Financial affairs naturally occupied
a prominent place in Japan's modern
career. At one time, indeed, her condition
caused much uneasiness and elicited
from on-lookers many predictions of disaster.
But by skilful management her statesmen rescued
her from embarrassment and falsified all sinister
forecasts. The story of that achievement may
well occupy attention for a moment.
It has been shown that in Tokugawa days
the land throughout the Empire was regarded as
State property, and parcelled out into numerous
fiefs, the feudatories holding it in trust and being
empowered to derive certain revenue from it.
The standard of taxation varied more or less in
different districts, but, at the time of the Restoration
in 1867, the most generally recognised principle was that four-tenths of the gross produce
went into the hands of the tax-collector and six-tenths
to the farmer. This rule applied to the
rice crop only, the assessments for other kinds
of produce being levied, partly in money and
partly in manufactured goods, at rates often of a
very arbitrary nature. Forced labour also was
exacted, and tradesmen were subjected to monetary
levies as official necessity arose. Neglecting
all these factors of uncertain dimensions, since
they do not admit of arithmetical statement for
the purposes of a general review, and taking the
case of rice only, the data are that the total yield
of that crop in 1867 was 154,000,000 bushels,
approximately, of which the market value then
ruling was 24,000,000 pounds sterling, or
240,000,000 yen, and it follows that the grain
tax alone represented 96,000,000 yen on the
lowest calculation, the farmers' portion being
144,000,000. Thus much premised, a basis is
obtained for comparing the burdens of the people
in ante-Meiji and in post-Meiji days.
When the administration reverted to the
Throne in 1867, the central treasury was of
course empty, and the funds hitherto employed
for governmental purposes in the fiefs did not at
once begin to flow into the coffers of the State.
They continued to be devoted to the support of
the feudatories, to the payment of the samurai,
and to defraying the expenses of local administration,
the central treasury receiving only whatever small fraction remained after these various
outlays. The Shōgun himself did not, on abdicating,
hand over to the sovereign either the contents
of his treasury or the control of the lands
from which he derived his revenues. He contended
that funds for the government of the
nation as a whole should be levied from the
people at large. Matters were further complicated
by the fact that the impecunious Ministry
had to engage in campaigns which, though they
placed the treasury in command of some limited
sources of revenue, had also the effect of augmenting
its liabilities.
The little band of men who had assumed the
direction of national affairs saw no exit from the
dilemma except an issue of paper money. This
was not a novelty in Japan. Paper money had
been known to the people since the middle of
the seventeenth century, and at the moment of
the mediatisation of the fiefs, no less than sixteen
hundred and ninety-four varieties of notes were
circulating in the various districts. There were
gold notes, silver notes, cash notes, rice notes, umbrella
notes, ribbon notes, lathe-article notes, and so
on through an interminable list, the circulation of
each kind being limited to the confines of the issuing
fief. Many of these notes had served a useful
purpose in tradal transactions, but those officially
issued by the feudal chiefs had in some cases ceased
to have any purchasing power, and must in every
case have become valueless when the fiefs ceased to exist. The first duty of a centralised, progressive
administration should have been to reform
the currency: to substitute uniform and
sound media of exchange for these unsecured
tokens, which hampered trade, destroyed credit,
and opposed barriers to commercial intercourse
between neighbouring provinces and districts.
The political leaders of the time appreciated that
duty, but instead of proceeding to discharge it,
they saw themselves compelled by stress of circumstances
to adopt the very device which, in
the hands of the feudal chiefs, had produced
such bad results. It was an irksome necessity,
and the new Government sought to relieve its
conscience and preserve its moral prestige by
pretending that the object of the issue was to
encourage wealth-earning enterprise, and that the
notes would be lent to the fiefs for the purpose
of promoting commerce and industry. The
people appraised these euphemisms at their true
worth, and the new notes fell to a discount of
fifty per cent. Then ensued a brief but sharp
struggle between rulers and ruled. The Government
resorted to arbitrary measures, sometimes of
great severity, to force its notes into circulation
at par with silver. But there was no continuity
of policy. One day, men were imprisoned for
discounting paper tokens; the next, they were
released. In December the authorities officially
recognised a depreciation of twenty per cent; in
the following April they withdrew the recognition and proclaimed the equality of specie and
paper. Now they promised to redeem the notes
in thirteen years; then they shortened the period
to five, and again they postponed it indefinitely.
