw ill be gone through and the new institution rith an authorized

capital of g150,000,000 will be open to business.




THE BANK OF JAPAN
TOKYO
August 20th, 1923.

Dear Governor Strong,

In writing to you, I have to tender you my heartfelt condolences upon the death of the late President Harding.
It was a great loss to your country and to the world.

He initiated and achieved a long step forward in the advancement of the good will among nations.

The clouds in the

pacific and Far Eastern sky were cleared, thanks largely to
his lofty ideals and efficacious efforts.

Although there

is no doubt that the friendly relations between America and
Japan will continue to grow under your new President, I think
I may tell you that the Japanese people as a whole feel the

passing away of Mr. Harding as a loss of their friend and
share particularly in the sorrow of your countrymen.

It is

to be greatly regretted that he has not lived to see the
ratification of the naval and Pacific treaties.
Many thanks for your hand-written letter from Colorado
Springs.

I knew from your previous correspondence with

Mr. Inouye that you had to refrain from dictating.

It was,

indeed, very kind of you to remember me amidst your difficulties.

I am glad to hear from you that you are now

much better, but I hope you will continue to be careful of
your self.






prepared to aid solvent banks.




Paymentsfreely, which fact assured
and were made rapidly

of the banks concerned, and th

The public seems to have learn
between banks.

Liss Addams had to und

her arrival here and spend mos

We wished to arrange a party f

meet a few leading men and wome

not materialize because of her

1:r. Inouye and other a

and desire me to remember them

With kindest

Benjamin Strong, Esq.,
Federal Reserve Bank,
Hew York City, N. Y.,
U. S. A.

...41114

July 79, 19??,.

Dear 7r. Fukai:

This note will be presented to you by my friend Mr.
Frank E. Noyes of 4ashington, twho is makinf, a. trip around the

iorld somewhat similar to the one which I made two years ago.

I have assured both Mr. and Mrs. Noyes that they will receive
a warm welcome from my friends in Japan, to whom I have given

them letters of introduction.
Anything that you are able to do to facilitate their

trip, or add to its enjoyment, I shall esteem a ;ersonal favor,
and you know hoN great

rleasure it will be to reci-rocsto at

any time.

With cordial regards, believe me,

Faithfully yours,

Eigo Fukai, Esq.,
c/0 bank of Japan,
Tokyo, Japan.




June 22, 1912.

Dear Yr. Fukai:

it as a great pleasure to receive your kind letter of June 12
written from London, and I hasten to reciprocate net only the kind personal
wishes that you send me but also your hopes - in fact I may say our mutual
expectations - that the relations between the Bank. of Japan and the
Federal f.ecerve System will beccac firmer and closer an

mcra intimate.

Personally, 1 would like to see the policy which we have now teen

practicing extended in such ways as may to pssib]e with the banks of issue
in ether important money centers, and I an indeed ,lad to note by what you
write that I may have been somewhat useful in this direction through my
correspondence with you and vith the Governor cf the Bank of England.
You will have learned before this letter arrives of our rate
reduction made yesterday.

Conditions in our money market have developed

such pronounced ease that we felt not only justified but required to make
our rate conform - as we have heretofore - with the obvious situation in
the money market generally.

I am assuming that cur regular reports through your New York Agent
keep you informed of developments in the general business situation with us.
If the reports are not exactly of the character that you need, please do not
hesitate to advise me.

It is very good of you to send me such good advice in regard to
my own health.

I am obliged to to careful and am trying to be so, and the

reward I am glad to say is obvious in my feeling much more vigorous and



June 22, 1922

t

i), much more able to do my share of the work of the bank than I have

for some time.

don't you please accept the same advice for yourself from
me?

I an hoping that by this letter you will convey to Governor
Inouye and to your associates in the bank my warmest regards and good
wishes, all cf mhich I cordially send to you as well.
Believe me, my dear Mr. Fukai,
Very sincerely yours,

