THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, NOVEMBER 5, 1937 JAPAN'S FINANCIAL NEEDS

New Zealand Herald, Volume LXXIV, Issue 22878, 5 November 1937, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, NOVEMBER 5, 1937 JAPAN'S FINANCIAL NEEDS

Can Japan bear the financial strain of her war with China ! It is her war much more than China's, since she is plainly the assailant in the field, whatever she may say about China's provocation; and although China stands to lose heavily by the material destruction wrought on her soil, Japan cannot escape from heavy costs, expanded by the requirements of transport and the necessities created by foreign conditions. The question as to how she will fare financially, should the Chinese resistance continue to be stubborn, is pointedly raised by recent events, and in the news is significant mention of the limit being reached in her prospects of augmenting war funds by domestic and foreign loans. Sir George Paish, a noted authority, has said she must go 011 borrowing, but has pointed out that the restoration of peace must be a prelude to the normal conditions essential for the free flow of money. Discussing the position, the Economist concludes that it is clear Japan has a very difficult task ! on her hands, the more so because ! she cannot raise loans abroad as she ' did in the war against Russia. It | is probable that nationalist fervour may sustain the zeal of the Japanese people, but this zeal can only be kept at a high pitch by the winning of substantial victories. The disciplinary power of the Government is great, yet even this cannot work miracles; in a country where the standard of living is relatively low any further reduction, imposed to increase the sinews of war, must bring popular enthusiasm for a foreign campaign nearer to collapse. Economic factors are not the onlyones ; however, they may count decisively. The Economist's judgment in September puts the matter plainly: "if the war or its aftermath be prolonged, the strain will become severe, but it cannot be confidently argued that her economic system will collapse and prevent her achieving her wat aims, provided the outside world 'does not employ any embargo against Japanese trade." Certain features of Japan's economic position strengthen the impression of a latent if not actually hampering disability. Her budget is chronically unbalanced, .and the Government's past successes in floating bonds to cover the deficit should not be interpreted as proof of ability to carry on in that way. On the contrary, there are signs of an increasing inability to do so, along with an increasing dependence on a supply of raw materials by other people in order to carry on the war. Her circle of friends is narrowing, and none of those now left in it can materially assist in providing them. She is without iron and oil in more than trifling quantities, and her coal resources are far from plentiful. Ninety per cent of her petroleum supply is imported ; she has to import 75 per cent of her iron ore, 50 per cent of her scrap-iron, and more than 25 per cent of her pig-iron. She does better with coal, yet has only 200 tons per head; she is under necessity to import coking coal, essential in the working of metals; and 50 per cent of her anthracite has also to be got from abroad. When other requisites are considered, it is notable that she has almost no wool; nor has she any nitrates, antimony, mercury, bauxite, nickel or resin. Her bombardment of Shanghai, not to mention other operations, looks like a reckless squandering of resources that cannot easily be replaced. She can furnish herself, it is true, with a varying percentage of her requirements in tin, zinc, lead, salt, jute, flax, hemp, and particularly copper. Her own resources of raw silk are the largest in the world; nevertheless, for cotton she must look to other lands —raw cotton has long been her principal import. Thus, with an experience remote from economic self-sufficiency, her growing dependence upon foreign credits is a serious fact.

It is possible, according to some estimates of Japan's resources, that she may avert perilous pressure at the most vital point, need for foodstuffs. She has local supplies of rice, and access to wheat, millet, soya beans and other edibles in Manchukuo. But this apparent security is not as sound as it looks. Her production of rice, by primitive methods, is on a low scale. One peasant family produces, as a rule, only enough to feed itself and two other families, even at the low rate of consumption ruling" in the past few years. In a time of war, especially one at a distance, the need is larger, and the mobilisation of greater numbers of men, with the removal of many peasant women for work in munition and other factories, cripples agricultural activity. Supplies from Manchukuo are less easy and more costly in acquisition under conditions created by a state of war. It is evident that every addition to the Japanese forces abroad and every extra mile of distance from the base of supplies must accentuate the problem. To control the northern provinces of China would mean access to many and varied requisites, but the campaign in that region has destroyed sonic resources and hampered the production of others. Eventually these may be a Japanese asset, yet they arc not of immediate benefit—a crucial consideration. So the problem has no complete solution without financial buoyancy based on advantageous trade. How to pay for essential imports remains a difficulty. Japan is economically vulnerable to a high degree in present circumstance. Her recent offer of a, peace—at a satisfactory price—was probably actuated by a growing realisation that a protracted struggle, whatever its gains, must plunge her deeper into diffi- j culties already threatening to engulf her.