Nothing is more notable than the fact that, despite
this bewilderment and vacillation, the
Government's financial credit gradually acquired
strength, so that within five years, though the
issues of fiduciary paper aggregated nearly
60,000,000 yen, the notes circulated freely
throughout the whole Empire at par with silver,
and even commanded, at one time, a small
premium. It is true that by this epoch the
revenues of all the fiefs had become available
for the service of the State, and that only one-tenth
of their total had been appropriated for the
support of the territorial nobles. But the Central
Government, having diminished the taxes to
about one-half of their former total, as will presently
be shown, found the public income too
small for the expenditures. The paper money of
the fiefs, amounting to 25,000,000 yen, had been
exchanged for treasury notes. The building of
railways had been commenced. The foundations
of an army and a navy had been laid. A postal
system, a telegraph system, a prison system, a
police system, and an educational system had
been organised. The construction of roads, the
improvement of harbours, the lighting and buoying
of the coast, had been vigorously undertaken.
A mercantile marine had been created. Public works had been inaugurated on a considerable
scale. Many industrial enterprises had
been started under official auspices as object-lessons
for the people, and large sums in aid of
similar projects had been lent to private persons.
Thus the Government, living far beyond its income,
had unavoidable recourse to further issues
of fiat paper, and in proportion as the volume
of the latter exceeded the actual currency requirements
of the time, its value depreciated,
until, in 1881, fourteen years after the Restoration,
notes to the face value of 150,000,000 yen
had been put into circulation, and eighteen paper
yen could be purchased with ten silver coins of
the same denomination. On the other hand, the
treasury held only 8,000,000 yen in specie, or
about one-nineteenth of its total note issues, and
no prospect of a return to hard-money payments
could be discerned by the public. The Government
indeed was not without a sense of its
responsibilities. Fitful efforts had been made
to strengthen the specie value of the fiat paper
by purchasing quantities of it from time to time,
an operation which inured chiefly to the benefit
of speculators on 'change, and large
sums—totalling 23,000,000 yen—had been devoted to
the promotion of various industries in the hope
that their products would go to swell the list of
exports and thus draw gold and silver into the
country. But, in 1881, it became evident that
these superficial devices must be abandoned, and that unless a sound programme were adopted
and steadily pursued, the credit of the country
would be seriously injured. The Government
therefore determined to shape its policy in acordance
with two distinct ends, first, reduction of
the volume of fiduciary notes in circulation, and,
secondly, accumulation of a specie reserve. The
means chosen were simple.
By applying the pruning-knife boldly to administrative
expenditures; by transferring certain
charges from the treasury to the local communes;
by suspending all grants in aid of provincial public
works and private enterprises, and by a moderate
increase of the tax on alcohol, an annual
surplus of revenue, totalling 7,500,000 yen, was
secured. This was employed in reducing the volume
of the notes in circulation. Then, in order
to amass a specie reserve, it was resolved that
all officially conducted industrial and agricultural
works should be sold—since their purpose of instruction
and example seemed now to have been
sufficiently achieved,—and that the proceeds, together
with various securities held by the treasury
and aggregating 26,000,000 yen in face value,
should be used for purchasing gold and silver.
The latter was a delicate and difficult operation.