Eigo Fukai, Esq.,
c/o Bank of japan,
Tokyo, Japan.
ES. Mill




9, Bishopsgate,
London. E. C. ?.JUN 2 2 1922

12th June, 192i

Dear Governor Strong,

I am going to leave here for home on
I should like to attend the Conference of
the 13th inst.
Central and Reserve Banks in the Autumn; but it is too
long to wait for, and in the meantime I am wanted in Tokio.
Mr. Norman was very courteaus and kind to me, and discussed
I am sure this
very freely matters of mutual interest to us.
is main17 due to your thoughtful introduction, for which I
thank you most heartily.
In Washington, I had very little
But I would feel
to do myself.
Genoa wasA.., disappointment.
gratified if the relations of the Bank of Japan with the
Federal Reserve System of America and the Bank of England
should prove to become firmer and closer, as I hope they
will.
Personally I value as my life-long asset the intimate
contact I had with you in Japan and in New York as well as
through your
the
I was able
Mr. Nagaike is now in London and has told me all
kindness.
about you.
Pray, do not overtax your energy. You will
ultimately serve your country and the world better, by taking
good care of yourself than by trying to do too much at a time.
As I am going home by the Indian Ocean,
I send you these lines with renewed thanks and best wishes.
Believe me, Dear Governor,
Yours faithfully,

Governor Benjamin Strong,
Federal Reserve Bank of New York,




U.

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DELEGATION JAPONAISE

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Form 61

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AND AGREED TO

' AC!r-NOtiVLEDGED
APR 1 1 1922

39

GOVERNOR STRONG FEDERAL RESERVE BANK NY

ON EVE OF DEPARTURE FOR GENOA

ON

I

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TENDER YOU AND

KINDEST REGARDS AND RENEWED THANKS AND

I\U

JAY MY

BEG LEAVE TO SEND YOU

MESSAGE THROUGH NAGAIKE ON MATTER OF OUR CONVERSATIONS FUKAI

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M
GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

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RECEIVED AT
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nless otherwise indicated bg sig nal after the number of words :--"Riue"(Dag Letter)"N .L."(NightLettel)or"Nite (Night Telegram)
STANDARD TIME INDICATED ON THIS MESSAGE.

8

ington D3 Jan 25 22

strong
Marlborough Blenheim

rive there thirsday evening to visit you




Eigo Fukai

DELIVERY NO.

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Jenuary 14, 1922.

Dear

Fukai:

lhile I feel very sure that my asecciates et the office have kept

you informed of the fact of my illness mnd absence from tee office, I still
cannot refrain from sending you this eersore-11

ford of regret that the oppor-

tunity which I had looked forward to for many enjoyable and profitable visits
with you was spoiled by my illness.

I am now at my home; expect to leave next Tednesday for Atlantic
City, whoro I shall b3 for a seek or ten days at the Marlboro-Blenheim Hotel.
from therm to

And there is quite
4ashington or. the ?,8th or 29th of this month.

Tould it be convenient far you to drop M9 a line at Atlantic City
advising whether you expect still to be in Tashington at that time, or, if not,
whether there will still be opportunity for us to hive R visit in ties York after
my return?

You may recall that some time ago I gave your representative in London
a note to my fri'nd Montagu Norman, Governor of the Bank of England.

Since then

I have had some correspondence with him on the subject of the relations which
exist er should be oultivated between other important banks o° issue.

fheee

suggestions naturally relate to the Bank of Japan and I have not felt willing
to write frankly and fully to Governor Norean on the subject without first
havieg a conversation with you.

It is much in my mind that ye can accom-lish results of importance
for the business welfare of our countries by bringing together in clocer associations the managements of th




varieus banks of issue, and I hope that this

January 14, 192?,.

Alb

suggestion, although most indefinite, may be received sym;:athetically by you
and by Governor Inouye.
I cannot conclude this letter without oxi-..ressing my i.,erscnal a:L.rec-

iation of `.he statsmar':ike accomplielmilts either made ooscible, or which

should have been made possible, ae the resu't of the attitude which your repro-

sentativesreemed tc havo consistentl; assumed towards the representatives of
our own Government.

You kn:IN how much this subject is al rays in my mind,

and I am looking forward to opportunity fr:r a chLt ::Ith you in 4ashington or

New York et the very first op;ortunity on this and many matters.
Ifith warTest regards,

Sincerely your friend,

Mr. Fi7o

c/ The Shoreham,
gashington, D.
ES/11119




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..overaber 30, 1921.

71er.r Yr. Fukai:

In sending you the enclosed letters of introduction to Mr. Crissin,1,7er and Senator Hitchw.ck,

iesires Ae to convey hir thanks to you for your
1etLer of Illovenix:,r75, 1.nel to express his regrets in not

teiag able to teknowledge it perecnaaly owing to indis-

eueition, but that he will +trite you at the -.!irst opportunity on hie return t.) the of'ice.

nurz very truly,

Secrettri to Mr. Strong.

