ECONOMIC CRISIS

Otago Daily Times, Issue 23706, 13 January 1939, Page 7

ECONOMIC CRISIS

JAPAN’S INSOLVENCY MUST END CHINA WAR INTERNAL DIFFICULTIES (United Press Association) (By Electric Telegraph—Copyright)' LONDON, Jan. 6. Japan is approaching an economic and financial crisis which she cannot escape unless the China war is speedily ended. This assertion is made by the Far Eastern correspondent of the Spectator.

“ Japan,” he declares, “is insolvent, and all the world knows it. Moreover, the Japanese internal economy and perhaps the very existence of the Japanese Empire, are menaced.

“ Informed circles would not be surprised to see a breakdown at any time.”

The correspondent points out that Japan’s overseas trade for seven years before the Sino-Japanese war increased by 700 per cent.; but this “ tremendous effort to accumulate the necessary reserves of foreign exchange for the war which had been planned” resulted in a deterioration of living standards and also in the quality of goods exported. Japan was well prepared, but only fqr one year’s war. It is inconceivable, the correspondent thinks, that the Japanese masses, especially the agriculturists, will continue to produce much longer. Dwindling Exports “Already Japan’s exports are dwindling,” he goes on. “Boycott sentiment in the United States has cut down Japanese silk exports 40 per cent. “Soon Japan will be unable to buy necessary raw materials, and hence peace will be necessary before the inevitable crash. “Already internal loans are only half subscribed, and the cost of living is increasing. « The production of woollen goods is now half the normal figure, because Japan cannot afford to buy sufficient wool from Australia. “ The rayon industry is operating at less than a third of the normal volume, and Japanese gold shipments to the United States are double her domestic production. These are necessary to pay for war materials, but are now dwindling. British Rights in China After months of. discussion _ between Sir Robert Craigie, British Ambassador to Tokio, and the Japanese authorities regarding AngloJapanese differences, virtually nothing, it is believed, has emerged. Japan’s promises to respect British rights have not been fulfilled. Definite British pressure on the Japanese, possibly in co-operation with the United States, may result. The Foreign Office here certainly feels that it is futile to _ negotiate further with Tokio; but it remains to be seen how the Bank of England and city circles respond to this.attitude. , ; 4 , It will also be necessary to sound the dominions, especially Australia, since, if Cabinet decides on trade action, raw materials exports by the dominions to Japan, and manufactured imports from Japan will clearly be affected; .. ECONOMIC “WAR” POSSIBLE RUMOURS IN LONDON LONDON, Jan. 12. (Received Jan. 12, at 10 p.m.)

The Australian Associated Press says: “Rumours, apparently officially inspired, are current that Britain, in conjunction with France and the United States, is on the verge of declaring an economic “ war ” against Japan. The United Kingdom asked the dominions what part they would plav if economic sanctions were imposed. The subject was raised during the conversations between Mr Chamberlain and M. Daladier in Paris. Mr Joseph Kennedy, the American Ambassador, conveyed to Washington an outline of Britain’s view, with the object of a British-United States agreement on policy.”

JAPANESE PRESS COMMENT THREAT OF” RETALIATION TOKIO, Jan. 11. “Japan will retaliate effectively against any economic measures by Britain and America against Japan, declares the Nichi Nichi Shimbun, which quotes Mr Arita as saying that Britain and America should be most careful against exerting economic pressure on Japan, since they must realise the extent of the retaliatory measures that could be taken by Japan against their interests throughout China. Other newspapers print similar reports, some asserting that Mr Arita will tell the United States that Japan is determined to establish a bloc comprising Japan, China, and Manchukuo capable of reconstructing East Asia.