The currency of Indonesia, the rupiah, has a long history dating back to its colonial period. Due to periods of economic uncertainty and high inflation, the currency has been re-valued several times.
800–1600 Native, Javanese and Chinese money
The first coin-like products found in Indonesia date from the 9th century Buddhist Sailendran dynasty and were produced in Indonesia until the 12th century: gold and silver massa (emas is the modern Indonesian word for "gold"), tahil and kupang, often described with the letter ma for massa or the image of sandalwood flower. Also used in this period were Mutisalah of Lesser Sunda Islands, strings of beads of Indo-Pacific origins, produced by the Sumatran Srivijaya empire, which spread to Borneo, Java and to the eastern Indonesian islands (Maluku Islands) in the 13th century. In the eastern islands those beads are saved as heirlooms until the present, using Chinese-made beads after the defeat of Srivijaya. The Majapahit empire, which became predominant in Java and Sumatra from the late 13th Century, received, with the arrival of Chinese traders, holed copper coins known as cash. These were later mimicked in Indonesia using tin or lead (further reading: Cash coins in Indonesia).
1600–1942 Dutch colonial money
When Europeans began arriving in Indonesia they brought with them gold coins from Portugal and Venice and silver Spanish dollars from Mexico, Peru and Bolivia in the Spanish colonial empire through the Philippines in the Spanish East Indies, the latter becoming the predominant trade coin in the archipelago for several hundred years. The Dutch East India Company was granted a trade monopoly over the Indies in 1600 and under the leadership of Jan Pieterszoon Coen gained effective government over the territory around Batavia on Java, their capital, with an area of influence that increased over time, and which was eventually expanded by Dutch conquest into the 20th century to include nearly all of what is now Indonesia.
The Dutch East India Company in the 17th century imported chiefly silver coin, in the form of Dutch small silver 1, 2, and 6 stuiver coins, as well as the Spanish dollar (the most popular trade coin) and Dutch trade coinage. They helped provide smaller change by selling tin to the cash mints, but generally did not produce or import it themselves.
Due to a lack of tin supply, in 1724 the company began to produce its own copper coins, 'VOC'-branded duit coins, which were minted in six provinces of The Netherlands and imported in vast numbers over the 18th and into the 19th century. There were intermittent efforts at VOC-branded silver coinage, but mostly imported Dutch and Spanish silver, which had a higher value in the Indies, was used. Although most coin was imported, (chiefly) silver and also some gold 'rupee' coins were minted locally in the 18th and early 19th century.
The first bank paper appeared with the formation of the De Bank Courant en Bank van Leening in 1752, and a number of issues were made over the next sixty years, which all tended to lose value over time due to lack of coin to back the paper.
The VOC went bankrupt on 31 December 1799 and the territories were nationalised by the then government, the Batavian Republic, which issued its own duits and made an issue of silver gulden coins in 1802. Duits were minted in large numbers in Surabaya between 1814 and 1840 from silver imported from the Netherlands. In 1854, the Netherlands Indies Guilder/Gulden was decimalised, the duit replaced by the cent and a series of coins from cent up to gulden was issued, all minted in The Netherlands. Larger denominations – , 1 and 2 gulden in silver, and 5 and 10 gulden in gold – were of regular Dutch issue and circulated alongside the lower denominated Indies coinage. This same series of coinage continued to be issued until independence in 1945.
The government put a stop to the inflationary bank paper with an issue of government paper in 1815, withdrawn on 30 June 1861. De Javasche Bank, the central bank of the Netherlands Indies, eventually to become Bank Indonesia, was established in 1828, subject to much stricter regulation than previous banks, and remained solvent.
1942–1949 Japanese invasion, and Indonesian independence – the dawn of hyperinflation in Indonesia The Japanese invasion
In December 1941 the Japanese invaded the Netherlands Indies and by March 1942 occupied most of the colony. On their invasion ships, they brought their own issue of the local money, the gulden. They liquidated the banks, including 'De Javasche Bank' and voided debt obligations. The notes issued by 'De Japansche Regeering' (the Japanese government) would be legal tender from March 1942 (although the existing notes remained valid), with notes printed from 1 cent to 10 gulden, by the new (as of April 1942) circulating bank Nanpo Kaihatsu Ginko.
The Japanese money was supposed to have the same value as the old Dutch money, with the old money to be recalled from use, but the invaders soon printed excessive quantities of money, and it was quickly apparent that hyperinflation was in progress, and hence people hoarded the Dutch money. By the end of the War, the Japanese had caused a massive increase in the paper money supply, which was 230 million gulden pre-war, to several billion post-war. This, plus the actions of the post-war Dutch administration, caused massive inflation and damage to the stability and economy of the country.
As their occupation continued, by 1944 the Japanese had determined that their long-term strategic interests were best furthered by encouraging Indonesian nationalism, and so it issued a second series of notes printed in Indonesian language, the Netherlands Indies roepiah.
