CAN JAPAN STAY THE COURSE
Commonwealth and Foreign
By GI. ENTHER STEIN JAPAN, today, is confessedly harassed more than ever by her economic limitations, as well as by the unfavourable effects which these last years of strain are gradually showing in her none-too-strong economic and social structure. Economics have become the main preoccupation of her military and civilian leaders. Social issues, although still neglected as far as action is concerned, are forcing themselves on their attention. And the pressure of all these problems—against which the " enforcement of the true Japanese spirit in all the fields of national life " proves no sufficient cure—seems destined to gain in intensity as time goes on and the international armament race grows apace.
Industrial capacity is the most prominent of the many vexatious problems facing the Japanese authorities. For the fifty per cent. growth in the volume of output of Japan's manufacturing industries, which was brought about from 1931 to 1936, and the accompanying fifty per cent. increase in the industrial machinery installed in the country, are no longer viewed as achievements which can assure Japan of the economic and military prominence to which she aspires. Even now the total output of all the factories in Japan equals but a fraction of that of each leading Western country, including the newly industrialised Soviet Union. Per head of her population Japan produces hardly one-twelfth as much in manufactured goods as Britain or the United States.
Japan-Manchukuo's output of steel, in spite of all the vigorous State assistance by which it was fostered in recent years, is but 6.7 per cent. of that of the United States, Britain and the Soviet Union combined ; on which countries, more- over, Japan has to rely for almost half of the ferrous materials used in her domestic production of steel. At present the shortage of steel, pig iron, ore and scrap is such in Japan that not only the civilian branches of the Government but even the Army had recently to declare that they would renounce the use of about one-third of the total of their steel consumption programme for the current year. And the dearth of steel may prove even more embarrassing to the Navy, which is an even greater consumer of it.
Japan's engineering industries, too, much though they have advanced recently both in the volume and quality of their production, are still lagging far behind the desires of her economic and military leaders. They can hardly be expected to increase the comparatively small total of machinery installed in all branches of industry by much more than about ten per cent. annually, even if no attention be paid to the replacement of obsolete equipment. Moreover, if only part of today's large-scale projects for industrial expansion were to be carried out, Japan would have to increase very considerably its costly imports of foreign machinery, which never ceased to be needed in large quantities side by side with home-produced equipment ; just as the country's hurried industrial progress in general, and that of its armaments in particular, depends to such a large extent on the acquisition from Western countries of costly patent rights and licences for newly-developed processes of manufacturing.
It is not only for these reasons that Japan's insufficient foreign currency income is the object of the second great anxiety of her leaders. The deficiency of raw materials which entailed imports worth Yen 770 million in 1931, rose to Yen 2,04o million in 1936, and it keeps on growing. Before the occupation of Manchuria and the new armament effort, 294 per cent. of all the industrial raw material requirements of the country had to be secured from abroad. But after five years of strenuous efforts to become one of the " have's," 33.5 per cent. of its raw material needs had to be imported. (Japan is still able, however, to feed her quickly growing population without incurring any deficit in her foreign trade in foodstuffs.) The increasing quantities of foreign raw materials needed for the manufacture of larger volumes of export goods which account for part of this deterioration do not constitute any real financial problem, for such exports automatically pay for the raw material imports involved. The quickly rising raw material imports for armament and equipment purposes are alone responsible for the mounting deficit in the country's foreign trade, which during the first five months of the present year reached the record total of almost Yen 60o million. This heavy burden is becoming the more onerous as the rising trend of world prices set in at a moment when Japan had almost exhausted most of her reserves of foreign currency. The comparatively small gold supplies of the country are now being tapped once more. Still severer measures of State control over imports are to restrict purchases abroad to such goods as are most urgently required on grounds of national policy ; but there are hardly any others left already now. And a new drive for another acceleration in the continuous growth of Japanese exports is to be launched.
The danger of inflation is another cause of apprehension which cannot easily be alleviated. Every attempt. however, to avert it, by checking the rapid growth of the State's armament expenditures, by leaving many of the projects for further industrial expansion on paper, and by ignoring the well- justified wage demands of all sorts of workers and officials, would slow down the pace of Japan's military prepara- tions, would still further increase the dissatisfaction of the forward elements, and thus augment political tension at least between the latter and the more conservative groups among the Fighting Forces, bureaucracy, and big business. Besides, even the so-called moderate elements who for years tried to prevent inflation from growing out of its present " beneficial " into its much-dreaded malignant form, have gradually given in so much to categorical demands in favour of expansion that they would hardly see a practical way out even if they were to come into undisputed power. For they realise well enough that, with the great changes in the country's economic structure that were brought about during these last five years, its dependence on ever-growing orders for armaments and for new industrial equipment has become sufficiently decisive to make any fundamental change in policy as much of a threat to the stability of Japanese economy as the maintenance of the present course doubtless would be. In 5931, only 14 per cent. of Japan's total factory output went into armaments and goods for capital investment ; but by 1936 they took up almost 31 per cent. of the much larger total that was produced by an entirely changed industrial mechanism in which " heavy " engineering, and other new industries had come to prominence.
The last, but by no means the least, anxiety of the leaders of Japan is the wave of demands for higher wages, of strikes in an almost unprecedented number, and of dissatisfaction with an insufficient livelihood that has been sweeping over the country since the beginning of the current year. There is nobody who would deny the justification for the wage and salary demands that are a general phenomenon not only among the workers and salaried men in private enterprises, but also among local and national government officials. For the 25 to 3o per cent. rise in the cost of living since 1931 was entirely unaccompanied by any increase in the average money income of nine-tenths of the population. The average wages per hour of industrial workers even fell by something like ro per cent. during that time, and it was only a corresponding increase in working time (to more than TO hours per day) which made up for this loss. Salaries also were under con- tinuous pressure, and those of government officials had just been cut considerably before the rising trend of the cost of living set in after the coincidence of the " Manchurian Incident " and the depreciation of the Yen in 1931.
It would be wrong to deny that in the social as in other fields Japan has still a fair measure of reserve strength with which to overcome the numerous difficulties of the near future and even to make further advances with regard to her military power, her industrial development, and the further expansion of her exports. Nothing like a major crisis seems to be imminent. But it is not difficult to understand why the leaders of Japan who are such profound sceptics with regard to the potentialities of international understanding in more than a superficial sense of the word, should worry about the ability of their country to keep pace, or even to gain new advantages, if the international armament race should keep on gaining momentum.
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