TRADE TROUBLES

Evening Post, Volume CXXV, Issue 28, 3 February 1938, Page 27

TRADE TROUBLES

POSITION OF JAPAN

IMPORT & EXPORT CONTROL

FINDING EXCHANGE

Japan's foreign trade today is encased in a legislative strait jacket which shows every prospect of being drawn tighter and tighter as circumstances may require, wrote the Tokio correspondent of the "Manchester Guardian" recently. ,Two new laws which were passed at the last session of the Diet are significant. One gives the Government wide powers in controlling both import and export trade. The other gives the Finance Ministry sweeping authority over new investments. Official permits are now necessary for the establishment of new companies capitalised; at more than 500,000 yen (about £28,000 sterling), for increases of capital or amalgamations of companies capitalised at this figure or more, and for all loans in excess of 100,000 yen. The purpose of the first law is to direct imports into the channels which are considered desirable from the standpoint of wartime needs, to prevent the frittering away of Japan's limited gold reserve of approximately £80,000,000 sterling, and to maintain the yen at its value of Is 2d. Further depreciation of the yen is frowned on by the financial authorities here, as it is believed that no economic advantage would be gained. The law instituting State control of investments is designed to divert funds into "essential"—that is, munitions and allied—industries and to discourage investment in enterprises which are not connected with war needs. The sharp limitation of imports which fall into the "non-essential" category is another means of achieving the same end. BLOCKED FOREIGN ACCOUNTS. Those foreign business firms which are not directly supplying military or naval needs are now reaping more worries than profits. Exchange control regulations, which have been in force for several years but have been mildly administered, ' have been tightened to1 a point where the problem of "blocked yen" is becoming serious. Permissions to transfer funds abroad are granted sparingly, and, it appears, in many cases capriciously, with, little consideration for the time when the' goods in question were brought into Japan. The total amount of these blocked foreign accounts is probably not far from 200,000,000 yen. Ironically enough, German business men seem to have been the most seriously affected, as their credits were more extended than those of other nationalities. Applications for import permits are closely scrutinised, and are now seldom granted in the-case of luxuries or articles for which there is a Japanese substitute. A large foreign camera company, for instance, has been informed that it may henceforward import only X-ray films.' A local candy manufacturer finds' his production plans threatened because of the refusal of a permit for cocoa-beans. , Cinema Jans are disconsolate because imports of foreign films have1 1 been forbidden until further notice, and it is-, intimated that no reconsideration of this decision is probable until well into next year. LIFE GROWS HARDER. Life for foreigners and_for Japanese with Western tastes is likely to become appreciably bleaker as existing stocks of canned foods and bottled beverages from abroad run out, because there is little prospect that new permits will be granted. The Japanese masses are, not threatened with any shortage of food, because the Japanese Empire is almost self-sufficient as regards rice, fish, soya beans, and vegetables, the main ingredients in the Japanese diet. On the other hand, rents are rising as a result of higher taxes. Clothing 'seems likely to increase in price and deteriorate in quality, because the authorities wish to encourage the use of staple fibre in cotton and wool mixtures. Japan at present has considerable reserves of cotton and wool as a result of heavy speculative purchases during the first half of 1937. New permits, however, will be doled but sparingly. It is believed that the use of staple fibre, even though a substantial amount of wood pulp must be imported at the present time, will ultimately make for self-sufficiency as the vast forest reserves of Manchukuo are brought into exploitation. ADVERSE TRADE BALANCE.. A glance at the trade figures shows why Japan is^ determined to resort to drastic measures to curtail all imports that can be dispensed with. The excess of imports over exports during the first nine months of 1937 reached the unprecedented figure of 744,129,000 yen, greater by over 500,000,000 yen than the corresponding figure for last year. There were several reasons for this strikingly unfavourable trade balance —higher prices'for almost ; all raw materials, heavy purchases for war industries, which had set in before the fighting in China began, and unusually large buying of wool and cotton. Japan's trade balance usually becomes more favourable in autumn. Several factors, however, threaten to cut down the Japanese export trade, which has made such remarkable forward strides since 1931. Japanese domestic prices are rising, so that the large margin of advantage which the Japanese exporter formerly enjoyed is. being reduced. All China except those parts of the country which are under Japanese military occupation has disappeared as a market. rx'he übiquitous Chinese merchants in the South Pacific countries are boycotting Japanese goods. Finally, war-time exigencies have diverted a good deal of shipping and of factory production ' facilities from international trade and communication to unproductive military uses. EARNING FOREIGN EXCHANGE. Japan's prospects of earning foreign exchange with which to pay for its munitions and for the increased purchases of petrol, iron, steel, copper, and other raw materials which are made necessary by the war are thus negligible. So there is a strenuous effort to throttle non-military imports as far as.possible. It is anticipated that this will lead to complications and to threats of reprisals on the part of countries which can no longer sell their products freely in Japan. The hope is that this may be averted through a judicious distribution of war 'orders among the countries affected. Just as in the totalitarian States, much attention is being devoted to the utilisation of possible substitutes. Besides staple fibre, which is partially to replace wool and cotton, these substitutes include synthetic oil, aluminium for copper, imitation leather, and leather made of fish skins.