Money Changer (両替商)

A money changer is a store or merchant who mainly deals with changing money and finance. The Japanese exchange business that first appeared in the Muromachi period was established in the Edo period. It began with stores where "koban" (oval gold coins), "chogin" (silver coins) and copper coins were exchanged for a commission and were traded, that is, changed for other currencies. In the Meiji period and onwards the money changers began to deal with banking business as banks, which are sometimes called "money changers." Outside Japan where cross-border transactions flourished from ancient times, there were many money changers who dealt with foreign money exchange and finance. In modern times the money changer mainly refers to stores and windows at airports that handle foreign money exchange.

Money Changers in the Edo Period

The term "money changer" derives from the fact that a one-ryo gold koban was exchanged for "shoryo" silver coins whose values were determined by equivalent standard weight of silver and which included chogin and "mameitagin" (small silver coins), or for copper coins. Another explanation for its origin is that gold bullion was exchanged for "kochugin" (publicly minted silver coins or chogin) in Ginza (where silver coins were minted, appraised and traded) or that exchanging cupelled and hallmarked silver, i.e., privately minted silver coins, for publicly minted silver coins, was called "nanryogae." The locations of Ginza were often called "Ryogae-cho" (a town of exchange). Around the Kinza (where gold coins were minted, appraised and traded) and Ginza where money changers concentrated, gold and silver were traded. When new coins were cupelled (minted), the money changers collected old coins which they exchanged for new ones instead of the Kinza and Ginza.

Currencies before the Edo Period
Market economy gradually developed from around the Muromachi period, and "toraisen" (Chinese coins) such as Song coins became current. General retail market was traded in zeni (the auxiliary currency) where one zeni was equivalent to one mon (a unit of currency). After several hundred years of circulation, however, some coins were considerably broken, chipped off or worn out. Forged Chinese coins, minted in Japan, were also in currency. These bad quality coins called "bitasen" accounted for a larger part of the currencies in circulation. On the other hand, Eiraku-tsuho coins which were newly imported from Ming China were treated as good currency, with which the practice of "erizeni" (selection of good coins) began.

Mainly in western Japan, large-amount transactions were conducted in "shoryo ginka" or silver coins which were hallmarked pieces of cupelled silver mined from a silver mine and whose real values were determined by their weight (mass). For small-amount transactions, "kirigin" or hallmarked silver cut into smaller pieces was used. This was partly related to the silk trade with Ming China settled in the shoryo silver coins. What was called "Kochogin" (old silver coin) was cupelled silver flattened into bar shapes and hallmarked.

The Provinces of Mutsu and Kai had many gold mines. Large-amount transactions came to be conducted in gold dust according to its weight. Later gold dust was melted and poured into a bamboo tube to make them into bamboo shapes (takenagashikin). Or melted gold dust was hammered into coin shapes called "bankin," which came to be used for transactions. These became later oban (larger gold coins) and koban (smaller gold coins).

In medieval Japan there existed merchants called 'kaesenya' or 'warifuya' who dealt with 'warifu' (tally), a precursor of money order. 'Doso' dealers who were at once warehousers and financiers were also active. As production of gold and silver increased in gold and silver mines across Japan in the (Japanese) Sengoku period, there emerged 'kinya' (gold dealers) and 'ginya' (silver dealers) who refined, appraised and traded in gold and silver bullions brought in by speculators. These money dealers, precursors to the later money changers, came to enter the exchange business after the sanka seido or tri-metallic monetary standard was established, as mentioned below.

Formation of the Sanka (Tri-metallic) Monetary System
Victorious in the Battle of Sekigahara, Ieyasu TOKUGAWA began to reform the monetary system as a first step towards the unification of the country. In 1601 he established the Kinza and Ginza. He gave orders to mint the Keicho koban and Keicho chogin. This is how the Keicho monetary system began. After 35 years, in 1636, the shogunate began to officially mint one-mon copper coins and Kanei-tsuho coins at the time of Iemitsu TOKUGAWA. With this the sanka (tri-metallic, i.e., gold, silver and copper) monetary system was built on the existing system of currency distribution.

Previously, in 1609, the shogunate implemented the following fixed exchange rate: '1 ryo of gold was equal to 50 monme of silver, which was equal to 1 kanmon of Eiraku-tsuho, which was equivalent to 4 kanmon of bitasen.'
Later, in 1700, the rate was revised as '1 ryo of gold was equal to 60 monme of silver, which was equal to 4 kanmon of copper,' and this rate was used for tribute and so on. However, general commercial transactions were conducted at market prices. In reality, one-ryo gold coins, one-monme silver coins and one-mon copper coins were traded at floating rates. In this way the three types of currencies were circulated in the country at the same time, and therefore, cross-currency exchange was required to facilitate the currency transactions. Thus, the exchange business that changed money for a 1 or 2 percentage commission came into existence.