Had the Government entered the market openly
as a seller of its own fiduciary notes for specie, its
credit must have suffered. There were, also,
ample reasons to doubt whether any available
stores of precious metal remained in the country. In obedience to elementary economical laws, the
cheap money had steadily driven out the dear,
and although the Government mint at Ōsaka,
founded in 1871, had struck 80,000,000 yen
worth of gold and silver coins between that date
and 1881, when the policy here described was
inaugurated, the customs returns showed that a
great part of this metallic currency had flowed
out of the country. Under these circumstances
Japanese financiers decided that only one course
offered: the treasury must play the part of national
banker. The State must advance paper
money to producers and manufacturers engaged in
the export trade, on condition that when their
goods were sold abroad, the specie thus obtained
should be handed over to the treasury. This
programme required the establishment of Consulates
in the chief marts of the Occident, and the
organisation of a great central bank—the present
Bank of Japan—as well as of a secondary bank—the
present Specie Bank of Yohohama,—the
former to conduct transactions with native producers
and manufacturers, the latter to finance
the business of exportation. The outcome of
these various arrangements was that, by the
middle of 1885, the volume of fiduciary notes
had been reduced to 119,000,000 yen, their
depreciation had fallen to three per cent, and
the metallic reserve of the treasury had increased
to 45,000,000 yen. The resumption of
specie payments was then announced, and became, in the autumn of that year, an accomplished
fact.
Viewed by the light of results, the above facts
constitute a fine economical feat, nor can it be
denied that the statesmen who directed Japan's
finances at that critical time showed clear insight,
good organising capacity, and courageous energy.
While these events were in progress, however,
they elicited a great deal of adverse criticism
from Europeans and Americans. Many onlooking
strangers were prepared each with an infallible
nostrum of his own, the rejection of which convinced
him of Japan's hopeless stupidity. Now,
she was charged with robbing her own people because
she bought their goods at home with paper
money and sold them abroad for specie; again,
she was accused of an official conspiracy to ruin
the foreign local banks because she purchased exporters'
bills on Europe and America at rates that
defied ordinary competition; and while some declared
that she was plainly without any understanding
of her own doings, others, averring that
she could not possibly extricate herself from the
slough of an inflated and largely depreciated fiat
currency without recourse to European capital,
predicted that her heroic method of dealing with
the problem would paralyse industry, interrupt
trade, produce wide-spread suffering, and, in short,
bring about the advent of the proverbial "seven
other devils." Undoubtedly, to carry the currency
of a nation from a discount of fifty or sixty per cent to par in the course of four years, reducing
its volume at the same time from 150,000,000
to 119,000,000, was a financial enterprise violent
and daring almost to rashness. The gentler expedient
of a foreign loan—an expedient of recently
proved efficacy in Italy's case—would
have commended itself to the majority of economists.
But it may be here stated, once for all,
that until her adoption of gold monometallism in
1897,[1] the foreign money market was practically
closed to Japan. Had she borrowed abroad,
it must have been on a sterling basis. Receiving
a fixed sum in silver, she would have had to discharge
her debt in rapidly appreciating gold.
Twice, indeed, she had recourse to London for
small sums, but when she came to cast up her
accounts, the cost of the accommodation stood out
in deterrent proportions. A nine per cent loan,
placed in England in 1868 and paid off in 1889,
produced 4,750,000 yen and cost altogether
11,750,000, in round figures; and a seven per cent
loan, made in 1872 and paid off in 1897, produced
10,750,000, and cost 36,000,000. These
considerations were supplemented by a strong
aversion to incurring pecuniary obligations to
Western States before the latter had consented to
restore Japan's judicial and tariff autonomy, a
point which will be explained by and by. The
example of Egypt showed what kind of fate
might overtake a semi-independent State falling into the clutches of foreign bond-holders. Japan
did not wish to fetter herself with foreign debts
while struggling to emerge from the rank of
Oriental Powers. After all, nothing succeeds
like success. Japanese financiers made a signal
success. Having undertaken to re-organise the
administration of an empire, and to inaugurate a
vast programme of reform, they met the difficulty
of an empty treasury by issuing fiat notes, and then,
fourteen years later, grappling boldly with the
problem of this inflated and heavily depreciated
currency, they restored its value to par and resumed
specie payments in the brief space of four
years.
It is advisable at this point to examine the question
of the national debt incurred by Japan since
the unification of the Empire.
As already stated, when the fiefs were surrendered
to the sovereign, it was decided to provide
for the feudal nobles and the samurai generally
by the payment of lump sums in commutation,
or by handing to them public bonds the interest
on which should constitute a source of income.