Existing stocks of notes remained in use by the new Indonesian government until they had printed their own money in 1946, while the notes actually continued to be printed until early 1946 in parts of Eastern Indonesia (where the Nationalists did not have control), as a temporary measure until the Dutch had re-established their pre-war administration across the scattered islands.
Dutch/Allied re-occupation The Dutch government, which was in exile in London, had been making preparations for the end of the war, whereupon it hoped to regain control over its colony. To do so, in recognition of the fundamentally altered financial conditions under which they would be issued, it was anticipated that a governmental issue would be needed, in view of the weakened position of the private De Javasche Bank, which had previously been issuing banknotes.
The notes were ordered in December 1942, printed in the US by the Security Bank Note Printing Company. The notes were dated 'March 1943' and labelled as 'Nederlandsch-Indische Gouvernementsgulden' printed in Dutch, along with the additional Indonesian text indicating the denomination of the notes and the word 'roepiah'. Denominations were 50 sen to 500 gulden.
At the end of the war, the Allies 'Netherlands Indies Civil Administration' (army), began to retake control of the old East Indies. It began issuing the 1943-dated money (the 'NICA gulden'), starting from 1944 in New Guinea, and subsequently in Maluku and Borneo, both of which were recaptured before the Japanese surrender on 14 August 1945. In areas under NICA control, pre-war Dutch notes were demonetised. Despite the fact that NICA had control over the outer parts of Indonesia, its authority to dictate the value of money was limited by the economic weakness of the administration and of The Netherlands itself. As a compromise NICA re-monetized the pre-war notes of 10 gulden and below, higher-valued notes were not re-issued to reduce the inflationary effect of having the pre-war currency as well as new NICA money in circulation.
After the Japanese surrender the administration was given official control of the institutions of the country by the Allies, and DJB, which had survived the war better than expected, was reincorporated on 10 October 1945.
Although the military action of the Allies in Eastern Indonesia and Kalimantan (Borneo) had introduced the NICA gulden into circulation in those areas, the transition back to Dutch control did not go smoothly in the main islands of Java and Sumatra and Allied military action gained control only over a few coastal enclaves, where Japanese money was used, large quantities of which were in storage by the Japanese.
The 'uang merah' ('red money' (the 10 rupiah note was red, and there may also be a reference to blood, as the money was unpopular with the Indonesian revolutionaries)) faced nationalist opposition to the principle of money issued by the Dutch, exacerbated by the fact that in spite of stated intentions to adopt a less colonial stance post-war, the notes had been printed in Dutch with a large picture of the Dutch Queen Wilhelmina.
When the first NICA money appeared in Java, Sukarno issued an immediate decree, of 2 October 1945, to declare that the NICA notes were illegal.
Lacking the control needed to issue money effectively, the Dutch determined that it would be inadvisable to issue NICA money in the towns of Java and Sumatra and prohibited their import.
With Japanese still acting as local government in Java and Sumatra, it was necessary for NICA to preserve the value of the Japanese money as much as possible, since it was the only means for them to pay the bills incurred in maintaining order. In many cases, the Japanese were instructed to simply print more money, and the amount of Japanese currency in circulation continued to increase rapidly: the Japanese-originated inflation continued with increased pace. By February 1946, 2 billion Japanese money out of 2.5 billion captured in the state printers, had been spent, a vast sum against the entire pre-war circulation of less than 500 million gulden.
Due to the dwindling supplies of money, destruction of the printing plates at the main printers for re-issue, and disquiet amongst European forces at payment in Japanese money, which was losing value constantly, it was finally decided to issue the NICA gulden in Java on 6 March 1946. Pre-war notes of 5 gulden and below only were to retain validity, and the Japanese money was to be exchanged at a rate of 33 to 1.
This action enraged the Indonesians, who imposed a 5-year prison sentence on its use. One army regiment even went as far as to execute people carrying the money, hoisting their bodies in public with the money pinned onto them.
Due to the difficulties associated with using the money, the supply of food and basic goods from the Republican interior was poor, and the NICA money by June 1946 had fallen to a black market value of just 10 of the Japanese money (which was still the preferred money throughout Java), despite Dutch attempts to enforce the rate.
The first Indonesian rupiah – in Java
Although the Republican government was firmly opposed to the use of the Dutch NICA money, seeing its exclusion as an important tool in the fight with the Dutch, the issue of its own money was slightly more considered.
After their 2 October proclamation on NICA money, it declared the next day that Japanese money as well as pre-NICA Dutch money would be legal tender in the Republic, with both holding the same value, despite the greatly inflated quantity of Japanese money circulating, reflecting in part the fact that the Dutch money was no longer backed by gold reserves, the gold having been evacuated in the early part of the war.
The Indonesians had been advised by the British that an issue of Indonesian money would be financial and political suicide, but their resolve was firm. Their first notes, dated 1945, were in preparation when the Indonesian printing works and all the money in it was seized by the Allies (which at this point included in the British, tasked with restoring order) in their successful assault on Jakarta in January 1946.