E(,ONOMIC &BUSINESS

3

sssVTE , ltQ//3e.IIIIIIIel.;•-})k, F"THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

1956

CONTENTS
Page
Industrialization and International Trade•-••••••••••-•••••••••••Fukuo KAvuA'rA

1--

Econometric Determination of Foreign

9

Exchange Rate of Japan for 1926-1953•••-•••-•••-••••••••• Hikoji KATANo
Present Status of Japan's Shipping••••••••••-•-•--•••••••••••••••-•Ginjiro SHiBATA

27

The Distinction between "Shasen" and"Shagaisen" as Historical Concepts inJapanese Shipping-•-••-•••-••--•-•-••-••--••----••-••••-••-• Seiji SAsAi<i45

The Banking System in the Middle
Meiji Era (1870-1910)•••••••••••-•••••••-•••••••••••-•-•••••--••-•Masahiro FuJiTA,

ro5

Disposition of Cost Variances inJapanese Tax Law •••.•••••-••••••••-••-•••••••••••••••••••-••Susumu WATANABE

.

.

87

Structure of Industrial Districts inJapan The Cases of Tokyo,
Osaka and Nagoya •-••••-•-•--•-•-••-•-•-•-•••-•-•Minoru BEiKA
Note on the zAiBATsu Combines•••••••••••••••••••-•••••••••••-••••Tadakatsu INouE••• 97

•••

125

•••

135

On the Model-Building for Social
Accounting Design ••••••••••••••••••••••-••••••-•••••••••••••••••-•••••Nobuko NosE

KOBE

r

ECONOMIC & BUSINESS]REVIEW
3ge
4ssVTF'ltoe//'N,,.I[llBl..ttr-(

THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

1956

Copyright, 1956, by The Research Institute For Economics
and Business Administration, The Kobe University

INDUSTRIALIZATION AND

INTERNATIONAL TRADE
Fukuo KAWATA(I)
The purpose of this article is to examine the effects of industrializationof backward countries upon world trade. The question is that whether thevolume of world trade in future may be expanded or contracted by thedevelopment of manufacturing industries in under-developed countries. On
this problem, there have been two conflicting opinions. The pessimists holdthat the volume of world trade will be reduced, because backward nations
may be able to produce those manufactured articles which they hitherto
imported from advanced nations. Thus the amount of imports from advanced

nations may gradually diminish. On the other hand, the rise of manufacturing industry in under-developed area may consume raw materials
which were formerly exported to industrial nations in exchange for manufactured ggods. Therefore, the export of raw materials may decrease.
In opposition to these pessimistic views, the optimists believe that theindustrialization will increase the national income of agricultural countries,

raise their standard of living, and give rise to new demands for various
manufactured articles produced by advanced countries. Even if industriali-

zation may advance in agricultural countries, and self-suMciency may beattained for non-durable consumer goods, itwill take a long time before they
can independently produce capital goods as well as durable consumer articles.
Therefore, the export of industrial countries to agricultural nation$ may not

1

2

FUKUO
KAWATAdecrease in spite of the industrialization of the latter.

Now let us examine some of the important points in question.

(ff)
1. Mercantilists
As the forerunners of pessimistic opinions, we may mention mercanti!ist

writers in the 18th century. They were so jealous of the development of
manufacturing industries in foreign countries, that thay strictly prohibitedthe export of machinery and raw materials, calling this kind of export as"bad export". They feared that their export might dwindle when theforeigners become able to produce those manufactured articles by themselves which were formerly bought from abroad.

2. RobertTorrens
In the 19th century, Torrens maintained that as population and wealthincreased, all countries might tend to become more and more self-sudicient,which would decrease the volume of international trade. In his work, " An
Essay on the Production of Wealth " published in 1821 (pp. 288-289), we findthe following passages :" As the several nations of the world advance in wealth and population,

the commercial intercourse between them might gradually become lessimportant and beneficial. I have already shown that species of foreign trade

which has the most powerful influence in raising profits and increasing
wealth, is that which is carried on between an old country in which raw
produce bears a high value in relation to wrought goods, and a new country

where wrought goods possess a high exchangeable power with respect to
raw produce. Now as new countries advance in population, the cultivationof inferior soils must increase the cost of raising raw produce, and thedivision of labour reduce the expense of working it up. Hence, in all new
settlements, the increasing value of raw produce must gradually check its
exportation, and the falling value of wrought goods progressively prevent

their importation; until at length the commercial intercourse between
nations should be confined to those peculiar articles, in production of which

immutable circumstances of soil and climate give one country a permanent
advantage over another."

Torrens founded his theory on the law of diminishing returns of land

rNDUSTRIALIZATION AM) INTERNATIONAL rRAbE
and on the rising productivity of labour owing to the prevalence of thedivision of labour with the increase of population. In applying this theory
to the actual circumstances of England, Torrens is rather optimistic to statethat the difficulties may lie in the remote future. He believes that 2` when

we look to Southern Africa and to the vast continents of North and SouthAmerica, we shall be convinced that centuries must roll away before thefull peopling of the world interposes dithculties in the way of England's

exchanging her cheap manufactured goods for the cheap agricultural
produce of less advanced countries."

3. WernerSombart
Towards the end of the nineteenth century, Sombart pointed out the" tendency of falling export ratio ", that is, the ratio of the value of export
to that of production tended to fall. He asserts that it is fallacious to believethat the relative importance of international trade is increasing for themodern industrial nations; the opposite is true;in recent decades, at Ieast

in Germany, the relative importance of international trade to her total
economic activities has been decreasing. As the reason of this tendency, hementions the pr6gress of industrialization in agricultural countries,

In his pamphlet, titled " the future of capitalism," which was publishedin 1932, the pessimistic view is more strongly expressed. His argument
runs as follows :" ••--••The peculiar exchange of goods between Western Europe and theremaining countries of the world will cease. It will be impossible to maintainthe exchange, in as far as the already mentioned industrialization of theagrarian population continues to progress. The absorbability of thesenations in respect to industrial productions will diminish, the industrial
export of Wertern Europe will fade away." Further he continues, " it hascertainly been said that the evolution of capitalism in the new countries will

mean an impetus for industrial export for the old capitalist countries. I
believe this to be a fallacious conclusion. The new capitalist countries will

essentially construct their own apparatus for the means of production,
namely on their own initiative; and perchance after a short period oftransition, will gradually have to abandon importation of goods entirely, forthe simple reason of not having equivalent values to offer for the industrial

productions intended for imports. They possess no equivalent values, merely

because they cannot simultaneously build up their own industry and at the3

4

FUKUO KAVVATA'

same time export raw materials and foodstuffs to Europe."

In this way, Sombart is strongly opposite to the optimistic view whichholds that the evolution of capitalism in the new countries may become. an
impetus for the export of manufactured goods from old capitalist countries,
and he maintains that the industrialization of backward countries will reducethe volume of world trade.
Among other pessimists, we count Friedrich Engels, who predicted in his
work, " Die Lage der arbeitenden Klasse in England " (1845) , that the industryof Britain might be defeated by the rising industry of America. The monopolistic position of British industry, he argues, is menaced by the competitionof newly industrialized nations, and her share in the world export may
decline.

(m)
We have so far dealt with some of the representative views on the sideof pessimism. Now we will turn to some of the optimistic opinions.

1. David HumeIn the first place, we mention the name of David Hume. In his essay," Of the Jealousy of Trade," he refutes the mercantilist opinion, stating thatthe increase of riches of neighbouring nations may be beneficial for thedevelopment of trade and industry of the country. His argument may be
regarded as the foundation of the later optimistic opinions, and it may bepermissible to quote his long passages :" Nothing is more usual among states which have made some advancesin commerce, than to look on the progress of their neighbours with suspicious
eye, to consider all trading states as their rivals, and to suppose that it is
impossible for any of them to flourish, but at their expense. In opposition tothis narrow and malignant opinion, I will venture to assert, that the increaseof riches and commerce in one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours;and that a state canscarcely carry its trade and industry very far, where all the surrounding
states are buried in ignorance, sloth, and barbarism.••••••"" Nor needs any state entertain apprehensions, that their neighbours will

improve to such a degree in every art and manufacture, as to have no
demand from them. Nature, by giving a diversity of geniuses, climates andINDUSTRIALIZATION AND INTERNATIONAL TRAPE 5
soils, to different nations, has secured their mutual intercourse and commerce, as long as they all remain industrious and civilized. Nay, the more

the arts increase -in any state, the more will be its demands from its
industrious neighbours. The inhabitants, having become opulent and skilful,desire to have commodity in the utmot perfection ; and as they have plentyof commodities to give in exchange, they make large importations fromevery foreign country. The industry of the nations, from whom they import,

receives encouragement ; their own is also increased, by the sale of commodities which they give in exchange."
Thus, Hume insists that the prosperity of neighbouring nations is beneficial for the development of the trade of England.

This argument may be applied to the case of present-day industrial
countries, which face the problem of industrialization of under-developed
countries. If these under-developed countries become richer through industrialization, it may be beneficial for the growth of foreign trade of advanced
countrles.

It must be noted, that so long as the industrialization is helpful for theincrease of national income and for the elevation of the standard of living of

those under-developed countries, this argument may well claim generalvalidity. But, if industrialization program is reckless and is not suitable forthe conditions of under-developed countries, it may reduce the real national

income and be rather harmful for the welfare of these nations.

2. Franz Eulenburg
Similar optimistic view as Hume's is found in the work of Franz
Eulenburg. In his treatise " AuBenhandel und AuBenhandelspolitik " (1929),
he maintains that as population and income increase, the demand for goods
and services increases, and it becomes impossible to meet this increasing
demand only with limited domestic resources ; the deficit must be imported

from abroad; to pay for imports, one country must expand her exports ;consequently it will become more and more dependent upon foreign countries, and foreign ttade will increase not only absolutely, but also relatively

to domestic production.
His opinion is, therefore, quite opposite to that of Sombart, although he(Eulenburg) did not specifically treat the relation between industrialization

and world trade.

3. Ernst Wagemann

6

FUKUO KAWATA•

By means of statistical investigations about Britain, United States andGermany, Ernst Wagemann, in his famous work, " Struktur und Rythmus
der Weltwirtschaft" published in 1931 reaches the conclusion that theso-called "law of falling export ratio" (Das Gesetz der fallenden Exportquote), has no general and unlimited validity, and that the export ratio

depends not only upon the structure of national economy and of foreign
trade, but also upon the business cycle and Iong-wave movement of economic
actlvlty.

Wagemann further suggests that although industrialization brings abouta growing self-suthciency of industrial products, this self-suMciency isconcerned only with consumer goods which are manufactured by means ofmachinery imported from highly industrialized countries; therefore, demands for producer goods may not decrease, but increase.
wagemann concludes that the tendency of falling export ratio is observed only for the export of consumer goods, and as to the producer goods
the ratio of export to production is increasing.

4. AlbertO.Hirschman
In his volume, "National Power and the Structure of Foreign Trade,"
A. O. Hirschman classifies world trade into four types of interchange, i. e.,(1) exchange of commodities against invisible items", (2) exchange offoodstuffs and raw materials against foodstuffs and raw materials, (3)exchange of manufactures against manufactures, and (4) exchange ofmanufactures against foodstuffs and raw materials. Then he points out thatthe "traditional type of exchange;' i. e., the exchange of manufactures
against foodstuffs and raw materials amounts only to somewhat less than one
third of the total world trade, while the exchange of manufactures against
manufactures, although accounting for no more than one fifth or one sixth ofworld trade, tends to increase, and moreover has constituted approximately
one half of the total trade in manufactures.

This finding suggests that the exchange of manufactures against manufactures between old and new industrial countries may not decline, but
increase; therefore, it may be concluded that industrialization of underdeveloped countries may not be injurious to the development of world trade.

INDUSTRIALIZATION AND
INTERNATIONAL
TRADE

(IV)
We have thus far touched upon both the pessimistic and optimistic
views about the effects of industriarization of backward nations upon world
trade. Generally speaking, the optimists lay much stress upon the " income
effects" that is, the rise of national income owing to industrialization

may increase imports, and thus the volume of world trade may be expandedin the long run, except for the period of transition. On the contrary, thepessimists emphasize the " structural effect "- that is, the industrializationof under-developed nations changes their industrial structure from primary

producing to manufacturing.
This structural change may alter the relation between backward andadvanced countries from complementary to competitive. When the relationis complementary, the trade between them may go on well, but when theyturn competitive, the trade may be impeded.
To pass a fair judgement as to which view is right, we should turn toempirical evidences concerning the relation of industrializatiQn and foreign

trade over a long period. As a reliable and comprehensive evidences, werefer to a study made by the League of Nations on the problem. The research

was made chiefly by Folke Hilgerdt, and was published in 1945 under thetitle, " Industrialization and Foreign Trade."This study reveals the following points :1) until about 1930, the growth of manufacturing, far from renderingcountries independent of foreign manufactured goods, stimulated the importof such goods;2) again up to about 1930, those countries in which inanufacturing
developed most rapidly as a rule increased their imports of manufactured
goods more than did other countris :3) after the breakdown of multilateral trade early in the thirties, thisrelationship between the growth of industry and of trade in manufactured

goods was severed.
It is made clear from the above findings that the optimistic view holds
true to the conditions prevailing before the great depression early in thethirties, but the pessimistic opinion claims validity for the situations thereafter,

7

8

FUKUO KAWATA

Why the optimistic view has lost its ground since the great depression?

The reason mentioned by the above study is that the multilateral tradesystem has been broken down since 1930. The revival and the maintenanceof the effective working of the multilateral trade system is therefore theremedy for the harmonious development of both the advanced and backward
nations. In other words, if the trade barriers be removed and all nations
specialize in those branches of industry in which they have comparativeadvantages, and exchange their products freely each other, the volume ofworld trade would be enlarge`d keeping pace with the progress of industrialization.

In addition to the removal of trade barriers, the re-adjustment or theco-ordination of the international division of labour may also be necessary.

According to the " law of comparative cost ", benefits from international
trade may be largest, when the difference of comparative costs is widest.
The industrialization of backward nations tends to narrow this difference ofcomparative costs. It is necessary for the old industrial countries to widen

the difference through new inventions and other technical improvements or
establishment of new industries. The advanced countries specialize themselves in higher grade or new industries, leaving those of lower grade to
new industrial nations. If we succeed in the re-adjustment of the international division of labour in this way, the world trade would expand, as theindustrialization of backward nations advances.

ECONOMETRIC DETERMINATIONOF FOREIGN EXCHANGE RATEOF JAPAN FOR 1926-1935
Hikoji KATANO

1. So far there developed certain kinds of theories to explain how theforeign exchange rate is determined. I do not attempt, in this paper, toreview the theories. I will attempt to show, according to the labour theoryof value, what the foreign exchange rate is and how it is determined.

2. The production which has the sway over the capitalistic economy is
the commodity production. According to the labour theory of value, thevalue of a commodity is the sum of the direct labour and the indirect labour.
The direct labour is a direct labour hours needed for the production of a unitof the commodity, and the indirect labour is the value of the means of
production needed for the production of the same. And the value of themeans of production which is held in an indirect labour is again the sum of
the direct labour and the indirect labour. Thus the value of a commodity, t,

is primarily determined by the following simultaneous system of equations :it(1) Z" aij+T,i == th (i=1, •. le, k+1, •••, k+ l)
J'-1where k stands for the number of means of production,lfor the numberof consumption goods, and there may be needed aij units of the 1'-th commodity and Ti units of the direct labour for production of a unit of the i-thcommodity.
9

10

HIKOJI KATANO

In the commodity production society in which there are a social divisionof labour and a capitalistic ownership of the means of production, direct
producers are deprived of their means of production by the capitalist. They

are obliged to make their labour power a commodity and to sell it to acapitalist by whom all means of production is kept. They form a wagelabour class which is a particular class in a capitalistic society. And in thissociety, each branch of social division of labour is held by the capitalist, andall products producecl there are owned by him. For this reason, in acapitalistic commodity production society actual expenditure of labour is
not sociat in itself, and must be remeasured by a social measure. That is tosay, in such a society, each capitalist makes a hired labour to produce aparticular value in use, and exchanges it others which are possessed by theother capitalists. In such a cas'e, each labour of direct producers does notappear as a social labour directly. To be hired by capitalist, it. produces any

kinds of value in use, And, to be exchanged each other, it appears as asocial labour. Therefore, individual direct labour is not social in itself,

though it is expended to produce any particular kinds of value in use. It

does not dominates many other kinds of value in use as a concrete anduseful labors which is expended to produce particular kinds of value in use,

but as a general and abstract human labour which is abstracted from them.
And while such a general and abstract human Iabour has a qualitativelysocial character as above-mentioned, it must be remeasured by a social
measure quantitatively.

That is to say, an actual labour hour needed for producing a unit ofparticular value in use is not a social measure, however much it may beneeded, but only a socially necessary labour hour w'hich is needed forpr6ducing the same value in use is social. But above mentioned sociallynecessary labour hour is not a socially average labour hour. Value used in

the simultaneous equations system (1) is measured by such a sociallynecessary labour hour.

How does it appear in a commodity produced by private producers
which contain a certain general and abstract human labour? In a commodity production society, there is no authority to consciously plan all social

production. So that there is no bureau to authorize how much value acommodity contains. In such a case, there is no alternative but to show thevalue of a commodity based on the other particular commodity. And, inECONOMETRIC DETERMINATION OF FOREIGN EXCHANGE RATE 11
OF JAPAN FOR 1926-1935
order that a labour expended to produce a particular commodity is a completely social general and abstract human labour, it must be shown not only

the equality between a labour contained in one commodity and in anothercommodity, but also the equality between a labour contained in one commodity and in all the other commodities. However, this may be impossible.
And in a commodity production society, the values of all commodities areshown by money, in which the labour expended for production of money
commodity is a socially necessary labour, a general and abstract humanlabour, in itself. Thus, all commodities but money express their sociality oflabour expended to produce them in a form that represents so many unitsof money commodity one unit of each commodity equals. Thus, the value
appears in a form of price.

Now, when gold (the 1-st commodity) is the money commodity, the rateof each value of commodity to the value of gold is : ••••••t"(2) Ri= 'ir, (i=1,"', k, k+1, "', le+l)•
We call this "value Price" to make it distinct from the below mentioned
actual " money price " and " production-price ".

Next, how does an actual price is formed? In a capitalistic commodity
production society, a fundamental motive of production is a capitalistic
pursuit of profit. That is, he carries out production so as to gain a maximum
profit for his invested capital. His invested capital for production is com-posed of a value of necessary means of production and wage paid for labors.
Even if the wage rate is equal in each industry to produce different kinds ofvalue in use, when an organic composition of capital is different in allindustries, direct labour does not proportionate with value of capital. There-

fore, in such a case, the above-mentioned condition of value price which isled by a capitalistic competition in order to maximize a revenue per capital(rate of profit). This is caused by the fact that the way to determine prices
are different in both national value systems respectively.
Thus, capitalistic competition generates a price conditions in which therate of profit is equal in all industries. This condition is as follows :(3) (i+r)ltk.,atjpj't.llii.ibr7•ipj""l-pi*(i=1, •`-, k, k+1, •••, k+l),
where pi," stand for production prices measured by money commodity, gold ;12

HIKOJI KATANOr for an average rate of profit; and bj for an amount of living materials
needed for reproduction of one labour hour of direct producers. (3) is reexpressed in more simple form as follows ;k+l(4) (1+r)E aijPj' =Pi ",1=1

for b,i=aij(1' --k+1, •••, le+l)(i -- 1, •••, k, k+1, •••, k+l)
And in this system, in order to be only a positive average rate of porfit under

all positive prices, all principal minor determinants composed of(5) (E-A) ; A= (aij)must be positive. This means that there must be a surplus product ; suplus
value in capitalistic society.

Now, gold, which enables to render to its owner the service of auniversal equivalent, operates as a national money with a n'ational uniform(different kipds of a unit of the measure of value, a name of maney and aform of mintage in different countries). That is, goid, in a qualification of
the universal equivalent, carries out its functions as the measure of value.

But if it makes each value of commodity appear their prices, then gold must
be connected with a certain amount of it as a unit of measure. This amountof gold as unit of measure construct a standard of money price. Now, thisstandard of money price is, on the one hand, pure traditional by nature, andon the other hand, must be needed to be generally available. For this reason,

this has been, after all, prescribed by law: Namely this is determined by

the general agreement of commodity owners. However, such a condition
can be realized only in an individual country. This is due to the fact that

there is not a general agreement of commodity. owners in the whole world.
In a country, say Japan, a standard of money price " yen " is determined
to stand for unit yen with u units of gold(6) \1 == G"

Then, the condition of production price (3) is transformed into the conditionof money price expressed by Japanese standard of money " yen ".

(7) a+r)Ite.,aijpj+,.=2k,".ig,7ip,l==pi,(i=1, •••, k, fe+1, •••, k+l)

where(8) Pi =TP•s "ECONOMETRIC DETERMINATION OF FOREIGN EXCHANGE RATE 13
OF JAPAN FOR 1926-1935
3. So far, we saw only about one country. But, from now on, we will
study international relations. However, for simplicity, we assume the world
composed of two countries, say Japan and the U. S. A.
Possibility with which these countries may be tied to transact each otherdepends upon the condition that production conditions are different in bothcountries. For, under such a condition, the above mentioned value prices
for the same commodity are naturally different in both countries. The orderof this defference are arranged as follows •-•••• •(P,i-P,2) >"'H' t ee(9)(Pntl-P,n2) 1(Pnl-P,,2) >""'' te(Psi-Ps2) 1 (S=k+l-1),
where superscripts 1 and 2 stand for Japan and the U. S. A. respectively andsubscripts 1,••••••,m, n, ••••-•, s stand for a number of commodities to beorderly arranged from plus to minus. The principle of comparative costshows that the 1-st commodity in this order is the most fav'ourable one for
the U. S. A. at the time of international transaction and the lower ordered

commodities has lesser favour and at the last the favour is transformed
from positive to negative, and that, for Japan, the favour appears as soon
as the disfavour appears for the U. S. A. and the s-th commodity is the mostfavourable. Such a favour is caused by the fact that these favourable
commodjties may be chosen as exportable commodities for internationaltransaction, which would produce more surplus value and increase the rateof profit in each country. However, in such a case, to what numberedcommodity the U. S. A. choice falls as her exportable commodities and towhat numbered commodity Japan's choice does fall are all decided by theconditions of production power and reproduction in both countries.

