Press translations [Japan]. Economic Series 0249, 1946-02-02.

Summary:

Your excellency, Mr. SHIBUSAWA, what are your plans with regard to the present economic crisis in JAPAN? We, the people, eagerly awaited the restoration of a pre-war, free economic system after our bitter experiences under economic control, which lasted during eight years of war.

However, we now find that this restored free economy is by no means [illegible]fiting us, as it is a different kind of economy from that of the pre-war days. The price s of commodities are so high that we cannot afford even the bare necessities of life. Indeed, the present government exists only for the benefit of the rich rather than for the people as a whole.

The moment the ceiling price on perishable foods, vegetables, fish, etc. Were lifted, these items appeared in the black markets and the prices paid by the ultimate consumer rose tremendously. This price rice which was caused by the lifting of controls from the prices of perishable goods has become a problem of grave importance. It is due to present economic conditions, that such a financial phenomenon has been brought about. Those economic conditions are namely, the increase of currency in circulation.

Prewar currency: 2,000,000,000 yen

present currency: 50,000,000,000 yen

Increase: 43,000,000,000 yon

Prewar savings: 46,000,000,000 yen

Present savings : 220,000,000,000 yen

Increase : 174,000,000,000 yen

As these figures indicate, the amount of currency now in circulation is 25 times as much as the amount before the war and present savings are five times as great as pre-war savings. During the war, the Government issued currency without the backing of precious metals or other commodities to finance the enormous war expenditures. This floating currency and the huge savings created by the influx of this currency flooded the market. The natural result was an immediate rise in the prices of commodities. So great was this phenomenon that even when more and more perishable food was placed on the market the prices of commodities rose nonetheless because of a larger corresponding increase in demand.

This can be easily understood if we analyze the price of an individual commodity. For example, let us take coal, Normal productive cost (per ton) - 26 Yen. Additional productive cost owing to diminishing production (per ton) - 190 Yen. Rise in price due

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ITEM 1 (Continued)

to demand (per ton) 384 Yen. Black market price of coal per ton 600 Yen. After the war the production of coal decreased to one tenth the prewar production which resulted in a sudden increase in production costs. The additional cost is 190 Yen per ton at the most. However the price increase due to the rising demand amounts to the remarkable figure of 384 Yen or twice the increase in cost due to diminishing production. The power of demand has taken an important role in the determination of prices. Therefore the best way to control prices is to cut out the increase in price caused by the large demand.

Theoretically, the abolition of price control of perishable food was rather premature. Under the circumstances the Government lacked the capacity to control prices and as a result the perishable food rations per household amounted to almost nothing. Because of this, the elimination of control was demanded by the people and the Government was forced to abandon it. However, if the abolition of control had been unavoidable, the Government should have kept prices down by curbing the rising; demand. The Government should not hesitate to do this now. Better late then never.

Your Excellency, I believe you have already heard of the monetary reforms which were recently carried out by the Dutch Government. Though they were severe, the people did not hesitate to welcome them as they wore thereby enabled to cope with their acute financial difficulties. The Dutch Government consisted of young and vigorous men who set out to take bold steps for the solution of their problems. They had the people deposit all the money they possessed and report all their assets and then they declared all currency void. Then the authorities permitted the conversion of up to 25 % of people's total assets into new and valid money. The rest of deposits and other assets of the people were left in the hands of the Government as long term deposits which did not mean confiscation. These were the steps necessary to readjust the ruinous economic conditions brought on by the war.

For JAPAN such drastic nonetary measures are also necessary to cope with the acute financial situation. All currency must be called in and all deposits frozen.

Before the war 2,000,000,000 yen were in circulation and this was a sufficient amount of money. Today it has increased to as much as 25 times that amount. As for savings, they reached 170,000,000,000 yen during the eight years of war. These deposits could not be reinvested to earn interest because they were spent in the prosecution of the war. (The war profit and property taxes were planned for the purpose of covering the cost of the war, but the revenue netted by such taxes alone could not cover war costs). The interest due to the original deposit of this money which was spent on the prosecution of the war and then had to be paid from tax revenues. Therefore, the people have been burdened with heavy taxes as an inevitable result, and the money collected by these taxes goes back to the large depositors add resumes circulation.

The people must strive to make up for the excess currency now in circulation, or JAPAN cannot be reborn. However, in reality, the people are not working toward that end. They are idle and are wasting precious time, simply because their pockets are now filled with money inflated though it is. No matter how hard a policy it may be to follow, this floating money in the hands of the people must be called in. Then the surplus purchasing power will be curbed and the people will have to work for everything.

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ITEM 1 Continued

GREECE and FIULAND have repeatedly tried to devaluate their money, but their efforts resulted only in failure. This was due to the lack of production. The currency may be adjusted but the financial market cannot be completely settled without the promotion of production.

This fundamental step, the promotion of production, cannot be put into effect without reducing overall purchasing power.

Recently, there has been a tendency toward decreasing deposits, and a corresponding tendency toward an increase in the issuance of currency. Such a phenomenon is serious even when the deposits are saved. It causes the reluctant issue of notes without backing and a resultant rise in prices.

Under the circumstance, the confiscation of all currency and the freezing of all deposits has become the most urgent measure needed to cope with this situation.

Your Excellency, do not hesitate to carry out these steps.

