The monetary policy in the Netherlands East Indies under the Japanese administration

Abstract

The authorized value of the military notes was on a parity with both former legal tender.5 On 6 December 1941, it was estimated that the number of notes issued by the Javasche Bank had an approximate value of 316 million guilders,6 which meant that the issue of military notes substantially increased the cash supply in the Netherlands Indies. [...]the logical consequence of the issue of the military notes was the triggering off of a rash of inflation, which afflicted Java and Sumatra in particular, but did not leave the other areas unscathed. Java was the economic heartland of the Netherlands Indies and there were more than ten banks concentrated in Java, especially in Batavia and Surabaya. Besides the banks just mentioned, we should add names as the Plantation Bank, the Amsterdam Commercial Union, the Netherlands Indies Mortgage Bank, the Java Mortgage Bank, the Post Office Savings Bank to the list. The Java Gunseikanbu considered these banks to be enemy banks and therefore marked for liquidation. Besides the large banks mentioned above, there were other, smaller Chinese banks in Java including the Batavia Bank, the Oei Tiong Ham Bank which had its head office in Semarang, the Hua Tong Bank in Java, and the Hua Qiao Bank (Overseas Chinese Bank) of which the head office was located in Singapore.10 Before the outbreak of the Pacific War there were four Japanese banks in Java, namely: the Yokohama Specie Bank (YSB), the Taiwan Bank, the Mitsui Bank, and the China and Southern Bank.1'The YSB and the 9 Java Military Administration, Financial Bureau, Tochi kison kikan oyobi korera ni taisuru sochi hoshin gaiyo' [Outline of policy measures for existing financial institutions in this area], 5 April 1942. [...]paradoxically, the law authorized not only the issue of banknotes, but also the issue of bank debentures, because the SDB was in fact restricted to raising funds in Japan and in principle foreign exchange transactions were prohibited.