Ir. Eigo Fukai,
c/o Shoreham Hotel,
Washington, D. C.
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November 4, '9"i.

Dear Mr. Fukui:_

This ie my first opportunity !o send you - note
welcome to the United .'fates.

1 AM :surer you will L31/6 an

interestiu6 and agreeable experience here, end my one hope
Lhut this great me,Aio; will :levelop constructive resule and
will be a euccess.

At the momeat that i dictate this letter, word reaches
me that Premier 'tiara bac bean assessimi.ted.

ileve the no's.

I can hardly be-

if it should unfortunately prove iD

be ourrect,

will you not accept my sincere expressions of regret that this
calamity coolC hove occurred, and convey the ea,ke to
associates.

y..)tir

V., surely have hope that the world will be spared

such acts of cruelty and faaticieT, and I sm deeply sorry thst
your country hab been called upon to suffer such a misfortune.
With oorciial regards, believe me,
ifery eincoroly yours,

Mr. Lig() Fuaai,

c/o Shoreham Hotel,
Wasningtou. D. C.




October t,t1,

1921.

Dear Mr. Fukai:
It was a great pleasure to receive your letter of September !-9, con-

veying the first news which I bad received of your proposed visit to this
country.

Your letter came while I was ill, having contracted a rather severe

cold in Washington, and immediately upon my recovery I was obliged to return
to Washington to attend a Conference, which detained me for another week; so
that to-day being my first at the office is the earliest opportunity I have
had to write you.
I

am sending the letters of introduction for your use in care of

Mr. Nagaike, together with this letter, as 1 am not certain whether you will

proceed directly to Washington, or whether I shall have the opportunity of
seeing you in New York on your way through.
It is time that,

I

should frankly confess to you that I have been

obliged to be away from the office almost all summer;

A considerable part

of the time in Washington in connection with an investigation of the Federal
Reserve System, which has given us a good deal of trouble.
You are to be here so soon that I shall not attempt a discussion
of what is transpiring here, as I confidently hope

to have the pleasure of

seeing you Shortly after your arrival, and will give you all the news in
person.

With you I am really hopeful that the Conference will be attended
by satisfactory results.

We must bend our energies toward getting matters

right between your country and ours.




It is due to no lack of

right

October 31, 1921.

#2

disposition on the ?art of our respective governments but rather the result of
an unintelligent and uninformed public sentiment that they are not so at the
In every situation of this charoteter benefit results from

?recent moment.

frank face to face discussion which we shall now have the opportunity of having.
In addition to the various letters of introduction which I am Lending
to you, others my apie.our to be of value and you have only to indicate what
you would like to have end I will send them at, once.

Further then that, er ycu knew, Yr. Milee and I are membere of a
little group of men who live together in Waehingten and v.ho are principally
in the verleuF vovernment services.

During your stay in Kaehincton, I am

anxious to entertain you end epee of your aaeocietee ae the house, and will
advise you of perticulere befcre my ne74 trip to the Capitol.
Pleeve be ceeured thot this letter if eepecially intendee to convey
to you a very rum welcome to the United Staeee, and sesuee you of Any desire
to assist

cbject of your miEeion by every means in my power.
Yours sincerely,

Mr.
0/0
120
New

Eigo Fukai,
Bank of Japen,
Broadway,
York City.

BS:MM







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January 21, 1D21

Deer

Fukai:

Your Lind letter of Decemter 14 was awaiting my return, and I received
it the day of my arrival, the fifteenth of this moneh.
Mr. Zeilin6a had already sassed through low York, and I mi ::sec him *nen

in Europe, aE I found it iroesible in my limited time to

et to Ami,tordam.

I am glari to eay that my health seems to be completely restored, no

small part of this desirable result being due to the delightful visit which I

made

to Japan, where new int.erests and environments really got my mind off of the werrie
and anxieties of the cast few years.

After leevinL Japan I seamed to have teen a bird of ill omen, for from
one place to the next I heard nothing but tA168 of 10bisb and bueiness disaster.
Literally my trip around the wori.d seemed to be uron

wsve of depression, if such

a thing exists, and I finally reeched flea York findine much the ease conditions here,
except possibly some little recent encouragement from :core activity in limited
lines of tuelnee:E.

