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.