JAPANESE FINANCE

Evening Post, Volume CIV, Issue 4, 5 July 1927, Page 4

JAPANESE FINANCE

NEW PROBLEMS ARISE

ABNORMAL SPECULATION

.'. All signs to-day point <to the Japanese Government being determined to save the banks' that Have been forced 1 to close their doors during the recent financial impasse, states the. Tokio correspondent of the "San Francisco Chronicle." It is well that some of the bigger institutions that were forced to the wall'be set on their feet again, but one fact must not be lost sight of, namely, that tho majority of these banks.are in difficulties simply because of their own gross carelessness and semi-mania for abnormal speculation, while, of the firms on whom the blow struck at the banks has ricocheted, independent and fair investigation shows that stupid incompetence has been the chief reason for such a sad state of affairs. .-, .

There, has always . been an unholy and unhealthy alliance between trading and banking, interests in Japan. Together these interests have forced prices up to'ari aSribrmal level, and Japan today is;'the dearest country in the.world. The external value of j.the yen; the Japanese unit of currencyj is high, but the internal value is far less. This is, in a measure, duo to certain- trading enterprises, in conjunction with- some banks, endeavouring to keep commodity prices from coming down, when they hays come down everywhere else in-the world. It need hardly bo said that such a practice on the part of the ijanks ?s far from being legitimate banking, as understood in any other part of the world. ' •

ri.Japan to-day is faced; with a sorious situation. Her frozen credit is so large that it threatens ti fresh financial crisis. On th 6 , »ther hand, ■ to realise on the collateral would certainly break tho commodity market and precipitate a commercial crisis. The authorises, like dope -fiendSj seem, afidicted to the; old temporising- measure, inflation. The' result will be a rise* in prices, a sinking rate of exchange, a rising rate of interest, and the repetition of the sickening business all over again. ;

Another matter to be taken into consideration is where the Government proposes to get the 500,000,000 yen it proposes to give the Bank of Japan in order to guarantee that financial institution against any losses incurred through helping other banks. It is an open secret that Japan has not this amount at home and cannot raise it internally without touching the peopleJs poßtal sayings. There are three other ways open;, the raising of tho income tax, the imposition of special taxes on idle property, or excise. And there is always the possibility of securing a loan from America or Great Britain. But the authorities, to judge from the indications thus far, seem inclined to prefer inflation.'. If inflation is again resorted to, then, in the opinion of economists in Tokio, it will be nioro than a generation before the,resultant damage to Japan's credit will have been rc f aired, a .-fl ntrhG c It? v. fl -' lil'Dn-,