On the whole it Eeeme to me that the banking Hoeition in this country and
of many others as well has been sho,n to be eironger than mk-;ht have been expected

after four years of devaetating warfare, tecauee ee have really survived a tremendous
shock of readjustment with co:operatively few ineuAriel and commercial disasters and
almost no important bank failures.

I am yet too recently at home to give sou any

details of what has been taking place here, but shall do so later.

It was nice tc see Mr. Imamura at our bankers dinner the other nights and
I shall hope Lhortly to have the pleasure of a visit from Mr. Nagaike.

he is much at home at the tank, and my colleagues



Apparently

antici.ate seeing him regulariy.

2

Mr. FUkai

1.21.21

Thank you vary sucL for the photograph, which has safely re,ched Awe,

and I shall shortly semi you one oC mine.

I as hoping also to have 4 p4oLo6raph

of Ur. Inouye.

Mr. Tilos I left behind me in India, as he was not obliged to return hots
as soon ae I

,

and my

on iv ncw in France, t,oing over the ground of his Icaapaignes

there.

With kindest wishes to you, Mr. Inouye, ind ay other friends in the Bank,
and with man, th,-.nkE for the hosiitalitiee you extended to We while in J,kaia, I am,

Very coraially

Eigo Puked, Est,:.,

Tlie Bank of Japan,
Tokyo, J,zrun.

BS.MSb




THE BANK OF JAPAN
TOKYO

December 14th, 1920.

ATTFNDEDTO
Dear Er. Strong,
I believe you will have b e

by the time this letter reaches there.

k'in New York

Er: Zeilinga of the

Java Bank was on a visit here and it was from him that I got
the latest news of you.

I am glad to have heard that he had

found you in excellent spirits.

I hope your journey after Java

has been a continuing success and you will resume your important
duties with fresh energy.

Since you left here, our economic condition has remained
unsettled.

So far there have been no further important fail-

ures, though private liquidations have been and are going on.
Business is stagnant, and money is easy for short transactions,
while financial circles are still generally nervous.

All

these seem to indicate the advent of a period of depression following the acute stage of reaction.

As to the foreign trade,

both imports and exports have dwindled.

The rise in our Ameri-

can exchange and the consequent shipment of gold by exchange banks,

both Japanese and American, are to be accounted for, I think, by
the cancellation on our merchants' part of their contracts for
imports, for which the exchange banks had made provisions; the
realization of profits by some merchants made in their transactions
in foreign markets, especially in respect of cotton and sugar;
and the withdrawal of funds held abroad by shipping and other interests, to meet the need of money at home.



These causes seem

4444441/
gib now nearly to have exhausted themselves.

Besides, our silk ex-

port has virtually stopped, so that the exchange has begun to show
the opposite tendency, and the shipment of gold now seems to be out
of the question.

Mr. Nagaike, our resident officer in New York, has reported
to us of the special facilities given him by your colleagues of the
Federal Reserve Bank.

I believe this is owing to your kind sug-

gestion, and my colleagues and I feel very grateful to you.

As promised, I am sending you under separate cover my photograph recently taken, and am looking forward to the pleasure of
having yours.

I hope your son and Mr. Miles are unchangingly very well.
My wife and daughter are both well and we often talk of you.
is kept as a treasure in our home.

With kindest remembrances and best wishes for a happy
New Year to you all, in which my wife joins me,
I remain,

Yours sincerely,
off,

Mr. Benjamin Strong,

Federal Reserve Bank of New York.




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March (3,

1920.

My dear Mr. Nagaike:

It is a personal ploaEure to convey to you and Mr. Hamaoka
this expression of Mr. Strong's sincere thanks and ai,preciAion of your
courtesy in the matter of nrrfinging for Mr. Mehl's servicer

accommodtions in connection with Mr. Strong's trip to Japan.

alco hotel
I

hft:

written to Mr. Strong about the arrangements that tv..ive Leen made and I know

he will feel greatly plepsed.
Pith renewed. thanks, believe me,

Very truly yours,

Secretary

Xr. A. Na.gaike,

Lank of Japan,
120 Broadway,
New York City.




tr.:.

the Governor.

February 17, n20.