ITEM 2 Our Nation Faces the Crisis. By TANABE, Tadao - Magazine: Diamond (3 times monthly) - 1 Jan 46. Translator: Nakamura - Hasegawa.

Full Translation:

Once upon a time IKYU, a Buddhist priest and philosopher, warned the people of the world: "The New Year' s gay decoration on the gate are but milestones on the oath to the grave. They give us cause for rejoicing; and also cause for sadness." As we welcome the New Year, five months have passed since the surrender; and JAPAN is on the way to ruin.

Our Government has done little or nothing to avert the catastrophe which confronts us. In complying with directives from MacARTHUR's Headquarters, The Government has made only the most superficial preparations for the democratization of our economy; it has made no really vigorous effort to start production, or to carry out a concrete reconstruction of our economy. Unless the descriptive measures taken thus far are followed by positive measures, we must fear even more serious economic dislocation in the future. For example, the dissolution of the ZAIBATSU will imperil the unity and maintenance of business management, the accumulation of capital, the resistance against business depression, the starting of new enterprises, and the reopening of trade.

In other fields, too, the so-called "democratization" of our economy, will have its harmful effects: the labor-union movement, the liberation of oppressed classes, and the agrarian land reforms will serve only to hamper the production of woods and agricultural products. Actually these worthy efforts to achieve the forms of democracy will be like inviting the starving masses to the dinner table - where there is no food prepared to satisfy them. They are bound to be dissatisfied with the results - and their dissatisfaction may very well be the cause of serious uprisings.

Our government has not yet taken even the initial steps toward a master-plan for reorganizing our economy. According to statements made by Prime Minister SHIDEHAWA and Minister KOBAYASHI at the Diet session, the Government is trying to reach a do-

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ITEM 1 (Continued)

cision on the establishment of a "National land plan", but thus far it has not even been decided whether or not the "National land-plan" comes under the jurisdiction of the Rehabilitation Bureau.

Furthermore, little or nothing has been planned concerning the salvaging and reconversion of wartime industries to peace-time industries or the acquisition of raw materials from abroad to facilitate production. The Government has received general permission to import raw materials, but it has thus far done nothing further concerning the problem. Moreover, though it is of the greatest importance that our economy and productive capacity be carefully investigated, the Minister of Commerce and Industry has destroyed records and figures necessary for those investigations, and no steps have been taken to replace these records. The Government has not even followed the investigation made concerning vital factories by General MacARTHUR's Headquarters, or obtained even one copy of the results of those investigations. Thus, while the Government idles, JAPAN'S industrial production slows to a halt. By the end of next year, the greater part of JAPAN's industrial plants will be shut down, and, except for the farmers, the whole nation will be unemployed.

What about the food problem? The plan to increase food production is still only on paper; the Government has made no basic preparations for carrying a plan; and has not even decided upon an effective method of collecting rice. Common sense tells us that the Minister of Agriculture and Fisheries cannot achieve any substantial results by touring the countryside urging the farmers to submit their crops. Surely these ministers, descredited as they are, cannot expect to check the illegal cabs of rice with threats and flattery. The collection of rice, as I have, stressed before, can be carried out only by the following concrete measures:

• (1).The issue of new currency;
• (2).The collection of manufactured goods;
• (3).The establishment of a pooling system; and
• (4).the exchange of foodstuffs for manufactured goods.

In the meantime, to check the evergrowing inflation, the Government has gone no further than to announce the taxation of profits (to be applied in the future) gained during and after the war.

What is the Government's viewpoint concerning Ambassador PAULEY'S announcement as regards the removal of industrial plants as reparations? I wonder if the machine tools which are to be removed arc not necessary for the reconstruction of our industries in order to secure our national life and to compensate for the loss of machinery. Without machine tools, the production of sulphuric acid and ammonia sulphate will be severely hampered. The soda industry is already on the verge of ruin. Even the closing down of shipyards will have its harmful effects on the machine tools industry. The removal of coal-burning electric generating plants, will have a disastrous effect on all industries between OSAKA and Northern KYUSHU. We want to know what the Government proposes to do about these matters.

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The people for their part are carrying on illegal sales of army equipment obtained at the termination of the war, and are deeply involved in black-market activities. They have lost all desire to engage in real production. Today, the festive mood of New Year' s day and the coming general election is overshadowed by the confusion and fruitless activity of both the people and their Government. The Government has not even planned policies to rebuild the Japanese economy, and the people have entirely lost the will to work. If the people should starve to death and our nation sink into ruin, we shall have no one to blame but ourselves.

We must establish immediately plans and policies which will enable the people to work for a decent living. The Japanese people must be reminded of two statements made by the representatives of the Allied Powers;-"JAPAN cannot hope to have a livelihood superior to that of the peoples whose lands she has invaded", and also "The Japanese will probably revive as a happy people." If we do not adopt concrete measures to combat our present crisis, the only thing we will have in the future is democracy in name only with the freedom which goes with dissatisfaction and idleness, and equality made up of starvation and poverty. Already five months have been wasted since the surrender - five months of confusion and idleness. If we cannot improve these conditions at least within the next three months, JAPAN'S position will be hopeless.

Aren't there some measures that the Government can take? Should the Government attempt to carry out the various plans already explained in this and previous issues of this magazine, won't there be at least a chance of overcoming this crisis?

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