Some Features of Japan's Economic Position
As the-Financial and Economic situation of Japan is somewhat obscure to many Westerners who are not acquainted with the Far East, it is perhaps useful for me to indicate a number of factors which may easily have escaped the notice of observers in the Western world.
Japan enjoys a very great advantage by reason of the fact that, although she has built up colossal industries within a comparatively short space of time, this expansion has not been accomplished at the sacrifice of her agricultural pursuits. In this way Japan is spared food problems and is practically self-sufficing. Off her shores there are abundant fish supplies, the average annual catch being about 5,200,000 tons ; in other words, some 40 per cent. of the total annual fish catch of the world is within her easy reach. Stock farming has of recent years been successfully developed in the Northern Island and this region is producing supplies of meat, butter and cheese in increasing quantities. No rationing of food is therefore necessary, and in fact the production of butter is not only sufficient for domestic needs, but a certain quantity, small it is true, is being exported for consumption in this country.
Clothing too is not likely to present a problem. The personal stock of clothing is far greater among the Japanese people than among Westerners, largely because the fashion in ladies' clothing does not change in style but rather in colour and material. As a result, in all classes a certain proportion of savings is invested in articles of apparel, and if it were determined to do so, new clothing could easily be dispensed with for four or five years.
Again, though Japan cannot count herself the possessor of rich coal deposits, nevertheless she is fortunate in having ample water power, and the capacity of her water-driven electric generators is still greatly in excess of her extensive industrial requirements.
These advantages, then, Japan has in her favour, but against them must be set an unfavourable trade balance for 1937 which may easily exceed 80o million Yen. Yet this heavy excess of imports, which is generally believed abroad to be attributable to the present conflict, is not in itself a unique phenomenon, nor has it much to do with war. It may be chiefly ascribed, first, to the import of raw materials, such as cotton, wool and oil which has been exceptionally large since December, 1936, chiefly because of speculative purchases in anticipation of a rise in general commodity prices and a stricter exchange control ; and, secondly, because Japan, in the process of her intensive industrialisation is obliged to import new machinery and materials every to to 12 years. At the present time she is entering upon mother stage of expansion in her heavy industries, and Expansion on a very big scale. Consequently, I should not be surprised to see a marked decrease in her imports for 1938. If the conflict continues, an increase in imports in respect of munitions will be expected abroad ; but in so far as war material is concerned, Japan is self-supporting. In short, from battleships and aeroplanes right down to the powder and shot, she can manufacture for herself.
The budget appropriation for the Sino-Japanese conflict which has already passed the Diet amounts to the unprece- lented figure for Japan of Yen 2,50o million. But it must be remembered that in Japan the procedure is quite different from that followed in the Nazi and Fascist countries, and that not even one yen can be taken from the people without the consent of Parliament. There is no secrecy whatsoever in the process. The budget is published and is open to criticism both at home and abroad. About Yen 3,000 million will be raised by way of public loans. It is estimated that the resources of the country's banks, insurance and trust companies total about Yen 20,000 million, and the public issues of the loans to be raised by the Government will be absorbed to a considerable extent by the institutions con- trolled by the big financial groups and the big Banks. A margin over and above the balance remaining for public subscription is constituted by the resources of the mass of the people, and increased prosperity in the armament industry due to larger Government expenditure will result in bigger Post Office and Savings Bank deposits, which deposits ulti- mately become available for the purchase of national loans.
There is no room for doubt that the yen exchange will be maintained at the present rate of is. 2d. Japan's industry has been adjusted to this rate, and any change in it would lead to dislocation of trade. The gold production of Japan is now 160 million yen-annually, and this will be increased up to 200 million yen, which will be credited to the special gold fund, a kind of Exchange Equalisation Fund. It will be utilised for the purpose of maintaining the yen exchange when necessary.
The outstanding balance of Japanese Loans floated abroad, including both Government and Municipal loans, is now about £138 million (L92 million from England, £43 million from America and £3 million from France). Japan has never defaulted or repudiated any loans, whether issued internally or floated abroad, during her history of 2,000 years. It happens, therefore, that, as a result of the confidence assured and the high yield obtainable, quite 6o per cent. of the foreign loans have been acquired by Japanese nationals. It is therefore evident that the nett payment of interest to actual foreign bond holders, is, in practice, less than half the amount which appears to be required on paper.
I should wish to make it clear that the foregoing is a brief outline only of a very large subject, and I have tried to deal with the matter as plainly and simply as space would allow. The only question which I have left untouched is one that must remain so, until time has shown us how far Japan's war-time requirements can be met from her stores, her