N. Nhgaike, Esq.,
Superintendent, New York Agency, Bank of Japan,
Equitable Building, New York, N. Y.
Der 7:;r. Nhgrike:

Governor Strong whc is awhy from the Bank ht present on a
vc.tion, has written me from the rest thlt he plans taking t. trip through
the Best Including(Java

Japem

in the early .-:art of April.

India, ::eylon, etc. leaving San Fr!.ncieco

The Governor will, of course, take the o-

7.,ortunity of visiting the Head Office of your institution during hie trij:
and hne

asked me to say to you that he will arvciate your sending word

to ycur Head Office to the effect, th,J, he mill visit them erly in Mhy and
also send him 2_ letter of introduction to them from you.

his party mill

include Mr. Br:sil Liles, formerly of our State Deirtmert, and his son,
Benjhmin Strong, Jr., c.nd the Governer is anxious to hhve all letters of
introduction include them.

If you will send me your letter to the Bank of

Jupam which the Governor desires to carry with him, I will see that it is
forwarded to him alon=- with other letters of a similAs nature which me are
procuring.

Assuring you that your corn liance with this re,iuest will be

gretly n: recited, I

be,,, to remain

Very truly yours,

JEC/MK



J. E. Case,
Acting Governor.

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IMPER IA L GOVERNMENT TELEG WHO.

.&Delix.

Ebe Vank of 3apaii
TOKYO.

June 4, 1920.

Benjamin Strong, Esq.,
:.:ateuzaka Eotel,

Lake :akone.

Dear Mr. Strong,

Many thanks for your card.

I am now nearly recovered, but not yet
strong enough to be at the Bank every day
I hope you are having good

regularly.

time over there in Hakone.

Please give

my best wishes to your son and Mr. Miles.
Thanking you for your kindness,

and trusting that you are in the best of
health,




Yours sincerely,

THE BANK OF JAPAN
TOKYO, May 26th, 1920.
Benjamin Strong, Esq.,
Tokyo Station Hotel,
City.

Dear Sir:-

All the party who were present at the official
residence of the Minister of Finance last Saturday are desirous of having the Japanese version of your speech and
ask me earnestly to let them have it.

Tou will oblige me very much if you will be kind
enough to lend me the note of your speech, or otherwise,
if you can spare a quarter of an hour for Mr. Nakaniahi,

to give orally the outline, including figures, etc., of
your speech.




Tours most sincerely,

Economic Research Department,
BANK OF JAPAN.

March 23, 1920.

Dear Mr. Fukai:

I recall with a great deal of pleasure y:ur little
Paris.
visit here at the btik, last year, on your way to

At

of
that time I understood we were to have the or.portunity
that
eeing yoU again, on your way home, and I sincerely regret

another
circumstances made it necesssry for you to return by
route.

since the
Mr. Strong, who has been away from the bank

Japan about the
early part of January, contemplates sailing for
opportunity to
tenth of ATril, and I know he will be glad of the
meet you there.

It will give me pleasure to convey your cordial

trip, which
good wishes to him and his party for an enjoyable

know be is looking forward to with keen interest.




#ith kind remembrances, I NM,
Cordially yours,

J. H. CASE,
Actin& Governor.

Mr. Figo Fukai,
The Bank of Japan, (Nippon GInko),
Tokyo, Japan.

JRC RAB




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the Vank of 3apan
(NIPPON

GINKO)

TOKYO,

..

Feb. 23rd.,

19420,

Dear Mr. Case,

It gave me a great pleasure to meet you in New
York last year on my way to Paris.

I was then wishing

to join you again on my way home; but the Peace Conference
lasted longer than I expected, and I had to sail from Marseilles with our Chief Delegate because I could not secure
my passage the other way in a convenient time.
Now I learn from this Bank's superintendent of
the New York Agency that Mr. Strong is coming out to our
ccuntry.

I did not meet him when I was in New York last

year, as he was then in the country.

This time I am keenly

looking forward to the pleasure of meeting him here.

My

colleagues and I shall be very glad if we could do anything
to make his visit here comfortable and interesting.
hope these lines will reach you before 'fr. Strong's departure,

and you will oblige me by conveying my best wishes to him
and his party.

With Lind remembrances,
Yours sincerely,

Mr. J. Herbert Case,
Deputy-Governor,

Federal Deserve Bank of New York.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102