Yield
Name. (millions of _yen_).
Tax on soy 4
Tax on sugar 16¼
Mining tax 2
Tax on bourses 2
Tax on issue of bank-notes 1
Tonnage dues ½
Taxes created on account of the war (1904-5) or in its immediate
sequel:--
Yield
Name. (millions of _yen_).
Consumption tax on textile fabrics 19½
Tax on dealers in patent medicines ¼
Tax on communications 2(1/3)
Consumption tax on kerosene 1½
Succession tax 1½
Also, as shown above, the land tax was increased by 39 millions; the
income tax by 19 millions; the business tax by 15 millions; and the
tax on alcoholic liquors by 15 millions. On the whole, if taxes of
general incidence and those of special incidence be lumped together,
it appears that the burden swelled from 160,000,000 _yen_ before the
war to 320,000,000 after it.
State Monopolies and Manufactures.
The government of Japan carries on many manufacturing undertakings for
purposes of military and naval equipment, for ship-building, for the
construction of railway rolling stock, for the manufacture of
telegraph and light-house materials, for iron-founding and
steel-making, for printing, for paper-making and so forth. There are
48 of these institutions, giving employment to 108,000 male operatives
and 23,000 female, together with 63,000 labourers. But the financial
results do not appear independently in the general budget. Three other
government undertakings, however, constitute important budgetary
items: they are, the profits derived from the postal and telegraph
services, 39,000,000 _yen_; secondly, from forests, 13,000,000 _yen_;
and thirdly, from railways, 37,000,000 _yen_. The government further
exercises a monopoly of three important staples, tobacco, salt and
camphor. In each case the crude article is produced by private
individuals from whom it is taken over at a fair price by the
government, and, having been manufactured (if necessary), it is resold
by government agents at fixed prices. The tobacco monopoly yields a
profit of some 33,000,000 _yen_; the salt monopoly a profit of
12,000,000 _yen_, and the camphor monopoly a profit of 1,000,000
_yen_. Thus the ordinary revenue of the state consisted in 1908-1909
of:--
_Yen._
Proceeds of taxes 320,000,000
Proceeds of state enterprises (posts and
telegraphs, forests and railways) 89,000,000
Proceeds of monopolies 56,000,000
Sundries 11,000,000
-----------
Total 476,000,000
The ordinary expenditures of the nine departments of state
aggregated--in 1908-1909--427,000,000 _yen_, so that there was a
surplus revenue of 49,000,000 _yen_.
Extraordinary Expenditures.
Japanese budgets have long included an extraordinary section, so
called because it embodies outlays of a special and terminable
character as distinguished from ordinary and perpetually recurring
expenditures. The items in this extraordinary section possessed deep
interest in the years 1896 and 1907, because they disclosed the
special programmes mapped out by Japanese financiers and statesmen
after the wars with China and Russia. Both programmes had the same
bases--expansion of armaments and development of the country's
material resources. After her war with China, Japan received a plain
intimation that she must either fight again after a few years or
resign herself to a career of insignificance on the confines of the
Far East. No other interpretation could be assigned to the action of
Russia, Germany and France in requiring her to retrocede the territory
which she had acquired by right of conquest. Japan therefore made
provision for the doubling of her army and her navy, for the growth of
a mercantile marine qualified to supply a sufficiency of troop-ships,
and for the development of resources which should lighten the burden
of these outlays.
