ON 1 JANUARY 1868 a solemn ceremony was held in Kobe. Present were not only local dignitaries but also representatives of the Japanese government and foreign powers. The festivities were arranged to celebrate the opening of the Port of Hyōgo to foreigners. Concurrent with its opening, a foreign settlement was established through the Arrangements for the Establishment of Foreign Settlement at the Ports of Hiogo and Osaka, signed on 16 May 1867 by the Japanese government and British, French and American representatives, but foreigners were not able to commence building permanent establishments in the settlement until the first auction of lots in September 1868. In actuality, the settlement was not in Hyōgo but in neighbouring Kobe, 3.5 kilometres east of Hyōgo. The reason for locating the settlement outside of Hyōgo was that the population around the Hyōgo harbour was larger so it was hard to find suitable land for the settlement. It was also feared that friction between the foreigners and the Japanese would occur. Thus, the “opening of the Port of Hyōgo” was not the opening of this old and prosperous port itself but an area east of it, which was largely a barren and undesirable sandy waste. Initially foreign ships were not allowed to enter the Osaka harbour and imports came through Kobe. Foreign trade made Kobe expand rapidly. Its population of about 20,000 had doubled by 1874. In 1893, Kobe had grown to a city with a population of over 130,000. In the beginning of the 1890s, trade passing through Kobe had increased to such a degree that Hyōgo harbour became part of Kobe, which had developed into Japan's largest import harbour. It was also partly a modern city. Its brick and stone buildings, with glass windows and painted walls contrasted with traditional Japanese houses. The international character of Kobe was enhanced by the steadily increasing number of foreigners residing there. While numbers in 1868 had been few, by 1874 foreigners in the foreign settlement had grown to no less than 1,016. The number o£ foreigners living in Kobe was in fact larger, however, since foreign citizens were also living outside of the foreign settlement in areas such as “the Hill” north of the settlement.