JAPAN'S FINANCIAL BURDENS AND RESOURCES
There are a good many people, some so-called financial experts among
the number, who are of opinion, and have expressed themselves to that
effect, that the financial position of Japan is an unsound one. They
depict that country as weighed down with a load of debt, mostly
incurred for her warlike operations against Russia, and the revenue as
largely mortgaged for the payment of the interest on that debt. Some
of these experts have told us that the facility with which Japan was
able to raise loans on comparatively moderate terms in the European
money-markets, and the rush that was made by investors to subscribe to
her loans, are matters which must have a baneful effect on the rulers
of Japan. These latter, we are assured, found themselves in the
position not only of being able to raise money easily, but of
positively having to refuse money which was forced upon them by eager
investors when the Japanese loans were put upon the market. The result
was, so it has been said, to encourage extravagance in expenditure and
to lead Japan to suppose that whenever she wanted money for any
purpose she had only to come to Europe and ask for it. The financial
experts who so argue, if such puerile assertions can be dignified by
the name of argument, talk as if Japan were like a child with a new
toy. The Japanese statesmen--in which term I of course include the
Mikado, one of the world's greatest statesmen--are by no means so
simple as some of these financial experts would have us believe.
Indeed, I will go further, and venture to assert that the statesmen
are far more astute than the experts. The former emphatically know
what they are about, financially and otherwise, and they are assuredly
in no need of any Occidental giving them a lead in the matter. If I
desired to adduce any evidence on that head I need only point to the
_Financial and Economical Annual of Japan_, published every year at
the Government printing office in Tokio. This exhaustive work deals
with the different departments of Government. The section I have
before me, which is for the year 1905, treats of the Department of
Finance and it certainly serves, and very effectively serves, to show
that the Japanese are not, as they so often have been depicted,
children in matters of this kind. This Government handbook is not only
exhaustive but illuminative. Published in English, everything of which
it treats is explained in simple and concise language. There is an
entire absence of that official jargon which tends, even if it is not
intended, to render Government publications in this country
unintelligible to the ordinary reader. The plain man who peruses this
Japanese year-book can at least understand it, and he will, among
other things, grasp the fact that the Japanese have got the whole
question of finance in all its ramifications at their fingers' ends.
The total National Debt of Japan in 1905 amounted to 994,437,340 yen,
or, roughly, L100,000,000 sterling--a sum which the publication I have
referred to works out to be at the rate of 19.548 yen, or about 39s.
per head of the population. Of the debt some L43,000,000 was incurred
to defray a part of the cost of the war with Russia. As an indication
of the estimate of the credit of Japan within her own territory as
well as abroad, I may record the fact that the Exchequer Bonds which
were issued in the country in 1904 and 1905 for the purpose of
defraying the extraordinary expenses of the war were largely
over-subscribed, the first issue to the extent of 452 per cent., the
second 322 per cent., the third 246 per cent., and the fourth 490 per
cent.--a record surely! Abroad Japan's loans were no less successful.
The three issues made in Europe during the war were literally rushed
for by the investing public, with the result that whereas in May,
1904, Japan offered for subscription a loan of L10,000,000, the issue
price being L93 10s. and the rate of interest 6 per cent., in March,
1905, despite the fact of two previous loans and the exhaustion of the
country incidental to a long and expensive war, she was able to place
on the market a loan of thirty millions at 4-1/2 per cent. interest, the
issue price being L90.
A National Debt which amounts to less than L2 per head of the
population compares very favourably with that of Great Britain, which
totals up to something like L19 per head, leaving out of account the
immense and yearly growing indebtedness of our great cities and towns.
