10th May.
Japan has been thrown open to the world, the Governments of the West having consented to the abolition of extraterritoriality, and the evil results that many foretold would follow both to Japan and foreigners have not yet been experienced. Japanese were afraid that there would be an irruption into their country of foreigners and foreign capital, with whom they themselves would be unable to compete; unfortunately for themselves, there has been no such irruption; and we now find the " Register," the Japanese magazine to which we referred the other day, pleading for the introduction of foreign capital in an extremely able article. Some remedy has to be found for the present unsatisfactory position of Japanese finance; though it must be said at the outset that Japanese finance is by no means in such a parlous state in reality as appears on paper. The stock of gold is down to Y63,500,000, against which convertible notes to the value of ¥208,000,000 have been issued but it must be remembered that the Japanese generally prefer notes to gold. A further draft upon the stock of gold seems, hoivever, inevitable, as large stocks of imported goods have still to be paid for. A panic might very easily follow such a condition, and already there have been a number of bank failures, and many sound industrial enterprises have been stopped by the difficulty of obtaining accommodation at reasonable rates. Japan's difficulty is that she is not in direct touch with the financial centres of the world. Ifa Kuropean country finds its stock of gold running low it raises its rate of interest and gold flows in directly from its neighbours; but this resource is cut off from Japan. As the value of Japan's imports is considerably larger than that of her exports, her gold is in constant danger of being drained away. Remedies for this are being sought, the principal ones being: (1) Discouraging imports; (2) Increasing ex (3) Government loans to replenish the gold reserve (4) Inducement to foreign capital to. invest in Japan.
The "Register" proceeds to examine these four remedies. The first, it says, "can never be entirely successful, because, so long as people require goods from abroad, they will not deny themselves for altruistic reasons. A large proportion of imports are necessities, and so long as Japan continues to adopt Western methods, she must buy Western machinery and appliances; every new project, every step of advance, requires some importation of equipment." As to the second remedy, the "Register" points out that a great deal has been done already to increase exports; but this, as it says, is closely bound up with the first remedy, as the experience of the yarn trade shows. This trade has grown in a few years into a very Important position, and is the result of the importation of machinery which would have been kept out of the country if the plan now proposed of discouraging imports had been then in execution. "The balance of trade can only be changed by present expenditure for necessary equipments, and it would be good business to obtain funds even at a present sacrifice. The motto should be: "Look after the exports and the imports will take care of themselves.'"
Phe Government loan remedy docs not commend itself to the " Register." It says:—"Loans by the Government to replenish the gold reserve would remove the pressing difficulties of the situation, but the remedy would have to be applied many times before the tide of trade changes to any extent, and the constant appeals to a limited class of investors would depreciate the value of such government issues. Further, such methods are too arbitrary, and would cause frequent severe disturbances." There remains the inducement to foreign capital to invest in Japan, and this is the remedy recommended. The exports of Japan amounted in 1900 to ¥204,000,000 in value, an amount considerably reduced by the occurrence of the troubles.in the North of China, and of this sum, ¥40,000,000 are directly the result of the employment of modern equipment, while the advance in the export of coal, copper, and silk manufactures, amounting in 1900 toa value of Y55,000,000, is due to the investment of capital in modern, i.e. western appliances. Japanese railway and steamship lines are all adding to the wealth of the country, as are Japan's docks, factories, shipbuilding yards, arsenals, ete., in which capital is invested reproductively. "In other words, the position of Japan is that of a debtor who is short of cash because he has been obliged to spend largely, and has no means of providing himself with money except ye selling property which he would rather hold." A peculiar feature of the situation, we are told, is that the Japanese Government has plenty of money, appropriated in bygone budgets and unspent; what the nation Is poor in is the gold necessary for international exchange. The national expenditure of Japan has largely increased in the last few years, but the wealth and productions of the country have increased fully proportionately. The money disbursed in the country by the Government does not impoverish the people as a whole. Money disbursed abroad for unproductive objects, such as men-of-war, only amounts to a few yen per head of the population, and it should be regarded as insurance premium, in which light it is not really unproductive. The national debt of Japan is only about £48,000,000, and of this all but about £15,000,000 is domestic debt.
The foreign obligations of Japan are practically entirely under the head of Government bonds issued at fixed and low rates of interest, there having been in Japan hitherto a strong feeling against the issue of debentures secured on the industrial enterprises of the country because they involve making annual payments abroad for interest, and against allowing foreigners to become partners in Japanese industries, because that is letting profits be taken out of the country. The " Register" argues against this feeling. It says: "It is, however, only necessary to consider the case of an individual to realise the fallacy of the arguments. If a merchant can invest money to bring in 20%, it pays him, to borrow at 10% or even 15%. As profits accumulate, the loans can, be paid off, so that his returns gradually increase until he reaps the whole benefit. Similarly, such a merchant without necessary funds would willingly divide the 20% with a partner who could supply the capital, considering it better to obtain 107 for himself than to let the opportunity pass because he could not obtain the whole profits." The one practicable method which would give Japan the full benefit of foreign capital is permitting investments by foreigners in the industries of the country, and allowing thei to share to the full extent in the rewards which accrue to such investments. " Money so introduced would come in natural ways, and flow along natural channels without disturbing the oven course of trade, while money introduced by means of government loan is always liable to misuse, and a means of disturbance. Further, the foreigner who has sufficient enterprise to invest in Japan will not do so unless he has the opportunity of obtaining a full return under conditions allowing proper control of his investments. A low rate of interest has no attractions for such people."
As the wealth of Japan increases, she will be able to buy back these investments from the foreigners. This is the way in which the United States and Australia have progressed so well, and this is what Russia is now doing. This is the one way in which Japan can get out of her present difficulties, and Government and people must work together to provide every facility for the introduction of foreign capital into the country.
Text read from the printed page and cleaned; old type leaves the occasional error.