Thus we see the possibility of international transaction between bothcountries, based upon the difference in production conditions in both coun-tries. -But, as above mentioned, in the world market without any uniform
standard of price, the value of commodity sold by Japan to the U. S. A. has,at first, Japanese price indicated by the unit of measure of "yen" value
provided in Japan, and then has the U. S. A.'s price indicated by the unit ofmeasure of " dollar " value provided in the U, S. A., vice versa, Thus, there

14

HIKOJI KATANO

appear the necessity to convert one country's price into the other country's
price.

In the first place, such a conversion must be carried out based upon therate of values between Japanese money and the U. S. A.'s money. Such arate of value is caused only by the fact that gold which is material of money

has a certain amount: of value in each country. But, in the actual international relation, one unit of gold in the U. S, A. can be passed freely as one

unit of gold in Japan. So that an international rate of value of money
depends upon the amounts of gold contained in the money of both countries.

Now, each name of money is given to the certain amount of gold in eachcountry. So that the money of both countries can be converted from one toanother according to the amount df gold contained in money, say \100 =$ 50.
The rate of value of Japanese money to the U. S. A.'s money is expressed insuch a conversion rate. Then the rate of value of money may be expressed
as a form of the rate of conversion of money, and this prepares a standardof conversion of money, and this prepares a standart of conversion of price.

As shown in such a case, a necessity of conversion of money is deduced
from a necessity of conversion of price.

Thus, in the world marl et without a general will of the commodity
owners, gold functions as a measure of value only with a conversion of priceor money. And, in this case, gold can not function through any representa-

tives as a credit and a paper money, but must work by itself, because amoney of one country with its own nationality can not be circulated in its

own form in other countries. Thus, a nationality must be converted fromone country to another. Such a conversion of nationality is possible onlywith a medium of gold. So that, those who will buy commodity from abroadmust exchange their country's money into the money usable abroad, or into
gold. Thus, in this case, a conversion rate of money appears as a money
exchange rate. This money exchange rate is called " mint parity ", because
this rate is about the amount of gold contained in each country's standard

money provided by respective coyntries. Now, when ui stands for an
amount of gold contained in the Japanese standard money (" yen") and u2
in the U. S, A. ••••••(10)\1==Cui$ 1=G u2,

where the money exchange rate of the one country's money to the otherECONOMETRIC DETERMINATION OF FOREIGN EXCHANGE RATE 15
OF JAPAN FOR 1926-1935
country's money is shown as ui/u2 or u2/ui in\ 1==UlT, $1(11)

u2 \ 1= $1.
-ii7,

4. Money exchange rate is generated from the simple commodity
circulation between both countries. And, in the course of develpment ofcredit system, the above rate has been evolved into an exchange quotation
rate.

Commodity transaction based upon credit system changes buyer todebtor, and seller to creditor. At certain stage of the development ofinternational circulation and credit, there are debtors and creditors in eachof both countries. In such a case, it is possible to internationally balance thecredit and the debt. The balancing method is not essentially different fromthat practiced within a country. Generally speaking, its fundamental form
is the transaction and transfer in terms of a bill of foreign exchange. And

by this balancing, each country attains the saving of payment in coin (orthe saving of sending of specie).

In this case, when a credit balances a debt in each country, the sendingof gold is saved completely. But if a credit does not equal to a debt, and if

the balance does not offset completely, a country with an excess-debt must
pay the excess-balance of payment in gold. In such a case, gold functions asa universal means of payment in an international circulation.

Now, while an international balance of payment is offset and sending ofgold is saved, an international payment is transferred into a payment withina country. In such a case, a foreign exchange bill, which is sent from a
debtor in one country to a creditor in the other, does not function as a meansof payment in a form of credit money, but merely one of the processes ofbalancing. And the greater the development of credit system and thecentra!ization of payment are, thb more the purchase and sale of bill on one

hand and even the collection of it are balanced. In such a case, money is
only a complete ideal culculating money. But there may always potentiallybe a metalic money within this culculating money. And under the certain
conditions, such an ideal form of money must be transformed into its actual
form (of metalic money), whether willing or no. But as far as the international balance of payment is offset, money functions only in the form of

culculating money.

16

HIKOJI KATANO

When the international balance of payment is offset, even if money
functions only in the form of culculating money, there still be an international production relation by which the necessity of conversion of price andexchange of money are brought.
Under the commodity transaction on credit, values of commodities interms of moneies in bot.h countries show its figures in the balancing processof payment as a credit and a debt. Conversion is necessary once again. For
example, Japanese debt to the U. S. A. in terms of dollar must be converted

into the terms of yen. That is, Japanese debt to the U.S. A. in terms ofdollar must be offset by Japanese credit on the U. S. A. in terms of yen. In

order to make the credit counterbalance the debt in Japan, Japanese debt interms of dollar must be converted into the terms of yen. As this conversion
is done at the time of payment, this substitutes an actual exchange of money,

and has a different character with a conversion of price. Necessity of thisconversion reflects with the necessity of money exchange. In other words,
what appears originally as an actual exchange of money to money (of dollar
to yen) is not realized by the balancing of payments. And yen and dollar asa culculating money are merely exchanged ideally, and this exchange isnothing but to take a form of conversion. Therefore, the rate of exchange,in this case, takes an ideal form of "rate of conversion".

There is an actual money potentially within a culculating money. It
may be expected to make it possible to transform a culculating money into
an actual money. And in the exchange of mintage or coin, an exchange ona rate of value is possible. Therefore, even when a value of credit in termsof dollar is converted ideally into a value in terms of yen and this isexchanged with an actual value in terms of yen, the exchange is governedby the same law. So that, this conversion must be, at first, done on themoney exchange rate. Thus the conversion rate (the cxchange quotationrate) is determined by the money exchange rate.
Exchange transaction is carried out for a balancing of payment. Sellingand buying of exchange bill appears as a means to attain the end. Exchangebill is one kind of note to indicate a credit. But in such a case of foreignexchange, this may be transformed into a commodity as a bill which can berealizd as same amount of value in terms of foreign money. In the courseof the development of credit system, when this bill does not appear in amarket actually, but appears only as a form of selling of foreign money

ECONOMETRIC DETERMINATION OF FOREIGN EXCHANGE RATE 17
OF JAPAN FOR 1926-1935

mediated by a foreign exchange bank, it may appear as a commoditizedforeign money.

Aside from a money exchange rate, here is formed an exchange quotation rate. The latter deviates from the former. Exchange quotation rate

expresses a rate of conversion as an ideal money exchange rate which is
generated on the process of international balancing of payment, and is a
developed form of a money exchange rate.
5. How does it appears to deviate an exchange quotation rate from amoney exchange rate?
On a money exchange transaction, moneies of all countries are corresponded and exchaged on the substance of metal and metals really anddirectly, by which the same amount of gold (the money commodity) istransformed from one form of mintage to the other. Therfore, then, amutual offer of money is not divided into a demand and a supply respectively,

and does not take the corresponding form. In this case, the mutual offer ofmoney does not stand face to face with a different value.

And, on an exchange quotation transaction of money, a direct offer ofreal money is avoided in the first stage. An object of this transaction islimited within an ideal being of money value to be paid. Thus, at a certain

time, a money value to be paid from abroad takes a form to be transfarred
as a credit, or a form of foreign exchange bill, and independently appears

as a quantitatively limited supply of money. On the other hand, those whohave a debt for abroad make their appearance as demander. Their demandis independently decided by the amount of money value to be paid for abroad.

Thus, as a money value to be paid from and to be paid for at the same time

coincides with each other only by accident, this demand and supply always
correspond with a different amount of money value. Such a evolution is only

an expression of the expansion of contradiction upon a development of
production relation in itself; from the relation of buyer to seller to therelation of debtor to creditor.

Those who transact in the credit abroad with a form of foreign exchangebill estimate and express many kinds of foreign money to convert them into
their own. national money. Such a value of their own national money is thestartingpoint for them. That is, demand for the credit for the U.S.A.
excesses its supply. Then, according to the law of competion, a dollar value
is estimated over an yen value, vic. e versa. Thus, an exchange quotation rate

18

HIKOJI KATANO

deviates by a difference reduced from the excess demand of an exchange billout of a money exchange rate ••••••(12) e==' Ul.2 Å}f(E),where e" stands for an exchange quotation rate, and E for the excess-demandof an foreign exchange bill.

Under the gold standard system, the system in which a payment inspecie is not obstructed and therefore a culculating money is freely trans-

formed into a coin, a maximum and a minimum of an exchange quotation
rate are determined by the cost which is composed of a transportation costs

and others of a necessary amount of gold for the payment in specie. Sucha

limiting quotation is called the specie point; the maximum or minimum
fixed price. When an exchange quotation rate fluctuates within the costs,
the cost needed for payment is less than the cost for the sending of thespecie. Therefore, the exchange quotation rate (12) is limited under the gold
standard system 'as follows ••••••(i3) -I21--o' f{e' E{ -l:il-+cr,where o stands for the above-mentioned costs. Thus, in either case, an ideal

money exchange rate deviates from the rate of value of money.

The above mentioned process of estimation, expression and conversion
is a social one which is free from the will of individuals concerned and as'

an objective results of such a process the new conversion rate is continuallyformed. Thus a fluctuation of an exchange quotation rate appears.
Even if the rate of value of money does not change, a fluctuation of an
exchange quotation rate is, in the first place, generated by the relation

between demand and supply of'foreign exchange bill. Fall of an exchange
quotation rate is nessarily generated by an excesspayment, and rise by ahexcess-revenue. But, under the gold standard system, it fluctuates within
the above mentioned limits between a maximum and minimum fixed prices.

The fluctuations over this limit are all immediately absorbed into thesending of gold. Therefore, so long as the law of maximum and minimum
fixed prices is accepted, even if an exchange quotation rate separates froma rate of value of money, the former is regulated by the latter. Under sucha condition, an exchange quotation rate is stable. This stability conditionis that an idealized money as a credit and a debt is always transformed

ECONOMETRIC DETERMrNATION OP roREIGN EXCHANGE RATE 19
OF JAPAN FOR 1926-1935
into an actual money. In other words, gold as money is always orderedout for an excess payment, or as an international circulation of the universal
equivalent is not obstructed.

The second cause of a fluctuation of the exchange quotation rate is thechange of a rate of value of money.

Even if a value of metal (a material of money) is not changed, when adefacement by circulation and a bad-casting by goverment appear, theamount of metal (gold) included in a unit of the country's money becomesless than the weight in law. In such a case, gold as mintage contradicts gold
as the universal equivalent, so that the function of the universal equivalent

in the interior circulation is crooked. And such a disorder propagetes into
an international circulation, because gold as the universal equivalent functionsin the world market. Thus the rate of value of a home money to a foreign
money is fallen.
In this case, an exchange quotation rate falls whether one is' willing or

not, because the old value of home money indicated in an exchange quotation

rate is already lost and then more coins than par value•is needed for thepayment ln specle.
.
The other cause of reduction of money value,
like the above mentioned,
is a change of relative value of geld to silver between the country with thegold standard and with the silver standard. But we will not touch thisproblem in details here.

The same condition as above mentioned is caused if a paper money
inflation is generated. Under such a condition, the gold mintage is all with-drawn from the circulation, and there is only a paper money in circulation.
And, in thin case, the value of paper money falls, and represents the smaller

amount of gold than it is. Thus money as a means of circulation is reducedin value. Then a contradiction between a gold represented in paper moneyas the universal equivalent appears. And this contradiction comes out as
the premiun for gold, on the one and a general rise of commodity price, on
the other. And an amount of gold as a standard of price is Gonstant in law,
it is already reduced economically. Therefore, the contradiction evolves towhat there is between a gold as a standard of price and as the universal
equivalent. And this, according to this contradiction, an exchange quotation
rate is fluctuated by force.

An exchange of money is governed by the law of value. Therefore, the20

HrKOJI KATANO

law that the rate of money value governs an exchange quotation rate appears.

The downward movement of an exchange quotation rate in the above
mentioned two cases show models in which the law penetrates itself upon
the respective forms under the respective conditions.
The fall of an exchange quotation rate of this kind is not caused by theinternational excesspayment, but by the fall of a rate of maney value.
Therefore, even if the balance of payment in both countries is equalized
upon the culculation by the mint parity, it may be generated. The sendingof specie, then, can not recover the old exchange quotation rate. The fall ofan exchange quotation rate caused by the reduction of money value canovercame if and only if the cause is rectified.

Such a fall of an exchange quotation rate, expressing a fall of the rateof money value, has a different chanacter from the one indicating a deviationof an icleal money exchange rate from a rate of money value. However,both can 6e generated at the same time. In other words, while a certain
exchange quotation rate is provided by the temporary rate of money value,
a fluctuation caused by the demand for and supply of the foreign exchangebill is generated at the same time.

6. Now, even when the rate of money value is constant, if the law ofmaximum and minimum fixed prices is destroyed by the force from outside,

an exchange quotation rate may be over the maximum and minimum fixedprices. Such a fluctuation shows a deviation of an ideal rnoney exchange
rate from the rate of money value.

For example, when Japan has an excess payment over revenue and there
is an excess•supply of a foreign exchange bill over the demand for it, if,though an exchange quotation rate falls and reaches the minimum fixedprice, the sending of specie is impossible, in other words, the calling of gold

as the universal equivalent is obstructed, the quotation must fall over theminimum fixed price.

So far as the law of the maximum and minimum fixed prices is
destroyed like this, an exchange quotation rate falls endlessly. It is, even insuch a case, because, the conversion of a money in one country into themoney in the other is carried but by force. However, now, an ideal money
exchange rate does not only deviate from the rate of money vaiue, but be
free from it. And, in such a case, the law of value to govern the exchangeof money to money is broken against one's will.

ECONOMETRIC DETERMINATION OF FOREIGN EXCHIANGE RATE 21
OF JAPAN FOR 1926-1935
When the free circulation of gold as the universal equivalent in theworld market is obstructed from outside, and when, say, quotation in termsof yen falls as the result of it, Japanese money standard seems to be reduced

in its value economically within the crooked relations of an ideal exchangeof money. That is, yen as a culculating money is transfotmed into what
represents less amounts of gold than is indicated in the law. Thus, in thiscase, the reduction of money value as the culculating money in the world
market appears at the first place.

As is shown above, when the real cut down of money standard is caused,
there must be a contradiction between the gold as the money standard andas the universal equivalent. The money standard can not function as such.

Reduction of yen (or dollar) as a cluculating money may be alreadygenerated in a small degree even when an exchange quotation rate deviatesfrom the rate of money value within the limit of the maximum and minimum
fixed prices. However, as the exchange quotation rate in this case still begoverned by the rate of value, a reduction of yen (or dollar) appear as ahitch of the function of gold as the universal equivalent. On the contrary,when a exchange quotation rate is no more governed by the rate of vaiue
and the limit of fall is endless, a reduction of yen (or dollar) has quite adifferent significance. This reduction is generated within the function of
the culculating money to internationally counterbalance, but this must warp
the functions in the circulation at home, because that a gold as the universal
equivalent functions not only in the international circulation, but also in thecirculatio nat home. When an exchange quotation rate falls, prices athome increase in proportion to the fall and the amount of money increases
accordingly. But this phenomenon must not be confused with the fall by apaper money mflatlon.

7. Lastly, we will examine the actual experience about the abovementioned fact. Inspection in detail is impossible from the point of view ofthe statistical data. But, broadly speaking, we may clarify it as follows••••••.

Under the normal gold standard system, the mint parity is decided by theamount of gold contained in each country's money. However, under theconditions of a prohibition of gold export, parity is decided by the amountof gold to stand for each country's money. And the gap between the parity
and the actual exchage quotation rate depends mainly on the net balance of

payment of the country.

22

HIKOJI KATANO

Here, as in the above mentioned, we consider the exchange quotation
rate between Japan and the U.S. A. Investigated priod is over a decadefrom 1926 to 1935 ; during this period, gold export was prohibited for 1926-29,

for 1930-31 the,inflow and outflow of gold is free momentarily, and for 193235 it is prohibited once again.

The assumption in the above consideration is that the world is composedof two countries, Japan and the U.S.A. On the contrary, in the actual world,

there is many countries, and all countries have respective kinds of money,

However, even in such a case, if the convertibility among the worldly
circulable money (say, dollar and pound sterling) is large, it may not cause

a trouble to assume as in this article. For, whether the payment by Japanfor the U. S. A. is due to dollar bill or the pound sterling bill will cause notrouble, if the convertibility between dollar and pound sterling is large. For

the period 1926-35, we can accept that this convertibility is large enough.

That is, comparing the Yokohama-New York T. T. selling rate ($ per \100)with the Yokohama-New York T. T. cross rate ($ per \100) which is madeby making the Yokohama-London T. T. selling rate (Åí per \100) connect
with the London-New York cross rate ($ per Åí1), the difference is very
smalL (cf. Table 1).

Table 1 Exchange Quotation Rate

Yokohama Yokoharna NewYork- YokohamaonNewYork onLondon LondonCross(A)-(B)
NewYork
T.T.Selling
T.T.Selliug
Rate
CrossRate(B)Rate
Rate(A)($perlr'100)($perIi•100)($perÅí1)($per\100) (Åíper\100)
1926

46.8659.64164.858146.8398

O.026

1927

47.4259.75294.861347.4117

O.O14

1928

46.45795416

4.866246.4313

O.026

1929

46.0699.48084.857346.0510

O.O18

1930

49.367

10.1424

4.862149.3144

O.053

1931

48.87110.8079

4.533548.9987-O.127

1932

28.0997.97413.504527.9452

O.154

1933

25.2206.0033-

4.218925.3273-OJ07-O.021-O.031

1934

29.5115.86045.039329.53231935

28.5705.83334.903228.6018

Source : The Annual Bulletin of the Financial and Econornic Statistics of Nippon,

The Institute for Commercial Research, The Kobe University of Comrnerce.

ECONOMETRIC DETERMINATION OF FOREIGN EXC}IANGE RATE 23
OF JAPAN FOR 1926-1935

Under the prohibition of gold export, it is dificult to statistically dis-tinguish the paper,money inflation from the exchange inflation. Therefore,
our inspection does not distinguish these two kinds of inflation. Money value

is reduced by whether the amount of paper money is increased or the exportof gold is prohibited. Then, under the normal amount of paper money andthe normal gold standard, the prices of commodities are

P'"•i.

(14) Peo == .. , (i -- 1, ''', k, k+ 1, ''', k+ l)
and when the production condition are constant and the value of money is
reduced, these are(15) P,,= Pi,it (i=1, •-,k,k+1, •••,k+l).
So that,(16) Uc= illl,,:' ;P•j=-//ft, '•Assume that the basic time points in Japan and U. S. A. are the same, the ofmoney value in both countries represents the money exchange rate at thattlme, or parlty,

2'w2,,,P2,

uie . ui. P2i . uio Ew2t

(17) u2, - u2.'Piif - u2,'Ewi{PricEwiiwhere superscripts 1 and 2 stand for Japan and the U. S. A. and
L'EWi"'//i"'and:EW;w2rtt2i
stand for the wholesale price indeces in Japan and the U. S. A. respectively.
Thus, righ.t side of (17) represents the so-called " purch'asing power parity ".

The .culculated purchasing power parity is shown in Table 3 (F).
So far, our inspection depends mainly on the theoretical inference. And,in order to ascertain whether this theoretical inference can explain thereality throughly or not, we must undertake the last inspection. The lastinference is that the gap between the real exchange quotation rate and thepurchasing power parity depends on the net balance of payment. The resultof inference is shown in Figure 1.

For this inspection, we divide the whole period into two periods; thefirst period 1926-29 and the second period 1932-35. Correlation coeMcientfor the first period is -O.909, and for the second period is -O.360. For the

24

HIKOJI KATANO
Table 2Wholesale Price Index

Japan

u.s. A.
(D)-'<c)'"1934-36=100.0(c)

1926=100.0

1930=100.0(D)

1930=100.0

1926

115.7

130.7

100.0

115.7

O.885

1927

109.9

124.2

95.4

11.0.4

O.888

1928

110.6

124.9

96.7

111.9

O.895

1929

107.6

121.6

95.3

110.3

O.907

1930

88.5

100.0

86.4

100.0

IDOO

1931

74.8

84,5

73.0

84.5

1.000

1932

83.0

93.7

64.8

75.0

O.800

1933

95.1

107.4

65.9

76.3

O.710

1934

97.0

109.6

74.9

86.7

O.791

1935

99.4

112.3

80.0

92.6

O.824

Source : Economic Statistics of Japan, Statistic Department, The Bank of Japan.

Statistical Abstract of the United States. United States Department ofCornmerce.
Table 3

Mint Parity •and Purchasing

MintParity

Power Parity.urcasmg(E)

PowerParity($perl'100)($per\100)(G)

Balanceof
International

Payment(H)(F)*(inmil.ofyen)

1926

44.113

2.743

1927

44.262

3.163

1928

44.6111.846-233.8-191.5-147.91929

45.209

O.860

-74.0

-e.478"O.974

111.6

1930

49.84549.845

1931

49.84549.84598.1

1932

39.876

1933

35.390-11.777-10.170

31.8

1934

39.427-9.916-200.1

1935

41.072-12.502

-61.9

55.3

EPc-]H*:(F) == (E)•CG) (A)-(F)Source : The Annual Bulletin
Nippon, The Instituteof Commerce.

ofthe Financial and Economic Statistics offor Cornrnercial Research, The Kobe University

25 RATEECONOMETRIC DETERMINATION OF FOREIGN EXCIIANGE

OF JAPAN FOR 1926-1935
Fig.

1

L

H=-66.8G-18.1
r==-O.909

Ig

H

H=i-92,7G-1072,2
r=-O.360

II.

150
]oo
o 1932

50

o1933

-l5

10

o1935

5

o

-5

-50

1015

G

l929

-lOO
-I50
e1934

-200

1928

o1927
e.]926-250

latter, we consider that this correlation is confused by the accumulation ofcompulsion in both the recovery period of the great depression and theperiod of disprohibitation of gold export. On the contrary in the first period

without these causes of confusion, this correlation is very high. Therefore,

for the comparatively normal first period, the above mentioned theoreticalinference is about the case. However, for the second period with confusion,
the other theoretical inference must be asked.