If a customer wants to break a koban into ichibunkin (a quarter of a koban) or tobangin into copper coins, that is, if he wants to change a large currency for smaller ones which are more usable, he had to pay a commission called 'kirichin' which was usually more expensive than one for which small change was converted into a large currency. If, however, a commission for changing smaller currencies for a larger one is higher than one for exchanging a large currency for small ones, it was called 'gyakuuchi' (reverse commission). The reverse commission was often required for the exchange of Nanryonishugin silver or ichibungin silver for kobans.

Thus, gold, silver and copper coins were allowed to freely circulate within a country. Although there was no notion of standard money at the time, each of the three coins, gold, silver and copper, was circulated with a value of nominal standard money, and was traded at floating exchange rates. This was a unique monetary system in world history.

Guilds of Money Changers
Money changers were later divided into 'Honryogae' (main exchangers) who handled changing koban and chogin, i.e., gold and silver, money orders, deposits, lending and credit transactions agency through the issuance of credit bills, and 'Wakiryogae' (subsidiary exchangers) who specialized in copper coinage transactions. Main exchangers formed the 'Honryogae Nakama' (Association of Main Exchangers) in Edo, the 'Junin Ryogae Nakama' (Association of 10 Exchangers) in Osaka, and each agreed on gold exchange rates, etc. Many exchangers had their headquarters in Osaka where honryogae developed, and branches in Edo where many wakiryogae were found, while Kyoto was somewhere between the two. Exchangers also started business in provincial cities, keeping close contact mostly with those in Osaka and contributing to the development of the tri-metallic monetary system. Major customers of honryogae exchangers were limited to feudal lords and powerful merchants who handled large-amount transactions.
The common people such as the merchant class used wakiryogae exchangers or 'zeniya.'
The number of zeniya gradually increased, and they grew so strong as to form a union in the Genroku era. By 1718 they were officially recognized as 'kabunakama' (a merchant guild) with a member population of over 600.

In Edo the money changers were divided into honryogae exchangers (16 people) who handled gold and silver exchange and finance, 'Mikumi Ryogae' (three groups of main exchangers consisting of Group Kanda, Group Mita and Group Seri) specializing in koban, chogin and zenika (copper coins), and 'Bangumi Ryogae' (Nos. 1 to 27) who traded in copper coins. Many mikumi and bangumi exchangers often ran liquor shops or pawnshops.

As has been commonly assumed, a person called Gohei of Tennojiya was the first to start fully-fledged exchange business in Osaka during the Keicho era. He was later followed by Jotoku of Kobashiya and Rokube of Kagiya. They issued bills and actively pursued financial business. Recommended by the Osaka machi-bugyo (town magistrate of Osaka), they became official dealers for the shogunate in 1662. Their number increased to 6 in 1668 and to 10 in 1670 at which point they formed the Junin Ryogae Nakama. They were responsible for cooperating with the shogunate's economic policy and supervised the other exchangers. They had rights to decide on exchange markets. Credit transactions made through bills issued by exchangers were indispensable for large-amount transactions in chogin and tobangin which required the cumbersome valuation of silver by weight. They occasionally involved frauds, which the shogunate had the Osaka machi-bugyo police. Independently of the Junin Ryogae, wakiryogae exchangers in Osaka formed two nakama-soshiki unions, the Sango Zeniya Nakama (Union of Copper Exchangers in Sango, i.e., Group Kita, Group Minami and Group Tenman) and the Minami Nakama Ryogae (Union of Exchangers in Minami).

A position called 'Kakeya' in domain was in charge of procuring goods, managing the proceeds from selling rice collected as annual taxes, transferring money to the countries and lords' residences, and 'daimyo-gashi' or lending money to feudal lords in case of fund shortage, and powerful exchangers were often appointed as kakeya.

Exchange Balances

Chogin and mameitagin silver coins whose values were determined by weight required weight measurements at each transaction. A balance called 'ginbakari' was used for small amount transactions in mameitagin silver coins. For large-amount transactions, chogin and mameitagin silver coins were put together to make a packet called 'tsutsumigin,' each of which was worth 1 silver coin, i.e., 43 monme of silver, or 500 monme of silver. A large balance for exchange known as 'hariguchi tenbin' was used to weigh the tsutsumigin packets. Koban and chogin were hallmarked after their gold or silver contents were appraised. Many of these coins were hallmarked by the Kinza and Ginza as well as money changers. This gives a glimpse of the situation at the time in which coinage was circulated on the exchangers' credit.