The war with Russia ensued nine years after these preparations had
begun, and Japan emerged victorious. It then seemed to the onlooking
nations that she would rest from her warlike efforts. On the contrary,
just as she had behaved after her war with China, so she now behaved
after her war with Russia--made arrangements to double her army and
navy and to develop her material resources. The government drafted for
the year 1907-1908 a budget with three salient features. First,
instead of proceeding to deal in a leisurely manner with the greatly
increased national debt, Japan's financiers made dispositions to pay
it off completely in the space of 30 years. Secondly, a total outlay
of 422,000,000 _yen_ was set down for improving and expanding the army
and the navy. Thirdly, expenditures aggregating 304,000,000 _yen_ were
estimated for productive purposes. All these outlays, included in the
extraordinary section of the budget, were spread over a series of
years commencing in 1907 and ending in 1913, so that the disbursements
would reach their maximum in the fiscal year 1908-1909 and would
thenceforth decline with growing rapidity. To finance this programme
three constant sources of annual revenue were provided, namely,
increased taxation, yielding some 30 millions yearly; domestic loans,
varying from 30 to 40 millions each year; and surpluses of ordinary
revenue amounting to from 45 to 75 millions. There were also some
exceptional and temporary assets: such as 100,000,000 _yen_ remaining
over from the war fund; 50 millions paid by Russia for the maintenance
of her officers and soldiers during their imprisonment in Japan;
occasional sales of state properties and so forth. But the backbone of
the scheme was the continuing revenue detailed above.
The house of representatives unanimously approved this programme. By
the bulk of the nation, however, it was regarded with something like
consternation, and a very short time sufficed to demonstrate its
impracticability. From the beginning of 1907 a cloud of commercial and
industrial depression settled down upon Japan, partly because of so
colossal a programme of taxes and expenditures, and partly owing to
excessive speculation during the year 1906 and to unfavourable
financial conditions abroad. To float domestic loans became a hopeless
task, and thus one of the three sources of extraordinary revenue
ceased to be available. There remained no alternative but to modify
the programme, and this was accomplished by extending the original
period of years so as correspondingly to reduce the annual outlays.
The nation, however, as represented by its leading men of affairs,
clamoured for still more drastic measures, and it became evident that
the government must study retrenchment, not expansion, eschewing above
all things any increase of the country's indebtedness. A change of
ministry took place, and the new cabinet drafted a programme on five
bases: first, that all expenditures should be brought within the
margin of actual visible revenue, loans being wholly abstained from;
secondly, that the estimates should not include any anticipated
surpluses of yearly revenue; thirdly, that appropriations of at least
50,000,000 _yen_ should be annually set aside to form a sinking fund,
the whole of the foreign debt being thus extinguished in 27 years;
fourthly, that the state railways should be placed in a separate
account, all their profits being devoted to extensions and repairs;
and fifthly, that the period for completing the _post bellum_
programme should be extended from 6 years to 11. This scheme had the
effect of restoring confidence in the soundness of the national
finances.
_National Debt._--When the fiefs were surrendered to the sovereign at
the beginning of the Meiji era, it was decided to provide for the
feudal nobles and the samurai by the payment of lump sums in
commutation, or by handing to them public bonds, the interest on which
should constitute a source of income. The result of this transaction
was that bonds having a total face value of 191,500,000 _yen_ were
issued, and ready-money payments were made aggregating 21,250,000
_yen_.[25] This was the foundation of Japan's national debt. Indeed,
these public bonds may be said to have represented the bulk of the
state's liabilities during the first 25 years of the Meiji period. The
government had also to take over the debts of the fiefs, amounting to
41,000,000 _yen_, of which 21,500,000 _yen_ were paid with
interest-bearing bonds, the remainder with ready money. If to the
above figures be added two foreign loans aggregating 16,500,000 _yen_
(completely repaid by the year 1897); a loan of 15,000,000 _yen_
incurred on account of the Satsuma revolt of 1877; loans of 33,000,000
_yen_ for public works, 13,000,000 _yen_ for naval construction, and
14,500,000 _yen_[26] in connexion with the fiat currency, we have a
total of 305,000,000 _yen_, being the whole national debt of Japan
during the first 28 years of her new era under Imperial
administration.
The second epoch dates from the war with China in 1894-95. The direct
expenditures on account of the war aggregated 200,000,000 _yen_, of
which 135,000,000 _yen_ were added to the national debt, the remainder
being defrayed with accumulations of surplus revenue, with a part of
the indemnity received from China, and with voluntary contributions
from patriotic subjects. As the immediate sequel of the war, the
government elaborated a large programme of armaments and public works.