The author wishes to acknow!edge gratefully the aid of Nobuo Okishio,
Assistant Professor of Kobe University. My paper is due to his excellent paper" Value and Price ", Keizaigaku Kenkyu Nenpd I.

PRESENT STATUS OF
JAPAN'S SHIPPING
Ginjiro SHIBATA

1. ECONOMIC CONDITION AND
SHIPPING BUSINESS IN JAPANJapan, whose population amounts to near ninety million within the
narrow land area of about one hundred forty seven thousand square miles,
must necessarily import tremendous amount of all sorts of materials fortheir industries and consumption. The shipping js, therefore, an essential
industry for Japan as transportation facility proper as well as the source ofinternational current revenue. Until 1930s unfavorable balance of trade had

been fully covered by the receipts from our shipping business as shown in
Table I.

After World War II, the aspect of our international payment, however,has changed extremely as compared with that of the pre-war period. A remarkable excess of imports over exports was shown every year until thelast half year of 1954 when the exports advanced extraordinarily and theimports decreased unusually. Only the shipping trade increased its revenue

to about 200 million dollars on an annual average during that period, andcovered a considerable portion of the unfavorable balance of international

payment. Thus, the shipping revenue has held a higher position among
the items of our international accounts than the exports of cotton manufactures or steel materials or all kinds of machineries. But the extent

of covering the unfavorable balance of trade was extremely reduced as

27

28

GINJIRO SHIBATA

compared with those of pre-war time as shown in Table I, i. e. the percentages of the net receipt from the shipping item to the balance of trade werefrom 15% to 32% for the post-war time, while that percentage for the sevenyears of the pre-war time was about 180gie on the average. The balance
between the shipping receipt and the balance of trade for post-war time wascovered mainly by the odicial grants by United States and other Governmental transactions with the United States until 1951, and subsequently bythe " special demands " of the U. S. Army stationed in Japan. (financed fromthe fund of E. C. A. or later from M. S. A.)

But the special demands have been remarkably decreased recently andthe other invisible incomes from other than the shipping business are not muchto be expected, and yet a large amount of the excess of imports over exports
will be inevitable owing to the economic structure of Japan, excepting a rarecase that happened in a short time in the second half year of 1954. After all,to maintain the economic stability the shipping business is an indispensablefactor for Japan.

TABLE I International Balance of Paym.ents.
(In Millions of Yen)
Items

Years

Merchandise Trade
Ex-

Im-

ports

ports

(FOB) (CIF)

ExcessOtheritemsthan shipping

Shipping
Re-.celpts

Excessin
Pay- Excess Excessin
Current Capital
ments
items
items

....

Annualaveragefor
1930-36

2,O06

2,083

-77

238

99

+139

+2

-189

-187

1951

569,384 723,539 -154,155 55,825

5,847 +49,978 +221,173 +11,445 +232,618

1952

463,919 737,424 --- 273,505 74,373

6,917

1953

452,819 865,994 -413,175 74,262 10,351 +63,911 +276,908 -62,984 +213,924

1954

573,716 858,499 -284,783 79,377 15,143 +64,233i +212,958 +14,417 +2on,375+67,456 +262,958 -14,244 +248,714

Source : "Economic Statistics of Japan," the Bank of Japan, 1955.

2. RECONSTRUCTION OF MERCHANT FREET IN JAPANThe Japanese merchant marine, excluding the vessels under 1,OOO G. T.,

is made up of 1,154 ships in number and 3,640,OOO GT. in tonnage as inPRESENT STATUS OF JAPAN'SSHIPPING

29

September 1955. Looking back upon the fact that at the end of the War there
was only 1,340,OOO G.T. in total, including recoverable sunken vessels anduriseaworthy vessels for ocean voyage, it may be said that our merchantmarine has remarkably recovered in tonnage and in quality during these ten
years. But compared with the reconstruction ratio on the existent tonnage in

foreign countries, it must be recognized that existing state of merchantmarine in Japan is certainly inferior to theirs, that is, the latter at the endof 1954 was shown to be only about 80% as compared with those in 1936, andits position in the world was 3.7% in percentage and seventh in rank at the
middle of 1954, while in 1936 they were 6.6% to the world total and the third

in the world rank.
Immediately after the War, the occupation force's policy on the Japanese

shipping seemed to have been negative for reconstruction of merchantmarine which had served as a potential military power in the past, and anarrow permission was given only for the continuance of building of the" war standard vessels " whose works had been suspended .for a time at theend of the War and the building of passenger boats for inland sea, Afterwards,

to alleviate the extreme shortage of carrying capacity for inland transporta-tion, the ship-building plans were annually permitted from the General Head
Quarter of Allied Forces to both the official shipping incorporation and the

independent shipowners from 1947 to 1949. But a regular reconstruction of
the merchant fleet was started at length in 1950. That is, since 1950 indepen-

dent shipowners have been permitted to build big vessels for overseas routeas was in the pre-war time, and until the end of 1954, the shipowners havebuilt 222 ocean-navigable vessels in number, 1,710,OOO G. T. in tonnage asshown in Table II. Besides these new built vessels, there were 68 warstandard vessels in number, 510,OOO G. T. in tonnage, which were remodeled
into those qualified for the international class boat. Furthermore 56 slightly

used vessels in number and 310,OOO G T. in tonnage had been imported fromforeign countries since 1950. Thus, the total tonnage of ocean navigablemerchant vessels of 3,OOO G. T. and over, adding the formerly held vessels(about 70,OOO G T.) to the above mentioned tonnage, amounted to 2,610,OOO
G. T. ,at the end of 1954.

On the other hand, the world total tonnage of merchant ships (total ofeach 1,OOO G. T. and over ships) developed from 64,O05,OOO G. T. in 1936 to
97,422,OOO G. T. in 1954 and, as shown in Table III, the United States, Norway,

30

GINJIRO SHIBATATABLE II Ship Construction
Seagoing Vessels Completed
Freight-Passenger

Freighters

Tankers

ships

No.

G. T.

207,390
217,750

1952

37
33
43
28

190,620

1

8,280

1953

31

238,260!

10,1oo

5

1954

19

154,470

Total

191

1,316,420

1949
1950
1951

No.

G. T.

18,380

G. T.

G. T.

No.

6

72,Ooo43279,390

2

25,OOO35

242,7oro

566,20048

374,130

11

144,95040

343,85064,ooO

37

312,360

No.

307,930

2

Total

29

372,150

19

154,470222

1,706,950

Source : "Monthly Report of shipping," the Mitsui Shipping Co. Ltd.

TABLE III Marchant Ships under Principal Flags
Vessels of 100 G. T. and over(unit : 1,ooo G. T.)

World Total

ear

No.

Tonnage No.

1936 29,197
1954 32,358

64,oo597 422

1,475
3,450

1936 2,486
1954 4,3os

9,434
24,880

United Kingdom

1936 6,891
1954 5,7co

17,18319,O14

Norway1936 1,857
1954 2,286

4,054
6,805

France1936 1,340
1954 1,257

2,973
3,841

388
560
372
738
229
428
41
116

1936 1,072
1954 1,143

3,057
3,798

Holland1936 1,408
1954 1,683

2,507
3,443

Japan

1936 2,367
1954 1,727

4,216
3,578

Sweden

1936
1954

1,244
1,252

1,507
2,701

Germany

1936
1954

2,085
1,797

3,708
2,226

Denmark

1936
1954

695
704

1,134
1,614

United States(Seagoing Vessels)

Italy

Source: Lloyd's'

Register of Shipping.

Non-Tankers

Tankers

Totals
Flags

71
159
zz
125
26
179
14
133
25
72
14
57

Tonnage %Tonnage Å}

% No.

9,195
24,62414 27,722
25 28,908

54,80972,798

86
75

2,490
4,955

2,098
3,763

6,945
20,285

2,314
4,595

26
18
13
26

6,519
5,O02

14,86914,059

1,658
3,795

41
56

1,628
1,858

2,396
3,OIO

240
964
349

8

25

1,299
1,141

2,733
2,877

74
82
87
74
59
44
92
75

11

1,OOI

1,144

30

984

2,708
2,654

423
692
188
709
117
810
126
228
104
447

17
eo

1,320
1,558

2,084
2,751

4

2,341
1,548

4,027
2,869

30

1,230
1,119

1,39e
1,891

3
10

2,060
1,725

3,582
1,998

9

681
647

1",030

-

20
8

28

1,167

89
70
83
oo
96
80
92
70
97
90
91
72

PRESENT STATUS OF JAPAN'S SHIPPING

31

Sweden, Netherlands, Denmark and Italy increased their tonnages steadily
since 1936. 0nly Japan and Western Germany have not recovered their tonnages of pre-war time.
A fact, however, must be acknow'ledged in the first place that the present

structure of trading areas of Japan have become widely different those of
pre-war time and the sphere of our maritime activity has necessarily changed
into a new condition. For instance, the foodstuffs and industrial raw materials, the principal import goods of Japan, had formerly been imported mainly

from Korea, Formosa, Manchuria and Chinese Mainland in the pre-war time ;that is, in 1936 the volume of imports, including all goods, from above mentioned four regions accounted for 48o/e to the total national imports and like-wise those from whole eastern Asiatic area for 72.8%.
Whereas, in the present day, the Canadian wheat is imported in place ofthe Korean, American coal in place of the Manchuria and Aden's salt inplace of the Kwantung's (a province of Manchuria). Thus, on the whole,
the annual imports from above mentioned four regions account for only
about 5% at present, while about 95% of total imports are those from North,Central and South America (about 50%), far distant Asiatic area (about25%), Europe, Oceania and Africa (latter three areas' total is at 20%e about).

TABLE IV Japan's Imports and Exports
classified by Areas and Regions.
(Unit : 1,OOO Yen)

Exports

Imports

Areas or Regions
1936

19 •52

1953

1954

1936

1952

1953

1954

Asia

1,942 227,756 287,562 265,259

2,267 236,237 235,630 286,852

EuropeAmerica
AfricaAustralia & Oceania

325 50,050 73,068 69,526
1,055 37Z910 413,700 460,686
108 19,091 20,113 18,4.62
211 55,534 73,026 4-9,769

303 64,381 42,748 52,667
719 107,587 126,499 182,355
198 34,O03 d.6,361 49,857
98 16,035 7,705 14,794

Total

3,764 73e,354 86Z4•69 863,785

2,693 458,243 458,943 586,525

Korea
Formosa
China
Hongl<ong

518 7,351
359 22,955
394 5,365
3 2,474648 16,851
244 21,814
658 21658 28,999

Total

1,274 38,145 39,682 39,571

3,084 2,916
23,054 20,552
10,692 14,677

2s852 1,426

38,45924,68421,94823,737

1,634 6,875
22,40027,815

1,608 67,880 84,441

83,111

32

GINJIRO SHIBATA

Similarly, the present destinations of Japan's exports have widely changed
from those in pre-war tFme. That is, in 1936, the exports to Korea, Formosa,Manchuria and Chinese mainland had taken up annually about 60% of thetotal exports, while these figures in post-war time is only about 15%. The
rest is exported to the longer distant areas. (Table IV)

Consequently, the navigating distance by the Japanese shipping has
been much extended as compared with that in the pre-war time. As for theimports only, it is said that each navigation distance is extended from 3,500

miles (nautical) to 5,500 miles on an average, and the ton-mileage index incargo shipping is shown to have increased from 100 in 1936 to 1-58 in 1954.

(The Department of Transportation : White Paper on Shipping, p. 20) Afterall, in spite of the increase of the shipping business by 158g/a, the potential

shipping capacity remains at only 80% as compared with that of 1936.

3. CONSTITUTION OF JAPANESEMERCANTILE MARINE(a) Classification by the Service of Shipping.
The constitution by the service of the shipping of the mercantile marine
of a country is determined by the geographic and economic grounds of thecountry. Accordingly, each country of the world has its own characteristic
mercantile marine constitution. As by the statistics at the end of 1954, of
the total shipping capacity owned by Japan, 74% was freighters, 4% freightpassenger ships, 21 %e tankers and only 1% was passenger ships, and it must
be noted that the passenger boats were small ships all employed on domesticlines.

The constitution of the mercantile fleets of the leading marine transport
countries is as shown in Table III. If we look up the tonnage ratios of tanker

and non-tanker in the world statistics in 1936 they were 14e/e and 86% respectively. But tankers increased year after year and in the middle of 1954
the ratios became 25oA and 75% respectively. This is the proof of the factthat the importance of mineral oil in the world economy is increasing
and that at the same time it signifies that the profit due to oil transport
is comparatively large to the marine transport industry. But the importanceof the tanker to the marine transport industry varies remarkably by the

PRESENT STATUS OF JAPAN'S SHIPPING
country. The countries that own tankers more than the world average (25%)

are: Norway with 56% stands first followed by Italy, Sweden, Denmarkand Britain in order. On the other hand, the countries owning less than theworld average are : Germany with 10% standing at the lowest, preceded by

the U. S. A. with 18%, Japan with 20% and Holland with 20%. But as toJapan, she owned in 1936 only 26 tankers, 117,OOO G. T. and its ratio was
only 4%. But this in 1954 increased to 179 tankers, 709,OOO G. T. This is anincrease of six times and must be said a remarkable advance. This advanceis only surpassed by Sweden which realized an increase of about 7 times.
Contrasted with the fact that the increase of the non-tankers in the same
period had barely reached 70%, the growth of the tankers is remarkable.
All this is due to the fact that mineral oil occupies an important positionin the foreign trade of Japan and to the high profit earning capacity oftanker business.

(b) TypeofVessels.
The Japanese mercantile vessels classified by type are given in Table V.

The post-war tendency is toward the large type ships. In 1936 4,OOO-6,OOO
G. T. type ships were most numerous, but in 1954 6,OOO-8,OOO G. T. typevessels became most numerous. In 1936 large vessels above 10,OOO G. T.
totalled to only 247,869 G. T. (5.9%). But in 1954 the total tonnage of suchships remarkably increased to 489,807 G. T. (13.7%). This tendency toward
large type vessels is due as had been noted above to (1) the change of thesphere of destinations of Japanese trade and the consequent extension of therange of Japanese mercantile marine navigation, (2) to the post-war increaseof the liners' activity with consequent decreasing activity of the trampers,(3) to the construction of many tankers which found it profitable to employ

large vessels. Moreover, the tendency toward large vessels for mercantile

marine is worldwide. This tendency is especially noticeable in Panama
which owns many newly constructed ships and in the U. S. A. which lies
astride the two oceans of the Atlantic and the Pacific and obliged to carry onlong distance navigation (Table VI). Along with this worldwide tendency,
Japan is taking up the tendency toward large ships. But its realization has
not been quite to the extent as was realized in other countries engaged inmarine transport business. This has been the case with Germany also.
Thus, in the average tonnage Japan has not come up to 2,OOO G. T. and in

33

34

GINJIRO SHIBATATABLE V Tonnage of Japanese Merchant Fleet,Classified by Type
(Unit: 1,OOO G. T.)
1949, Dec. 31

1936, Dec. 31

Gross Tons

1954,

June 30

442
127
462
415

476
153
466
108
439
56
144
o

2,OOO- 4.,OOO

311
319
912

4,OOO- 6,ooO

l,235

6,OOO- 8,(OO

15,OOO & over

819
370
180
68

Total tonnage

4,214

1,842

3,577

Total number
Average tons

1,787

1,319

1,727

2 358 G. T.

1,381 G. T.

2 072 G. T.

100- 1,ooO
1,Ooo- 2,ooO

8 OOO-10 OOO

t)

10,OOO--15,OOO

per vessel'

Source : "Mouthly Reportof Shipping, " the Mitsui

1,322

319
418
72

'

Shipping Co. Ltd.

TABLE VI Average Tonnage per VesBel
under Principsl Flags
Vessels of 1oo G. T. and over
1951

1953

1,OooG.T. Nurnber AverageTons1,OOOG.T.NumberAverageTons

perVessel

perVessel

Japan

2,182

1,529

1,427.3

3,250

1,669

1,947.5

United18,550

5,983

3,100.5

18,584

5,784

3,212.9

UnitedStates*
France25,036

4,479

25,067

4,527

5,669.9

3,367

1,246

2,702.0

3,826

1,260

3,036.3

Germany

1,031

1,440

715.6

1,750

1,671

1,047.0

Holland

3,235

1,595

2,028.1

3,372

1,646

2,048.5

Panama

3,609

6e7

3,907

593

6,588.3

Soviet Union

2,222

989

2,246.4

2,292

1,049

2,185.3

Sweden

2,113

1,247

1,694.6

2,575

1,268

2,031.1

Italy

2,917

1,071

2,723.9

3,456

1,120

3 085.5

Norway

5,816

2,199

2 644.7

6,263

2,218

2,823.6

World Total

87,24531,226

2,794

93,352

31,7972,935.9

Kingdom* Excluding Lakeboats.
Source : Lloyd's Registerof Shipping.

5589.5'5946.2'''

PRESENT STATUS OF JAPAN,S SHIPPING 35
Germany it is no more than 1,050 G. T. This is due, in both countries, to the

Ioss of large ships by war and to the slow recovery after the war.

( c ) Constitution according to the Age of the Vessels.

Compared with the mercantile marine of foreign countries that of Japanshows the decided preponderance of younger ships in the constitution. Of
all the ships younger than 5 years in age freighters and tankers together

occupy 43%. But most of the remaining ships are the wartime standard
ships inferior in eficiency hurriendly constructed during the war, or the oldships imported from foreign countries after the war. Most of these ships
are not suitable to make long distance voyage and are mostly employed in. in the Far East, and the navigation expenses are much more
the waters
costly than the new ships. Of all the Japanese ships these wartime standard

ships and the old ships older than 25 years in age constitute 36%e of thefreighters, 30%e of tankers, and are destined to drop out, earlier or later,from the marine market. Thus it is not valid to say of the Japanese mercan-

tile marine that it has the preponderance of newly built ships, but it is

TABEL VII Age of Vessels under Principal Flags(unit : 1,ooo G. T,)

XFlagsL-X"H"'xs.Ages 5 Years 5-9 Years
Under

l -O
e!

%
24.6

10-14

15-19

20-24

Years

Years

Years

25 Years& over%493 13.8%
177 5.0% 361 10.0
99 2.8.e/oJapan
United Kingdom

1,569
43.8

879

4,134 21.7

4,459 23.4 5,436 28.6

1,989 10;5

781 4.1

2,216 1!.7

408 1.6
209 5.5
127 7.3
424 12.6

230 O.9

United States

3.9
957

5,373 21.6 IZ421 70.0

France1,207
31.6

Germany

46.1
807
18.0
607
795
20.4
104
4.5
736
28.6

980 25.6 622• 16,2
51 2.9 90 5.1
944 28.0 675 20.0

HollandPanamaSoviet Union

SwedenItaly

Norway

411
11.9
?,526
40.3

22.0.

83 2.1

189 4.8

491 2.0
519 13.6
515 29.4
459 13.6
972 24.9

14•.3
94 4.1
766 29.7 222, 8.6
649 18.8 1,043 30.2

167 7..3
151 5.9

330 14,4.

1,270 55.4

14e 5.4

561 21.8

58 1.6156

526 8.4

484 7e8

1,O08 25.8

1,247 19.9

860
327

857

13.7

288 7.5
160 9.2
263 7.8

45 1,141 33.0

Note : The figures for Japan, United Kingdom and United States are for June 1954 ;those for other flags are for the end of 1953.

Source : " Monthly Report of Shipping", the Mitsui Shipping Co. Ltd.

622

9v9

36 GINJIRO SHrBATA
nearer to the truth to say that it has little else to depend on for its operation

than the small portion of the newly built ships in the fleet. The comparisonof this feature with that in foreign countries is given in Table VII. In thistable it is seen that Panama, Greece and Italy have many old age ships,
which is due to the fact that their mercantile fleets are constituted of theslightly used second-hand ships imported from foreign countries. Thisfeature is in good contrast with that in Japan, Denmark and France, where

the newly built ships form the nuclei of the mercantile marine. In the
U. S. A., Britain, Holland and many other countries somewhat old ships from
5 to 15 years of age constitute the central strength of their marcanti!e fieets,

4. ACTIVITY OF THE JAPANESE MERCANTILE MARINE(a) Disposition of the Ships.
As of Dec. 1955, the freighters of the Japanese mercantile marine plying

on high seas rose to 3,228,OOO D!W (2,230,OOO G. T.) and the tankers to925,OOO D,,'W (585,OOO G T.). Of the freighters, the tonnage of the liners andthat of trampers are about equal. 81eA of the freighters and 87% of thetankers are plying on high seas.

In the postwar reconstruction of Japanese mercantile marine emphasis
was laid on the reconstruction of the liners plying on high seas. The lines

in the Far East which had been developed by Japan with many long years'
efforts had been encroached by foreign ships during the occupation period,and in 1952 when the military control of occupation was removed, the marine
policy then adopted was to increase the liners connecting the high sea lines
with the Far East. In consequence, at the end of 1952, the shipping capacity'on the lines was estimated at 1,OOO,OOO D/W and at the end of 1953 at
1,400,OOO D/W which showed an increase of about 5 times in a short spaceof time of less than 2 years. This is of course due to the convertion of
trampers to liners. At first the liners' increase was most rapid and remarka-

ble on the Far East-New York line and the Japan-India, Pakistan line.
Before the war, these two lines fully used up more than one half of theshipping capacity of the Japanese liners, and even in the postwar situation

both outward and homeward bound voyages on these lines could anticipate
considerable carriage of cargoes. Moreover, in these lines there is no

PRESENT STATUS OF JAPAN'S SHIPPING

37

powerful well knit organisation as " shipping conference" hostile to there-entrance of Japan into the market. These are the causes that helped thegrowth of the Japanese mercantile marine in these lines. A,t the end of
1952, 47% of Japanese lin,v=rs were employed on the New York line and 15%eon the India-Pakistan line. But in 1953, the opening of new lines entered ona new stage, and the lines to the Latin Americas, Europe and Australia were
instituted and attempt was made to newly institute the liner service in the

shipping market plying between the third foreign countries. At the end of
1952, the ships employed on the Latin America lines were only 4 which at
the end of 1953 increased to 24 and the liners to Europe increased from 5 to

20 (prewar number 42). Of these liner routes, the Europe line, the Around

the World Iine, the South America West Coast (via Northwest of North
America) line and the South Africa line pertain of the nature of the Iinerroutes plying between the third foreign countries, carrying cargoes, besides

those from and back to Japan, moving between these foreign countries.
But the rising curve of the liner capacity began to flatten in 1954. Although

new liner routes to the west coast of Africa and Middle Near East wereopened in 1954, the total level capacity at the end of the year fluctuatedalong the !ine of 1,400,OOO D/W. In 1955 the monthly number of the naviga-

tions on the highsea liner routes was 35.5, which was only 60% of the
prewar number and shows how tardy was the rate of restoration as it is also

in the rate of increase of the shipping capacity. On the other hand, thepresent status of the foreign liners shows an increase of 130f•o! over that ofthe prewar period, and enjoy the position that had been enjoyed by Japanese
ships before the war.