The result of this transaction, the details of
which need not be set forth, was that bonds
having a total face value of 191,500,000 yen
were issued, and ready-money payments aggregating
21,250,000 yen were made.[2] This was
the foundation of Japan's national debt. Indeed,
these public bonds may be said to have represented the bulk of the State's liabilities during
the first twenty-five years of the Meiji period.
The Government had also to take over the debts
of the fiefs, amounting to 41,000,000 yen, of
which 21,500,000 were paid with interest-bearing
bonds, the remainder with ready money. If
to the above figures be added two foreign loans
aggregating 16,500,000 yen (completely repaid
by the yen 1897); a loan of 15,000,000 yen incurred
on account of the only serious rebellion
that marked the passage from the old to the new
régime—the Satsuma revolt of 1877; loans
of 33,000,000 yen for public works, 13,000,000
yen for naval construction, and 14,500,000[3] in
connection with the fiat currency, there results
a total of 305,000,000 yen, being the whole
national debt of Japan during the first twenty-eight
years of her new era under Imperial
administration.
The above statements sufficiently explain the
liabilities incurred by the country during what
may be called the first epoch of her modern financial
history. There remains to be considered the
second epoch, dating from the war with China,
which occurred in 1894–1895.
The direct expenditures on account of the
war aggregated 200,000,000 yen, of which total
135,000,000 were added to the national debt,
the remainder being defrayed with accumulations
of surplus revenue, with a part of the indemnity received from China, and with voluntary contributions
from patriotic persons. In the immediate
sequel of the war, the Government elaborated a
large programme of armaments' expansion and
public works. The army, at the time of the
war, consisted of six divisions and the Imperial
Guards; the peace establishment being 70,000,
and the war strength, 268,000. The navy comprised
thirty-three vessels—exclusive of twenty-six
torpedo boats—representing a displacement
of 63,000 tons. It was resolved to raise the
number of divisions to twelve, with a peace establishment
of 145,000 and a war strength of
560,000, and the navy to sixty-seven ships[4] (besides
eleven torpedo-destroyers and one hundred
and fifteen torpedo boats) with an aggregate displacement
of 258,000 tons. The expenditures for
these unproductive purposes, as well as for coast
fortifications, dockyards, and so on, came to
314,000,000 yen, and the total of the productive
expenditures included in the programme was
190,000,000 yen,—namely, 120,000,000 for railways,
telegraphs, and telephones; 20,000,000 for
riparian improvements;[5] 20,000,000 in aid of
industrial and agricultural banks, and so forth—the
whole programme thus involving an outlay
of 504,000,000 yen. To meet this large figure,
the Chinese indemnity, surpluses of annual revenue
and other assets, furnished 300,000,000, and
it was decided that the remaining 204,000,000 should be obtained by domestic loans, the programme
to be carried completely into operation—with
trifling exceptions—by the year 1905.
In practice, however, it was found impossible to
obtain money at home without paying a high
rate of interest. The Government, therefore, had
recourse to the London market in 1899, raising
a loan of 100,000,000 yen at four per cent and
selling the 100-yen bonds at 90. Evidently a
further loan must be obtained abroad, for money
commands such a high price in the domestic market
that the State cannot afford to use home
capital. This somewhat wearisome array of
figures may be concluded by noting that, according
to present arrangements, Japan's national
indebtedness will reach its maximum, namely,
575,000,000 yen, in the year 1903, and will
thenceforward diminish steadily.[6]
It remains to consider briefly the annual revenues
and expenditures of the State, and the manner
of their growth during recent years.
The burden of taxation is small, especially
compared with the career of vigorous progress
upon which the country has embarked. Only
120,000,000 yen is raised by direct taxes, that is
to say, something less than three yen (six shillings)
per head of population. The sources are these:—
On the other hand, the ordinary expenditures aggregate 164,000,000 yen. Thus there is a surplus of 37,000,000 yen. At present this surplus is absorbed for extraordinary and terminable enterprises forming part of the post-bellum programme described above, but in a short time the country may look forward to finding itself with a substantial annual balance on the right side.
