Currency Reorganization Project

The Japanese financial adviser Megata had the Korean Empire’s nickel coins and copper cash exchanged for notes of Japan’s Dai-Ichi Bank. Korean merchants and banks were badly hurt and Korea’s finances were tied to Japan.

Megata Tanetarō, who became financial adviser to the Ministry of Finance under the first Japan–Korea Agreement (1904), launched the currency reorganization in July 1905. Citing the inflation caused by the nickel coins (baekdonghwa) the empire had minted freely to cover its deficits, he had them and the old copper cash exchanged for new money issued by Japan’s Dai-Ichi Bank.

Nickel coins were graded A, B and C: only grade A was exchanged at full value, grade B at a lower rate, and grade C not at all. With a short exchange period and little publicity, many Korean merchants lost money, a shortage of cash followed, and Korean traders and banks failed one after another.

The Dai-Ichi Bank acted in effect as Korea’s central bank, and Korean money and finance became subordinate to Japan. Japanese loans brought in by the Residency-General for currency reform and "improvements" reached 13 million won, prompting the National Debt Repayment Movement of 1907.