Japanese International Banking

After the opening of Japanese ports to Western countries in 1859, Japanese foreign trade and trade finance were dominated by Western merchants and banks along with Chinese merchants. The Japanese government encouraged Japanese merchants to conduct business directly with merchants on foreign soil and established government-related banks such as Yokohama Specie Bank, the Bank of Taiwan, and the Bank of Chosen to give foreign finance. Just before the First World War, Japanese merchants traded about a half of the Japanese international trade and Japanese banks also gave about a half of Japanese international trade finance. During the War, non-government-related banks such as Mitsui Bank and Mitsubishi Bank of which main customers were their zaibatsu affiliated trading companies such as Mitsui and Co. and Mitsubishi Corporation began foreign exchange business and foreign banks’ market share dropped significantly because of the wartime control by their home countries. In the 1920s, foreign banks regained some of their lost business but could not take as much share as before the War. After the Great Depression, however, the Japanese government introduced foreign exchange control to reduce trade deficits and activities of non-government-related banks were restricted; therefore, market shares of the Japanese government-related banks increased again.