In spite of the conclusive evidence furnished by figures such as the above, an impression prevails in Europe and America that Japan's financial condition is not sound. People seem to be influenced solely by the fact that her expenditure has grown with striking rapidity, and to forget altogether not only that the Treasury is every year applying large surpluses of ordinary revenue to carry out enterprises which have nothing to do with the usual routine of administration, but also that when these post-bellum undertakings are brought to a conclusion, the State will find itself with an income greatly exceeding its outlays. It is further habitually alleged that Japan's revenue has been unduly increased during recent years, and that the burden of taxation is becoming intolerable. Perhaps the simplest way of dealing with that allegation is to quote the statement made by way of preface to this review, namely, that at the time of the mediatisation of the fiefs the people were paying a sum of at least 96,000,000 yen in the form of a grain tax alone, whereas the corresponding impost (land tax) amounts now to only 46,500,000. Besides, this 46,500,000 yen cannot justly be regarded as a tax in the ordinary acceptation of the term. Up to the time of the mediatisation of the fiefs, all the land in the Empire being the property of the State, its tenants could not dispose of it at will, nor had they any right of possession in it. The sum they paid in kind to their rulers consequently represented a rent for use of the land rather than a tax. That distinction became still more emphatic after the fall of feudalism, for the land was then declared the absolute property of its tenants, the only condition attached being perennial liability to pay as compensation to the original owner, namely, the State, an annual sum equal to about one and one-fourth per cent of the market value of the land. In short, the farmers entered into absolute possession of the fields they had hitherto cultivated as mere tenants, and in return for being transformed into owners they were required to pay a rent assessed on a basis of eighty years' purchase. An agriculturist in England or America would certainly think himself singularly fortunate if a farm were declared his property without any condition except the yearly payment of a rent not even amounting to one-fourth of that usually charged for the mere privilege of tenancy. It would scarcely occur to him to claim that such a rent should be considered as including his taxes. Yet that is the case with the Japanese farmer. He pays no tax whatever unless his very petty rent can be held to be partly a tax. It is true that he is liable for income tax in common with all his countrymen; but the income tax in Japan is so graduated that the lower classes are scarcely sensible of its incidence, and at any rate the total sum collected under that heading from a nation of 44,000,000 is only 550,000 pounds, or an average of three pennies per head.[7] But an inquiry limited to the case of the agricultural population does not satisfactorily account for the fact that whereas the ordinary revenue of the State was 78,000,000 yen ten years ago (1891), it is now 201,000,000, having increased to the startling extent of two hundred and eighty-six per cent in one decade. Before inferring, however, from these figures that the burdens of the people have increased to a corresponding degree, it must be noted, in the first place, that the revenue includes an important item quite independent of taxation, namely, receipts from Government enterprises and properties (as railways, posts, telegraphs, telephones, factories, forests, etc.); an item which naturally grows with the country's prosperity. The income from this source ten years ago was 8,500,000 yen; to-day it is 46,500,000. In considering the revenue derived from taxes, profits of such a nature must be omitted, and if that correction be applied, the revenue for 1890-1891 becomes 96,250,000 yen and that for 1901-1902 is reduced to 154,500,000. Further, to correctly estimate the weight of the people's fiscal burden, it is necessary to exclude the taxes on sake and tobacco, as well as the customs dues, for the two former need not be paid by any person desiring to avoid them, and the customs are an indirect impost scarcely felt by buyers of imported goods. The sake tax produced only 15,000,000 yen ten years ago; to-day it produces 55,000,000, the tobacco tax produced nearly 2,000,000 in 1890-1891, and is now included in the receipts from Government industries; and the corresponding figures for customs dues are 4,000,000 and 15,250,000. Thus corrected, — the miscellaneous receipts also being omitted, — it results that the revenue raised by taxation at present is 78,250,000 yen against 48,250,000 in 1890-1891, the increase being nearly sixty per cent.