Contrasted with the above, the shipping capacity of the trampers in
April 1952 reached 1,560,OOO D/W, 81% of 1,930,OOO D,!W which was thecapacity of the total freighters. But the subsequent advance of the liner
routes induced many trampers to be transfered to the liner routes market
and the tramper shipping capacity was reduced to 1,200,OOO D 'W at the endof 1952. The capacity maintained this level for some period, but on the wave
of marine transport prosperity since the spring of 1954, the trend again took
the increasing turn, and in August 1954 the capacity reached 1,400,OOO D 'W.

To sum up, the increase of the shipping capacity of Japan up to 1953means
the increase of the liners, and the increase after 1954 means the increase ofthat of the trampers. Table VIII shows in what directions the Japanese38 GINJIRO SHIBATA
ships were distributed in 1954.

TABLE VIII Distribution of Lines of Japanese(Monthly Average for 1954)!. Greater Coasting Area

A areaKorea
Okinawa
Formosa

Shipping

No.

D/W T.

115-6

795,960

O.5

2,744

11.5

24,217

4.5

19,260

Sakkalin05

China
B area10.2

2,816
61,049

Philippine

39.8

285,657

Angaur

1,3

7,819

Indochina

4.6

36,846

MalayaSiam
C area18.3

17Z201

9.2

57,O15Indonesia

5.8

Burma

6.7

Others
2. Highsea Area
India & Pakistan

2.7

51,092
54,592
15,652217.2

2 13- 9 295

45J

402,476

Southern Pacific19.5

170,247

Central & Near East

6.3

64,804

Europe14.7

150,902

North Americ.a (.Pacific)."-'•1.2

318,393(Atlantic)
Latin America & Africa
Round the World

39.3

410,631

3. B•etween the Third Countri•es

Total

Js

47.3

479,760

13.8

14.P,,082

14.4

138,299

34Z2

e•,073,554.

Source: "Monthly Report of Shipping", the Mitsui Shipping Co. Ltd.

(b) Loading Condition of Japanese Ships.
As of 1954, the amount of freight transported on the .iapanese

ships

39

PRESENT STATUS OF JAPAN'S SHIPPING
plYing on highseas is estimated at 15,624,OOO M. Tons of imports and2,508,OOO M. Tons of exports. Besides, 3,280,OOO M. Tons of cargoes arecarried between the third countries. As can be seen in Table IX the amountis very small compared with what it had been before the war, which is dueto the shortage of the capacity.

As to the proportions of the freight by the commodity, on the side ofimports, the proportions for rice, iron ore, timber and mineral oil are always

high. On the other hand the proportions for raw cotton, sugar and ceal are
remarkably low. On the side of exports, the proportions for sundry goods isalways high, and the proportions for coal, fertilizer and cement can notcome up to it. Generally speaking, on the side of imports, the proportion of
freighting of high priced commodities is low, and on the side of exports, thereverse tendency is seen. This is the feature resulting necessarily from theconstitution of the Japanese foreign trade, the details of which are shown intables X and XI.

As to the regional proportions of freight, the freighting proportions ofJapanese ships in the regions of South East Asia, India-Persia and Australia-

South Pacific generally keep up high level. Contrasted with this fact, thefreighting proportions in the regions of Europe-Africa and North & SouthTABLE IX Loading Condition of Japan's knperts and Exports
Monthly average in 1,OOO M. Tons
Exports

ImportsYearf

on 1 onJa•ttpe-sreShigsE.pr.".ign-..Sh.tp.s-

Total

Total

Loading.O'e-

Loading

on l onJapanese Ships,/ FQreign Ships'`' 1'-"' '--tL-"
Loading
Loading

%

."'e-

360

1936

2,771

1,579

57.0

1,192

43-O

1,092

732

1947

30
52

8.1

147

120

91.5

153

106

I 27
69.3 l 47

1949

1,064

1.21

11.4

88.6

188

64

34.0

1950

875

73.3

261

1,72g

32.6

!,164

67.4

302

45
80

IZ2

1951

26.5

1952

1,978

234
564
900

26.7

341
563
943
641

91.9

1948

371
615

4•5.5

1,078

54•.5

421

133

31.6

!953

2,607

1,122

43.0

1,485

Jr7.o

413

156

37.8

1954

2,794

1,302

46.6

1,492

53.4

476

209

43.9

8.5

67.0

81 .6

124
216
222
2g8
257
267

Source:"Shipping" (monthly bu!letin), the Nippon Shipping Exchange Corp.
" Monthly Report of Shipping ", the Mitsui Shipping Co. Ltd.

%
33.0
18.4

30.7
66.0

82.8
73.5
68.4.

62.2
56.1

40

GINJIRO SHIBATATABLEX Freight on Japanese Shipsby theCommodity(Unit : 1,OOO M. Tons)

Imports to Japan
Total Freight

Freight

1955
1954
Jan.-Dec. Jan"Sept. Jan.-Sept.

1953

Rice

1,079

1,278

Barley

706

679

946
430

Wheat

1,687

1,790

1,790

1953

1954

1955

'Jan"Sept.

Jan.-Dec.

659
173
681
236
465
132
472

on Japanese Ships
Jan.-Sept.
'"-%% 766%

61

60

2rJ

76180
24658
1,064
59
23531
49539
25571
53747
77238
2,67169
20023
64442

Sugar

1,094

777

758

Sa:t

1,384

1,180

1,287

CottonPhosphate ore
Coal

484
1,068

381
981

1,132

4,066

2,771

2,051

1,416

35

16324
3.o,
585
23330
59•
621
16643
43244
66224

Iron ore

4,312

3,885

3,931

2,875

67

2,644
68

Sicrap iron

1,141

801

862

42

Timber

1,207

1,O04

1,541

475
779

Others

4,893

3,478

8,685

1,194

24

1572P
63863
87925

Total

23,121

19,O0523,775

9,557

41

7,946
42

9,243
29

By Tanker

8,168

6,775

2,578

3,899

48

3,802
56

1,37157

Grand Total

31,28925,78026,353

13,45643

11,74846

10,614
40

27

176
251
7
30

362

40

22
34
27
44

65

1,363
16

Exports from Japan

297
297
570

211
255
15
45
153

1,692

2,464

3,959

5,596

Fertilizer

795
701
485
198
598

644
644
ns5
195
549

Others

2,180

Total

4,957

CementSteel

CoalTimber

851
1,117

36
3

23

27
39
3
15i

37
8

33
16

26

219

40

139

22

1,174

54

1,O07

oo

1,357

55

1,860

8

1,690

43

2,378

43

Source:Data from the Department of Transportation and the Department of
Finance.
America (especially in the East Coast) are remarkably low. In the regionsof Korea, Formosa, and Red China the activity is not so remarkable as inother Asiatic regions.

316
426
98
42

PRESENT scATUS OF JAPAN'S SHIPPING

41

Japan depends for the supply of iron ore and timber on South East Asia,and that the freighting proportions of the Japanese ships are high is reason-

ably due to the fact that the countries in this region do not own goodmerchant ships and also to the fact that these cargoes are just suitable for

trampers. On the other hand, that freighting proportions for coal, raw
cotton and sugar from North America are low is due to the shortage of theships plying on high seas. Again, that the freighting proportions of theJapanese ships for coal and fertilizers, chiefly exported to Korea and Formosa,are low compared with those for other countries is due to the fact that the
newly created mercantile fleets of these countries carry the greater portionof the cargoes.

TABLE XI Imports and Exports loaded

on Japanese Ships

and Foreign Ships
Imports

onJapaneseExports

Tonnageinl1,OOOM.tons
Value
Value
Valuein Tonnagein perM.tons
Valuein
perM.ton
1,OOOM.tons\1,OOO,OOO\1,OOO,OOO
in\1,ooo
in\1,ooo

Ships

1950

8,167

609

13

36,526

2,225

16

1951

61,O05605

101

94,548

6,373

15

1952

154,948

1,609

96

218,848

11,45919

1953

207,448

1,775

117

310,O15

14,33422

1954

276,356

2,507

110

370,753

16,33723

onForeign

Ships
1950

289,866

2,521

115

297,674

8,420

35

1951

427772'

2,493

172

642,686

14,36045

1052:303,295

3,447

88

511,503

12,27942

1953

251,495

3,182

79

557,458

16,95533

1954

302,9033,206

94

484,451

17,13728

334,200

10,64431

737234'

20,73336

23,738

31
28

Total
1950

298,033

3,130

95

1951

488,777

3,098

158

1952

458,2435,056

91730,352

1953

458,9434,957

93867,473

31,289

1954

579,279

5,714

101

855,205

33,514.

26'

Source: Data from the Customs Divisionof the Department of

Finance.

42 GINJIRO SHIBATA(c) Conclusion
As can be deduced from the above, the standpoint of the Japanese
mercantile marine in the Asian region and that in the other regions arequite different. In the former region, the Japanese ships transport certain

fixed proportion of the Japanese trade which may increase or decrease attimes. But in the other regions, the freighting proportion of the Japanese

ships follow different tendency from that of the fluctuation of Japanesetrade. The quantity of the cargoes carried on the Japanese ships remains
almost the same, independent of the fluctuation of the Japanese trade, andremains at low rate. To be more specific, in the South East Asian region
and the Indian region the capacity of collecting cargoes for Japanese ships
and the shipping capacity of the ships on the lines and the present amountof the trade are generally stable and fixed ; but in the American and European regions, the space in the Japanese ships tendS to be less than theircargo collecting capacity demands, and though the ships alway carry fullcargo, a large amount of cargoes is left over for foreign ships to carry. In

the European, American and African regions there are abundant Japandestined cargoes for trampers. But due to shortage of suitable ships the
distribution of the ships in the regions is rendered impossible. If, therefore,

trampers are distributed in these regions, it will reasonably result in theincrease of the freighting between the third countries. Provided that there

is abundance of Japan destined cargoes in the American, European and
African regions, and that the cargoes for the outward bound voyage fromJapan is nil, the navigation does not usually pay. Since the later half of 1954

many Japanese ships have been engaged in the freight transport between
third countries in the Atlantic waters and on their home bound voyage, theships take on board the cargoes destined to Japan. That is clearly due tothis paying account. In summer 1954 the distribution of Japanese trampers
plying between the third countries suddenly increased to over 200,OOO D •iW,

and 250,OOO-300,OOO DIW continue still to be distributed. Of these figures
100,OOO-150,OOO D/W are distributed in the Atlantic waters.

The future of the marine transport of Japan, whose trade structure has
been changed to that of far distant trade, must aim at the activity in thesphere as a member of the world shipping circles. For this the ships
must be of large type and high speed, and their port services must be
highly ethcient. Such qualitative improvement are of course necessary andOF JAPAN'SSHIPPINGPRESENT STATUS
indispensable, but the increase of the shipping capacity is as well indispensable as a matter of course. The writer of the article thinks it necessary toestablish a firm natjonal marine po]icy implementing all these insistences.

43

THE DISTINCTION BETWEEN"SHASEN" AND "SHAGAISEN"
AS HISTORICAL CONCEPTS IN
JAPANESE SHIPPING
seiji SAsAKI

1. PREFACE
The idiomatic shipping terms " Shasen " and " Shagaisen " in Japan are
the most peculiar and significant contrapositive words on account of theirpractical much-usage and their close relation with the developmental processof the modern shipping industry. It was a general, but somewhat hastyinterpretation of the term that the vessels owned by the " Nippon Yusen
Kaisha " and " Osaka Shosen Kaisha " inciuding lately the " Toyo Kisen
Kaisha " were called " Shasen " and all the other Japanese vessels werecalled "Shagaisen". In other words, the term "Shasen" was represented
by the word ships of " Big Two " or " Big Three ".

It was a general tendency in many books of Japanese shipping history,
published hitherto, that the opening and enlargement of the regular service(liner business) which mainly the N. Y. K. and O. S. K. operated with the aidof the government protection was overestimated, and that the growth andactivity of Shagaisen was accordingly treated as secondary or attendantaffairs. The great development of these "Big Two", naturally, had their

45

46

SEIJI SASAKI

own peculiarity and importance and they played always the largest andleading part in the progress of the Japanese shipping since the Meiji era. It

was quite an obvious fact. The modern Japanese shipping industry as awhole, however, was by no means consisted solely of the big two or threecompanies with their ships, so-called "Shasen". AII the developmental
process of Japanese shipping can not be sufficiently understood till thegrowth of " Shagaisen " as well as " Shasen " is taken into account, because

the contribution and influence of " Shagaisen " on Japanese shipping as awhole could not be underestimated than that of " Shasen ".
The writer holds the following opinions for these years and attempts tostudy the history of " Shagaisen " ;1) It must be clearly recognized and analyzed that there welre confrontation or competitive relationship b.etween " Shasen " as a privilegedclass and "Shagaisen" as an unprivileged class through-out thehistory of the modern Japanese shipping industry.
2) We will be able to find out the historically essential transition of thebusiness type "from private carrier to common carrier'i more
distinctly in the developmental process of " Shagaisen ".

However, the concepts of "Shasen" and "Shagaisen", the fundamental standard of their distinctoin and their most essential significancewere very ambiguous. There are not yet a reliable definition. Many facts
prevent us to understand their essential meaning ; the terms were solely
used as simple and convenient idiom in the shipping circle ; there were noevidence that showed their early and general sense of usage;and there
were some changes or developments in their meaning of usage. Thus what
could say at most is that " the distinction between Shasen and Shagaisen isbased on the sole business convinience", and "their meaning is indistinguishable ". The concepts " Shasen and Shagaisen ", because of " their non-scientific distinction;' have not yet been analyzed by anyone, and theiressential meaning, their influence and relationship to the process of Japanese

Shipping, and the course of their appearance, change and stoppage have
hardly been studied.

This article will mainly describe them from the stand point of 2) andstudy the progress of the historical concepts.

AS
THEDISTINCTION BETWEEN " SHASEN " AND " SHAGAISEN " 47
HISTORICAL ooNCEPTS IN JAPANESE SHIPPING

2. THE APPEARANCE OF THE TERMS"SHASEN" AND "SHAGAISEN"As is generally known, the terms " Shasen " and " Shagaisen " appearedin usage first at about the 25th year of Meiji (1886) in this country. This

fact shows their very close connection with the growth of the steamers,
especially of cargo steamships. Although the thought that "Shasen" arethe vessels owned by the N. Y. K. and O. S. K., and " Shagaisen " are all theother vessels, was a general opinion, this distinction was originally connectedwith the steamer, without including the sailing vessels. Indeed, at about
25th of Meiji, when the terms " Shasen " and " Shagaisen " were first used,

the Japanese shipping market passed through the transition from sailing
vessels to steamers, and there were three kinds of vessels, Japanese typesailing vessels, European type sailing vessels and steamers. So apparently
it might be better to suppose that all the vessels that belonged to the N. Y.

K. and O. S. K. - Toyo Kisen Kaisha not yet established were " Shasen "disregarding the vessel-kind. If that was so, the appearance of such a dis-tinction proves of older date. We must carefully recognize the historicalfact that those terms "Shasen" and "Shagaisen 'S appeared, for the firsttime, in the 25th of Meiji, when it was eight or nine years after the establish-

ment of the N. Y. K. and O. S. K. It must be distinctly remembered that
there were at least two historical affairs ; 1) the N. Y. K. had just become aperfect steamship company, in the strict sense of word, after the sale of alast sailing vessel " Tametomo-maru " in June 24th of Meiji ; 2) the lesser
shipowners who had been the older shipping interests than the N. Y. K. and
O. S. K. and later composed the earliest " Shagaisenshu " (owners of Shagai-sen), began now to introduce the steamers arround the 20th of Meiji.
Upon this ground, the distinction between "Shasen" and "Shagaisen"
just appeared as that of the steamer.

Among the usage of steamer, especially the introduction of the cargosteamship had more closely important relation with the origin of the terms.
The adoption of the steamer, besides the N. Y. K. and O. S. K., had alreadybeen put into practice. In the Iocal short-hauls, coastroute or island-route,there were fairly the early development of the so-called " small steamshipservice " engaged mainly in the passenger traflic, Those, hQwever, did not

48

SEIJI SASAKI

use yet the term " Shagaisen ".

Since 19th of Meiji (1886), when Nisaburo Hiroumi bought a larger
steamer " Hokuriku-maru " (615 gross tons), so many cargo steamers vLrere
emulatively imported and operated by other 'private firms ; Shichihei Ooya,

Gonzaemon Ukon, Yasaburo Hamanaka, Michihisa Baba and N. Hiroumi in" Kitamaesen " group ; Gohei Kishimoto, Kensuke Hachima and Seshu-nadakogyo Co. in " Han-shin " group (Osaka and Kobe area) ; Soichiro Asano andKikusaburo Oaki in " Kanto " group, they were the most well-known ship-owners and constituted lately the earliest "Shagaisenshu". This was amost direct and important move which caused the distinction between" Shasen " and" Shagaisen ".

It was a common tendency in the world history that the steamer was atfirst adopted in transporting the passenger or mail, and their introduction to

the cargo trafic was fairly late. The cargo had, generally, less capacity tobear high freight, which the steamers required in the early days to realize,

so as to cover their cost (both building and operating). Moreover, thesewere, in this country, special circumstances,, which required of us to in-crease the steamers as quickly as possible and protect a few privileged
companies strongly on account of the military or defense necessity. This
made the N. Y. K. and O. S. K. the exclusively privileged companies in theJapanese shipping circle. Both of them engaged mainly in the mail and passenger trafic by aid of subsidy and established early 'their superiorities enoughto bring pressure on the growth of other steam-ship firms in this field. On
the other hand, a very rudimentary national economy as a whole limited thegeneral development of the steamer, with the still continuance of the sailing
vessel in the cargo traMc.
In spite of such considerations, some shipowners since the sailing vessel
period attempted at last to substitute their European sailing vessels for thesteamers. T.hey could not readily hitherto adopt the steamer on account of
their financial, technical or psychological reasons, however when the disting-uishable superiority of the steamer because not only clear both in its econo-

my and function, but the fear of the unevitable encroachment on the cargotraffic, in which the sailing vessels had traditonally been engaged, began torealize by the " Big Two", and above all, the N.Y.K., the strongest ship-owners decided to adopt the steamers and continue their job. Then theirlong experience and performance in the cargo trathc could make theirTHE DISTINCTION BETWEEN"SHASEN"AND"SHAGAISEN,' AS 49
HISTORICAL CONCEPTS IN JAPANESE SHIPPING

position more powerful than that of the old " small passenger steamships ".

Moreover, for the circumstances that the "Shasen" were giving a greatpressure to another shipping firms and enjoying the exclusive priority, those

new owners of the steamers formed an organization "Nippon Kaiun-gyo
Domei-kai" (Union of Japanese Shipping Industry) in 25th of Meiji tomaintain and enlarge their own services. This formation of "Shagaisen
Union " was a demon$tration against the N. Y. K. and O. S. K. in spite of any

announced purpose. Since this time, the two competitive powers became
perceptible in the Japanese shipping circle ; one was the group composed of

the N.Y. K. and O.S.K., another was the group of those new-comers. It
brought forth the possibility and necessity to distinguish between bothgroups. And this was the historical background, in which the terms" Shasen " and " shagaisen " were originally used.

3. THE ESSENTIAL GROUND OF THE DISTINCTION
BETWEEN "SHASEN" AND "SHAGAISEN"
The terms " Shasen " and " Shagaisen ", themselves, may be pure andsimple Japanese expression. The "company's vessels" in English is expressed as, "Kai-sha-sen" in Japanese and " Shasen " is a curtailment of" Kai-sha-sen ". And the vessels outside " Shasen " are "Shagaisen ". In thestrict expression, it is not right that the company (Kai-sha) are limited only
to the N. Y. K. and the O. S. K., and " Shagaisen " are confined to the vesselsof the private (non-company's type) shipowners, for there were some firms

with the name of company for example, " Seshu kogyo Co.", " Nippon
Kisen Co." and "Seiko Co., etc. The latter, however, were so less apartfrom the private organization both in their capital-fund and business scale.

And if we understand the word "company" as a large and powerful firm,
only the N. Y. K. and O. S. K., which were the most representative shipping
firms in that time, were worthy of its name.

Nevertheless, the above consideration was simply able to show theapparent meaning and external distinction between " Shasen " and" Shagaisen". The terms were •not only the most universal and historical words,

but had very important influence or developmental significance on theprocess of Japanese shipping as a whole.

The term appeared, as we have seen, just in the epoch-making period of

50 SEIJI SASAKI
Japanese shipping history, and its standard of distinction, its significanceor its method of expression were gradually developed and canged in the
succeeding periods. How can we grasp the essential meaning of the term?

The writer believes that we can seize the meaning only through theconfrontation or in the competitive relationship between both groups. The" Shagaisen " were really a competitive, actively or passively, force against
the old-established " Big two ". Even when the N. Y. K. and O. S. K. controlled

the entire coast routes, divided into east part and west part, and now began

to advance toward overseas markets, they had still the imperfect andunexPloited activities in the domestic field. For those two companies which
engaged mainly in the passenger and mail trathc, the transportation of the

cargo was a great subject to solve in the coastal trades. Therefore the" Shagaisen " which attempted to maintain their tradition with the steamersin this field were themselves the self-defensive resisting power, as well as
the new competitive force against " Shasen "---- - the vessels of the N. Y. K.

and O. S. K. We may well understand by the following fact that thosecompetitive vessels were called "Hantaisen" (opposite vessels) until theterm " Shagaisen " came into general use.

Now such shipowners established an organization " Nippon Kaiun-gyo
Domei-Kai " and opposed as a powerful rival against " Shasen ". As a groupdefinition each term, either "Shasen" or "Shagaisen" was a compoundword, and above all the individual shipowners of "Shagaisen" had thevarious business scales and the multifarious management types. Nevertheless they were always called " Shagaisen " in a lump, as far as they werea distinct existence from " Shasen ". In fact, every book that discusses thegrowth of " Shagaisen " does it always in comparison with that of " Shasen ".

