The
Japan–Korea Treaty of 1876 opened a period during which Japan enjoyed a near-monopoly on Korea's overseas trade, as the country's trade with Japan expanded dramatically while its trade with China collapsed. Dai-Ichi rapidly seized that opportunity and secured a dominant position in the country’s financial sector, thanks to Japanese Finance Ministry protection. It opened a first Korean branch in
Busan in June 1878, for which the Japanese government lent it half of the 100,000 yen needed for start-up expenses. This episode has been described as the starting point both of Japanese-Korean financial relations and of modern banking in Korea. Further branches followed in
Wonsan (May 1880),
Incheon (November 1882),
Seoul (1888),
Mokpo (1898), and
Chinnampo and
Gunsan (1903). Tariffs were not specified in the 1876 treaty and were only agreed upon in 1883. On that occasion
Paul Georg von Möllendorff, a German adviser to the Korean royal court, negotiated a $24,000 loan (denominated in
Mexican silver dollars) from Dai-Ichi National Bank to finance the setup costs of the Korean Customs Service, which was collateralized with future tariff revenue. That same year, Dai-Ichi Bank received permission from the Japanese government that its bills be used to pay for customs duties in Korea's open ports. In February 1884, Dai-ichi Bank and von Möllendorff agreed that the bank's branches would collect all local customs duties on behalf of the
Joseon dynasty government. Dai-Ichi Bank's $24,000 loan to the Korean government was disbursed simultaneously; it was followed by a second loan in January 1895 and a third in March 1900. In May 1886, Dai-Ichi Bank secured funding from the newly established Bank of Japan to collect
gold and
silver in Korea for the benefit of Japan, which at the time still lacked sources of precious metals. Purchases of gold became an important component of Dai-Ichi Bank's Korean business, with yearly volumes fluctuating between 2,400 and 3,600 tons between 1901 and 1907. Towards the end of the 19th century, Dai-Ichi Bank's near-monopoly on banking activities in Korea had been eroded by the belated entry of other Japanese banks, such as the
Eighteenth Bank from 1890 onwards, and also by the gradual appearance of homegrown Korean banks such as
Hanseong Bank, established in 1897. Instead, Dai-Ichi Bank played an increasingly central role in the reform of Korea's monetary system, for which the Korean government became acutely dependent on Japanese actions.. In mid-1898, Shibusawa traveled to Korea to negotiate the revocation of an earlier prohibition by the newly proclaimed
Korean Empire of using stamped silver yen coins that had become important for the bank's business. At the turn of the century, Dai-Ichi Bank started to issue sight bills to facilitate its collection of customs duties, and in October 1901 applied for permission from the Japanese Finance Ministry for its Korean branches to issue yen-denominated banknotes, which the ministry granted in May 1902. Meanwhile, Dai-Ichi Bank remained the dominant financier of the Korean government, despite
Emperor Gojong's attempt to foster an alternative system with the foundation of
Daehan Cheon-il Bank in early 1899. In the autumn of 1900, difficult loan negotiations with the Korean government required another trip to Korea by Shibusawa; Dai-Ichi Bank made more loans to the Korean Empire in the early 1900s. In total, the share of Korea in the bank's total loan book rose from 2 percent in 1879 to over 15 percent by in 1905, and its share of Dai-Ichi Bank's total profits reached 29 percent in 1905. Attempts by the embattled Korean state to resist Dai-Ichi's monetary role in Korea proved futile, and crumbled as the
Russo-Japanese War resulted in the elimination of the last check against Japanese dominant influence in the country. In early 1903, officials in the Korean capital attempted to prohibit the use by Koreans of Dai-Ichi's banknotes, but had to rescind the order after a fortnight. In January 1905, the Korean authorities conceded unlimited circulation of Dai-Ichi banknotes in exchange for another loan, which practically designated Dai-Ichi Bank as the
central bank of the Korean Empire. Dai-Ichi's banknote issuance expanded rapidly, from a total under 5 million years over the three years 1902–1904 to over 8 million in 1905 alone, then gradually increasing to reach nearly 12 million yen in 1909. Following the
Japan–Korea Treaty of 1905 which reduced the Korean Empire to a Japanese protectorate, the dominant status of Dai-Ichi Bank in Korea became a matter of renewed debate, this time among Japanese. In August 1907, Japan's Resident-General
Itō Hirobumi and Shibusawa agreed that Dai-Ichi's operations should be eventually transferred to a dedicated central bank for the territory. A debate ensued between Itō and the Japanese finance ministry, with the latter favoring the creation of a Korean branch of the Bank of Japan over that of a stand-alone colonial institution over which Tokyo would have less direct control. Eventually Itō's position won the debate, and the finance ministry rationalized the decision as preferable to preserve financial stability. The new institution, originally named the Bank of Korea (, ), was created by Japanese law of July 1909, largely modelled on the
Bank of Taiwan (est. 1898) but with a greater role for Itō in its governance than in the Taiwanese precedent. Dai-Ichi Bank kept branches in Seoul and Busan but later in 1909 transferred all its other Korean branches and offices to the Bank of Korea, totalling 220 regular employees and 121 support staff, in Chinnampo, Gunsan, Incheon, Mokpo and Wonsan (see above) plus those established in the meantime in
Daegu,
Hamhung,
Kaesong,
Kyongsong,
Masan,
Pyongyang,
Songjin, and across the
Yalu River in
Andong. The transfer also included the new building initially planned by Dai-Ichi Bank for itself in Seoul, then still under construction and which became the
Bank of Korea's head office. Following the
Japan–Korea Treaty of 1910 and full annexation, the Bank of Korea was renamed the
Bank of Chōsen in 1911. It was the direct predecessor of today's
Bank of Korea. Overall, Dai-Ichi Bank's actions in the three decades following its first Busan establishment in 1878 have led to its depiction as the "primary agent of Japanese financial imperialism" in Korea. ==Later developments==