Such figures cannot be said to indicate any excessive addition to the burden of taxation, even if the arithmetic alone be considered. It is necessary to look beyond the arithmetic, however, and to observe that there has been a large development of national wealth and a large appreciation of the prices of commodities during the past ten years. In 1891 the yen was worth three shillings three pence, whereas it is now worth only two shillings. Thus, reduced to sterling, the taxes ten years ago were 7,900,000 pounds, whereas now they are 7,830,000. Of course it may be said that Japan has nothing to do with sterling values, the yen being simply a yen to her people, and not so many shillings and pence. But the price of Japanese labour and the prices of the commodities it produces have appreciated even more sharply than gold has appreciated during the past ten years. The labour that earned only twenty-four sen in 1891 can easily earn more than thirty-nine sen to-day, and of course it is proportionately easier for the producing classes to pay their taxes at present. In fact, the tax-payer is much more favourably circumstanced now than he was ten years ago. People receiving fixed salaries, as administrative and judicial officials, persons engaged in education, etc., have had no increase of income to compensate them for increased taxation or for the sharp appreciation of prices. But such persons form a small fraction of the nation. All the other classes are earning more and possess much larger property. On the other hand, their taxes have not undergone any proportionate increase, and instead of saying that the nation is embarrassed by the payments it has to make to the State, the truth is that it pays relatively less than it did ten years ago.
Looking at the figures from another point of view, it is necessary to admit that excellent financial management is required in order that the nation of 43,500,000 inhabitants, which maintains an army of half a million men and a fleet of 258,000 tons, may pay its way at a cost of some 16,000,000 pounds sterling. Such a feat presents itself in a scarcely credible light to Occidental statesmen. Again, observing that the annual expense of maintaining the army and navy is only 55,000,000 yen, whereas the tax on sake (rice wine) alone yields 55,000,000, and noting that this tax — which falls on a luxury — grew from 4,000,000 yen in 1891 to 55,000,000 in 1900, it seems plain that if the country has greatly increased its armaments, there has been found, at the same time, a compensatory source of revenue which does not add seriously to the burdens of the people at large.
Another factor which has operated injuriously to Japan's credit is that her politicians, by assaults upon the budget in the Diet and by clamouring for a reduction of the land tax as well as of official salaries, greatly misled the foreign public. That this outcry was merely a convenient weapon for attacking the Cabinet and courting favour with the constituencies, was amply proved in the sequel, when these same agitators voted to increase the land tax and to augment official salaries. But they had sustained the clamour so vigorously and incessantly during session after session of the Diet, that the world ultimately learned to think of Japan as a country crushed by a weight of taxation which the people's representatives were vainly struggling to lighten, and preyed upon by a number of overpaid officials whom the Diet was seeking to deprive of their excessive emoluments. Accepting the estimates made by the Japanese themselves, Europe and America regarded Japan as an embarrassed State, instead of recognising the abundance and elasticity of her resources.
The wealth of Japan is a subject which has not yet been investigated so thoroughly that an altogether trustworthy statement can be made. The following figures are the closest approximations possible at present: —
Millions of yen.
Value of lands (agricultural, building, forest, etc.)
It will be observed that this sum is approximately one-tenth of the accumulated capital of the United Kingdom of Great Britain and Ireland. That is what might have been expected, for, speaking roughly, money is ten times as valuable in Japan as in England.
With regard to the income derived by Japan from her capital, the following figures are deduced from the best statistics: —
Concerning the distribution of wealth in Japan, it has only recently become possible to form a trustworthy estimate. Careful investigations now show, however, that the number of men possessing property valued at fifty thousand pounds sterling and upwards, does not exceed 441. Comparing this record with American statistics, for example, it appears that whereas there are 3,828 persons in the United States credited with possessing at least two hundred thousand pounds, or in other words one for every twenty thousand inhabitants, there is in Japan only one owner of fifty thousand pounds for every hundred thousand of the population. The contrast is very striking. Japan differs from America in another respect also, namely, that few Japanese amass great fortunes in a lifetime. Of the 441 persons spoken of above, not more than sixty are nouveaux riches.
