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Press translations [Japan]. Economic Series 0162, 1946-01-14.
Supreme Commander for The Allied Powers. Allied Translator and Interpreter Section.

translation-number: economic-0763

call-number: DS801 .S81

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No. 763 Date: 14 Jan 46


ITEM 1 The Reparations Problem - Magazine: Zaisei (Monthly) - Dec 45 Issue. Translator: N. Yagiu.
According to the Allied policies towards Japan issued last September, "properties in the lands other than those which should belong to Japan" are to be taken over as the first reparations. JAPAN's properties both abroad and in the territories to be ceded would come to such a vast amount that I believe most of the reparations will be filled by them alone. The statement of the Allied policy also points out that besides the properties abroad what goods are not needed for a peacetime economy and for the occupation forces will be take over. We might say that munitions are mainly meant here. This constitutes a difference from the reparations in World War I when the Allied [illegible]ations took over everything indiscriminately. Still, if the munitions factories which could be switched over to peace industries with a slight reform should be removed, our ability to pay reparations would be much reduced. No doubt the burdens we are to shoulder cannot be light. Unless freedom of trade and credit be granted we should be put into a difficult plight.
The purpose of reparations has been changed in the course of time. Formerly it was a means of penalty and the defeated nation was fined properly. Later it came to signify compensation for every loss of the victorious country, including its war expenditures. The very change of words from indemnification to reparation shows its change of purpose. This time reparations seem to have taken on another meaning; the Allied Nations are considering the problem with a view of doing away with the munitions industries to eliminate German and Japanese war potential. Accordingly, indemnification for the loss suffered by the Government and the people becomes of secondary importance. Establishment of democracy is undoubtedly the chief intention of the Allied nations.
That Germany did not perform her duties concerning reparations after World War I is due to the lack of co-operation on the German side as well as the unreasonably colossal requirements by the Allied nations. It is easy to imagin that the reparations to be imposed on our country today would be predicated on a reasonable basis taking every economic situation into consideration. Consequently, it is up to us to fulfill our duties at all cost and establish international trust and respect as soon as possible.

