EXCHANGE CONTROL

Dominion, Volume 30, Issue 155, 29 March 1937, Page 12

EXCHANGE CONTROL

New Japanese Regulations IMPORT TRADE AFFECTED The anouncement <>u January 8 that by a Treasury Ordinance the Japanese Government had issued regulations governing the exchange value ot the yen came as a bolt from the blue, wrote Mr. M . I'. Spalding, the well-known authority on foreign exchange, in a recent issue of the trade supplement of "The limes. Ao warning had been given as to the imiiosition of further control, and as the regulations were made immediately effectne no one had been able to arrange to meet the position. Circumvention in any case would not have been possible, since, in effect, the ordinance was retrospective. The exchange value of the yen, the pai value, of which is 24.58(1.. had been weak for some time prior to this enactment, the rate in London varying between 1/1* and 1/1 15-16, and for several days afterward the quotation was nominal at about 1/1 7-8; the exchange banks were disinclined to do business, and the open market was averse from quoting for anything beyond small sums.

The first intimation on January 8 was that the regulations governing foreign exchange transactions were temporarily tightened, and it was clear that practically the whole import trade would come under official control until July-31, the end of the importing season. Permission, it was stated, would be required for all purchases of foreign currency, as well as of Japanese currency abroad and. iemittanccs abroad. That the regulations were to be retrospective was evident troni the fact that permits would be required for the execution of existing exchange contracts, while firms importing goods to the value of 500.000 yen annually would have to report their imports for IJ3o-6<> for comparison. Further, the onus ot ascertaining the legality of customers exchange dealings was put upon the foreign exchange bank*?. As usual in such eases, the regulations as at first issued were complicated, and few bankers could be found willing to interpret them, it being held that the ordinance was designed to control not. only exchange, but also the foreign trade of Japan. , . The main points of the regulations communicated to the Press by the Japanese Financial Commission in London were as follows: — , 1 Foreign exchange transactions and acquisitions of letters of credit for the settlement of accounts of imported, goods require, in principle, the permission ot the Finance Minister. 2. In order to appropriate the yields from goods exported, without bills of exchange being drawn for the collection ot their price, for payment for imported goods, permission of the Finance Minister is necessary. . , . 3 Those importers of goods who want to dispose of their bonds, deposits, loans and other credits in foreign currencies held abroad, or to borrow money abroad in foreign assets in foreign currencies for the purpose of paying for imported goods, must obtain the permission of the Finance Minister for such disposal or borrowing. Supplementary Explanations. A statement by Dr. Baba, the Minister of Finance in Japan, to 'the effect that the ordinance was aimed solely at stabilising the yen, and that it would be administered carefully, did little to dispel the confusion and dismay that followed both on foreign markets and among importers in Japan, and as business was being held up it became necessary for the Finance Minister to issue a further statement on January 19 in Tokio. The control of exchange, which is strengthened by the enforcement of a licence system applying to transactions in exchange in settlement of imports into Japan, it was stated, is intended to check anticipatory and speculative imports, which have increased since December last. The exchange control, however, is not designed to restrict legitimate trading. Applications affecting transactions in settlement of legitimate imports have been and will be granted. Further, it is declared that the new exchange legislation does not affect bona fide traders or shippers. The Ministry declares itself confident that it can maintain the yen quotation at the level of 1/2. In the meantime, a somewhat lengthy amplification of the new regulations was issued and circulated in the London market, with the result that business became more normal and the yen quotation recovered to about 1/2. It. is stated that foreign exchange transactions and acquisitions of letters of credit for the settlement of accounts of imported goods require. in principle, the permission of the Finance Minister. The transactions which are subject to the regulations include purchases of foreign exchange, sales of yen in foreign countries, remittances abroad, and execution of exchanging contracts made before the issue of the ordinance.

Exchange transactions or acquisitions of letters of credit may be undertaken without permission (a) if the total amount concerned in one month does not exceed 30.000 yen or its equivalent; (b) exchange transactions arising from letters of credit which have been obtained with permission, or for which permission has not been required. In this connection it should be noted that exchange transactions in connection with letters of credit obtained before the issue of the ordinance require permission; (c) no permits are required for the settlement of documentary bills covering goods which have been either already imported or shipped from abroad: or for (d) execution of exchange contracts made before the issue of the ordinance for settlement of documentary bills, provided that the goods concerned were shipped from abroad within one week of the issue of the ordinance. In regard to foreign exchange banks it is stated that they must ascertain that their customers are in possession of the necessary permission for their exchange transactions or the acquisition of letters of credit, or that the permission is not required by the ordinance for such transactions. As from January 9, foreign exchange banks were also required to obtain permission in order to make payment to a bank as per instruction from abroad, except when the amount to be paid against remittance cheque or draft, or as per instruction for payment, does not exceed 10.000 yen or its equivalent per item. Apart from the stabilisation of the yen and the prevention of exchange speculation. the object of the ordinance is to impose n control over imports, which it is anticipated would otherwise show a disproportionate increase in order to avoid payment of the. higher import duties which come into effect in April. New Gold Mining Companies New Welcome Gold Mining Co., Ltd., Reefton, has been registered. Capital: £12,000 in 240,000 shares of 1/- each. Subscribers: Cronadun—M. S. O'Malley 2000. Reefton—G. J. Dick 2000, J, li. Discaciati 2000, T. 11. Lee 10,000, D. A. MeViear 2000. Big River—E. W. Jones 2000. Wellington—F. W. Manton 2000. Greymouth—J. W. Hannan 2000. Objects: Purchase mining privileges of A. Walk?r and E. B. Comerfort and incidental. Dominion Gold Prospecting Co. (no liability), Wellington, has been registered. Capital: £lO,OOO into 200,000 shares of 1/- each. Subscribers: Wellington— W. H. Ilindle. F. Cassia. IL E. Avery, E. . Hunt. C. G. Johan, D. L. Irwin. W. S. Wilson, 1 share each. Gold Mining Returns The Worksop Extended Gold Dredging Company, Ltd., give the following return for the week ending March 25: Yield, 31 oz.; yardage treated, 11.500; hours dredged, 133. Bv Telegraph--Press Association. Greymouth, March 28. The Maori Gully dredge return was 250 z. 7dwt. for 110 hours (five days work). The Mossy Creek dredge returned 220 z. 18dwt. from 7137 yards for 107 hours.