Reference may be made here to the question of Japan's gold-mining capacity, about which many doubts have been expressed by European and American writers. At present her annual output of the yellow metal is not quite two tons, a small contribution to the total of 470 tons produced throughout the world. Nevertheless the ratio of her auriferous area to the whole extent of her territory is a larger figure than that for any other country, her gold-mines being scattered all over the Empire from north to south. The trouble is that metallurgical art is very imperfectly developed. Various restrictions have hitherto debarred Western enterprise from entering this field, and the Japanese themselves lack capital, if not knowledge, to apply the latest scientific methods. Very little of the gold produced in former times remains in the country. Calculations indicate that between 1620 and 1766 about 15,000,000 sterling worth of the metal were exported to China and Holland, with at least an equal quantity of silver.
Rapid development of the country's resources has taken place during the Meiji era, and is still taking place. The conditions were never previously so favourable. All classes of the people are now equal in the sight of the law, perfect security exists for life and property, the people are guaranteed against oppression or extortion on the part of their rulers, and a full measure of personal freedom is enjoyed. A comprehensive idea of the growth that has been encouraged by these circumstances may be obtained from the table on pages 26 and 27, where the statistical facts are tabulated for intervals of every five years.
Japan's great difficulty is want of capital. The capital actually engaged in public and private enterprises is 60,000,000 pounds sterling, in round numbers, and 79,000,000 more are pledged though not yet paid up. On the other hand, the volume of circulating media is only 25,000,000, of which amount 22,000,000 consist of convertible notes; the deposits in the banks total 33,000,000, and their capitals aggregate 49,500,000.[8] Under such circumstances the rate of interest is necessarily high — it averages about twelve per cent throughout the Empire — and many profitable enterprises remain undeveloped. Recourse to cheap foreign capital would be the natural exit from the dilemma. But so long as her currency was on a silver basis, Japan hesitated to contract gold debts, and European capitalists would not lend in terms of silver. Now that she has adopted the gold standard, her situation should be more favourable. Europe and America, however, have not yet acquired confidence in her integrity, or ceased to regard her as a terra incognita, and in the meanwhile a great opening for foreign capital vainly offers in the field of industrial enterprise. Recent returns issued by sixty-eight joint stock companies show that they paid an average annual dividend of sixteen and one-half per cent, and it is not to be doubted that still better results could be attained were foreign business experience and cheap capital available.
↑An abnormal year. The rice crop in Japan is subject to great fluctuations owing to climatic influences. Thus the crop in 1897 was only 163 millions of bushels.
↑There has been a great development of the petroleum industry during recent years.
↑This figure is for 1889, the earliest record of the match industry, which began to be followed about the year 1886.
↑This figure is for 1889, exact statistics not being previously obtainable.
Note 1.—This operation should be called more properly
a reversion to gold monometallism. The currency system,
established by Japanese financiers at the beginning of the Meiji
era was based on the gold standard, the unit being the gold yen
a coin worth four shillings, in round numbers. But, in the first
place, Japan's stock of gold was soon driven out of the country
by her depreciated fiat currency, and, in the second, as all other
Oriental nations were silver-using, and as the silver Mexican
dollar was the unit of accounts in Far-Eastern trade, Japan ultimately
drifted into silver monometallism, the silver yen becoming
her unit of currency. So soon, however, as the indemnity that
she received from China after the war of 1894–1895 had placed
her in possession of a stock of gold, she determined to revert to
the gold standard. Mechanically speaking, the operation was
very easy. Gold having appreciated so that its value in terms
of silver had exactly doubled during the first thirty years of the
Meiji era, nothing was necessary except to double the denominations
of the gold coins in terms of yen, leaving the silver subsidiary
coins unchanged. Thus the old 5-yen gold piece, weighing
2.22221 momme of 900 fineness, became a 10-yen piece in
the new currency, and a new piece of half the weight was
coined. No change whatever was required in the reckonings of
the people. The yen continued to be their coin of account, with
a fixed sterling value of a little over two shillings, and the denominations
of the gold coins were doubled. Gold, however, is
little seen in Japan: the whole duty of currency is done by
notes.