A history of the Japanese shipping till the World War II may be discussed as a history of the process of the competition between "Shasen"

and "Shagaisen". The writer thinks that those apparently commonplaceterms enable us to understand the essential and historical meaning only
through such mutually opposed relationship.

The change or development process of the concepts "Shasen" and" Shagaisen" will also become more clear, when the extensibility of the'confrontation between both corppetitive powers is completely grasped.
It must be noticed that even those shipowners who early were not called" Shagaisen " or " Shagaisenshu " came to be included lately in the term,

'iOHE DrsTINcrrlON BETwEEN "SllAsEN'i AND "SHAGAIsEN" AS 51
HISTORICAL CONCEPTS IN JAPANESE SHIPPINGand then became even the main or leading members. The Mitsui Bussan
Kaisha or Mitsubishi Shoji Kaisha were the famous examples ; the former,
above all became a strongest member of " Shagaisen " by the growth of its
competitive ability and relation against " Shasen ", and led the advancementof the " Shagaisen ", though it started from the neutral position. The Toyo

Kisen Kaisha was another exceptional existence which started from theposition of "Shagaisen" and developed lastly to that of "Shasen" by
virtue of its splendid growth and the limitation or stoppage of the competi-tion against "Shasen". Nl show that the distinction between "Shasen"
and " Shagaisen " was not simple and convinient and based essentially on
the confrontation between the two.

,

4. THE DEVELOPMENT OF THE CONCEPTS"SHASEN" AND "SHAGAISEN"
Every term is apt to change from simple to complex in the course oftimes. It will be almost a common phenomenon. Such "magical development of the term " was also seen in those words. The terms " Shasen " and" Shagaisen " were originally simple or fairly convinient names correspond-

ing to the undeveloped shipping industry in that period. However, when themodern business of the merchant shipping and the international maritime
terms were introduced into Japan, the terms "Shasen" and "Shagaisen"
gradually put on complicated and broad-common expression and began tochange their concepts or meanings. The most concrete and universal
development was the appearance of the use "Shasen" as "liner" and" Shagaisen " as " tramp ".

One pair of terms " Shasen and Shagaisen " has often been interpreted

as synomious with another pair "Liner and Tramp" in many books ofJapanese shipping history. It was nothing else but the reflection of following correlation ; " Big Two " or " Big Three " which consti.tuted exclusively

the " Shasen " group were the most typical liner companies, and therefore
almost all their vessels were composed of the so-called " liner-boat " ; on theother hand the " Shagaisen " were mainly " tramp " not only in the middle
Meiji era, but in the succeeding period. As far as it was, the synomiousinterpretation may be seemingly true. But this pecuiiar idiom which wascurrent only in Japan, is not the same with the international and more

52

SEIJI SASAKI

scientific term. Although we could look for some similiarities between" Liner " and " Shasen " or between " Tramp " and " Shagaisen ", the perfectidentification will be a blunder. It will not only be a contrary to the historicalfact, but spoil the foundamental distinction and significance.

Even before the middle Meiji era there were many regular services
which were operated by the smaller passenger-steamer. Also in the cargotraffic some shipowners engaged early in the Tokugawa era in the regularservices with their sailing-vessels, though such vessels could not yet becalled "liner" in the strict sense. Those "constant traders" advanced
gradually to the " liner " by virtue of their own introduction of the steamer

and the development of the coastal trade. In the twenties of Meiji somefirms outside " Shasen " group operated already the distinct " liner " service.

For example, Isaburo Amagasaki (lately established Amagasaki Kisen Co.)

opened Okayama Line, Banshu Line and Nagasaki-Kagoshima Li,ne, andShichihei Ooya operated the foreign lines, like between Niigata and Vladi-

vostok, by the government order. In the succeeding period "Shagaisen"
had an inevitable transition from tramp to liner. Nevertheless those regular
vessels were still called " Shagaisen " distinguished from " Shasen ", as far
as they belonged to the firms outside the N Y. K., O. S. K. or T. Y. K. Contrar-

ily " Shasen " included also the tramps which were engaged in the irregularservice, as well as "Shagaisen". Those vessels, however, were still called" Shasen " as far as they were owned by the " Big Two " or " Big Three ".
Thus there were a distinction between the terms " Shasen " or " Shagaisen "and the terms"Liner"or"Tramp". •In spite of the essential difference they were often interpreted synony-mously. And such an embellishment with the scientific or international gloss

was, in a sense, seemed a development of the terms " Shasen " and " Shagai-

sen ". The thought "Shasen" as "liner" was strengthend by the inclusionof the Toyo Kisen Kaisha, established in Aprjl 29th of Meiji (1896),'into" Shasen " group. This company was similiar to " Big Two " (N. Y. K. and
O. S. K.) in relation to the capital-fund, business scale or management type,though this company was established by Soichiro Asano who had been amost famous " Shagaisenshu ", and the main line of this'company " North
American Line" was an essentially or potentially competitive route withthat of the N.Y.K. We must remember that the personal career of Mr.
Asano and his competitive feeling against " Shasen " disappeared with theTHE DISTINCTION BETWEEN t`SHASEN" AND t` SHAGAISEN" AS 53
HISTORIDAL CONCEPTS IN JAPANESE SHIPPING
establishment of the T. Y. K. and his appointment to president, and that thereal competition was limited by the goverment who supported the foundation of this company and designated the aforesaid line to their Order Lineand gave the subsidy. Thus this company belonged to "Shasen" group.
By the way, it has to be emphasized that it was an example which " Shagaisen " developed till " Shasen " ; that even a small or humble shipowner could

become to a member of"Shasen", if he could develop to as powerful andlarge organization as " Shasen " ; and the terms " Shasen " and " S'hagaisen ",as we have seen, were never the fixed concepts.

At any rate the term "Shasen" thickend the liner's character, and aprivileged feeling which was found out under " Shasen " sense, prevented

their group to expand farther, even if other "Shagaisenshu" developed
gradually to as powerful position and practiced as similar regular service as" Shasen ". The liner service, itself, required a Iarge business structure, andhad an international connection and a natural tendency toward monopoly.
It prevented the other firms to advance toward the liner service. Thus " Shasen " enjoyed exclusively the profit from their regular services and maintained the identifiable position with the " liner ".

The generalization of the thought " Shasen is equal to liner and Shagaisen is equal to tramp ", the identification of the distinctions between " Shasen

and Shagaisen " with that between " liner and tramp ", and the tendency of
substituting the latter for the former, those were the beginning of the declin-

ing process for the terms " Shasen and Shagaisen ", as well as the develop-

ment process. Those led inevitably a rarefaction of the necessity to
distinguish between " Shasen " and " Shagaisen " as similarly as the terms" liner and tramp ".

An important tendency " from tramp to liner " in the world shipping
industry was also adequate to the development process of " Shagaisen " inJapan. Coippared with the remarkable development as the liner in " Shasen ",which could be realized in accordance with their common carrier type, theexpansion to regular service in the " Shagaisen " group were fairly fallen
behind, for most of them started as the private carrier and engaged mainlyin the cargo traMc. The historical development rule " from private carrier
to common carrier ", however, was distinctly carried through in the growth

process of " Shagaisen". Most of them transfered their management type
to common carrier, and in this process they advanced step by step to the54

SEIJI SASAKI

regular service, receiving the international influence,

To carry on the liner service, naturally, it required so much capital.
Many shipowners or operators of " Shagaisen ", however, could accumulate
enough capital through the three wars in a few decade from Meiji to Taishoera. Since the last year of the World War I •(1918), many members of" Shagaisen " began one after another to set up the regular services, among

which that of the Taiyo Kaiun Kaisha and the Yamashita Kisen Kaisha wasconspicuous. For example, the former engaged in 'the American Line andthe latter opened the Formosa Line in the year. As soon as such a great
development of the liner service was extended on almost general scale of" Shagaisen " business, the idiomatic thought " Shasen is equal to liner " or"Shagaisen is equal to tramp" had no longer its appropriateness for thepractical purposes.

At length the terms"Shasen" and "Shagaisen" were led to disappear
for the reasons that practically the conception of both was so often and so

predominently used as synomymous as with the meaning of the " Liner"and " Tramp", though there were essential difference between them, andthat under the remarkable tendency of " Shagaisen " mentioned above fromtramp to liner, there became no grounds to distinguish "Shasen" from" Shagaisen " upon the concepts " Liner " and `' Tamp ". It may be said thatthe international terms " Liner " and " Tramp " have substituted the nationalterms " Shasen " and " Shagaisen ". Thus we rarely hear the term " Shasen "and " Shagaisen " spoken since about the World War II, but we should notforget to pay attention to that competitism or rival spirit which formed theoriginal basis of such a distinction between "Shasen" and "Shagaisen"
has been still alive up to this time in the form of the competition between"Big Two" and other firms. It may be a fate of the Japanese shipping
industry.

SYSTEM IN THE
THE BANKING
MIDDIEMEIJI ERA (1870-1910)
Masahiro

FUJ•ITAI

The Meiji Economy taught us its remarkable development. The forcesof change which had been released by the ReStoration and strengthened bydeliberate policy of the Meiji Government affected in some measure every
branch of agricultural, industrial and commercial life. But it would bewrong to imagine that all parts of the Japanese economy were brought
quickly under the direct infiuence of the West. Japan attained the powerful

position by herself. The Sino-Japanese, the Ruso-Japanese Wars were best
steps to develop. During 1890-1914, the so-called the middle-Meiji (era), we

found our splendid forward economic growth. Meanwhile, such capitalistic
extension brought into the inharmonious result, in the long run we must
notice, fi.rst of all, this fact.

The remarkable features of this period, especially of the banking instiu-

tion and function may be expressed as follows :1) In the establishing of industrial capital, the representation in rela-tion to modern industry and banking capital was the spinning finance, but
the electric industry finance was the delegate of highly developed capitalistic

economy•In the case of the electric industry finance, the characteristics of thehighly developed capitalism are its concentration (that is an overwhelming
development of fixed capital, highly developing in concentration and accu-

55

56 MASAHIRO FUJITA
mulation of the growth of the banking capital and industrial capital).
2) In the silk-reeling industry, " modern industrial finance " conditions

appeared gradually by the accumulation and concentration of capital tosome extent.
3) The early capitalism conditions of the financial domination of commercial capital in the textile industry declined.

4) In the agricultural finance, our agriculture did not ag. yet attain thestatu$ of satisfactory modern agriculture, so modern agricultural firianceremained under-developed.

Table 1
Number and fund sources of Banks all over the country(million yen)numberofbanks

year

capital(stock)loan

deposit

1893

628

3712

1894

761

5427

1895

726

7470

1896

1054

14655

1897

1300

23231

1898

1485

27913

1899

1634

30210

1900

1854

35614

1904

2227

37319

80310

107804

1906

2210

40113

167050124879

1908

2172

45882

157990160836

1910

2144

49571

202797169075

Table 2rThe accumulation of capital to thefinancial

illStitUtiOll(million')
Nationalspecial

BigFiveYearfinancialinstitution

Amount

%

1893

30

1901

120

15%
11%

1910

312

12.0/e;Big Five:

Mitsui,Privatebank
exceptBigFive

Total

Amount%57 45% 109

55%
70%

1049

691 I 38% , 1637

6?.%

2641

Arnount%

202 30% 727

Mitsubishi, Yasuda,

Sumitomo, Daiichi,

196

ERA
THEBANKING SYSTEM IN THE MIDDLE MEIJI (1870-1910)

ff
Some monetary and fiscal policies required further emphasis, first ofall, because of the part which they played in nourishing the growth ofJapanese capitalism through its infancy. In Meiji Japan, as in all countries

undertaking economic development, one crucial problem was to mobilizesavings out of a mass of small incomes, by one means or another, and to
generate a flow of investment funds into new forms of enterprise. Althoughgovernment investment was itself a small part of total, the whole processof capital formation was inevitably infiuenced by the State at many points.

A rising tempo of investment followed almost automatically from the
new impulses the techniques which fiowed into Japan, once she abandoned
the policy of seclusion, threw off the old shackles on freedom of enterprise,and embarked on a new era of political unity, Iegal security, and technicaladvance. Such a development had long been latentin pre-Restoration Japan.

It was now quick to manifest itself in the new climate of opportunity.
Private capital formation was aided by wide inequalities in wealth andincome; also by the resistance offered by traditional Japanese values tohigher standards of material consumption. Yet the new circumstance was
not either of these factors so much as new incentives and opportunities touse wealth in productive ways rather than to hoard or consume it. This
process, however, required a steady growth of currency and credit to keep
pace with the growth of production and its shift to a commercial basis. It
called for new financial mechanisms to create and mobilize liquid purchasing power for private investment as well as state expenditure. And it could
be accelerated by employing these mechanisms to inflate profit expectations

so as to draw increasing resources into capital formation. In part such
resources might previously have been idle, as in the case of mines, forests,

or underemployed farm labor. In some degree they had to be drawn fromlabor and capital previously devoted to consumption. In large measure they
were hewly created in the process of growth.
The turbulent financial history of 1868 to 1881 reveals these processes

at work. Only by large issues of paper money could the Meiji regime
initially meet its requirements. As quickly as possible,-however, it soughta more orderly solution. The land taxreform of 1873 created a state system

57

58

MASAHIRO FUJITA

of national revenue collected mainly from the agricultural class. Meanwhile, to augment the supply of liquid funds for public and private use, theauthorities alse encouraged the spread of joint-stock finance and privatebanking and note issue. The borrowing powers of the government werefirst employed on a large scale in the attmpt to resolve the political problem

of displaced soldier class (samurai) by a mixture of conciliation and force.

0ver 2eO mil!ion yen of public bonds were issued in commuting the feudal
pensiong of 400000 families. Some of these bonds were used by the nobility
to found note-issuing banks, which led to a rapid increase in the supply ofcredit. Others afforded capital directly for small enterprises of all sortsthat mushroomed in the• inflation that followed.
These early financial expenditure are dithcult to assess in their effects
on real capital formation, Initially, in all likelihood, the result was not somuch to create new wealth as to redistribute spending on consumption fromone class to another, and to concentrate the• ownership of land and otherexisting assets. The government managed at any rate to meet its own mosturgent political and administrative requirements through a critical period.
At the same time, sizable pools of banking capital were created under thecontrol of private financiers who began to seek outlets for their funds in
new forms of large-scale enterprise. And a dynamic impulse wa.s given tocountless small undertakings in agriculture, commerce, and handcraft industry, some of which survived the defiation and depression of the eighties.

As the result of above-mentioned, we had the need for a system ofcurrency and banking which would be more ample and more stable thanthe early improvisations. This experience, together with further study ofEuropean practice, formed the basis for the far-reaching reforms undertaken

by Count Matsukata after 1880 and carried out over next two decades.

The Bank of Japan was developed as a central bank of note issue andfiscal agent of the government. Other semioMcial banks were founded on
government initiative to enlarge the credit system. They also served toextend the range of government control over the network of private banks
which was growing apace. In a series of steps the currency was unified :the banking system was placed under a greater measure of Treasury supervision : and in 1897 Japan followed the example of most other countries inabandoning bimetallisrb aftera long and unsatisfactory experience. She
now adopted the gold standard, with the help of the sterling in deminity

59
THE BANKING SYSTEM IN THE MIDDLE MEIJI ERA (1870-1910)
exacted from China as the price of defeat in 1895 (as the reparation of theSino Japan war) : Germany had used her war indeminity from France a
generation earlier for a similar purpose. Western money markets werehenceforth open to Japanese public borrowing, and large loans were contracted during the next fifteen years. Although still inadequate in many
respects, Japan's own banking system provided a fairly erfective instrument
for the development of modern industry and trade.
The key role played by the great quasipublic banks formed in the tater

Meiji years deserves special notice. Besides, the Bank of Japan, they
included particularly the Yokohama Specie Bank, the Industrial Bank ofJapan, the Hypothec Bank of Japan, and the Bank of Ch6sen and the Bank
1)of Taiwan.
These institutions functioned side by side, and often in close collaboration with the private banks, particularly the traditional Big Five - the First(Daiichi), Mitsui, Mitsubishi, Sumimoto and Yasuda. Together they madefor a powerful concentration of banking capital, and one which increased

with the passage of time, as hundreds of small banks were graduallyabsorbed by the big private institutions in a series of financial crises.
Besides, the concentration of banks in the Meiji period was the policy ofdefense against the economic depression, on the other hand the concentration of banks in the early Showa period was the formative policy of Zaibatsu(money plutocracy) capital.

Such difference is difinetly necessary to analyse the following study.
The process of amalgamation and concentration of bank (especially Big Five)is as followsing table 3-8 : 1) The necessity of establishment of the long-term financial institution has beenemphasized from various fields. Namely @ the leading article of news paperon the establishm:nt of the Industrial bank -Aug. 6. 1885. the HOchi Shimbun@ the written memorial for the issuing bank-note by the title-deel security or
mortgage -the oldest form of this type was "Liberal bank (Osaka Prefecture)"that had been expected to start September, 1876. @ the same plan had been
proposed by Ichiro Fujita (establishment of " Dainihon KannO Sha " in 1881.

(D the written memoria! by Count Matsukata-"Purpose of the Hypothec
Bank of Japan" at the same time. @ the plan for the regulation of theindirstrial Bank of Japan by Dr. Stein. O (an Austrian)in 1886 -- this effort has

been promoted by Mr. Kawajima (iater the Governer of the Hypothec Bank ofJapan) @ the advice to money and finance (Zaisei Ikenshd) by finance
Minister Matsukata - Aug. 1895 in this plan, he emphasized the establishmentof the Hypothec bank and the Industrial bank.

60

MASAHIRO FUJITAm
With the appointment of Count Mutsukatsu as Minister of Finance in1881 a determined and successful attempt was made to introduce order into
the chaotic financial situation. It was decided to abandon the experiment innational banking, to a central banking system on the European model, tobalance the budget and to restore parity between the silver yen and thenotes. The Matsukata reforming policy was as follows : 1) Amendment in the system of land taxation

2) Adjustmentofpaper-money3) Establishment of the Bank of Japan and the other government banks4) btarting of the specialized bank ------ @ the Hypothec Bank of Japanand the Industrial Bank of Japan ---- as the long-term financial institution.

@ the Taiwan and the Ch6sen bank ---- as colonial expanding banks. Q)
the Yokahama Specie bank ---- as the Foregn exchange specializing bank.
Strictly speaking, we wust analyse the whole financial institutions of
this period. But we cannot cover it all in this articie, so intend to observe
the specialized banks above all.

First of all, we now pick up the Hypothec Bank of Japan, for example.

The establishment of a central bank and a foreign exchange bank appeared after the stabilization of the currency, the next step, in accordancewith the principle that Count Matsukata had laid down, was to create
financial organs for long-term loans. There was an urgent need for suchinstitutions, for a well-to-do middle class, prepared to invest in industrial
securities, scarcely existed. what were required were institutions formed forthe purpose of mobilizing the savings of the community through the medi-

um of bank debentures guaranteed by the G-overnment. In this way resources could be collected and directed towards enterprises.

It was not possible to proceed with this plan during eighties, for
Government bonds then stood at a considerable discount. By the end of the
Sino-Japanese War in 1895 Government credit had improved sufficiently tomake the scheme practicable. So, by a law pasSed in 1896, the Hypothec
Bank of Japan was established, modelled on the Cr6dit Foncier of France,with a capital of le million yen. This was empowered to make loans,redeemable by annual instalments within 50 years, on the security of im-

61
THE BANKING SYSTEM IN THE MIDDLE MEIJI ERA (1870-1910)
movable property, such as paddy fields, upland fields, salt fields, forests andfishing waters and rights. It was also permitted to make abvances without
security to publjc authorities, co-operative societies and fishery guilds, Inorder to obtain funds, it was autholized to issue debentures to an amountnot exceeding ten times its paid-up capital.

It could also accept deposits which it had to employ in purchase ofnational bonds and bills of exchange. For the first ten years of its life thegovernment guaranteed its dividends at the rate of5per cent. At the sametime 46 Agricultural and Industrial Banks were established, one in eachprefecture. Their business was similar to that of the Hypothec Bank, towhich they acted as local advisory bodies. They were permitted to raise
funds to the extent of five times their paid-up capital, and they wereaccustomed to resort to the Hypothec Bank for other advances. Indeed, thelatter acted as a kind of central bank for these local institutions. It
supplied them with funds by taking up their debentures, and jt employed

them as agents in making advances to its clients. The Government exercised close supervision over the business of these banks and granted themfinancial help. Apart from the guarantee of dividends already mentioned,
it advanced a loan of ten million yen to the prefectural authorities to enable

them to subscribe to shares in the Agricultural and Industrial Banks, and1898 it used 3 43 million yen of the Chinese Indemnity for the purchase of

the Hypothec Bank's debentures.

Japan was at that time 1896--- an agricultural country, andagriculture was the most important economic activity of the people : but so

far it had not received proper and adequate attention and assistance fromthe government or from the banking institutions already established. So
large an amount of money was required by the agricultural community that
it was wellnigh impossible for either government or banking institutions toprovide fully for the need. Though the aggregate amount of funds waslarge, it was composed of small demands from multiple individual farmers
whose personal requirements were too small to attract the attention of.abank or any .individual investors, except perhaps some small capitalists who
lived on usury.

The funds needed by the farmer can be divided into three classes, viz. :(1) Iong-term credit with which to purchase land or to carry out improvement on the land already acquired ;62 MASAHIRO FUJITA(2) intermediate credit with vLThich to purchase seeds, fertiliser on eq-

uipment, or to made minor improvements ;(3) short-term credit with which to meet the expenses incurred in harvesting and marketing the crop.
Credits number 2 and 3 could be met by commercial banks or privatemoney-lenders, however, credit number 1 needs a special institution which
deals only in long-term operation.

On accout of these long-term funds, the Hypothec Bank of Japan had
many ordinary business transactions e>cept above mentioned. They are
principally as follows :( 1 ) To make unsecured loans to prefectures, cities, towns, villages andother public corporations organised by law.

(2) To make loans without security, redeemable at a fixed time or by
annual instalments in the case of the adjustment of arable land under
the law of such adjustments.

