The Central Bank of Japan was established on May 1, 1924 under the 1924 Law of Central Bank of Japan. The bank was formed from the consolidation between the Osaka-based Bank of Japan, the Nationalist-owned Trade Bank of Kyoto and the independently-operated Workers' Bank. The headquarters of the imperial central bank, Bank of Japan, was located on Chuo, Tokyo which now became the headquarters for the Bank of Kanto. Under the Republican government, the Osaka branch office of Bank of Japan became the headquarters for the Central Bank in 1925. The decision to have the central bank headquarters away from the capital in the Kansai Region was made after the Kanto Region was hit by the earthquake in 1923.
Between 1925 and 1946, the Central Bank of Japan remained the only domestic bank to operate not only as central bank but also as the sole commercial bank in the Republic of Japan. An attempt to reform the banking system was proposed in 1933 to create the state-owned Farmer-Workers' Bank and revive the Bank of Kanto which will operated commercially on its own. The proposal was debated both by the pro-autarky Japanese government and the Nationalist Party before formally turned down following World War II in 1941.
After the war, the Ministry of Finance under Tsushima Juichi proposed another banking reform in 1946 in which the Bank of Kanto will became an independent bank out of the Central Bank. However, before the reform was realized, the cabinet was changed in which Yonai Mitsumasa became the new prime minister in 1946. In 1948, the Liberal-minded Minister of Finance, Ishibashi Tanzan, whose served under the new cabinet proposed even more radical financial reform which ensured the growth of private sectors in Japan.
Ishibashi's plan sought not only to create four independent state-owned banks (the Bank of Kanto, the Bank of Kansai, the Bank of Ezo, the Bank of Taiwan, the Farmers-Workers' Bank), but also to allow the foreign capitals to invest in Japan through joint-stock banks, especially in Karafuto and Taiwan. The banking reform thus served as the pretext for the economic reform in Japan. The reform then was carried in the 1949 Law of National Banking Reform, the 1950 Law of Central Bank of Japan and the 1954 Law of National Economic Development. The Central Bank of Japan thus successfully reformed itself in 1950s under the guidance of Ishibashi and the then-Governor of Central Bank, Ichimada Hisato.
According to its charter, the missions of the Central Bank of Japan are
- Issuance and management of banknotes
- Implementation of monetary policy
- Providing settlement services and ensuring the stability of the financial system
- Treasury and government securities-related operations
- International activities
- Compilation of data, economic analyses and research activities