Note 2.—The amounts include the payments made in
connection with what may be called the disestablishment of the
Church. There were 29,805 endowed temples and shrines
throughout the Empire, and their estates aggregated 354,481
acres, together with 1,750,000 bushels of rice (representing
2,500,000 yen). The Government resumed possession of all
these lands and revenues at a total cost to the State of a little
less than 2,500,000 yen, paid out in pensions spread over a
period of fourteen years. The measure sounds like wholesale
confiscation. But some extenuation is found in the fact that
the temples and shrines held their lands and revenues under
titles which, being derived from the feudal chiefs, depended for
their validity on the maintenance of feudalism.
Note 3.—This sum represents interest-bearing bonds issued
in exchange for fiat notes, with the idea of reducing the volume
of the latter. It was a tentative measure and proved of no value.
Note 4.—Japan's fleet at the time of the war consisted of
comparatively small vessels, the largest being three coast-defence
ships of 4,278 tons. She captured from China an armour-clad
of 7,335 tons,—the first line-of-battle ship in her navy. Her
post-bellum fleet now includes six first-class battleships, ranging
from 12,500 to 15,000 tons, approximately; six first-class
cruisers of 9,200 tons; nine second-class cruisers, ranging
from 3,700 to 4,800 tons; ten third-class cruisers, ranging
from 3,300 tons, etc.
Note 5.—Japan suffers severely from inundations. It has
been estimated that the average annual loss from this source
does not fall short of 19,000,000 yen. In 1887 an extensive
scheme of riparian improvement was undertaken. It involved
a total expenditure of 26,000,000 yen of which 6,000,000 had
been expended when the war with China broke out.
Note 6.—All Japan's domestic loans are now placed on a
uniform basis. They carry five per cent interest, run for a
period of five years without redemption, and are then redeemed
within fifty years at latest. The Treasury has competence to
expedite the operation of redemption according to financial convenience,
but the sum expended on amortisation each year must
receive the previous consent of the Diet. Within the limit of
that sum redemption is effected either by purchasing the stock
of the loans in the open market or by drawing lots to determine
the bonds to be paid off. Perhaps a more suggestive idea may
be furnished of Japan's finance during the Meiji era by noting
that, owing to processes of conversion, consolidation, etc., and to
various requirements of the State's progress, twenty-two different
kinds of national bonds were issued from 1870 to 1896; that
they aggregated 673,215,500 yen; that 269,042,198 yen of that
total had been paid off at the close of 1897, and that the remainder
will be redeemed, according to the present programme, by 1946.
Note 7.—Income tax is payable, not only by Japanese subjects,
but also by all persons having a domicile in Japan, or
having resided there for more than one year. The minimum
taxable income is 300 yen (£30) annually, and the rate for such
an income is one per cent. As the income increases, so does
the rate, up to a limit of five and one half per cent, which is
paid by persons having an income of 100,000 yen (£10,000)
or upward. There is a business tax which is levied on various
branches of business; as, sales of merchandise, banking, insurance,
warehousing, manufacturing, printing, photography, transportation,
restaurants, hotels, factors, and brokers. When
levied on the amount of mercantile transactions, it is 1/2000 for
wholesale dealers and 3/2000 for retail dealers. In other cases,
it is levied at the rate of 2/1000 capital engaged, or at the
rate of from two per cent to six per cent on the rental value of
the buildings employed. When a business is carried on partly
in a foreign country and partly in Japan, only the capital used in
Japan is liable to tax. The taxes on vehicles and saké do not call
for any special notice. Stamp-duties and registration fees are
also collected.
Note 8.—The efficiency of money has greatly increased,
of course, during recent years. Thus whereas, in 1873, there
were only half a dozen banks with a total capital of six
thousand pounds, and aggregate loans of the same amount,
approximately, the number at the close of 1899 was 2,296,
with a total capital of 49,500,000 sterling and loans
aggregating 267,000,000. In 1873 sums deposited by
individuals in banks amounted to 500,000; in 1892, they
aggregated 33,000,000. In 1887, the year after the establishment
of clearing-houses in Tōkyō and Ōsaka, the clearances
aggregated less than 3,000,000 sterling; in 1899, they totalled
over 129,000,000.