Press translations [Japan]. Economic Series 0332, 1946-02-19.

Full Translation:

Recognizing that the most effective measure against inflation is to increase production, the Ministry of Commerce and Industry, following the two steps of the compulsory purchase of concealed and hoarded material s and price control of daily necessities intends to take the following three steps which will be of great service in increasing production:

(1) Designation of plant s of important industries. The productive elements such as materials, labor and funds will be preferentially allotted to those plants of important industries which have the most favorable production conditions. For designating these plants and industries, an urgent Imperial Ordinance will be used. Coal and chemical fertilizer, especially ammonium sulphate, are to be of the highest priority.

(2) System of plant committees. In order to avoid any conflict between capitalists and laborers, plant committees will be formed representing both sides. This will take charge of the rationalization of working conditions, improvement of sanitary and welfare institutions and arbitration in labor disputes. This, however, will have no part in the management. In addition, the formation of the committees will be legalized.

(3) Establishment of new companies. As a temporary step to promote the establishment of new companies, until measures are legalized by the approval of the extraordinary Diet, the Ministry intends to set up a loophole in the present law. This will enable businessmen to establish a new company without the approval of creditors and mortagee of the old companies and at the same time, facilitate the financing of these businessmen and request financiers to participate in the new company as shareholders. In addition, it will provide for the growth of new companies by favoring them especially in the supply of materials and labor.

In connection with these steps, the strengthened control of distribution and consumption should necessarily be considered. The Ministr is studying this problem and will make some announcement in the near future. As for the mechanism of control, it intends to apply the laws on industrial organizations which are to be presented at the next session of the Diet. As a rule, the present control organizations will also be utilized in future control.

ECONOMIC SERIES: 332 (Continued)

ITEM 1 (Continued)

Next, we should examine the effect upon production by the Government's two steps, the compulsory purchase of concealed and hoarded materials and control of prices of commodities.

(1) According to the emergency ordinance issued by the Government, all materials concealed and hoarded by any corporation or individual are to he purchased by the present control organizations. These vario[illegible]types of commodities are to he purchased at official or reasonable price s and distributed to war sufferers, repatriates and farmers as well as to producers through ordinary channels. We must criticize the lukewarm steps adopted by the Government in its establishing of ten exceptions in article 2 of the Ordinance. The latter provides for the outright requisition of concealed and hoarded materials by prohibiting a transfer, change of shapes and quality or removal during a certain period.

At present, when capitalists are sabotaging production and being allowed to obtain large profit s from the rise in the price of material[illegible]the concealed and hoarded materials should be requisitioned as quickly as possible by drastic measures and then distributed to those producers who are most willing to produce. In this case, the distribution must be conducted smoothly and rapidly in order to meet the urgent need for those essential materials. This necessitates a rapid improvement in the present imperfect distribution organization.

(2) The Government has decided to control prices of commodities for the purpose of stabilizing them and carrying out production and distribution smoothly according to the plan. As a first step, it established ceiling prices on 220 types of daily necessities. According to the announcement by the authorities, price s of other types of daily necessities will be indicated gradually but prices of other commodities will be controlled by the fixe d price system as before.

The doubtful aspects with regard to the ceiling price system are the following points; (l) the ceiling prices were fixe d at a very high level as no consideration was giver to the new economic situation brought forth by the blockede of deposits and issue of new bank notes. (2) It was inevitable that prices should be fixed on the basis of black market prices since the authorities calculated costs of commodities upon the purchasing pric[illegible]s reported by department stores and other merchants. (3) It will be necessary to revise the ceiling prices basing them on lower cost s as a preliminary means to meet the coming economic situation produced by deflation. (h) How will the numerous street stalls be dealt with and how will the ordinary commercial organizations be established hereafter?

In order to obtain the full effect of these two steps, the Government must use strong political power. At the same time, it should endeavor not to end these steps simply as negative measures against inflation, but should induce industrialists to have considerable zeal for production. It is highly desirable that the authorities adopt drastic steps such as the revision or abolition of the Enterprise Restriction Ordinances (KIGYO KYOKAREI), the Extraordinary Fund Adjustment Law (RINGI SHINKIN CHOS[illegible]IHO), the Ordinances on the Investment of Bank Funds (GIKOTO SHIKIN UNYOREI), etc., or to faciliate the financing of civilian goods producers by establishing the Reconstruction Finance Company FUKKO KI[illegible]YU KAISHA) as well as other measures.

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ECONOMIC SERIES: 332 (Continued)

Full Translation:

The future development of our national economy depends solely for its success on the present Government's comprehensive program of national reconstruction and rehabilitation, including various kinds of emergency steps toward control of food, currency and commodities. Since the termination of the war, our national economy has found itself plunging found to total collapse with the growing social unrest and economic chaos resulting from the swollen currency, the considerable decrease in the production of daily necessities, and the consequent sharp increase in commodity prices. Such being the case the Government, in response to public opinion charging it will inability to curb inflation and insisting upon the necessity of taking drastic steps to save the nation from economic collapse and stabilize the livelihood of its 80,000,000 people, established the Price Department within the Ministry of Finance thereby taking up discussions with the Cabinet Deliberating Council and the Postwar Currency Deliberating Council on problems requiring immediate solution, hence the present emergency economic steps.

Therefore, it is not too much to say that the present Government steps are those aiming at bringing about deflation, while leaving the hithert prevailing inflation untouched to some extent. It goes without saying that the Government's emergency measures have the following major aims. To decrease the current excess purchasing power amounting to 60,000, 000.000 yen so as to set up a new price level; to stabilize wages and salaries on the basis of the foregoing price level; to secure food and other daily essentials; to solve the unemployment problem thereby stabilizing the livelihood of the nation.

In snort, the Government intends to control our national economy while bringing about suitable balance between the fixed amount of new currency and the prices of such staple goods as food and coal which are to be fixed hereafter. In view of the present situa[illegible]tion, we are right in thinking that it will take about three years before our national economy finds its steady course leading to complete stabilization. We are convinced that through the Government's steps, the present floating currency amounting to more than 6l,000,000,000 yen will be reduced by March this year to 2 or 25 billion yen i[illegible]eluding living as will as indust[illegible]ial funds, and will continue to decrease to about l6 billion yen by 1949, which is an increase of ten times the 1,600,000,000 yen in circulation in 1937. The present commodity prices will likewise be reduced considerally.

Along with this, it is also desirable that in food we should become as self-sufficient as possible and at the same time the production of staple goods such as coal and other necessities should be restored to their normal capacity by 1949.

Nevertheless, there still remain unfavorable conditions such as the following:

• 1.Since the Government declared it impossible to increase food rations even by means of emergency measures, the people still face the difficulty of living un[illegible]er the 2. 1 go rice rationing system without - 3 -

•   ECONOMIC SERIES: 246 (Continued) ITEM 2 (Continued) being able to buy black market commodities.
• 2.Although we look forward to the increased production of staple commodities, will the Government be able to secure necessary amounts of these commodities for urgent needs?
• 3.There is great fear that although the new bank notes are now restricted, they may increase in circulation again as a result of the shortage of staple commodities.
• 4.There is strong possibility of inflation returning if the Government has recourse to deficit financing in the present fiscal year, especially to relieve unemployment.

As may be seen clearly from the above, the Government must first of all overcome the foregoing difficulties in order to carry out its emergency measures effectively.

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