The author is deeply grateful to Ms. M. Hori for helpful comments and suggestions.

¹ Korea had borne a state-controlled trade relation with Tokugawa Japan (and China). This relation was dissolved by the fall of the Tokugawa government, and Korea closed her door to the Meiji government as well as to Western Powers.

² For the traditional type of commerce and merchants, see, for instance, Kang, Man-gil, Choseon-hugi Sangop Chabon ui Paldal (Development of Commerce in the Late Yi Dynasty) (Seoul: Korea University Press, 1974)Google Scholar, and Yu, Won-dong, ‘Korean Markets and Peddlers,’ International Cultural Foundation ed., Econonic Life in Korea (Seoul: The Sisa-yong-osa Publishing Company, 1982).Google Scholar

³ A brief review of the traditional financial institutions is given in Suzuki, T., Chosen Kin-yu ron Jukko (Ten Lectures on Korea's Financial Affairs) (Seoul: Teikoku Chiho Gyosei Gakkai, 1940), ch. 4.Google Scholar

⁴ For an economic analysis of the kei system, see, Campbell, Colin D. and Ahn, Chung Shick, ‘Keys and Mujins—Financial Intermediaries in South Korea,’ Economic Development and Cultural Change 11 (1) (10 1962), pp. 55–68.CrossRefGoogle Scholar

⁵ It contained one yen silver coins, the Bank of Japan notes, and Mexican dollars. Furthermore, Russian roubles and Chinese silver coins were found near the Russian and Chinese borders.

⁶ In the early period of the Yi Dynasty paper money was issued by the government. But it did not circulate widely and the issuing of paper money did not happen thereafter. For a history of currency in Korea, see Won, Yu-han, Choseon-hugi Hwapye-sa Yeongu (Study of History of Currency in the Late Yi Dynasty Period) (Seoul: Hanguk Yeongu Won, 1975)Google Scholar, ‘Development of Korean Money,’ Economic Life in Korea.

⁷ For more details of the Mekata reform, refer to Takashima, M., Chosen ni-okeru Shokuminchi Kin-yu no Tenkai (History of Colonial Finances in Korea) (Tokyo: Ohara Shinsei-sha, 1978).Google Scholar

⁸ The money stocks here include all those held by the government, banks and public in Korea so that adjustments for subtracting interbank deposits and bank notes held by banks have not been made. This is because data deficiency has not allowed us to do so. Nevertheless, the share of the banks in holdings of cash currency and deposit money does not seem to have been large even in the earlier period.

⁹ Mizoguchi, Toshiyuki and Nojima, Noriyuki, ‘Kyu-nihon Teikoku no Kokunai Soseisan to Soshishutsu no Suikei’ (Estimates of GDP and GDE in the Japanese Empire), Umemura, Mataji (ed.), Kyu-nihon Teikoku no Suryo Keizaishi-teki Bunseki (Quantitative Analyses of Economic History of the Japanese Empire) (Tokyo: Institute of Economic Research, Hitotsubashi University, 03 1981).Google Scholar

¹⁰ See, for instance, Okazaki, Tomitsu, Chosen Kin-yu oyobi Sangyo Seisaku (Monetary and Industrial Policy in Korea) (Tokyo: Dobunkan, 1911), p. 139.Google Scholar This fact is observed in other underdeveloped countries as well. See, Wai, U Tun, Economic Essays on Developing Countries (Holland: Sijhoff and Noordhoff, 1980), ch. 6.Google Scholar

¹¹ In 1930, the number of the kashikin-gyosha totalled 11, 583 (Japanese 3,384, Koreans 8,165 and foreigners 34). Saito, Seiji, Chosen ni okeru Shomin Kin-yu (Finance for Commoners in Korea) (Seoul, Chosen Kin-yu Kumiai Rengokai, 1931), p. 55.Google Scholar

¹² Average loans per borrower made by the kashikin-gyosha and pawnbrokers were 137 yen and 5 yen respectively in 1930, and those made by local governments to Korean peasants for helping their on- and off-farm business were 20 yen in the same year (Saito, S., Chosen ni okeru Shomin Kin-yu, pp. 29, 56, and 69Google Scholar). This fact suggests that the kashikin-gyosha were on average much larger in operation size than the institutions serving poor peasants.