(3) To make loans without security, redeemable at a fixed time or by
annual instalments, to industrial staple export manufacturers, fishery,
forestry, stock breeding or building associations (or federations of such

assoclatlons).
( 4 ) To make loans without security, redeemable at a fixed time within aperiod not exceeding five years or by annual instalments within aperiod not exceeding ten years, to a party of at least ten persons
combined with joint liablity, who are engaged in agriculture, industry
or fishery in any prefecture where no Agricultural and Industrial Bank
exlsts.

(5) To make loans without security, redeemable at a fixed time or by
annual instalments, to land rearrangement associations or federations
thereof, in case they apply to borrow for the rearrangement of land to

be undertaken under city planning law, or to a party of at least ten
persons combined, with joint liability, in case they apply to borrow for

the same purpose.
(6) With money obtained by the issue of IIypothec debentures withpremium, to make loans on security of cultivated fields, saltpans,forests, or on pledges of claims secured by these thems (including realestate mortgage certificates).

C7) Hypothec Bank is required to take up debentures issued by the

T}IE BANKING SYSTEM IN THE MIDDLE MEIJI ERA C1870-1910)63
Agricultural and Industrial Banks, and Hokkaido Colonisation Bank,
Central Bank of Co-operative Societies, and Ch6sen Industrial Bank.

(8) To make loans, redeemable by annual instalments on security of theclaim on loans redeemable by annual instalments that are issued by the
Agricultural and Industrial Banks, and of the mortgage in security ofsuch loans.
(9) To make Ioans on pledges of claims secured by real estate (including
real estate mortgage certificates), redeemable at a fixed time within aperiod not exceeding five years, and to buy and sell real estate mortgage
certificates.

(10) To accept deposits and take custody of gold and silver bullion andnegotiable paper, provided that the total amount of deposits, other thanthe deposits of prefectures or cities, shall not exceed the total amountof the paid-up capital.

Further-more, the banks shall employ the deposits and the money lying
idle in the course of its business in the following manner only :(a) To purchase, with a sum not less than one-quarter of the total
deposits, the national bonds or negotiable paper approved by the Minister of Finance, or to deposit it in the Deposit Bureau of the Ministryof Finance or in banks approved by the Treasury.
(b) To discount bills or make short term Ioans on security of the above-

mentioned negotiable papers or on agricultural or marine products oron industrial manufacturers.
(c) To discount bills or grant overdrafts to industrial associations, staple

export manufacturers' associations, fishery associations or federations

thereof.
(d) To make short-term loans to public corporations,(e) To make short-term loans without security to a party of at least ten
persons combined, under joint liability, who are engaged in agriculture,industry or fishery in any prefecture where no Agricultural and Industrial Bank exists.

(f) To receive fixed deposits as funds for an initial payment on securityof real estate or fishery rights, or on pledge of claims secured by realestate (including real estate mortgage certificates) of loans, redeemable
at a fixed time within a period not exceedihg five years.

At first it was strictly required that the proceeds of the toans granted

64

MASAHIRO FUJITA

by the banks had to be employed only in the ways conductive to theimprovement and development of agriculture and industry. Such restrictions, however, were found to be too rigid to enable the banks to perform thefunctions with which they had been charged. The scope of the use of theloans, therefore, was gradually enlarged more and more, until in 1911 such

limitations were finally abolished. Under the apprehension, however, thatthe freedom thus granted might accentuate the tendency to concentrate theoperations upon urban mortgage, thus defeating the true purpose of suchinstitutions, the following provisions were instituted :(1) With the exception of the Ioan on financial foundations (Zaidan)
connected with factories or with the sites or buildings thereof, the total

amount of mortgage loans on land or buildings situated in places subject

to municipal administration or in towns designated by Ordinance, andof loans made to the readjustment of land societies, may not altogether

exceed one-half of the total amount of the paid-up capital plus the
mortgage bonds issued.
(2) In the case of Agricultural and Industrial Banks, however, the total
amount of such loans may not exceed one-fourth of the total amount ofpaid-up capital and mortgage bonds outstanding, with a special provision that such loans may be increased up to the total amount of thesaid two items of account with permission of the minister concerned.
Both the Hypothec Bank and the Agricultural and Industrial Bank may
receive deposits. In order, nevertheless, that this privilege may not bringpressure to bear upon ordinary (commercial) banks, it is provided that (a)the total amount of fixed deposits and deposits other than those of publicbodies shall not exceed the paid-up capital: and that (b) the deposits ofmoney are to be employed to the extent of not less than one-fourth of theamount in purchasing national bonds or othe eligible papers or in depositing

with the Deposit Bureau of the Finance Ministry or with other banks. The
funds still available after covering the above requirements may be invested
in short-term loans on national bonds or eligible papers as above-mentioned,or on agricultural, marine or industrial products, or discounting bills, ingranting over-draft credit on current accounts of co-operative societies, orin making short-term advances to public bodies.

It must be remembered, however, that it is only after the principal
business has been carried out and when there are funds to spare that they

65
THE BANKING SYSTE.M IN THE MIDDLE MCM ERA (1870-1910)
are allowed to make short-term advances. Such transactions are to beconsidered as side issues.

In view of the relation of the Hypothec Bank and Agricultural andIndustrial Bank, when the Hypothec Bank was created the ordinary corporations were allowed to issue their debentures only within the limit of theirpaid-up capital and provided that one-half or more of their registered capital

had been paid up. The Hypothec Bank, however, was authorised, when atleast one-quarter of its nominal capital had been paid up, to issue mortgage

debentures to the amount not exceeding fifteen times its paid-up capital,
provided that the amount of such debentures shall not exceed the total

amount of outstanding loans, redeemable by annual instalments or at a
fixed time, plus the debentures in the hands of the Agricultural and Industrial Banks, Hokkaido Colonisation Bank, Central Bank for Co-operative
Societies, and the Ch6sen Industrial Bank. These mortgage debentures must

be redeemed by means of drawings taking place at least twice a year inamounts proportionate to redeemable by annual instalments plus the debentures in hand of the abovementioned banks. In case any loans redeemable by annual instalments are before maturity, the bank may, with theamount so paid, purchase and redeem its mortgage debentures.
The Agricultural and Industrial Banks were first permitted to issue
their debentures to an amount not exceeding five times (later increased to
fifteen times) their paid up capital, without any such restrictions as were

imposed on the Hypothec Bank. Withaview to securing funds of long
period and law interest rate to finance agricultural and industrial enterprises,

the Hypothec Bank has been authorised to pay bonuses or premiums on its
debentures at their maturity. The maximum of such bonuses was at first
fixed at 500 yen, but later increased to 5000 yen.

It has further been provided that the Hypothec Bank cannot use thefunds acquired from the bonusbearing deventures for other purposes than
Ioans on mortgage of farm land, forests and pastures, unsecured loans toprefectures, cities, towns, villages and other public corporations organisedby law, and underwriting the debentures of the Agricultural and Industrial

Banks and the central treasury of industrial associations. The law thus

prohibits the employment of such funds for any purpose other than the
primary business of the Hypothec Bank as an institution for the mortgage
loan business,

66

FUJITA
MASAHIRO

The Agricultural and Industrial Banks are not allowed to pay bonuses
or premiums on their debentures, but it is provided that the Hypothec Bank

may underwrite their debetures to enable them to obtain necessary funds.

However, the capacity of the Hypothec Bank to absorb the debentures ofthe former banks is limited, moreover, it is not easy for the Agricultural andIndustrial Banks to fioat their debentures, owing to the fact that all of thesebanks, except a few in large cities, are situated in provincial localties.

Naturally, therefore, they have to depend for their resources chiefly on
deposits, especially time deposits. But deposits in such localties are few andsmall, consequently the primary cost of money is exceedingly high. The
supply of funds for agriculture and industry is thus limited.

In order to remedy this drawback the Government, in 1900, allowed thebanks to act as agents for loans made by the Hypothec Bank. In 1902 an
arrangement was made under which the Agricultural and Industrial Banks
are at!owed to borrow from the Hypothec Bank on the security of claims toloans redeemable by annual instalments or on the security of mortgage

righst. However, this remedy proved to be nothing more than a mild
measure, inadequate to relieve the banks of the dithculty in acquiring
operating funds. Finally, the Governmant arrived at the conclusion that it

would be better to amalgamate all the Agricultural and Industrial Banks
with the Hypothec Bank and made the former the latter's branch oMces.
The law of Consolidation of Agricultural and Industrial Banks was accordingly passed in February 1921. Since then twenty-nine of the Agricalturaland Industrial Banks have been merged with the Hypothec Bank, only wasseventeen remaining independent in 1937, but subsequently all the Agricultural and Industrial Banks were absorbed by the Hypothec Bank in 1944.
The debentures issued by the Hypothec Bank are of five kinds :(1) Small Hypothec certificates at the face value of 50 yen. In order torender this class of debentures popular they have been converted into
premium-bearing bonds, and they have for a long time constituted thechief source of funds for Hypothec Bank.
(2) Large Hypothec certificates of 100 yen denomination. These certificates were first issued in 1910 while old 4 per cent national bonds of theGovernment were still in circulation. The aim was to give liquidity toidle funds in various sources, so that the "tightness of money" in rural
districts might be overcome. It appears that this class of certificates

(A) SumitornoBank

Table 3

Yao bank (1896 established)

1 Tsujibayashi bank (1920 renarned)

Sanbayashi bank (1900 eastablished)
Ohtsu bank (1zz2 established)
Kawaizumi bank (1911 established)
1lohchi bank (1896 established)
Nagano bank (1932 purchased)
Nagano bank (1897 established)si b..k 1 jOkadKai,bhain.k..d(.i9b3.0.1egi6go"Srpeantea.dm/ed,isg3estabiish)Okada bank (1885 established)Tsujibayashi bank " Ohtsu bank (1926purchased)
Kawaizumi bankKohchibank 1
Hannan bankt 51 bank (1897 renamed) Kishiwada national bank (1878 establish)

Kishiwada bank (1922 renamed) l Kishiwa• da saving bank (1894 establish)

Hannanbanki Kishiwada saving bank (1921 establishlish,1935 rename)Terada bank (1907 establish)
Kaizuka bank (1894 establish)

Izumi bank 1 Izumi ba• nk (1922 rename> lzumi saving bank (1897 establish)
1 Ozaki bank (1930 purchase)
Izumi saving bank (1921 establish, 1934 amalgamated)
Fukahibank(1897
estabHsh, 1942 purchase)
Sennanbank(1932
establish, 1942 purcha• se) i Tottoribank (1899establish)

i Uesato bank (1883 establish)+ Sumitomobank (1895esta•blish,1912rename) , •61 bank (1912 purchase) 61 bank (1897 rename) Kurume 61 national bank (1878 establish)
Kyomachi bank (1897establish)

Sumitomobank(lsg7amalgarnate) ?i}OkliwMaabbaannkk((is8st39eesSttaadbliigShh))I

Kushihara bank (1883 establish)
Tanaka Indusrerial bank (1920 rename, 1924 purchase) Tanaka bank (1896 establish)

l Wakamatsu Commercial bank (1925 purchase) Wakamatsu saving bank (1896 establish)
Kurume bank (1922 rename, 1928 purchase) - Kuurume saving bank (1896 establish)
Asada bank (1889 establish, 1930 purchase)

Saga l06 bank (1897 rename, 1941 purchase) t Saga l05 national bank (1879 establish)
l Hizen bank (1915 establish, 1924 amalgamate)
Nishihi bank (1916 establish, 1925 amalgamate)

Ikeda Business bank (1945 amalgamate) Ikeda Business bank (1911 establish)
Hirone bank (1897 establish, 1923 amalgamate)
Hokusetsu bank (1899 establish, 1923 amalgaimate)
Nose bank (1887 establish, 1931 purchase)
Itamibank (1896 establish, 1944 purchase)

Table4 (B) Mitsuibank and Daiichi bank

Teiyu bank (1920 purchase)
Osaka commercial and Industrial bank (1896 establish, 1901 amalgamate)
Ogaki kyoritsu bank (1887 establish, 1900 amalgamate), Osaka meiji bank (1894 establish, 1899 amalgamate)
E 5th bank (1896 estabHsh, 1898 ama• lgamate)
Eiiag"26Waamaigamate) IiT.N.a.n.'].:.Yba.b.aknliig68s9.9,E.ebniai,Mh?)igi49illa.kiG.31ZZdt.gationaiba"k(i878establish)

Mitsui bank(1948 seperate)

Bakwan commercial bank (1896 establish, 1918 amalgamete)
15th bank (1896 rename) Tokyo 15th national bank (1877 establish)
Kobe Kawasaki bank (1905 establish, 1916 rename, 1920 amalgamate)

15 bank(1944 amalgamate)1

Mitsui bank

TeikokubanklTsuda bank (1899 establish, 1921 amalgamate)
Commercial
andIndustrial saving bank (1895 establish)
Comrnercial and Industrial bank (1922 rename
amalgamate)
Mitsui bank (partnership)(1876 establish, 1909 rename)Nishiwaki bank (1910 establish, 1941 ammlgamate)l TOkai bank (1889 establish, 1927 amalgamate)
Kyoto commercial and Industrial bank (1886 establish, 1916 amalgamate)t 20th.b.a',n,.k,•ii,8.9.8,r?n,,a,ggei.i.9i.2.a'.m)aiy)..,,'.o},y,O(liO.t,h,.(ig2Kg`,1•)..".a,tLO.".a':?r,",k6.,,.bii,h)Daiichi bank

[ Euruka• wa- bank (1917 establish, 1931 purchase)

Senjij bank (1897 establish, 1925 purchase)
WatanabeEbank (1912 establish, 1933 purchase)

Daiichi bank(1948 seperate)

AsO bank (190P establish, 1941 purchase)
Iron industry bank (1900 establish, 1941 purehase)

Miike bank (!943 purchase)

1 Miike bank (1886 establish)
i Sedaka bank (1888 establish, 1926 amalgamate)1 Tokyobank(1918arnalgamate)Ohmi bank (1928 transfer) Ohmi bank (1894 establish)
Kyuki bank (1928 transfer) Kyuki bank (1898 establish)

l Enumabank(1921amalgarnate)

Table 5(c)

84th bank (1928 transfer) i 84 bank (1897 reorganize) 84th national bank (1878 establish)

Fuji hank (Yasuds bank)

1 Kyobashi bank (1909 amalgamate)
Murai bank (1917 establish, 1928 transfer)
Nakai bank (1920 establish, 1928 transfer)

Nakazawa bank (1918 establish, 1928 transfer)

Showa bank(1939 amalgarnate)i Showa ba• nk (1927 establish)
l4wariya bank (1900 establish, 1927 transfer)

Toyokuni bank (1928 transfer) l Toyokuni bank (1907 establish)
I Hamamatsu credit bank (1908 purchase)
Wakao bank (1917 establish, 1928 transfer)

1 Furuichi bank (1926 purchase)
Fujita bank (1928 transfer) i Fujita bank (1917 establish)

Sawahara bank (1927 amalgamate)
Thish6 bank (1913 establish, 1928 transfer)
Nihon Shinyd (trust) bank (1943 establish)

L Kyoto Ohuchi bank (1893 establish)r Yamakuni bank (1900 establish)

Kyoto Ohuchi bank (1931 new est, 1943 transfer).

Nemuro bank (1897 establish, 1923 amalgamate)Kanazawa bank (1896 establish, 1923 amalgamate)

Shinano bank (1923 amalgamate) L Nagano saving bank (1823 amalgamate)t Shinano bank (1889 establish)
Gunma
commercial
bankFinancial(1897 establish,
1916
amalgamate)
Meiji commercial bank (1923aMalgaMate)
1 shinanobank (lgoO
establish,
19oo amalgamate)

3rdbank(lg23amaigamate) I 38

r2dba
ankk(1(8r9e6orr ge::.ae/iZe'138r9d7naaMtia'oingaalMbaatnek(ls7862ensdtanbailgohn)aibank(i878establish)bn

1 44th national bank (1878 establish, 1892 amalgamate)l Yasudabank(1912amalgamate)

Fuji bankl-Yasuda bank(1948 rename)

Yasuda bank (1923 ama!gamate) i Yasuda bank (1911 establish) Yasuda bank (1878 establish)

Hozen bank103rd national bank (1878 establish, 1897 purchase)
Nihon commercial ba- nk (1923amalgaMate) i Nihon commercial bank (1895 establish)(1923 establish,

1923 firm name changed)

Kyoto bank (1894 establish, 1923 amalgamate)l i2h2a6ga.kba("igk2gi.9.2i.?gM.a.ig.atYate) 1 .2C2h:g.O.kk"8sag"7k.(,i.8,9g7..al.,a)igaM2a2tfi)dnationaibankas77est)

Yasuda banki G6so bank (1921 purchase)

Tamana bank (1923 purchase) 9th bank (1897 reorganize) 9th national bank (ls77 est.)
Kumamoto bankl Ekinanbank(1907amalgamate)l (1899 amalgamate)

Higo bank (!897 reorganize 6th national bank (1877 est.)

Higo bank (1923 amalgamate)

1 Kumafu bank 1921 transfer)fiirm name change)

Tamana Shinano bank (1922 transfer)
L Agei bauk (1901 establish, 1906 amalgamate)
130 bank (1923 amalgamate) " 58th bank (1897 reorganize) 58th national bank (1878 ost.)

ct/ 36 bank (1923 a• malgamate) 136th national bank (1879 est.)
saka industrial bank (1898 arnalgamate)

130 bank (lsgs reorganize) i

118th national bank (1880 est.)
130th national bank (1878 est.)

Nishijin bank (1899 amalgamate)
87bank (1897 transfer, 1902 amalgamate)

87th national bank (1878 est.)

Fukuchiyama bank (1902 amalgamate)
Hamamatsu commercial bank (1922 establish, 1924 amalgamate)l Kasaibank(1924amalgamate)
M6ri bank (1928 tranfer)

MOri bank (1907 establish)(1896 establish
136th bank (1942Itsukaichitransfer) bank1'

163th bank 1878establish, 1897 reorganize)

Nihon Chaya bank Asano Ch-uya bank
(1922 firm name change) (1918 reform)-Nihon day and might(ch-uya)bank (1943 amalgamate)

Nihon Ch-uya bank 5th bank Nitto bank(1916 reform)(1913 reform), (1898 reform)

Ohmi bank (1882 establish)
Ohmi comrnercial bank (1889 establish)
Buy6 bank (1927 new establish, 1942 amalgamate)
Tama agricultural bank (1896 establish)
Tama bank (1898 establish)
Hikawa bank (1898 establish)
Hanemura bank (1899 establish)
Nariki bank (1900establish)
Tokyo Seisan (proudction) bank (1901 establish, 1929purchase)
Chdfu bank (1900 establish, 1931 purchase)
Tanashi bank (1900 establish, 1901 purchase),3rdfi .n,;;g:2•.n,d.kr,2d,:'pg.c.ok2',Z2,Za.m.ahlg,a.'m.a.:e.3l
3rd bank (1944 transfer)

1 Itsukaichi saving bank (1896amalgamate), 1924 amalgamate)

3rd bank (1927 reform)i Teikoku commercial bank (1894 establish)

Yoshihama bank(1898 reform)

Table 6 (D) Mitsubish

i bankTokyo Nakano bank (1922 rename, 1942 purchase) Nakano saving bank (1902 establish)
1 Fuch-u bank (19oo establish, 1931 purchase)

Asada bank (1899 establish, 1930 purchase)bank (1900 establish, 1924 amalgamate)
ilFukagawa
1 (1899
rename 1917) Tohri Kawase (exchange) Shop (1885 est.)
Kinbura bank (1940 purchase)
i Shiba saving bank (1890 establish, 1928 amalgamate)
Tsukagoshi day and night (Chaya) bank (1912 establish, 1932 amalgamate)

Mitsubishi bank

Shinagawa bank (1896 establish, 1925 amalgamate)i Shimura bank (1899 establish, 1924 amalgamate)
Morimura bank (1889 establish, 1929 putchas)L
Mitsubishi bank (1920 rename) Mitsubishi & Co. (partnership) (1895 establish)

Fushimi bank (1888 est. 1916 purchase)
I
Kawasaki lOOth bank (1943 amalgamate) Kawasaki lOOth bank (1927
L new est.) Kawasaki bank (1926 rename) Kawasaki bank (1880 establish)
100 bank (1898 rename) Tokyo 1ooth national bank (1878 establish)

l Ch-ukyobank (1903amalgamate) Chukyobank (1895est.)

Takasago commercial and industrial bank (1919 establish, 1925 amalgamate)
Nisshin bank (1907 establish, 1926 purchase)
KOjimachi bank (1889 establish, 1927 amalgarnate)] Ohi bank (19oo est. 1924 amalgamate)
Tokorozawa bank (1929 purchase) Tokorozawa bank (1893 establish)[ Tokorozawa saving bank (1898 establish, 1922 amalgamate)
Kawasaki saving bank (1899 rename, 1936
Tokaiamalgamate)saving bank (1890 establish)
Chitose saving bank (1927 amalgamate)
Tokiwa saving bank (1920 establish, 1927 amalgamate)Horikawa saving bank (1896 establish, 1928 purchase)Tokyo hoarding bank (1800 establish, 1936 amalgamate)
Haneda bank (1900 establish, 1939 purchase)

73(1870-1910)
SYSTEM IN THE MIDDLE MEIJI ERATHEBANKING

will be the basis of future debentureissuing operations of the Hypothec

Bank. They are issued in two forms, i. e. either offered direct to theinvesting public or underwritten by the Deposit Bureau of the Finance
Ministry. In the latter case the issue in called Special Debentures.

(3) Savings certificates, which were created during the Russo-Japanese
War to absorb the small sums of money scattered among the people.
( 4 ) Reconstruction premium savings certificates which were created after
the earthquake of 1923, in similar manner, to absorb the funds scatteredamong the people, for the reconstruction of the devasted areas.
The last two kinds of debentures are issued at a denomination of 5 yen,and the bank only acts as issuing agent of the Deposit Bureau of theTreasury ; the funds obtained therefrom being transferred to the Treasury.

