THE MacARTHUR PLAN AND ITS PROSPECTS

Press, Volume LXXXIII, Issue 25240, 19 July 1947, Page 8

THE MacARTHUR PLAN AND ITS PROSPECTS

JAPANESE TRADE

[By

the Tokyo Correspondent of "The Times."]

(Reprinted by arrangement.)

General MacArthur’s recent announcement of the reopening on August 15 of private or semi-private trade between Japan and the allied nations was on the whole welcomed by the Japanese people, who are ready to accept any plan that offers them even slight hope of economic rehabilitation. But doubts have sme arisen and it is now widely felt that the so-called reopening of private trade is only a first attempt to return to some degree of normality, whichof itself will not carry Japan far along the road to recovery. Under the new plan the present system of government-to-govemment trading will continue for those commodities which constitute the bulk of Japan’s exports. They are raw silk, tea, and cotton textiles. In the same category are included such items as rolling stock, mining machinery and lumber, textile machinery, and communications equipment, but these are in such short supply that virtually nothing is available. It may perhaps be intended to treat goods in this class as possible “reparations out of current production” if that form of compensation is sanctioned. The commodities available for the private buyer are very varied and for the most part of a kind which the allied liaison missions in Japan could not successfully handle by themselves. It is quite obvious that the production of consumer goods has been vigorously pushed forward, but how much of that production will find its way into foreign markets remains questionable. Control of Visits Visiting businessmen will be allowed in the first instance to stay in Japan only 21 days, but they may apply for a further extension. Each country naturally selects its own representatives, but final approval for entry must be given by General MacArthur. Transport facilities, hotel accommodation, and communications within Japan will be provided by the Japanese Government. The businessmen are not expected to be accorded any of the privileges enjoyed by members of the occupation forces, and without such amenities they may find life in Japan to-day extremely austere. Payment in dollars must be effected for all services rendered by the Japanese Government. In order that allied and neutral trade representatives now residing in Japan may not enjoy special advantages over new arrivals, transactions may not be completed before September 1, although such residents have been allowed since May 27 to conduct commercial activities in Japan on a yen basis without the necessity of obtaining headquarters’ approval. The businessman who comes to Japan may, if he wishes, discuss prices with Japanese manufacturers, but only as a matter of mutual interest in regard to transactions that may take place after the peace treaty has been signed. For the time being, all pricing of goods for export is to be carried out by the commodity specialists of allied headquarters. It is proposed to establish “world prices” for Japanese goods for sale abroad, and headquarters has given an undertaking to determine on request, within 48 hours, the price of any given commodity, but past experience gives rise to fears that there may be considerable delay. Artificial Prices Another difficulty is the complicated procedure by which all business must be transacted. When the foreign businessman has decided what he wants to buy, he must apply to the Japanese Government for a licence to export; the competent Japanese body is the Boekicho (Board of Trade), which has proved a haven of refuge for displaced bureaucrats from other Government departments. When the businessman has completed all the formalities required by the Boekicho, he must apply to allied headquarters for validation of his proposed transaction. If it is validated the deal may be closed, and he is informed what the price will be in “an acceptable foreign currency,” and in due course the Boekicho will pay the Japanese manufacturer a certain sum in yen. Under the system of government-to-government trading the Japanese manufacturer has had to wait a long time before being paid—often longer than he could afford. He has, however been well paid, for the Boekicho, in its desire to procure merchandise for export, is prepared to pay Japanese manufacturers, in yen, prices which bear no relation to the selling price of the article abroad. This practice of having two distinct and unrelated prices, the one a real one geared to world prices, the other an artificial one designed to induce the manufacturer to produce the goods the Government wants, can only lead to increased inflation. Allied headquarters’ refusal to fix an international exchange rate for the yen imparts a further air of unreality to the whole plan of private trading, and, in the view of

many Japanese, may well cripple the country’s economic recovery. Head, quarters holds that to permit the to find its own level in terms of foreign currencies would at present be highly undesirable; at the same time exchange control is not favoured. In the absence of an international exchange’rate for the yen there is no criterion of prices, which means that no incentive exists for the Japanese manufacturer to produce goods at com. petitive prices. Generally speaking, the Japanese manufacturer is not at present particularly keen to export, since he can dispose of his goods at fantastically high prices on the local black market. Further, the Japanese manufacturer has so long been out of touch with foreign markets that he does not know what foreign buyers require, and he is unwilling to invest capital or use up his scanty supplies of raw materials unless he is certain of a quick turnover. The British businessman will probably find himself at a disadvantage with his American competitor. Poli, tically and economically, Britain ha* played so small a part in the occupation that the eyes of the Japanese are for the most part turned towards the United States. American products are everywhere in evidence. The Amencan businessman has at his dispoaa! good communications between Japan and the United States, whereas the British in the Far East lag woefully behind.

The system of the 21-day permit was instituted because allied headquarters want quick results —the rapid acquisition of foreign currency fo r Japan’s use. That system may perhaps be suitable for American businessmen who would fly out to Japan on special ourchasing trips, but it is less suitable for British businessmen, who would wish to reopen on a permanent basis their pre-war commercial concerns slowly rebuilding their businesses. The National City Bank of Nev/ York and the American International Underwriters Corporation have been in business here for many months; British banks and insurance companies have not yet reopened, though it is expected that they will shortly do so. Japanese Attitude Short-term commercial loans from the United States are apparently already under consideration, but allied headquarters is still cool to sugge*. tions from other nations that their businessmen should import raw materials for the use of Japanese manufacturers, without which goods for export could not be produced in any large quantity. The reason for this is that headquarters desires to keep Japanese exports entirely free for sale in whatever market they deem best. In spite of all such disadvantages, British business, deeply rooted here before the war, should in the end do well provided that no discrimination is exercised against it. The whole purpose of the- new plan is to try to boost Japan’s exports io as to reduce the occupation costs now being borne by the United State* Treasury. Expert observers here believe that that endeavour may fail and that, in view of the economic chao* into which Japan has been allowed to sink, the only answer may well be a large foreign loan. A “political loan” of 1,000,000,000-1,500,000,000 dollar* from the United States is already freely rumoured in allied circles. It is further suggested that Japan's gold reserves of 150.000.000 dollars may also be used to finance her foreign trade. The success or failure of this new plan of developing Japan’s oversea trade to pay for her imports of food depends in the final analysis upon the attitude of the Japanese themselves which hitherto has been extremely unhelpful. Down to the level of factory managers, the Japanese leaders have for 18 months remained inactive in all matters affecting their country’s economic future, except to carry out, whenever occasion offered. Intensive propaganda for the granting of rehabilitation lo'ans. Any proposal that the shares Of the great zaibatsu concern* be sold to investors abroad in order to raise foreign exchange is greeted with extreme coldness; any suggestion that the Japanese have done little to help themselves since the war ended is quietly ignored. To hold, as many observers do, that the Japanese leaders have deliberately allowed their country’s economy to go to ruin in the hope that the allies would be compelled, at their own cost, to set it right is perhaps too harsh and cynical a judgment; but it can be said with justice that the policy of permitting the Japanese to exercise almost absolute control over their own economy has proved unwise. As a high official of headquarters said recently, the primary desire of the Japanese leaders is to get rid of the occupation forces, and they will in the future co-operate, or refuse to co-operate, with the allies in accordance with which alternative appears to them to offer the better chance of achieving that aim.