Consolidation
Although the former daimyo had become government employees, they still retained a measure of military and fiscal independence, and enjoyed the customary veneration of their former subjects. This was considered an increasing threat to central authority by Ōkubo Toshimichi and other members of the new Meiji oligarchy, especially with the large number of ex-samurai revolts occurring around the country. In August 1871, Okubo, assisted by Saigō Takamori, Kido Takayoshi, Iwakura Tomomi and Yamagata Aritomo forced through an Imperial Edict which reorganized the 261 surviving ex-feudal domains into three urban prefectures (fu) and 302 prefectures (ken). The number was then reduced through consolidation the following year to three urban prefectures and 72 prefectures, and to the present three urban prefectures and 44 prefectures by 1888.
The central government accomplished this reorganization by promising the former daimyo a generous stipend, absorbing the domain's debts, and promising to convert the domain currency (hansatsu) to the new national currency at face value. The central treasury proved unable to support such generosity, so in 1874, the ex-daimyo stipend was transformed into government bonds with a face value equivalent to five years' worth of stipends, and paying five percent interest per year.
Makino Nobuaki, a student member of the Iwakura Mission, was to remark in his memoirs: Together with the abolition of the han system, dispatching the Iwakura Mission to America and Europe must be cited as the most important events that built the foundation of our state after the Restoration.
Read more about this topic: Abolition Of The Han System