Press translations [Japan]. Economic Series 0033, 1945-12-01.

Summary:

In connection with the directive issued by General Douglas MacARTHUR ordering the Japanese Government to set up a strict war profits tax and a capital levy, Finance Minister Viscount SHIBUSAWA, Keizo declared as follows: "Today a directive concerning the war profits tax and the financial reconstruction of JAPAN was issued by the Supreme Commander of the Allied Forces, and I would like to clarify it for the nation.

In view of the gravity of these problems, the Government has been conducting elaborate studies, and has submitted its program in a document to the Supreme Headquarters, on which the Supreme Commander gave his approval, and he clarified his intentions today." Finance Minister SHIBUSAWA explained the new government sponsored project saying that the government planned to introduce two new taxes. One is to be called war profits tax, which aims to recover all war profits gained by all firms and individuals. Another is a graduated capital tax, to be levied on all properties owned by firms or individuals.

Object of Both Taxes: Minister SHIBUSAWA made it clear that the war profits tax aims, by eliminating the unlawful profits gained by the war, to foster peaceful and democratic tendencies and, at the same time retard the impending inflation, thereby contributing to the financial recovery. "Opinions differ in defining war profits, but I should like to regard all profits gained during, in connection with, and as a result of the war, war profits."

Speaking of the capital tax, the minister said, "This tax aims to check inflation, and make the economic and financial reconstruction of our country more certain. At this crisis of the state, I should like to demand of all rich people that they pay a tax proportional to their incomes. This tax should be levied at a gradual rate. Thereby the Government, in dire need, will be able to amass funds. The extent of the tax rate or of tax levying will be fixed in proportion with the financial reconstruction programs to be developed hereafter."

Civil Committees to be Appointed for Estimate of Assets: The anticipated taxes are epoch-making and we have to be fair and equitable in this connection. For example, we do not consider levying this tax upon individual deposits of the general public earned by their hard labor. Ample consideration will be given for the maintenance of the lowest living standard necessary for the peaceful reconstruction of the country.

ECONOMIC SERIES: 33 (Continued)

ITEM 1 (Continued)

Viscount SHIBUSAWA suggested a committee for the estimation of assets to be composed of able civilians in order to estimate assets on a strictly fair basis. "In enforcing this important program", he said, "the Government will do its utmost, but the implicit cooperation on the whole nation is essential. I would like to appeal to the nation for their collaboration at this time."

"I cannot tell now how much income the government estimates will come in, by the enactment of the new tax laws, but it will be enough, they believe, to check inflation and to stabilize the economic and financial situation. "The properties owned by the Imperial Household are also subject to taxes according to a directive of the Supreme Headquarters."

War Indemnity Subsidies Shall Be Approved on Conditions: Speaking of controversial subsidies for war indemnity, the Finance Minister declared: "The Government proposed to the Supreme Command that they be enforced after the Government has taken adequate preventive measures against inflation, lest the payment of such subsidies by the Government should bring forth inflation as a result. The Supreme Command approved our policy fundamentally but stated that it was subject to several conditions. The conditions, in short, define the suspension of payment, but the cancellation of this suspension requires the approval of the Supreme Command. This is nothing but the measures which the government has been taking now being placed under stricter control." He said that the Government would announce in details its policy concerning this problem in the near future. According to the Minister, the amount which the Government has to pay as war indemnity subsidies to munition industries will aggregate 30,200 million yen, but the amount which these companies have borrowed from banking organizations is estimated to surpass the above figure. Further the amount which these banking organizations have borrowed from the Bank of JAPAN is 25,000 million yen. Thus over 80 percent of the total which the government has to pay in the future will be refunded to the Bank of JAPAN.

"Under these circumstances", he went on to say, "I do not think the payment of governmental subsidies will become the main cause of inflation. However, if the Government fails to pay such subsidies, all resulting economic transactions will lose their value, and it is quite clear that losses will prevail in the national economy. We came to the conclusion that we have to enforce the new drastic project for the benefit of the whole nation. On the other hand, it is necessary for the Government to establish a financial prospectus for the future. Therefore, the Government, while making haste in drawing these new tax bills on one hand, tried to coordinate future plans with financial reconstruction. On this basis the Government obtained the approval of the Supreme Command."

Regarding the payment of war indemnity and war risk insurance for cancellation of war contracts, Minister SHIBUSAWA declared, "The Government will continue to assume responsibility for such payments, but they are subject to strict inspection. It is, however, a matter of course that such payment will be frozen by the new measures.

"By today's announcement of a new directive, the solution of this problem has been decided, and the economic circle which was in a state of chaos, has now assured definite order. The Supreme Command at the same time requested the Government to obtain approval of the

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ECONOMIC SERIES: 33 (Continued)

ITEM 1 (Continued)

Government wishes to issue or borrow bonds, lend funds or assume indemnity responsibilities, pay subsidies or exempt taxes, or dispose of state owned estates or transfer governmental enterprises to civilians.