The balances allowed to be used for this type of exchange were those produced by Hakariza in Kyoto that received a hereditary privilege in 1653. The family of Shirobei GOTO whose profession was metal carving and who was granted a hereditary privilege in 1661 was the only authorized maker of the counterbalances. The use of the counterbalances other than those made by Shirobei GOTO was strictly forbidden to prevent fraud. Monme as the unit of weight was therefore kept homogeneous throughout the Edo period. The family of Shozaburo GOTO who consistently undertook to produce oban coinage issued by the Toyotomi family through the Tokugawa family was a branch of the Shirobei GOTO family.

Money Changers outside Japan

Similar money changers existed in courtiers other than Japan. Rather, in Europe, Islamic world and China where currencies frequently came to and went from the countries through land and sea traffic, the records of money changers' activities predated those of the Japanese counterpart's.

Europe

In the ancient Mediterranean world the Phoenicians assumed the role of a money changer. Then, in the cities of ancient Greece and Rome money changers emerged. Besides exchanging foreign currencies for domestic currencies or vice versa, they handled money transfer and lending. In the Middle Ages an inflow of currencies from the East continued although commerce declined in Europe. In the 10th century the money changer played a more important role as the commercial network was rebuilt between Europe and remote places. In France the money changers and gold- and silversmiths were gathered around the Grand-pont in 1141. They were forbidden to do business outside the area so that their activities were controlled. That is why the bridge came to be called the Pont de Change (the Bridge of Exchange). At about the same time city states in northern Italy began to issue their own currencies, giving rise to the money changer who changed a city's currency for another's. The money changers installed a platform called "banco" on which they weighed or exchanged currencies. This word "banco" seems to have been the origin of the term "bank" which later assumed the meaning of 'bank' as financial establishment. Italian money changers went to more economically advanced areas or major cities in Europe such as England, Flanders and Champagne. They created the matrix of the later banking business, collecting tithes and providing transit and money transfer services. The Fugger family in South Germany and the Medici family in North Italy are the typical examples of the money changers who later became bankers. In late medieval times, money changers appeared in the Flanders, Catalonia and Switzerland. Those who had survived fierce competition advanced into banking. In the Age of Exploration, the financial center gradually shifted from North Italy which was on the decline, failing to catch up with the volatile economy, to London, the capital of England. London had since been the center of world economy and finance up to the 20th century. In Europe Mark (the Evangelist) has been venerated as the guardian saint of the money changers.
Islamic World
As the caliphate expanded, regional trade flourished in addition to the traditional intermediate trade between Europe and Asia. A commercial network was established between Baghdad, Basra and Alexandria. The gold dinar and the silver dirham were leading coins. Bullions and ingot currencies which came from other regions were used as currencies. In the 9th century money changers called 'sarraf' came into being to facilitate the exchange of such foreign currencies. Subsequently, they made sealed packets of ingot currencies such as small pieces of silver, gave them certain monetary value and circulated them. They also handled bills. Money dealers called 'jahbadh' changed the currencies and bullions collected in various places as taxes into the official currencies, which they delivered to the government.
China
In China a unified monetary policy based on copper coinage had been implemented since earlier times. However, the partition of the nation and the chronic shortage of copper led to the usage of light coins including gold, silver or silk as substitutes. Money changers called 金銀鋪 (dealers of gold and silver coins) and 兌房 (dealers of copper coins) came into existence under the Tang and the Song Dynasty. At first they produced and sold gold and silver work, and later began to appraise gold and silver and undertook to hold them in safekeeping as requested by their clientele. This developed into exchange and deposit operations. They issued and underwrote flying cash and jiaozi bills under the Song dynasty. Under the Ming Dynasty and onwards, silver sycee were circulated alongside the copper coinage. Money changers, known as 銭荘 (Qian-zhuang) or 銀楼, who specialized in exchange between silver sycee and copper coins appeared.
Banks
Most of the present Japanese banks derived from money changers in the Edo period. The map symbol for the bank is drawn from the shape of a counterbalance used by the money changer in the Edo period.
For more information, please refer to the section on 'Bank.'
Foreign Exchange Dealers
A money changer is a window or store at an airport that exchanges the currency of one country for that of another at exchange rates on behalf of those who leave or arrive at the country for a commission. In former times only the authorized foreign exchange banks were allowed to handle foreign exchange and foreign money exchange in Japan. After 'The Foreign Exchange and Foreign Trade Law' was revised in April 1998, the former restriction was lifted, enabling any commercial company to deal with foreign exchange and foreign money exchange. While banks and exchange bureaus at airports mainly handle foreign money exchange in Japan, foreign exchange dealers are also found in major cities and sightseeing spots outside Japan. In some countries the travellers need to exchange money at an authorized foreign exchange dealer to obtain a certificate of exchange when they enter the countries. In failing to do so, they may not be able to change surplus money back into their own currencies when they leave the countries.