THE STRAIN OF WAR

Evening Post, Volume CXXVI, Issue 58, 6 September 1938, Page 9

THE STRAIN OF WAR

FINANCIAL BURDEN

JAPAN'S STAYING POWER

Daily reports from the Sino-Japanese war zone N and from Tokio are being followed closely throughout the Administration in the belief that they may contain the answer to the question of Japan's staying power in the Far Eastern conflict, says a message from Washington to the "Chicago Tribune." State Department experts each day find increasing evidence of the magnitude of the task Japan has undertaken in her campaign against China not only from the military point of view, but from an economic standpoint. Information has come in that Japan is finding it increasingly difficult to pay her way in the world and that she is now living beyond her means. Her gold reserve has been cut in half. As yet other capital reserves hav3 not been drawn upon, it is reported. When and if such drawing begins, experts assert, then Japan's situation will become desperate and her expansion plans in the Far East, which are part of a plan of world dominance, will crumble to leave her a second-rate Power. The strain of the .war on the Japanese pocketbook has been extremely heavy. The Japanese Diet in April passed a special war Budget of 1,506,----000,000 dollars, which brought the total appropriations for the war operations from July, 1937, to 2,143,000,000 dollars. The size of the sum asked and voted in April indicates that Japan anticipates that the struggle will continue for months to come. The appropriation is more than was required to operate the war from the outbreak of hostilities up to Aprif, about eight months. WAR COST MOUNTING. The cost of the war in the 1937-38 fiscal year which ended in March approximated. 92,000,000 dollars a month. It is estimated that this since has mounted to 126,000,000 dollars a' month. The Japanese Budget has soared during the war. The Budget for the present fiscal year is 2,238,000,000 dollars. This represents an increase of more than 200 per cent, over the last peacetime Budget. The Budget for the fiscal year which ended in March was 1,592,000,000 dollars, which represented an increase of about 150 per cent, over the peace-time Budget of 1936-37. Appropriations for the fiscal year just ended amounted to 40 per cent, of the national income. Military and naval appropriations alone amounted to 30 per cent! of the national income. They totalled 1,160,000,000 dollars. In the present fiscal year the military and naval appropriations are expected to pass 40 per cent, of the national income. The World War cost the United States at its height in. 1918 about 25 per cent, of the national income. Ths United States had far greater reserves to draw on than Japan has yet untouched. The national income is not sufficient in Japan to meet the heavy military expenses through taxation. Taxes have been increased one-third, but (he increase is a mere drop in the buckat against the flood of war expenditures. Huge loans have been floated so far with success. MAY RESORT TO INFLATION. When these loans slow up, according to experts, Japan may have to resort to inflation, with all its dire consequences, it is reported. As the struggle is about to enter its second year, Japan has lost her favourable trade balance. In 1937 there was an excess of 176,000,000 dollars of imports, largely due to the import of raw materials for war purposes and war materials themselves. The various anti-Japanese boycott movements also tended to lower Japan's exports. During 1937 Japan managed to pay her way by exporting about half her gold supply. Less than 290,000,000 dollars of the metal remains in the country.. To offset the diminuation of its gold supply, Japan, has been making heroic efforts to increase its gold output. If the gold mines can produce, it is reported, Japan has a chance to keep on paying her own way.' However, the consensus is that Japan cannot long go on at the present rate, because present trends indicate continued depletion of the gold stock. Wages and prices have been rising during the war, with the cost of living mounting more rapidly than wages. Stringent Japanese regulation of business and exchanges has prevented measurement of the financial strain through various business indexes, but the very existence of the regulations is held by observers to be evidence of the seriousness of Japan's condition. Japan has been lending money to key munitions industries and making capital available to a lesser degree to industry in general. The Government also has taken steps to ease the money market and hold down interest rates.

The building up of the munitions industries at the sacrifice of other industries is another factor in the loss of the trade balance. Still another is the diversion of shipping to war. pur» poses.