The expenditure for these unproductive purposes, as well as for coast
fortifications, dockyards, and so on, came to 314,000,000 _yen_, and
the total of the productive expenditures included in the programme was
190,000,000 _yen_--namely, 120 millions for railways, telegraphs and
telephones; 20 millions for riparian improvements; 20 millions in aid
of industrial and agricultural banks and so forth--the whole programme
thus involving an outlay of 504,000,000 _yen_. To meet this large
figure, the Chinese indemnity, surpluses of annual revenue and other
assets, furnished 300 millions; and it was decided that the remaining
204 millions should be obtained by domestic loans, the programme to be
carried completely into operation--with trifling exceptions--by the
year 1905. In practice, however, it was found impossible to obtain
money at home without paying a high rate of interest. The government,
therefore, had recourse to the London market in 1899, raising a loan
of £10,000,000 at 4%, and selling the £100 bonds at 90. In 1902, it
was not expected that Japan would need any further immediate recourse
to foreign borrowing. According to her financiers' forecast at that
time, her national indebtedness would reach its maximum, namely,
575,000,000 _yen_, in the year 1903, and would thenceforward diminish
steadily. All Japan's domestic loans were by that time placed on a
uniform basis. They carried 5% interest, ran for a period of 5 years
without redemption, and were then to be redeemed within 50 years at
latest. The treasury had power to expedite the operation of redemption
according to financial convenience, but the sum expended on
amortization each year must receive the previous consent of the diet.
Within the limit of that sum redemption was effected either by
purchasing the stock of the loans in the open market or by drawing
lots to determine the bonds to be paid off. During the first two
periods (1867 to 1897) of the Meiji era, owing to the processes of
conversion, consolidation, &c., and to the various requirements of the
state's progress, twenty-two different kinds of national bonds were
issued; they aggregated 673,215,500 _yen_; 269,042,198 _yen_ of that
total had been paid off at the close of 1897, and the remainder was to
be redeemed by 1946, according to these programmes.
But at this point the empire became involved in war with Russia, and
the enormous resulting outlays caused a signal change in the financial
situation. Before peace was restored in the autumn of 1905, Japan had
been obliged to borrow 405,000,000 _yen_ at home and 1,054,000,000
abroad, so that she found herself in 1908 with a total debt of
2,276,000,000 _yen_, of which aggregate her domestic indebtedness
stood for 1,110,000,000 and her foreign borrowings amounted to
1,166,000,000. This meant that her debt had grown from 561,000,000
_yen_ in 1904 to 2,276,000,000 _yen_[27] in 1908; or from 11.3 _yen_
to 43.8 _yen_ per head of the population. Further, out of the grand
total, the sum actually spent on account of war and armaments
represented 1,357,000,000 _yen_. The debt carried interest varying
from 4 to 5%.
It will be observed that the country's indebtedness grew by
1,700,000,000 _yen_, in round numbers, owing to the war with Russia.
This added obligation the government resolved to discharge within the
space of 30 years, for which purpose the diet was asked to approve the
establishment of a national debt consolidation fund, which should be
kept distinct from the general accounts of revenue and expenditure,
and specially applied to payment of interest and redemption of
principal. The amount of this fund was never to fall below 110,000,000
_yen_ annually. Immediately after the war, the diet approved a cabinet
proposal for the nationalization of 17 private railways, at a cost of
500,000,000 _yen_, and this brought the state's debts to 2,776,000,000
_yen_ in all. The people becoming impatient of this large burden, a
scheme was finally adopted in 1908 for appropriating a sum of at least
50,000,000 _yen_ annually to the purpose of redemption.
_Local Finance._--Between 1878 and 1888 a system of local autonomy in
matters of finance was fully established. Under this system the total
expenditures of the various corporations in the last year of each
quinquennial period commencing from the fiscal year 1889-1890 were as
follow:--
Total Expenditure
Year. (millions of _yen_).
1889-1890 22
1893-1894 52
1898-1899 97
1903-1904[28] 158
1907-1908 167