¹³ It should be admitted, however, that there seems to have been some influence of the development of banks on the shijo-gashi money markets, for it was reported that the extraordinarily high rates of interest tended to be charged less often on the shijo-gashi as time went on. See Zensho, Eisuke, Chosen no Shijo (Markets in Korea) (Seoul: the Government-General of Korea, 1924), pp. 61–74.Google Scholar

¹⁴ In 1906, fourteen different banks carried on their business in Korea. Out of them, six were special banks (Agricultural and Industrial Banks) and three were local private banks sponsored by Korean capitalists and the rest were Japanese banks, i.e., banks making advances from Japan. The numbers of banks including the Bank of Chosen in the country since then were 22 in 1915, 20 in 1931 and tain 1940. For a detailed history of the banking business in Korea, see Koh, Sung-je, Shokuminchi Kin-yu Seisaku no Shiteki Bunseki (Historical Analysis of the Colonial Monetary Policy) (Tokyo: Ochanomizu Shobo, 1972)Google Scholar, and Kenkyukai, Chosen Shiryo, Chosen Kindai Shiryo Kenkyu Shusei (Collected Records of Modern Korea), no. 4 (Tokyo: Yuho Kyokai, 1961).Google Scholar

¹⁵ Koh, Sung-ju, ‘Tairiku Seisaku no Tenkai Katei ni okeru Chosen Ginko no Yakuwari’ (The Role of the Bank of Chosen in the Development Process of the Japanese Policy in China), Shakai Keizai Shigaku, 37 (4) (04 1971), pp. 21–42.Google Scholar

¹⁶ The share of the formal sources in total agricultural credit in Japan rose from 7.2% in 1888 to 35.7% in 1911 to 47.3% in 1932 (Teranishi, Juro, Nihon no Keizai Hatten to Kin-yu (Japan's Economic Development and Finances) (Tokyo: Iwanami Shoten, 1982), p. 267, Table 4–9).Google Scholar

¹⁷ According to another estimate, the share of the informal sources in 1931/32 was computed at 26%, slightly higher than the figure given in Table 1 (Saito, Seiji, ‘Noka no Ko-risai to Kin-yu Kumiai no Yakuwari’ (The role of Kin-yu Kumiai in Mitigating the Problem of Farm Indebtedness), Kin-yu Kumiai, 47 (09 1932), pp. 36–7).Google Scholar

¹⁸ See Teranishi, , Nihon no Keizai Hatten, p. 268.Google Scholar

¹⁹ As a parent bank of Kin-yu Kumiai, Kin-yu Kumiai Rengokai was set up in 1918, in each of the thirteen do, and Chosen Kin-yu Kumiai Rengokai was a reorganized institution of Kin-yu Kumiai Rengokai (reorganization took place in 1933). Chosen Kin-yu Kumiai Rengokai issued bonds in Japan, thus functioning as an intermediary to introduce funds from Japan into Korea.

²⁰ The balances of deposits and credit for Kin-yu Kumiai in the selected years were as follows:

Source: The Government-General, Statistical Yearbook, each issue.

The customers of Kin-yu Kumiai were for the most part the Koreans. The vigorous savings campaign which government organized in order to help finance war against China was responsible for the large increase in deposits between 1935 and 1940.

²¹ Based upon the report written by Matsuda, Kozo, Chosen Keisho Chusei Kogendo Ryoko Kiji (A Diary of a Traveller over Kyongsang, Chungchong, and Kangwon-do in Korea) (Pusan: Pusan Chambers of Commerce, 1888), p. 238.Google Scholar

²² Correspondingly, the government made much effort to organize the irrigation cooperatives, for there had to be efficient investment units along with supply of funds in the economy, in order to push domestic capital formation.

²³ The character of the Japanese immigrants is examined in Kimura, Mitsuhiko, Industrialization in Korea Before World War Two, Discussion paper, Faculty of Economics, Osaka University, 1980.Google Scholar

²⁴ The importance of the government savings campaign in less developed countries suffering from capital shortage has been emphasized by many economists (for instance, see Lewis, W. Arthur, The Theory of Economic Growth (London: George Allen and Unwin, 1955) PP. 229–30) The Japanese Empire's experience aptly illustrates the point.Google Scholar

²⁵ The postal saving deposits collected in Korea were sent to Japan and put in the accounts of the Deposit Bureau in the Ministry of Finance.

²⁶ It should be noted that this tendency did not apply to the period after the late 1930s, when the amounts of deposits with the formal financial institutions in Korea materially increased owing to the government savings campaign and, correspondingly, the outflow of funds to Japan through these institutions increased. For estimates on balance of payments of Korea in the colonial period, see Yamazawa, Ippei and Yamamoto, Yuzo, Trade and Balance of Payments, Estimates of Long-term Economic Statistics of Japan since 1868, no. 14, ed. by Ohkawa, K., Shinohara, M. and Umemura, M. (Tokyo: Toyo Keizai Shinposha, 1979).Google Scholar

²⁷ Such kinds of the paektonghua as characterized by poor fineness, most of which had been hoarded by the Korean citizens, were declared to be invalid by the Mekata reform. For a discussion of the chaos resulting from the Mekata reform, see Kang, Doek-sang, ‘Chosen Kahei Seiri Jigyo ni kansuru Kenkyu Noto’ (A Note on the Monetary Reform in Korea), Sundai Shigaku, 17 (1965), pp. 118–39.Google Scholar

²⁸ McKinnon, Ronald I., Money and Capital in Economic Development (Washington, D.C.: The Brookings Institution, 1973), pp. 105–11.Google Scholar