Furthermore, almost the whole of the National Debt of this country, as
of the European Powers generally, has been incurred not only for
unproductive, but as a matter of fact for destructive purposes. The
vast loans of Europe have been raised for the purpose of waging bloody
wars, some at least of which history has pronounced to have been
gigantic, not to say wicked, blunders. Much of the National Debt of
Japan, on the contrary, has been incurred for useful, productive, and
even remunerative purposes--improving the means of transport,
constructing railways, &c. The various loans outstanding up to the
year 1887, on which Japan was paying very high rates of interest, as
much as 9 per cent. on one foreign loan, were in that year converted
and consolidated by the issue of a loan bearing interest at the rate
of 5 per cent. per annum--a proceeding which materially improved
Japan's financial position and demonstrated that her credit stood
high.
The war with China in 1894-5 necessitated fresh borrowing to the
amount of over L12,000,000. Subsequent loans were issued in order to
extend the railway system of the country and so develop its trade, for
such public works as the establishment of a steel foundry, the
extension of the telephone system, the introduction of the leaf
tobacco monopoly, for the development of Formosa and, another most
important matter, the redemption of paper-money. In the early days of
her expansion Japan suffered greatly from the evils of inconvertible
paper-money and strenuous efforts had for a long time been made by the
Government for the redemption of the paper-money and the improvement
of the general financial condition. In 1890 it was found that the
reserve fund kept in the Treasury for the exchange of paper-money of
1 yen and upwards was insufficient to meet the demand. To meet this
emergency, the maximum amount of convertible bank-notes issued by the
Bank of Japan against securities was increased from 70,000,000 yen
(L7,169,927) to 85,000,000 yen (L8,706,340), of which sum 22,000,000
yen were advanced to the Government without interest. This sum added
to the original reserve fund of 10,000,000 yen (L1,024,275) was
employed for completing the redemption of paper-money of 1 yen and
upward. Subsequent loans for the purposes of the war with Russia I
have already referred to. Besides funded Japan has also, like this
country, had experience of unfunded debt in the shape of Treasury
Bills, temporary loans from the Bank of Japan, &c. Financial
operations of this kind are, however, I imagine, necessary for all
Governments to meet current expenses. To briefly recapitulate Japan's
indebtedness and borrowings generally up to the end of March, 1905,
these amounted to, in all, L140,045,030, of which sum L38,187,369 has
from time to time been paid off, leaving a balance of L101,857,661
owing by the nation.
When we consider that for this large, but not unduly large, sum Japan
has waged two considerable wars, and raised herself to the position of
a great naval and military Power, that she has developed and organised
a magnificent Army, provided herself with a strong, efficient, and
thoroughly up-to-date Navy, has constructed railways and public works,
and generally has placed herself in a capital position to work out her
own destiny free from the fear of foreign interference, I altogether
fail to see how she can be accused of financial extravagance. There is
certainly no extravagance in the administration of her finances.
London might, I suggest, learn much from Tokio in this matter. The
system of financial check and thorough and rapid audit of public
accounts is in Japan as near perfection as anything of the kind can
be. Though the late war did produce, as I suppose all wars do,
peculation, most of it was discovered and the punishment of the
culprits was sharp and decisive. There was no opportunity for
financial scandals in the campaign with Russia such as occurred during
the South African War. Every country, of course, produces rogues, and
war seems, _inter alia_, to breed roguery on a large scale, but in the
Japanese methods of finance the checks are so effective that roguery
in the public services has a bad time of it in war as well as in
peace.
As I have already remarked, I am of opinion the debt of Japan is by no
means excessive, especially in view of the fact that a large part of
it has been devoted to purposes which are profitable. The debt works
out, as I have shown, at something under L2 per head of the
population, and that population is steadily increasing. That Japan is
well able to pay the interest on her debt there can be no question
whatever, and that when the present debt becomes due for redemption
she will be able to raise the necessary funds for that purpose on
terms even more favourable than those at which she has hitherto placed
her loans I am confident. I must emphasise the fact, since so many
persons seem to be oblivious of it, that this is no mushroom South
American Republic borrowing money merely for the purpose of spending
it on very unproductive and occasionally very doubtful objects, but a
Great World Power sensible of its obligations, sensible likewise of
the policy and necessity of maintaining the national credit, and
confident that the national resources and the patriotism of its people
will enable it not only to bear the present financial burdens but even
greater, should these be found necessary for the defence of the
country or for its development.
