31 JULY 1936, Page 14


Commonwealth and Foreign


JAPAN today is fighting a desperate battle to maintain her place in the industrial and commercial sun. Two recent developments, the outbreak of a formal trade-war with Australia and the marked slowing up in the Japanese export figures, indicate that a hard struggle will be necessary to retain the striking gains which •- Made in Japan " pro- ducts have been registering on foreign markets ever since 1931.

Foreign "trade is a most important branch of Japan's economy. The Island Empire is completely or very largely deficient in some of the basic raw materials on which its industrial life is based and which are indispensable from the standpoint of national defence—a consideration that is never overlooked in Japan. • Among these are cotton, wool, rubber and oil. Inasmuch as the country's receipts from such sources as oversea investment and shipping are limited, the chief means of paying for essential imports is with exports.

Moreover, industrialisation, with its attendant expansion of the shipping, transportation and distributive services, has seemed to represent the most hopeful solution of Japan's problem of population, which becomes more serious every year, with the annual increment of one million,. with the rural districts congested to the last degree and with slight possibilities of emigration.

The cause of the outbreak of the trade war between Japan and Australia was the action of the latter Government. in sharply raising its customs duties on non-British goods. Under the new regulations Japanese rayon goods and cotton textiles were subjected to levies which, in the opinion. of Japanese exporters, are prohibitive. Moreover a licensing system, not imposed in the case of British goods, has been introduced for many commodities which Japan sells to Australia.

The Japanese reply to the Australian measures was to invoke the so-called Trade Protection Act, which is framed with a view to economic reprisals. Henceforward licences will be required. from importers of Australian goods, while a supplementary duty of 50 .per cent. will be levied on such Australian products as are purchased. Japan considers itself in a strong economic position in relation to Australia because the balance of trade between the two countries is heavily in Australia's favour. Japanese purchases in Australia. in 1935 were valued at about 235,000,000 yen (approximately 13,500,000 pounds sterling), while sales to Australia amounted to only 75,000,000 yen. Three per cent. of Japan's exports go to Australia, 9 per cent. of Australia's to Japan.

The main item in the trade between the two countries is Australian wool, of which Japan normally takes about 30 per cent. One of the measures on which Japan is reckoning as a means of pressure on the Australian Government to modify or rescind its tariff increases, is a substantial curtailment in the purchases of wool. It is realised here that Australian wool cannot be dispensed with altogether ; but it is hoped that the amount of this import may be reduced by one-third or two-thirds.

An interesting question which arises in this connexion is whether Australia or Japan will suffer more from an interruption of the wool trade. Japan has a flourishing and growing woollen industry. Alternative sources of wool- supply, such as South Africa and South America, are much more expensive. Two suggestions have been much dis- cussed by Japanese officials and industrialists : that sheep- breeding should be expanded in Japan and Manchoukuo and that staple fibre should be utilised as a substitute • for wool.

Japan at the present time is virtually a sheepless country. The extremely close settlement on the land and the presence on the hillsides of bamboo-grass, which is hard to eradiz sate and cuts the sheep's tongues, make it improbable that any great supply of wool can ever be raised at home. The Mongolian provinces of Manchoukuo are natural pastures for sheep and cattle. But the Mongols have developed- a shaggy type of sheep, the wool of which is of little value for industrial purposes ; and efforts to change the breed have thus far met with little success. And whether staple fibre will be as satisfactory a substitute for wool as rayon has been for silk remains an open question.

Despite these considerations Japan felt compelled to take some pronounced action against Australia as a sort of defen- sive gesture on behalf of its export trade. Australia is very far from being the sole country which is imposing restrictions On imports of Japanese goods. The Australian- action occurred simultaneously with the announcement 'of a forty- two per cent. increase in the American tariff on Japanese textiles.

Mr. Otokichi Shoji, President of the Japan, Spinners' Association and a prominent textile industrialist,• recently published the results of a survey which his association under- took of the restrictive measures which are in force in various parts of the world against Japanese cotton cloth. The - survey revealed restrictions of the most varied kinds, quotas, special tariffs, duties to compensate for the . depreciated Japanese exchange in lands as far removed as Haiti and the Dutch East Indies, South Africa and Ecuador. It is estimated that of some ninety markets in the world more than sixty have imposed some special restrictions on Japanese textiles.

That these restrictions are bearing fruit is evident from the fact that Japan's sales of textiles in foreign markets declined by 25,000,000 yen during the first six months of 1936, compared with the corresponding period in 1935. For several years Japan has been sweeping ahead steadily in foreign markets, as a result of a combination of favourable circumtances, some of which are permanent, while others may he temporary. Among these circumstances one may mention cheap labour, an exchange rate more depreciated than that of any other large power, a high degree of rationalisation in many industries, and close co-operation between manufacturers,, exporters, bankers and shippers.

But now the counter-measures 'which Japan's advance has aroused are obviously taking effect ; and there has been a good deal of anxious comment in the Japanese Press on the significance of the foreign trade figures for the firstlrix months of 1936, which have just been made public: Exports, valued at 1,263,000,000 yen, showed a gain of only 3.4 per cent: over the first half of 1935; while imports, at 1,578,000,000 yen, increased by 11.5 per cent. The gain for the first half of 1935, by comparison with the first six months of 1934, -was 17.2 per cent.

The distinct retardation of the pace of Japan's 'exports, which more than doubled in yen value between 1931 and 1935, has elicited several interesting reactions: It has stimulated the desire of Government departments, especirillY the Commercial Bureau attached to the Ministry of Foreign Affairs, to place Japan's economic relations with the outside world on a more stable basis by concluding trade agreementi which exclude the possibility of sudden tariff rises and quota impositions. But foreign trade barriers are stimulating a drive for self-sufficiency, for the creation of a close Japan-Manchonkuo economic bloc. The Navy is especially anxious to `promote plans for the extraction of oil from coal, of which there is a superfluous amount in Manchoukuo. The chief visible obStakle to the economic bloc with Manchoukuo as a sOlirtion foi Japan's economic difficulties is that the purchasing-power of that country is too low to allow it to absorb permanently a very large share of Japan's exports. Trade restrictions also stimulate imperialist economics in Japan, as it is con- tended that Great Britain' and other States employ pOlitieal power and influence to exclude or restrict' Japa4se wares which would win their way On their economic merits..' There is obvious danger in the -state of Mind which the diskinimitien of that doctrine' produces.