Press translations [Japan]. Economic Series 0217, 1946-01-27.

Summary:

JAPAN's economic system is in a rather chaotic state, and it is difficult to foresee whether it will be capitalistic or socialistic. From the standpoint of politics and economics, the principle of democracy has been decided upon, and a thorough reform can be carried out on the political front without any trouble. But what of the economic front? It is said that democracy and capitalism are in contradiction to each other. Ordinarily, democracy is based on elections, but capitalism inevitably developes into monopolistic capitalist, which in turn changes into imperialism, and thence to militarism. Therein lies the danger of war.

The political system of ENGLAND and the U. S. is naturally based upon democracy, but their economic systems are still based on capitalism. It could be said that ENGLAND is going through a transition period from capitalism to socialism. But it is entirely different in the United States.

Which method will MacARTHUR's Headquarters expect JAPAN to follow? Will it be the American or the English? Naturally it will be the American way, but there is a lack of clarity in its limitations. The American method is not truly perfect, especially in the method of accumulating capital. We wonder whether MacARTHUR's Headquarters fully understands the specific problems in JAPAN, and, likewise, we may not understand the specific problems in the United States. In any event, our greatest problem today is to make clear the application of democracy, and its limitations in the economic system.

Summary:

The Japanese seem to lack the ability to come to grips with things objectively. The problem of inflation, for instance, should be approached objectively, not merely idealogically. JAPAN today is on the averge of catastrophe. There is no time to talk of the various idealogies involved. The basic fact about JAPAN's economy today is not that prices are high or that there is a surplus of purchasing power, but that there is an absolute scarcity of food. Until this basic shortage is remedied, no makeshift measures to reduce purchasing power, or to limit prices, will succeed in curbing inflation or in restoring order to our economy. In short, JAPAN's economic structure is on the brink of death. We must save the patient immediately with, say a complete injection before we can discuss such incidental matters as currency inflation.

In considering measures to be taken, we should not ask whether or not a certain measure will increase inflation, but whether or not it will stimulate production. With the purpose in mind that the whole nation

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ITEM 2 (Continued)

must unite political and idealogical differences must be put aside, and a planned, concerted effort must be made to achieve our goal.

As a result of the coal shortage and allied factors, those of our industrial works, which are still functioning will soon come to a stop. Farmers, upon whom we depend for our food, will then be the only element of our society in action. But the farmers themselves are badly in need of fertilizer and farm implements which cannot he supplied to then unless industry continues to function. The primary question, then, is how to promote industrial production, especially the production of chemicals, farm implements, and other items which the farmers need.

In view of the fact that, in their present uncertain status, factory owners are doing little or nothing to increase production, there seems to be no other way but to let present owners run their factories as they wish; to give them full freedom of action, and full responsibility. Neither the Government nor the workers, in our opinion, will be able to run the factories efficiently. The Government, furthermore, must not seek to control production, but on the other hand, must give all possible financial and other assistance necessary to increase the production of essential commodities.

While we are taking these steps, we need not fear an undue rise in prices. Purchasing power apparently has already begun to decrease, and it will continue to do so. Our only concern at the moment should be to increase production. When the quantity of goods produced has been substantially increased, we can turn our attention to the stabilization and equalization of our economy. Under the circumstances which confront JAPAN today, we cannot very well concentrate on increasing production and controlling inflation at the same time.

Summary:

A war profit tax is going to be levied showing the Japanese that war does not pay. Inasmuch as, even in the victorious countries, BRITAIN and the UNITED STATES, a similar tax of 95 to 100 per cent has been imposed, it is natural that we, the vanquished, should bear a heavy burden. But, in fact, the Government has already taken part of our war profit in such forms as excess profit's tax, corporation tax, amusement tax, income tax, and so forth. The authorities, therefore, should be as careful as possible not to make the imposition double.

The new property tax is of an un[illegible]recedentedly high rate and might rather be called a. capital levy. After World War 1 most nations adopted the capital levy, but they only repeated the same failure, and could not attain the projected purpose. BRITAIN did not adopt the tax after deep deliberation. The object of a property tax is to tax private property. The economic figures night indicate an increase in the value of private properties in JAPAN, but, virtually, they have decreased, mainly because of land loss and war damage. A property tax in a defeated country differs categorically from that in a victorious one.

The purpose of taxation are "prevention of inflation" and "the adjustment of the gulf between rich and poor." But it is impossible to give the stupendous task of absorbing 40 or 50 billion yen over to the new tax alone. We should direct our attention to the ordinary taxes such as income tax and indirect taxes. For the people's properties to be properly taxed, they must be fairly assessed. But they are so fluctuating, at present, that it would take much tine to value them exactly. In this respect, the importation of rice, and the exchange of the old by the new currency will help settle the fluctuation. The capital levy is conducive to the prevention of inflation only when it encourages the people's desire for production.

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The tern of paying the tax, as well as its method, is another problem. The people are not in a position to pay all of the duties with cash, bonds, or other such valuables. Then tax in kind must he allowed. Here comes the question of valuation again. When the Government gains a large sun of money through the taxes, it is most likely to use it in ordinary expenditures. But this would be against the first purpose, which is the prevention of inflation. The capital levy cannot be put into operation without the people's co-operation. The authorities should not abuse the penal law affecting tax-dodgers. They should, rather, make the people know the real significance of these taxes so that they might willingly co-operate with the Government.

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