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ECONOMIC SERIES: 162 (Continued)
ITEM 2 Japan's Future International Economic Relations by NODA, Uichi - Magazine: Zaisei (Monthly) - Dec 15 Issue. Translator: H. Nakamura.
By the time the war ended, JAPAN's foreign trade, which had fluctuated greatly during the course of the war, had dwindled to almost nothing. When hostilities began, trade with the Allied Nations, as well as with Italy, Germany, and even the Soviet Union, all but came to a halt. Even within the Greater EAST ASIA Co-Prosperty Sphere, because of her great shipping losses and the adverse progress of the war, JAPAN's trade had practically disappeared by the time the war came to an ended. Today, as a result of her defeat, JAPAN is an economically isolated nation.
In re-opening our foreign trade, our first duty is to carry out faithfully the provisions of the POTSDAM Declaration. Our future economic development depends in large measure upon the execution of this Declaration, the amount of reparations which will be required, and upon the decision as to what industries will be removed as reparations. It must be remembered, however, that no matter how severe the demands may be, the primary purpose of the POTSDAM Declaration and the Allied Powers is not to run and enslave the Japanese people, but to abolish militarism and to establish democracy in our land. Consequently, much of the reparations will consist of military equipment, munitions industries, and war-making facilities. Furthermore, the Declaration provides that JAPAN will be allowed to obtain abroad the raw materials necessary for supporting her economy and for facilitating the payment of reparations.
In restoring our foreign trade, our first and most urgeant task is to import food stuffs. Such imports are imperative if we are to secure the peoples livelihood, upon which the payment of reparations as well as the achievement of the POTSDAM Declaration's democratic ideals in the long run depends. Recognizing this fact, SCAP recently directed that the Government be allowed to import food, cotton, oil, and salt. Because of the shortage of both funds and ships, the task will be difficult. We must do our best with what we have, however, by quickly repairing all usable ships, and by requesting such goods as can be used as collateral for imports.
The importation of foodstuf is a pressing need which must be met immediately, no matter what difficulties may stand in the way. Ultimately, however, if we are to acquire funds and goods from abroad and establish normal international trade, we must stabilize our own domestic economy. Essentially, this means that we must secure the rate of exchange by establishing price of internal commodities. Until we do so, the restoration of normal foreign trade will be impossible.
It is probable that the major portion of our trade will be with the countries of EAST ASIA. For the most part this trade will be in every day necessities; later, with the increase of production and the improvement of techniques, this trade will include luxury goods as well. There are vast markets in CHINA and the Southern areas —— markets where the competition of the UNITED STATES will be relatively slight. As far as the UNITED STATES will be relatively slight. As far as the UNITED STATES is concerned, we shall export raw silk, tea, and luxury goods. JAPAN in turn must borrow capital and import capital goods, without which her economy cannot be rebuilt.
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ECONOMIC SERIES: 162 (Continued)
ITEM 2 (Continued)
Until Japan's position is clarified, we cannot say how long it will he before normal trade relations are re-established—-whether it will be one year or two, or even more we do know, however, that American merchants are eager to resume trade; they are especially looking forward to obtaining Japanese ceramic wares, silk and industrial art.
In the new world economy which is rising up from the ruins of war, international co-operation is replacing the previous nationalistic competition which characterized trade during the years preceding the war. The Bretton Woods monetary agreement, which provides for international currency management, will greatly facilitate international trade in the post-war world. In time JAPAN too will be able to join such a system, and, as a member of the family of nations, contribute her share to world economy.
At the moment, then, though the path before us is hard and the way is long, our hopes are high and we shall set ourselves with renewed determination to the advancement of the bright future which lies before us.
ITEM 3 The Sanger Involved in Deflation by Ishibashi, Lanzan - Magazine: Zaisei (Monthly) - Dec 45 Issue. Translator: Echigo.
Unless drastic steps are taken to counter-act it, a very grave deflation lies in wait for us. Unfortunately, the trend of public opinion appears to be moving the other way; newspapers have repeatedly warned us against an approaching inflation, and the Government is trying its utmost to work out anti-inflationary measures. Hence it is a matter of extreme importance that the problems of inflation be clearly placed before the public for deliberation.
According to a view which generally prevails, inflation means an increase in the amount of currency (purchasing power) as compared with the amount of purchased goods, while deflation means the opposite. The distinction is sound as far as it goes, but it does not tell the whole story — it does net make clear the material difference between the two. We should recognize, for instance, that deflation means low prices, business depression, decreased production, and unemployment. It is in the direction of deflation, not of inflation, that our economy appears to be drifting. If, under such circumstances, the Government adopts a deflationary policy, it will only serve to aggravate the deflation which is already underway.
My primary reason for insisting that we shall be confronted with deflation is this. Now that the war is over, our national expenditures will be sharply reduced. According to figures made public by the Government last spring, our government expenditures in 1945 amounted to 65 billion yen an our industrial fund in the same year came to 13 billion yen. These vast sums were needed to meet the enormous wartime needs of our financial world. Now that the war is ended, these expenditures will inevitably be reduced. Industrial expenditures may be expected to continue, of course, and public disbursement for such purposes as demobilization will continue for a short while. Soon, however, the special war expenditures, which totaled no less than 55 billion yen annually, will no longer be necessary. Even though industrial expenditures continue, it seems inevitable that this vast shrinkage in public disbursement will result in a severe deflation.
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ECONOMIC SERIES: 162 (Continued)
ITEM 3 (Continued)
Those who favor a deflationary policy point out as probable inflationary factors the cost of the Allied occupation and the payment of reparations. It is my opinion, however, that these costs will not be excessibe, and that our financial structure is strong enough to bear these burdens without undue difficulty. (TN. The article which follows is a reply to the above).
ITEM 4 A Criticism of the Deflation Argument by Kimura, Kihachiro - Magazine: Zaisei (Monthly) - Dec 45 Issue. Translator: Echigo.
I have seized every chance to warn that, unless bold and decisive steps are taken, our post-war inflation will assume a very grave aspect. Nevertheless there are some who insist that a deflation is ahead of us, a view dismetrically opposed to ours. Ishibashi, Louzau is one of the foremost exponents of this view. Frankly speaking, his is an erronous view—-a view which fails to recognize the real situation of our finance and our national economy.
First of all, Ishibashi insists that deflation lies in wait for us because government deficit financing will decrease in amount as a result of the ending of the war. The truth of the matter is, however, that our inflation has already reached dangerous proportions. Even a small addition to the national debt may be the "last straw" for our shaky financial structure.
Ishibashi overlooks two factors which cause inflation. One is the existence of our dormant purchasing power, which amounts to loo billion yen; the other is the rapid increase in the circulation of the Bank of Japan notes, which has already swollen to more than 47 billion yen.
Ishibashi insists that our financial system is powerful enough to bear the burden of paying the interest for national bonds, which amounts to only 3.5 billion yen per year. However, this interest payment may be a heavier burden than he supooses, especially since productive capacity is likely to show a sharp decline during the coming fiscal year.
Through the withdrawl of various restrictions, more and more commodities have come to appear in the market. As a result, black market prices have dropped slightly. In Ishibashi's opinion, this limited drop is a sign of coming deflation. But this is clearly no more than a transitional phenomenon. Now that inflation has gained a free hand, it is likely to go forward faster than ever, and the time may soon come when even the tightest control will be unable to check its vicious rise.
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HomePress translations [Japan]. Economic Series 0162, 1946-01-14.
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