The ability of a nation as of an individual to discharge its debts
depends of course upon its resources. No man possessing even a
perfunctory knowledge of the resources of Japan would surely venture
to express alarm at the increase in her debt and scepticism as to her
being able to meet the annual interest on that debt as well as the
constantly increasing expenses of administration. The resources of the
country have, in my opinion, as yet scarcely been realised, and
certainly have not been anything like fully developed. And when I use
the word resources I do not employ it as it is so often employed in
respect of minerals, although the mineral wealth of Japan is
considerable. Her resources, as I estimate them, are to be found in
her large and rapidly increasing population--a population perhaps the
most industrious in the world, persevering, enterprising, methodical,
and performing, whatever be its appointed task, that task with all its
might as a labour of love, in fact, not as the irksome toil of the
worker who is a worker simply because he can be nothing else. It is
this great industrial hive which in the near future will supply China
and other Eastern countries with all, or nearly all, those articles
they now obtain elsewhere. What I may term the European industries of
Japan have of recent years been largely developed or evolved. Take,
for example, an item, insignificant in one way--that of matches. In
1904 matches to the value of 9,763,860 yen, or, roughly, one million
sterling, were exported, and, strange to relate, European clothing to
the value of 287,464 yen.
The glib people who talk about Japan biting off more than she can
chew, and with a light heart borrowing money she will find a
difficulty in repaying, have apparently not grasped the fact that
Japan possesses many very eminent financiers who have quite as much,
if not more, claim to be considered financial experts than some of
those gentlemen who pose in that capacity here in England. The
Japanese financiers have, moreover, the advantage of an intimate
knowledge of their own country and its potentialities. The Japanese
Government has always had the benefit of the advice of these
singularly able men, and the result has been that its financial
operations of recent years at any rate have invariably been well
organised and skilfully and economically effected. I cannot speak too
highly of the capacity shown by the Japanese in everything relating to
banking. The Banks--of course I refer to the National Banks and not to
the European Banks having branches in the country--have very quickly
attained a high status in the International Banking world, and are
undoubtedly on a very firm financial basis. And there are many great
houses in Japan which, although not ostensibly bankers, cannot be left
out of consideration in any remarks on this head. They occupy a
position somewhat analogous to that of the Rothschilds in this
country. Let me take for example the house of Mitsui, the name of
which constantly crops up in Japanese finance.
The history of this ancient house has much that is picturesque about
it, reminding one of the old merchant princes of Venice. The family
originally belonged to the Jujiwara clan, and its origin is traced
back to a certain Mitsui who lived as a feudal lord in the fifteenth
century. At the time of the fall of the Ashikaja Shogun he lived in a
state of perpetual war, and the god of war was not propitious to him.
He retired to a neighbouring village and became the overlord of the
district. He was succeeded by his son, who removed to Matsusuzaka,
where he settled down as a private citizen and man of business, and
laid the foundations of the present Mitsui house. In the middle of the
sixteenth century his descendant became a merchant. His son moved to
Kyoto, where he started a large goods store, which is represented in
Tokio to-day by the Mitsui Hofukuten. Subsequently, at the beginning
of the seventeenth century, a member of the same house invented and
introduced the system of retailing for cash, which was an absolute
revolution of business methods at that time in Japan. In addition to
that he organised an excellent system for the remittance of money from
one part of the country to the other, as also a carrier's
business--two very remarkable facts when one remembers in what a
primitive and elementary condition of development the monetary
business of Japan was at that period. In the year 1687 the Mitsuis
were appointed by the Government purveyors and controllers of the
public exchange, and in recognition of the excellent manner in which
the duties were performed, they were given the grant of a large estate
in Yeddo.