Table 7 Principal Account of the Hypothec Bank of Japanand the Agricultural and Industrial Banks (In thoysand Yen)

The Hypothee Bank of Japan
Paid-up

Years

Capital

1897

2500

1898

2500

1999

2500

1900
1901

DebenReserves

tures
issuedUnderwrLoansiting of D-

Short

Balance

Loans with Banks,etc.

ebentures

1376

171

892

6706
8774

137

2500

7
34
70

4997
7417
9753

11650

170

816

2500

135

13520

14048

228

1349

3250

2!O

14409

17320

407

782

1903

3250

460

19547

21795

471

1102

1904

3250

574

25046

23808

453

4808

1905

3250

900

34185

25633

461

11756

1906

3250

1199

48102

29588

545

19115

1907

4250

1503

54184

36793

412

20951

1908

5000

1712

60021

45762

413

22158

1909

6250

1992

68968

59350

438

20503

1910

8750

2333

93929

88423

165

165

19925

1911

12500

2748

134943132776

202

797

21845

1902

F

1179

l

74

MASAHIRO FUJITA
The Agricultural and Industrial BanksYear

Number ofbanks

Paid-upDebentures

capitaloutstanding

1897

46

575

1898

46

1899

46

1900

46

1901

46

1902

46

1903

46

1904

46

1905

46

1906

46

1907

46

1908

46

1909

46

1910

46

1911

46

8740
15980
22923
26050
27657
27770
27807
28257
28294
28620
29004
29369
30619
32370

Especially,

Loans

Balancewith Banks,
etc.

300

4221

5030

12063

5895

3151

1222
2147
3421
4004
4760
5502
5976
6967
8219
8656

530
630
1023
2019
2602

2590
2535
2818
3002

19200

7020

23086

8805

25114

10142

27881

9503

29627

8711

30398

9121

32102

10134

34488

11041

36462

10535

4125

12141

40339

10252

11697

18004

51551

10692

30981

23050

77ee8

1330

the process of the amalgamation or merger

Hypothec Bank offollows : --Deposits

Japan and the Agricultural and Industrial

between the
Banks is asTable 8

Ohita Prefecture agricultural and industrial bank (1898 estabiish, 1937 amalgamate)
Awa agricultural and industrial bank (1900 establish, 1937 amalgamate)
Miyagi Prefecture agricultural and industrial bank (1900 establish, 1937 amalgamate)Nohbi agricultural and industrial bank (1900 establish, 1937 amalgamate)
Mieh agricultural and industrial bank (1897 establish, 1937 amalgarnate)
Osaka aglicultural and industrial bank (1898 establish, 1937 amalgamate)
Hyogo Prefecture agricultural and industrial bank (1898 establish, 1937 amalgamate)
Hiroshima Prefecture aglicultural and industrial bank (1898 establish, 1937 amalgamate)
Ehime Prefecture agricultural and industrial bank (1898 establish, 1937 amalgamate)Kagoshima Prefecture agricultural and industrial bank (1998 establish, 1937 amalgamate)
Miyazaki aglicultural and industrial bank (1897 establish, 1934 amalgamate)-Nara agricultural and industrial bank (1898 establish, 1930 amalgamate)
Saitama Prefecture aglicultural and industrial bank (1898 establish, 1930 amalgamate)
Iwate Prefecture agricultural and industrial bank (1897 establish, 1930 amalgamate)
Gunma Prefecture agricultural and industrial bank (1898 establish, 1930 amalgamate)
Nagano aglicultural and industrial bank (1898 establish, 1930 amalgamate)
Chiba agricultural and industrial bank (1898 establish, 1927 amalgamate)
Higo agricultural and industrial bank (1898 establish, 1927 amalgamate)
Fukuoka Prefecture agricultural and industrial bank (1898 est. 1921. amalgamate)
BOchO agricultural and incustrial bank (est. 1921 amalg.)
Saga Prefecture agricultural and industrial bank (1898 est. 1921 arnalg.)
Yamanashi agricultural and industrial bank (1898 est. 1921 ama;•g.)--the Hypothec Bank of Japan (1897 establish)
Shimane agricultural and industrial bank (1898 establish, 1922 amalgamate)
Tottori agricultural and industrial bank (1897 establish, 1923 amalgamate)-Sanuki agrlcultural and industrial bank (1898 establish, 1922 amalgamate)
Ryouh agricultural and industrial bank (1898 establish, 1922 amalgamate)
Fukui Prefecture agrciultural and industrial bank (1898 est. 1922 amalg.)
Ishikawa Prefecture agricultural and industrial bank (1898 est. 1922 amalg.)-Tosa agricultural and industrial bank (1898 establish, 1922 amalgamate)
Okinawa agricultural and industrial bank (1897 establish, 1922 ama!gamate)
Shizuoka Prefecture agricultural and industrial bank (1897 est. 1922 amalg.)
Niigata Prefecture agricultural and industrial bank (1899 est. 1922 amalg.)
Kyoto Prefecture agrlcultural and industrial bank (1899 est. 1922 amalg.)
Akita agricultural and industrial bank (1898 est. 1922 amalg.)
Wakayama agricultural and industrial bank (1898 establish, 1923 amaJg.)
Aomori agricultural and industrial bank (1898 est. 1923 amalg.)
Nagasaki agricu:tural and industrial bank, 1929
(1898 amalgamate)establish
Tochigi agriculcural and industrial bank, 1933
(1898 amalgamate)establish(1899
establish. 1936 amalgamate)h Tokyo Prefecrure agricultural and industrialbank
Shiga Prefecture agricultural and industrial bank (1898establish, 1938amalgamate)
Okayama Prefecturure agricultural and industrial bank(1897arnalgamate)establish, 1944

The Hypothec Bank of Japan

1

Aichi Prefecture aglicultural and industrial bank (1898establish, 1944amalgamate)'ank (1898
Fukushima Prefecture agricultural and industrial
b establish, 1944 amalgarnate)
Ibaragi Prefecture agircultural and industrial bank (1898estabiish, 1944amalgamate)(1898bankestablish, 1944 amalgamate)
Kanagawa Prefecture agricultural and industrjal

SYSTEM IM
THEBANKING
THEMIDDLEMEIJI ERA (1870-1910)

77

IV
As above-mentioned, the Hypothec Bank of Japan played as an important
promoter of our capitalism (especially, industrial capitalism) in the Meiji
Era. Then, we try to examine the detail in loan of this bank by statistics.

Table9 Year after loan (yen)loan by yeartly
instalments

year

numberamount. ttmeloan

numbertotal

amountnumberamountl,376,Oll

1897

28

1,376,Oll

28

1898

136

5,400,597

136

5,400,597

1899

83

2,356,081

83

2,356,081

1900

113

3,370,416

1901

246

3,O02,109

1902

808

4,490,495

1903

1,376

5,921,594

6

1904

869

3,728,672

4

1905
1906

1,250

3,985,176

5

1,915

7,287,048

15

23
5
22
144
446

1907

1,673

9,987,276

1908

2,158

!1,846,751

1909

4,055

17,622,884

1910

10,44435,575,322

1911

20,O0558,472,463

2

76,OOO115

3,446,416

2

110,OOO

248

3,112,109

808

4,490,495

99,OOO

1,382

6,020,594

43,139873

3,771,811

40,800247,123

1,255

4,025,976

1,930

7,525,171

So, the early businessperiod intheloan by yearly instalments,

but thetotal

659,230

1,696

10,646,506

63,6002,163

11 910 351

183,500

4,077

17,806,384

2 149 050

10,58837,724,373

4,675,601

20,451

63,148,065t)ep

Hypothec Bank of Japan largely
amount of loan shows as in thefollowing Tables : Table le

The Total amount of loan byborrower(thousand yen)itemsinpercentage
year

total

1897
1898
1899
1900
1901

1376
6707
8775
11651
14049

farmermanufacturer

24.9%

59.3%

15.8%

21.3

66.7

26.5
29.9

55.7

12.0
17.8
19.7
21.6

32.5

50.4
45.9

publicbody

78

FUJITA
MASAHIRO
Table 11 Public body Ioan

(thein the early daysof the Kangyo Bank
Hypothec Bank of Japan) 1897--1901 (thousand yen)numberamount%agriculture

73

3143

90.6

industry (manufacture)

4

259

7.4

reforestation

4

70

2.0

Total

81

3471

100.0

the Kind of enterpriseIn Table, 11 the contribution of this bank is clear, aspects as thepromoter of agricultural development in Japanese capitalism (name!y as the
only supplying source of fund).

The use of these funds were invested as follows : Table 12 Industrial Ioan (1897-1sc1) (thousand yen)amountuse%

spinning cotton, twisted industry

3790

47%

textile manufacturing

923
632
615

11

cement industry
paper industry
raw silk industry
engineering industry
other industry
total

8
8

464

6

407

5

1293

15

8124

100

In the early Meiji, our export was mostly textile fabries. Moreover, theraw silk was large weight in export (volume). And, this was an important
agricultural product.

Table 13 Agricultural loan (one thousand yen)
new planned(enterprise)use

investment

redemption ofold loantotalland clearing

1439

667

2106

reforestation

942

190

1132

readjustment of arable

1696

289

1985

4077

1146

land, and
tota!

%

other

78.1 %

21.9 %

5223
L
!
1

100%

Table 14 Year after

year

publicbody

number amountreadjustment

ofarablelandn.

industrialguild

goodsindustrial

fisheryguild

a.

n.

n.

a.

a.

a.

n.

(yen)
live-stock

forestguild

associationn.

a.

importantexport

year loan (non-morigage loan)buildingand

land-read-

breedingguild

associationloan

justment

n.

n.

a.

a.

n.

a.

total
n.

a.

216,703

1897

216,703

1898

595,605

595,605

1899

780,068

780,068

1900

784,930

784,930

1901

840,100

840,100

1902

489,688489,688

1903

1,722,331

16,796

1,730,127

1904

1,385,427

240,464

1,625,891

1905

584,636

329,969

1906

2,449,160

1,205,891

1907

3,539,943

1,397,884

1908

3,225,563

1,577,774

1909

2,722,642

1260661l7

1910

5,771,649

1,887,O09

48,5001911

13,386,078

4,717,771

1,507,685----mrm----"-15619-nrn--rrm-m-m+------.-inhiL-mL-----H----'MT----1

977,605
3,655,051

4,937,827
4,803,337
3,992,303

9,OOO

direct1897--pp---H----yiv-m-7707158st

"
3,OOO

Ioan

number amountos

1,376,Oll

1898

136

5,400,597

1899

83

2,356,081

assured ioan
n.

a.

m
m
139

m
289,90919.614,534'

Year after year loan (yen)Table 15year--m---m------m'r-HH--m-m---Lmnv

specialcollateral

nt

n.

a,

n
m
-

acceptanceof
bond

total

loan

a.

--

28

1,376,Oll"

136

5,400,597

rTt

n.

total

a.

n.

H
142,28028

1,376,Oll

136

5,400,597

88

2,498,361a.

83

2,356,081

'
-5

115

3,446,416

1

33,300116

3,479,716

248

2,112,109

3

63,810251

3,175,919
4,720,895

1900

115

3,446,416

1901

109

2,813,200

1902

147

3,306,282

661

1,184,213

4

21,100812

4,511,595

6

209,300

818

1903

135

4,026,113

1,247

1,994,481

58

263,560

1,440

6,284,154

4

158,160

1,444

6,442,314

1904

90

2,300,024

783

1,471,787

22

82,140895

3,853,951

3,853,951

1905

95

1,814,442

1,160

2,211,534

47

211,680

1,302

4,237,656

-

895

1906

119

3,751,384

1,811

3,773,787

42

178,740

1,972

-

m
1

33,3001,303

4,270,956

7,703,911

2

133,OOO

1,974

7,836,911

-

1907

131

5,781,420

1,565

4,865,086

131

566,920

1,827

11,213,426

1908

129

5,926,699

2,034

5,983,651

20

95,5002,183

12,O05,851

1909

217

6,776,271

3,860

11,030,113

649,700

4,083

17,856,084

1910

563

11,531,390

10,02526,192,983

Jt"

37,724,373

1911

1,116

22,164,646

19,3354s983,419

2-

10,588250,OOO 20,453

63,398,065

'

-

1,827

11,213,426

2,184

12,053,251

1

47,4002

71.000

4,085

17,927,084

h10,58837,724,373

120,OOO 20,454

63,518,065

1

81

SYSTEM INTHEMIDDLEMEIJI ERA (1870-1910)
THEBANKING

Above table 12-14
but table 15

enterprlse,

shows loans classified
shows ciassificationby the kind of businessby the kind of loan (loanprocedure).

However, the redemption of such loan was not going well for its cause
might be the economic crisis (financial bankruptcy) at the end of Meiji We
can study the economic situations of these days by the next table :-Table 16 The Amount of redemption

Amount of

year

loan
num- amount
ber

1897

1

Total of loann.

a.

redemption

Amount of

Total ofredemption

n.

n.

1

a.

o

o

o

69,874

1901

28 1,376,Oll
164 6,776,608
83 2 356 081 247 9,132,690
115 3 446 416 362 12,579,106
248 3,112,109 610 15,691,215

3 570,627
1 714,161

1902

812 4 511 595 1,422 20,202,811

11 1 240 072

1898
1899

1900

28 i 1,376.011(yen)

136 5,400,597

3 287,973

)s
e)

o

a.

Total to the endof year(rewainder)
n.

a.
'

28 1,376,Oll
164 6,706,734
357,848 244 8 774 842)p928,475 356 11,650,631
1 642 637 603 14 048 578

ogg

69,874!"ls
Jt)p 2,862• 25,486,965 29 1pe
808 861
1903 1,440 6,284,154
4 691 570 2,815 21 795 394
pssplr
1904 895 3,853,951 3,757 30 340 917
32 1 840 948 ,:g 6 532 519 3,678 23 808 397
pt
)}
ts
)t
1905 1,302 4,237,656 5,059 34,578,573
4,919 25 633 305
61 2,412,749
8,945,268
st1906 1,972 7 703 911 7,031 42,282,485 131 3 748 564 !g; 12,693,833 6,760 29 588 651
I))tt}
1907 1,827 11,213,426 8,858 53,495,911 262 4,O08,324
16,702,157 8,325 36 793 753
es1908 2,183 12,O05,851 11,041 65,501,762 196 3,037,187 702 19 739345 10,339 45 762 417
sp
1
l
1)
1909 4,083ilZ856,084,15,124 83,357,847 279 4,267,648 981 24 O06 993 14,143 59 350 853
IIO,588i37,724,373i25,712•
rs 24,098 88ts423 147
1910
121,082,221 633 8,652,080 1,614 32,659,074I
1
1et
1911 20 453i63 398,065 46,165i184 480,286 1,456 19 044 327i3 070 51,703,401 43,095 132 776 884
'
''l
}t
'1
i' -' i 1
19 2,882,709 1,404 17 320 101

The stock of of the Hypothec Bank of Japan, its price (par value) was
500 yen per stock and, number of stocks issued was 50 thousands. As prosperity of after the Ruso-Japanese war was very large propensity to invest,

promising stock was generally welcomed.
When this bank closed the list of applications on May 11st 1897, the total

suscrjption (number of stock) was 730495, and 14.6 times, total margin (ordeposit) ----- 25 yen per one stock was 18262 thousand yen.
The cause of was this condition (D speculation to promoter's stocks and82

FUJITA
MASAHIRO@ the stock of Bank of Japan showed three tirnes for paid-up price in its
current prices, so similar possibilities were remarkable to the stock of thisbank (this bank was semi•government bank), (D loan safety as mortgage
bank, (D no danger of conversion by low interest (as government bond) and(i) the user of the Agricultural and Industrial Bank was about to hold thestock of the Hypothec Bank of Japan as the central bank of the agriculturaland Industrial Bank. The name and profession of the stock holder with morethan 50 shares of the stock at the end of 1897, as follows:-

Table 17
holding

numbernarne

986

Profession

dwelling place

Nakaemon Nishidaland-lord

400

Uhei Kaizuka

President of
Spinning Co., Ltd.

Hyogo Prefecture
Mieh Prefecture383

Seizo Ishisaki

pawn shop

Tokyo

327

Tokujiro Ichijima

land-lord

Niigata Prefecture

169

Chojiro Ito

land-lord

Hyogo Prefecture

138

Heikichi Kishi

land-lord

Niigata Prefecture

137

Michihisa Baba
Chosei Kuroda

land-lord

Toyama Prefecture

old feudal lord

KyushuToshitsugu Maeda
Bank of 15
Bank of Senshu

old feudal lord

Ishikawa Prefecture
Osaka Prefecture
Osaka Prefecture

273
150

205
137

136
80
205

136
176
54

Bank of Ohwada
Bank of Kamezaki
Nihon Life
Insurance Co.,
Nippon Fire
Insurance Co.

Hanyomon Tatsuma
YozaemonWakabayashi

sake-distillingindustrysake-distillingindustry

Hyogo Prefecture
Hyogo Prefecture

In foundation days, the most important business of this bank was therelief finance to our cotton and spinning industry, because Minister ofFinance directed to give an extraordinary credit to these industries facing'
seriousdepression all over the country in 189Z And the relief industries
were as table 20 :above all, trade industry -- exporting or importing industry (firms) @spinning industry (including silk industry), @ textile industry, (il) wollen-

83

MEIJI ERA (1870-1910)
THE BANKING SYSTEM IN THE MIDDLEyarn industry, @ cement and chemical industry.

2)

The standard of loan was decided by the
Theboard
ext- of directors.

raodinary loan was chiefly given to Osaka and Kyoto districts, but theamount and condition of credit is shown in the table 20.
This relief loan, during May 1898-Aug. 1898, granted to Osaka 124.1 (tenthousand yen), 24 Kyoto, 15 Hyogo, 17 Okayama, 22.4 Fukuoka, 6.5 Tokyo.
To assure dividend, for the first several years, the Hypothec Bank of Japan

has been given to subsidy from government. However, it composed of theReparation Special Fund (a!c) the Reparation of the Sino-Japanese War
931000 (ten thousand yen), became gradually unnecessary after 1899.
Table 18 The plan for subsidy

subsidytothe

AgriculturalandIndustrialBank

1897

1898

1899 1900

1901

2000

2000

2000 2000

2000

125

250

.o57

500

500

subsidytothe

HypothecBank
ofJapan(10 thousands yen)
1902

1903

1904

1905

500

500

500

500

In reality, the subsidy to the Hypothec Bank of Japan, 5.5 was in 1897, 6
in 1898. As the results, net Profit increased by and by.

Table 19
netprofit(amount)(one teousand yen)
ratio

of

dividend%

1897

E

7503

50

1898

I

3600

25

1898

g

35141

2.5

1899

I

115634

2.5

1899

I

126718

3.3

1902

I

251976

5.0

1902

g

5083285.02) The standard of credit 1) the highest necessity on national economic policy
from the aim of comrnencement of business. 2) the possibility of high dividend(rnore than 6%). 3)the most safety and assured enterprise in net pr6fit. 4)
the excellent productivity. 5) between the fixed eapital and Iiquid capital.

balanced. 6) the excellent managerial groups.

84

MASAHIRO FUJITA

Besides, in this paper, we omitted other national Banks, colonial Banks,
Special Banks and Private Banks, we intend to study them at another chance.

v
In short, our analysis can be summarized as follows :( 1 ) In the middle Meiji days, Japanese people's accumulation of capital

was extremely poor, private capital formation, national economy met difficulty aggregately and seriously due to capital shortage for a long time.

(2) The majority of our people had lttle economic knowledge, andunderstanding of modern economic organizattion.
At the start, our capitalism on account of our under-developed economy
experienced shortage both of industrial and commercial fund in deposits andsavings. T.herefore, the commercial bank depended exclusively upon thecreation of credit by means of the central bank.

Such conditions disappeared since the middle of Meiji, because ourfinancial institution (or banking system) had been established and seperated

into the deposit bank and the long-term bond issued bank, the former taken
charge of the economic finance, the latter national policy finance.

Table 20
DebtorEnterpriseBusiness

Capital(Stock)(tenthousandsyen)

AppraisalPrice(yen)

Loan(tenthousandsyen)

OsakaSpinningCo.,Ltd

Spinningindustry

120339223

12.5

OsakaTwisted(yoriito)Co.,Ltd.

Twistedindustry

15

70130

4.5

MeijiSpinningCo.,Ltd,

Spinningindustry

OsakawollenyarnCo.,Ltd,

Wollenyarnindustry

SakaiSpinningCo.,Ltd.
HironoSpinningCo.,Ltd.
KinchakuSpinningC.,Ltd.

20970014511817011
22776025238212992013248888004
282588

12.5
9.0
10.0
12.5
9.6

FukushimaSpinningCo.,Ltd,
TemmaTextileCo.,Ltd.
KbriyamaSpinningCo.,Ltd.
NihonSpinningCo.,Ltd.

Spinningindustry
Spinningindustry
Spinningindustry
Spinningindustry
Textileindustry
Spinningindustry
Spinningindustry

85
50
40
50
200
50
35
70
200

8.0
8.3
5.8
12.5

MurasakinoTextileCo.,Ltd.

Textileindustry

15

53742

KyoritsuSilkSpinningCo.,Ltd.

Spinningindustry

160265100

BorrowingPurpose

10extensionoffactory

10

purchasingofmachine
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
extensionoffactory

purchasingofmachine

8

10.0

fixedfund8

redemptionofoldloan

8

8

2.0

purchasingofrawmaterials

NihonSilkFabricSpinningCo.,Ltd.
HeianSpinningCo.,Ltd.

Spinningindustry
Spinningindustry

100
50

7.0
4.5

Cementindustry

36
50
60
30

15952985194
1167781359281663021550oo7D

redemptionofoldloan
redemptionofoldloan
redemptionofoldloan

8.0

extensionoffactory

7.0

redemptionofoldloan
redemptionofoldloan
purchasingofraw
materialsandmachine
redemptionofoldloan

OsakaCementManufacturingCo.,Ltd.

Chernicalindustry
Spinningindustry
Cernentindustry

OsakaCottonindustryCo.,Ltd.

Cottonindustry

20

39180

2.5

OhmiHempthreadSpinningCo.,Ltd.
NagoyaSpinningCo.,Ltd.

Spinningindustry

60

131261

7.0

Spinningindustry

1001294238.0

Spinningindustry

80

Sugarindustry

60
60

Cementindustry

BizenSpinningCo.,Ltd.