"In this connection, the Government, by faithfully observing the intention of the Supreme Headquarters, will conduct smooth financial transactions, by all means," concluded the Finance Minister.

Full translation:

Sweeping the feudalistic elements from Japanese society is the most important task which we now face. The feudalistic elements in JAPAN have their existence in the landed proprietorship in agriculture, in the system of peerage and in the manner of thinking and customs of the citizens and farmers. However, the worst and most influential element of feudalism exists in the form of authority and power of the vast bureaucratic institution of the state. This fact can be clearly recognized by the peoples of the whole world. In spite of the termination of the war, this authority and influence has not been swept away. On the contrary, those feudalistic elements seem to be trying to extend their power even more.

The Land Reform Bill, which was approved at the Cabinet meeting the other day, can be considered a means of expanding their power; or, at least, it will possibly become such. The agricultural Association, which is widely known to be a model for inefficiency and corruption in the feudal bureaucratic institution, will at least extend its power. Although the freedom of association may exist, the tenants' association will become useless. The free transaction of land sales becomes impossible, and the modern management of agriculture and all the other enterprises will be in the hands of the landed bureaucrats.

The feudal remnants which remain in Japanese agriculture are not such as in czarist RUSSIA or in PRUSSIA. With particular exceptions, there are no big feudal landlords who are characterized by their estates of large areas or by their feudal relationships with their tenants. The problem lies in the high rate of land rent. This high land rent is due to the weakness of tenant farmers who have no protection such as leases. If the leasehold of tenant farmers should be assured, the rate of the rent would automatically be lowered. The matter as to whether the rent should be paid in money or in kind must be decided voluntarily by both the landlord and the tenant concerned. When the prices of crops fall sharply, no tenant will prefer to pay his rent in money!

The construction of modern society is so complex that the clumsy adjustment of it inevitably meets some difficulties. For the reconstruction of the social framework a drastic step must be taken by which all private properties should be completely denied. If this cannot be done, it would be better to follow the economic principle based on the present system. We are not so forgiving that we can forget the bitterness of the misgovernment carried out forcibly by the authority of the bureaucratic state which was based on self-conceited idealism.

At this time of emergency, instead of clumsy legislation, all the useless laws enacted in war-time based on the feudal or national-socialistic principle should be abolished instantly, and new legislation should be referred to the new legislature. Now the readjustment of a large majority of officials and semi-officials is inevitable. The bureaucracy and its party should consider how to get on in the difficult times of the future.

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ECONOMIC SERIES: 33 (Continued)

ITEM 2 (Continued)

It would be better for then not to meddle in people's affairs. This is the starting point toward democracy. Any reform bill which is planned by a party which can not throw off its traditional feudal mysticism or rid itself of the fundamental idea behind feudalism, will, however "fair" it may seem, be "fair" only in the feudal sense. If the greater feudal influence should be allowed to conquer the lesser one under the name of democracy, it would be nothing but a profanation of real democracy.

ITEM 3 Metal Mining not Hopeless. - Nippon Sangyo Keizai - 27 Nov 45. Translator: T. Kitagawa.

Summary:

Three months have elapsed since the end of hostilities and there is no visible activity in the metal mining industry. An opinion is held among those concerned that something should be done to break up the current state of stagnation. The following facts are reported to be the causes of hesitation of the government and mine owners in taking proper steps to revive the industry. 1. Intentions of Allied Headquarters have not been clarified. 2. The Mining Bureau has not set up a plan. 3. Miners keep attacking the government's apathetic attitude. Consequently, they are not in a mood to form a practical program. 4. The producer's price of metal remains to be fixed. 5. The future of the mining industry is as yet uncertain. The demand for metal, however, will be urgent for the reconstruction of devastated areas, as long as the import from foreign countries is impracticable.

The way out is as follows: The Mining Bureau should estimate the demand for metal necessary for reconstruction or for the use of private citizens, and establish a policy. This policy should be brought to mine owners for further study before it is put into practice. So far, the owners of mines who have long been held down by redtape are not ready to give aid to the Bureau. But whether they like it or not, their united effort to create a plan reviving the industry is utmost necessity. The purchaser's price of copper, lead, zinc or even gold is not yet decided. The price, which will be decided shortly however, will depend solely on supply and demand after the abolition of regulations controlling ore distribution. They can set up a tentatively basic price subject to later change or they may establish a completely arbitrary price. A lower price is not hopeless if the free competition plan is realized. A few examples of producer's price which different trades desire are, copper 7,000 yen per metric ton, lead 1,700 yen, zinc 1,800 yen. The Supreme Headquarters is reported to have issued a directive instructing the abolition of the Staple Metal Increase Regulations (JUYO KOBUTSU ZOSAN HO), but other laws and regulations inflated during the war are still untouched, and should be abolished at the earliest opportunity, thus opening the way for activity. If there is need for additional articles to the present Mineral Law they should he enacted.

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