In 1723 the head of the family, carrying out the verbal wishes of his
father, assembled his brothers and sisters and then and there drew up
in writing a set of family rules which have ever since been
practically the articles of association of the house of Mitsui. These
rules embodied on business-like lines and in business-like language
the principle that the family and not the individual forms the
ultimate union in Eastern life. It was not one or the other of the six
brothers of which the family consisted when these rules were drawn up
that was to trade, but the whole family as one unit. There was to be
unlimited liability as far as the property of each one was concerned,
and the profits of all were to be divided. This agreement is the
identical one under which the great house of Mitsui is run to-day.
Under it the family prospered exceedingly, so that when Japan decided
to take on some portion of Western civilisation, the Mitsuis acted as
the principal financial agents of the Government, and it was mainly
owing to the enormous financial resources of the house placed by them
at the disposal of the Government that the country was enabled at the
period of the revolution to pass successfully through what might have
been a most disastrous crisis. As some reward for the great services
rendered at the time, the present head of the house was created a
peer. Since the opening of Japan to Western influence the business of
the Mitsuis has enormously increased, and has been extended in various
directions. In 1876 their money exchange business was converted into a
Bank on the joint stock system, but with unlimited liability as far as
the Mitsui family was concerned. In the same year, for the purpose of
engaging in general foreign trade, the Mitsui Bussan Kwiasha was
formed, better known in Europe and America as Mitsui & Co. In 1899 the
family acquired from the Government the concession of the Meike
coal-mines, and there was then formed the Mitsui Kaishan, or Mining
Department, which has the management of this mining concession
together with many others which have since been acquired.
To-day the house of Mitsui consists of eleven families under a system
of joint liability bound together by the old rules drawn up close upon
two centuries back. The wealth of the collective families is
unquestionably great, and the confidence of the people of Japan in
this great financial firm is shown by the immense amount of money it
holds on deposit. In one or other branches of their varied businesses
they give employment to a very large number of persons. They have
initiated an exceedingly interesting system of insurance for their
employees. Each is allowed 10 per cent. interest on his wages up to
three years on condition of its being deposited in the Mitsui Bank,
with the proviso that the sum shall be forfeited in case of the
embezzlement of any of the Company's money. During the late war, as
well as in that with China, the Mitsui house had immense transactions
with the Government in providing war material, steamers for transport,
supplies, &c., and their magnificent organisation enabled them to
carry out their various undertakings without the slightest hitch. I
may also add that the name of Mitsui headed the various charitable
funds which were started in the country in connection with the war. I
am sure that this necessarily imperfect sketch of this famous Japanese
house will convince my readers of the fact that in finance, as in
other respects, Japan has already shown a capacity for holding her own
with Western nations.
I have headed this chapter "Japan's Financial Burdens and Resources,"
but I am not quite sure that the word "burdens" is not a misnomer.
Japan appears to me--and I may claim to have studied the matter with
some little attention--to have no financial burdens, if burdens be
taken to mean something that is inconveniently felt, that is difficult
to carry. There is here no people weighed down under the crushing
incubus of debt. There is a springiness and alertness, a go-ahead
energy about the nation--symptoms not usually connected with the
carrying of burdens. Japan seems to me to be in somewhat the same
position in regard to finance as France was after the close of the war
with Germany when the former nation found itself saddled with a
tremendous debt incurred for war expenditure and the indemnity which
had to be paid to the conquering nation. The fact, however, as we all
know, instead of depressing the French people seems to have put the
whole country on its mettle, with the result that the heavy interest
of the enormous debt was easily met and effective steps taken to
reduce the principal. The borrowings of Japan in Europe in the future
are likely to be small, because she will be able to obtain what she
needs at home, and provided she is not drawn into any war she will
find her expanding revenue sufficient not only for the current
expenses of administration as well as for the interest on her debt,
but over and above all this enabling her year by year to provide a
sinking fund which will in due course materially reduce even if it
does not entirely extinguish the national indebtedness. In my opinion
Japan can look forward to its financial future with equanimity. In
regard to its financial past it has the satisfaction of thinking that
heavy in one sense though its financial obligations be they have not
at any rate been squandered for unworthy purposes.