Spinningindustry

Total

Spinningindustry
Spinningindustry
Spinningindustry
Spinningindustry
Spinningindustry
Spinningindustry

35
40
35
36
30
45
25

109362
180538155342
92216
84167
95337
173453
25208
91586
9!517

1992

4528986

9
10

3.5

50485

NihonSugarProducingCo.,Ltd.
HakataSilkspinningCo.,Ltd.
HarimaSpinningCo.,Ltd.
AwajiSpinningCo.,Ltd.
TakaokaSpinningCo.,Ltd.
KurumeSpinningCo..Ltd.
ShimomuraSpinningCo.,Ltd.
NihonCementManufucturingCo.,Ltd.

99redemptionofoldloan

extensionofenterprise40

Kash-uSpinningCo.,Ltd.

9

9
9
9
9

Twistedindustry

KyotoSpinningCo.,Ltd.

instalment(year)

extensionoffactory

purchasingofmachine

NishijinTwistedReadjustingCo.,Ltd,

HokkaidoCementCo.,Ltd.
OsakaSulphateofSodaManufacturingCo.,Ltd.

'Ilietermofannual

8.0

6.5
6.5
7.5
5.5

8.0
4.5

9.5
1.5

5.4
5.5

237.1

extensionoffaÅëtory

purchasingofmachine
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
redemptionofoldloan
extensionoffactory
redemptionoffactory
redemptionoffactory
extensionofenterpriseextensionofenterprise

8
9

8
8
9
7

8
9

9
4

8
8
9

8
9

8
9

8

DISPOSITION OF COST VARIANCESIN JAPANESE TAX LAW
Susumu WATANABE
PROBLEMS TO BE CONSIDERED
It is provided in Japanese tax law that inventories shall be valued atacquisition cost (or actual cost) when the cost basis is adopted.i Since, inthat case, tax law expects the valuation of closing inventories as the basisof the profit and loss account to be made at actual cost, it follows that

corporations are not complying with the requirement of tax law if theyvalue their inventories otherwise than at actual cost. For instance, suppose

we have \1,OOO,OOO to the debit of the goods in process account (the amountbeing entered at actual cost), and \800,OOO to its credit (indicating theissues priced at predetermined cost). The balance of this account, \200,OOO,

does not necessarily show the actual cost of the goods in process on hand,because the requisitions were priced at predetermined cost instead of at
actual cost. If we find closing inventories amount to \400,OOO if valued at
actual cost in this case, the total of this amount and the amount of the issues

exceeds the amount' on the debit side, \1,OOO,OOO by \200,OOO. This excess

indicates the overpricing of the issues by \200,OOO. This means a costvariance on the credit side, and at the same time means the overpricing of
the debit entries of the finished goods account by that amount. It is obviousthat this will result in its turn in the overpricing of the issues of finishedgoods (the issuing price here forms the cost of sales) and the closing stock
if they are calculated on the basis of receipt entries. If we are to meet the1) Besides the "cost" basis, the "market" basis and the "cost or market,
whichever is lower " basis are recognized by Japanese tax law.

87

88

SUSUMU VV'ATANABE

requirement of tax Iaw, we have to distribute the cost variance of \200,OOO
in the goods in process account between the finished goods on hand and thecost of sales. We have supposed in the preceding example that the debit
entries of the work in process account were made at actual cost. Now wesuppog.e instead the same entries were made at the predetermined cost of
cost elements such as materials, labor, etc. Then the cost variances of costelements should be distributed between the issuing price of goods in process
and the goods in process on hand. Cost variances also arise when the standard

cost accounting is adppted or when departmental transfer is made at prices

other than actual cost. The sources of cost variances vary with the costaccounting systems adopted by business enterprises. It should be noted that
here in this article I mean by the term cost variance not only the difference

between the standard cost and the actual cost, but the difference between
the actual cost and any cost that may resu!t from the cost accounting inpractice in a given enterprise. " The Notification Relating to the Dispositionof Cost Variances" (May 18, 1953) defines the term cost variance as thedifference between the cost that may result from the calculation of acorporation and the actual cost that forms the basis of acquisition cost in

conformity with Sec. 20 of the Corporation Tax Law Enforcement Regulations, and includes within the meaning of the term materials cost variances,labor cost variances, manufacturing expense variances, and profits or losses
arising from internal transfer. It is only natural that law should require thedisposition of such cost variances so long as it stands on the actual cost basis.

The Internal Revenue Code of the United States also requires valuation
at actual cost (except that valuation is made at market when it is belowcost). But as the standard cost accounting is prevailing in practice inbusiness circles, it might be reasonably expected that a method should beestablished of disposing of cost variances for the purpose of calculating
taxable income. Few articles and textbooks treating this problem, however,are to be found. Reitell and Harris, Cost Accounting (pp. 544-5) is one
which discusses the problem. It shows the method of apportioning the total

manufacturing variance where the standard cost system is adopted. It is,however, open to question whether their method is applicable where theelective method of inventory valuation is adopted for tax purposes, while
the standard cost system is adopted for business purposes. The reasons forthis questioning follow. The effect of cost va-riances on the cost of sales of

DISPOSITION OF COST VARIANCES IN JAPANESE TAX LAW 89
the period varies with the valuation methods adopted. Under Lifo, for ex-

ample, where the closing inventory is equal to the opening inventory inquantity, the same value should be given to the c]osing inventory as to the
opening inventory, and all the cost variances arising during the period should

not be apportioned to the closing inventory, but be closed to the profit andloss account. (Tnder Fifo, on the other hand, the case is othervLrise. So far

as the closing inventory consists of goods manufactured during the period,
part of the cost variances arising during the period should be apportioned tothe closing inventory valued at other than actual cost. It follows that themethods of apportioning cost variances should vary with the methods ofvaluation.

There is group of accountants who support valuation at standard costby distinguishing cost from loss, and maintain that cost variances should beclosed to the cost of sales or profit and loss accounts. But since the standard
cost is not the actual cost, valuation at standard cost is, it must be admitted,

inappropriate from the point of view of financial accounting that makes apoint of matching costs with revenues. Where cost variances are slight,that is, where valuation at standard cost approximates valuation at actual
cost, the cost variances may be closed to the profit and loss account of theperiod from the standpoint of the principle of materiality. The AIA
Committee on Accounting Procedure says in the Accounting Research
Bulletin No. 43 at p. 30 fn. " Standard costs are acceptable if adjusted atreasonable intervals to refiect current conditions so that at the balance-sheet

date standard costs reasonably approximate costs computed under one of therecognized bases."

Now we proceed to make a brief account of the Japanese tax regu!ations
governing the acquisition cost of inventories and the method of disposing of
cost varlances.

THE ACQUISITION COST OF INVENTORIESJapanese tax law classifies the acquisition cost of inventories into (A)that of purchased goods, (B) that of manufactured goods and (C) that ofgoods brought forward from the preceding period.

(A) The Acquisition Cost of Purchased Goods. This includes thepurchase price of purchased goods and the following incidental expenses :90

SUSUMU WATANABE( 1 ) All expensc:s paid to obtain possession of purchased goods, such as

brokerage, freight inward, loading charges, transportation insurance, customs duties, etc.

(2) All expenses not listed under head (1), such as those relating topurchasing procedure, inspection, arrangement, assortment, care-taking,transportation, relocation, etc. As regards expenses under head (2), however,
it is not required to include them in the acquisition cost where they have notclearly contributed to the enhancement of the value of the goods and do notcome up to a substantial amount.

(B) The Acquisition Cost of Manufactured Goods (including Processed
Goods), i. e. Manufacturing Cost. It means all expenses incurred for produc-tion and incidental to production, and includes direct material cost, direct

labor cost, direct expense and also manufacturing overhead. (Such small
corporations as find di'thculty in distributing overhead, are permitted toleave manfacturing overhead unapportioned to goods in process and partly
finished goods. It is understood in this case that all manufacturing overhead
should be absorbed into finished goods.)

As regards expenses, such as listed under head (A-2), which are
incurred for production and incidental to production, it is required to include

them in the manufacturing cost even though they have not c!early contribut-

ed to the enhancement of the value of the goods and do not come up toa substantial amount.

With regard to items which are not quite clear as to whether theyshould be included in the manufacturing cost, " the Notification Relating to
the Treatment of Corporation Tax " makes proper provisions as follows :(1) The following expenses should be included in the manufacturing
cost where they are incurred for production or incidental to production :( a) the amount credited to the retirement allowance reserve and theamount of retirement allowance treated as deduction, except those amounts
coming under heads (2, a-c) below.

(b) employees'bonuses.
(c) such portion of the deficiency in depreciation brought forwardfrom preceding periods by corporations filing their returns on the blue form
as is recognized as a deduction for the period. It is permissible, however, notto include it in the manufacturing cost where all other expenses to be includedin the manufaturing cost are properly calculated.

DISPOSITION OF COST VARIANCES IN JAPANESE TAX LAW 91(d) additionaldepreciation.
( e ) amortization of good-will, patents and other intangible fixed assets.

( f ) amortization of mining land, telephone rights, right to the utilization of port facilities, key money paid for houses, etc.

(g) expenses for experiments and researches ordinarily made for the
execution of business.

(h) the amount credited to the special repair reserve.
( i ) contributions paid, and ordinarily to be borne, by factories, etc.

(j) taxes such as property tax, automobile tax, mining tax, mining
product tax, etc.

( 2 ) The following expenses need not be included in the manufacturing
cost:(a) the excess, if there is, of the amount credited to the retirement
allowance reserve in the period when the retirement allowance rules areamended, over the maximum amount to be credited to the said account forthe same period on the assumption that the amended retirement allowancerules were in force at the close of the preceding period. This is permissible

only where all other expenses to be included in the manufacturing costare properly calculated.

(b) the excessof the amount of fetirement allowances paid by acorporation that has a retirement allowance reserve, over the portion of it
which corresponds to the accruals of the period. This is permissible only

where all other expenses to be included in the manufacturing cost areproperly calculated.

(c) retirement allowances paid to dismissed employees in cases oflarge-scale dismissal by reason of closing, reorganization, curtailment or the
like of the business.

( d ) the excess over the amount of ordinary depreciation of the amountof extra depreciation made in accordance with the Tax Special Treatment
Act or the Business Rationalization Act.

(e) businesstax.
(f) excess depreciation or any other amount not recognized as adeduction for tax purposes.

(g) expenses corresponding to the period of suspended production
where production is suspended for a considerable time by contingencies.

Proper cost accounting standards should apply to items which are not

92

SUSUMU WATANABE

expressly specified in the tax law as to whether they should be included in
the manufacturing cost or to which of direct material cost, direct labor cost,direct expense, and manufacturing overhead they should belong if theyshould be included in it.

(C) The Acquisition Cost of Goods Brought Forward from the Preceding Period. It is required to value the closing inventory at actual cost insteadof at the figure of the precedjng period, where the cost or market basis isadopted and where the value of the goods was written down to market,
because market was below cost. This applies with necessary modifications
to cases where the value of inventories is written down in accordance with
Sec. 17-2 of the Corporation Tax Enforcement Regulations.

DISPOSITION OF COST VARIANCES
Since tax law requires valuation of inventories to be made at actual
cost as stated in the preceding section, a corporation which makes valuation

at other than actual cost has to apportion cost variances and acljust its
valuation.

Tax law, however, does not require such apportionment in all cases.
Where the amount of cost variances does not exceed one per cent of the total

manufacturing cost, the law permits such cost variances to be closed to the
profit and loss account instead of being apportioned. The determination ofwhether the amount of variances is within one per cent or not is made asa rule by each factory or line of business. But where the amount of costvariances in each factory or line of business does not exceed three per centof its total manufacturing cost, the law permits such cost variances to beclosed to the profit and loss account instead of being apportioned, provided
that such cost variances, taken altogether, do not exceed one per cent of thetotal manufacturjng cost of the whole corporation. In case of any difficultyin calculating exact total manufacturing cost, it is allowable to resort to thefollowing formula if approximate total manufacturing cost is obtainable :receipt entries of finished goods + goods in process at the close of theperiod - goods in process at the beginning of the period
Although the Notification Relating to the Disposition of Cost Variances
above referred to provides for the standard method of such disposition, it

does not prevent corporations from adopting other methods if the methods

93
DISPOSIT!ON OF COST VARIANCES IN JAPANESE TAX LAW
are recognized as more adapted to their methods of cost accounting and thepractical needs of their kinds and forms of business and therefore morerational. Where, on the other hand, the value of inventories is unreasonably
reduced by their methods of calculation, the superintendent of a tax oMce isauthorized to calculate the value of their inventories by a more exact method
in order to approximate valuation at actual cost.

Where a corporation with more than two factories applies cost account-ing separately, cost variances are to be disposed of for the respective
factories. Furthermore, where a factory engaged in more than two lines ofbusiness applies cost accounting separately, cost variances are to be disposedof for the respective lines of business.

(A) The following is a description of the standard method of apportionment. Cost variances to be apportioned to goods in process account should
be disposed of by applying the following formula to adjust the closing inventory of goods in process. And then cost variances to be apportioned to finishedgoods (including that portion of variances to be apportioned to goods inprocess account which were not apportioned to the closing inventory of goods

in process) are to be disposed of in a similar manner to adjust the closing
inventory of finished goods. Where cost variances are to be apportioned tornaterials because, for instance, incidental expenses paid on materials cannot

be conveniently apportioned to individual materials and therefore are notincluded in the acquisition cost of the materials, apportionment should begin

with materials before proceeding to goods in process and finished goods.

(1) Where Fifo is adopted:
costvariancesÅ~totaflrOeSci2igpisnVo?ntthOeripeeSriod

Note: Where the total receipts of the period are below the closing
inventories, the total amount of cost variances is apportioned to the closing
inventorie$ minus the opening inventories included in the closing inventories.

( 2 ) Where Lifo is adopted :cost variances Å~ CIOsing inventories -- opening inventories

total receipts of the period
Note : Where the closing inventories are below the opening inventories,

there is no need to make any apportionment. Where the closing inventories

are above the opening inventories, approtionment must be made to theexcess.

94

SUSUMU WATANABE(3) Where the weighted average method, moving average method or
straight average method is adopted :cost variances x Closing inventories
the total receipts of the period + opening

mventorles( 4 ) The formula for the specific cost method is omitted here.

(a) The aforesaid term " opening inventories " means inventories ofmaterials, goods in process or finished goods standing at the close of thepreceding period after disposition of cost variances if necessary. Where,
however, cost variances to have been apportioned at the close of the preced-

ing period are disposed of by the method mentioned under (B) below, theterm means closing jnventories of the proceding period before adjustment.

(b) The said term " closing inventories" means those closing inven-tories which have been computed by the corporation by applying thevaluation method it adopts, on the assumption that opening inventories anddebit entries of materials, goods in process or finished goods represent theirrespectlve acqulsltlon cost.

(c) The term "total receipts of the period" means the total of receipts of materials, goods in process or finished goods calculated by the
corporatlon.

(B) How to dispose of the adjusted amount in the following period
where adjustment was made in a lump sum. Where cost variances to beapportioned to the value of closing inventories of the preceding period aredisposed of in a lurnp sum instead of being distributed among individual
items, the amount so treated (hereinafter called adjusted amount) is to bedisposed of by applying one of the following formulas to adjust the closing
inventories of materials, goods in process or finished goods, to say nothingof cost variances that have arisen during the period. In this case, the rest of

the adjusted amount which did not go to the closing inventories of materials
is to be included in the cost variances of the period for goods in process andto be disposed of by applying one of the formulas listed under (A) above ;and the rest of the adjusted amount which did not go to the closing
inventories of goods in process is to be included in the cost variances of theperiod for finished goods and to be similarly disposed of.

DISPOSITION OF COST VARIANCES IN JAPANESE TAX LAW 95(1) Where Fifo is adopted :adjusted amount Å~ OPening inVentOries-total issues of the period

openlng lnventorles
Note:The term "total issues of the period" means opening inventories+total receipts of the period-closing inventories. Where the opening
inventories are below the total issues of the period, there is no need to adjust
the closing inventories.

(2) Where Lifo is adopted:
inv.entories of the portion of closing inventories that correspond to opening inventories

adjusted amount Å~

openlng mventorles(3 ) Where the weighted average method, moving average method or
straight average method is adopted :The adjusted amount is to be included in the cost variances that havearisen during the period and to be disposed of by applying the formula (A-3)

above.
With regard to cost variances attention is called to the following points :(1) Disposition of cost variances must be made in the financial
statements approved at the shareholder's general meeting. Otherwise thedifference between the value of the closing inventories (not adjusted) andtheir actual cost is deemed to have been written up or down by the corporation as the case be.

( 2 ) Writing up or down of adjusted inventories must be made according to the groups in which disposition of cost variances was made,STRUCTURE OF INDUSTRIAL
DISTRICTS IN JAPAN- -THE CASES OF TOKYO,OSAKA AND NAGOYA

Minoru BEIKA(1)
It is difficult to select the plant location by the general theory that
determines the most favorabie location. Actually, the marginal adaptabilityof the location to the requirements is of more importance to the plant.
The evaluation of the latter starts chiefly with the investigation of thelocational patterns for each industry. But it can not necessarily be charact-erized by the type, as each industrial firm is managed by many different

requlrements.
The spatialness (that is spatial exclusiveness) of location gives rise to

the land use competition. Consequently, the location of a certain plant isrelatively limited by the location of other plants. It is necessary, therefore,
to carry on the research of the structure of the industrial districts together
with the investigation of the location factors of the industries.

This article is the regional research, as above defined, in the urban andsuburban ditricts of the three chief industrial cities in Japan ; Tokyo, Osakaand Nagoya.
These three cities have occupied 20.5% of our industrial workers in 1949 ;

97

98

MINORU BEIKA

29.7% in the metal and engineering industries, 8.2% in the textile industry,

20.3% in the chemical industry, 12.7% in the food and drink industry, 54.1%
in the printing and publishing industries, 20.6 a/e' in the clay, pottery and glassindustries, and 17.5% i'n the other industries.

The structure of these industrial districts is shown as below' of the'metal and engineerjng industry, textjle industry, chemical industry andothers. The tables show, (A) how much percentage of the whole industrial
workers is employed in each industry in the coastal region or the hinter zoneof the three cities, and (B) how much percentage of each industry is locatedin each zone of the cities. The writer thinks, the result of this research
could have a significant effect on the patterns of land use in our manufacturing industries.

(2)( 1 ) The Metal and Engineering Industires.
The transportation is one of several important location factors for every
industrial establishment, but, above all, the heavy industries such as metaland engineering industries are remarkably dependent upon the location
factor. Since these industries in our country must import a considerable
part of materials abroad, such as iron ores, some kind of coal, scrap iron,etc., they have inevitably had to concentrate not only in a few large coastal
cities, but also in the coastal regions of these cities, due to the convenienceof the transportation, especially that by sea.

The metal and engineering industries are the representative of suchindustries, so that the three cities have occupied about 30% of the workersof the whole industries in our country, and then half of the industrial workers
in each of the three cities are employed in this industry.

As is tabulated jn the table I, 70 or 80% of all the industrial workers in
the coastal region in the three cities, are employed in the metal and engineering industries, and this is common to the three cities. Moreover, the industries

in the coastal regions in Tokyo and Osaka, occupy about 40% of the whole
metal and engineering industries in each city. In the hinter zone of thecoastal region, these industries have about 40-50% of the workers of allindustries, and then the inner zones of the cities have less workers engaged
in this industry. Exceptionally, in the hinter zone of Nagoya, 60-80e% of the

STRUCTURE OF INDUSTRIAL DISTRICTS IN JAPANindustrial workers belong to the metal and engineering industries. Thisphenomena was caused by the earlier industrial development in the innerzone than in the coastal region, and on the other, by the industrial structurethat larger part of this industry in Nagoya belongs to the machine industry<textile machinery and transportation equipment), which depends on the railtransportion in great deal.

The metal and engineering industries consist of the primary metal
jndustry, metal processing, machine industry, and precise machine industry.
The lower stages of these industries are located chiefly in the coastal region,and the higher stages are located in the hinter zones because the processes
have relatively more transportability for rnaterial or products.

( 1 ) The primary metal industry chiefly consists of large sized factori-

es belonging to the iron and steel industry, which is without
exception, concentrated in the coastal region, about 50% or moreof the industry.

(2) The metal processing industry consists of a number of middle
and small sized factories, and is chiefly located in the inner zone
adjoining to the coastal regions, or in the hinter districts. These

localities of the cities occupy about 50% of the workers engaged
in the industry.
( 3 ) The machine industry is considerably located in the coastal region
as well as the primary metal industry, but the extent of the concen-

tration of the former is lower than that of the latter. Someportions of the higher stage factories of the machine industry
have encroached not only into the inner zone of these cities, butalso considerably into the suburban districts.

(4) Especially, the precision machine industry consists of middle andsmall sized factories, and is located chiefly in the inner and hinterzone districts.
As a whole, the factories in the coastal region are very large or moderately large in size, and ones in the inner zones are middle or small sized. The

former is relatively more material-oriented or transportation-oriented, while
the latter is relatively more market-oriented, rather due to the location factor

of mutual connection by regional concentration. The data of the location ofeach metal and engineering industries is shown in the tables, II, III, IV

and V.

99

8(1)

The Regioma1 Structure of the Metal andCityof Osaka

Tokyo-toSections(ku)

A

B

Total

49.0

100.0

Koto

75.9

12.8

Minato

69.6

5.4

69.6

10.1

@Shinagawa
Ota

Engineering Ir:dugtries

E

82.7

Sections(ku)

A

Total

55.3

1oo.O 1oo.O

Nishiyodogawa

78.1

12.7

Konohana

78.2

12.1

81.5

2.4

1oo.O

41.4

@

Minato13.1

Cityof Nagoya

B

Taisho74.1

9.8

Sumiyoshi

72.3

4.3

Edogawa

46.2

3.6

Katsushika

41.3

4.2

Adachi45.9

4.6@•Sumida

40.2

6.7

Arakawa

34.6

4.0

Kita

27.2

3.0

Naniwa49.8

1.6

Itabashi

47.3

4.8

Nishinari

58.5

6.4

h

Sections(ku)

A

B

Total

52.8

1oo.O

Minami

73.7

9.1

61,3

13.6

'Atsuta

81.8

IZ5

Mizuhoo Minato

22.7

ee

5

?41.3

!

69.9

9.8

@Nakagawa

58.8

10.3

Nakamura

60.1

8.2

Nishi

23.3

5.7

Kita

31.2

5,9

515

10.2

31.5

1.2

45.8

'

Higashi-30.9yodogawa
Oyodo

46.0

9.4

48.0

4.6

Fukushima

36.9

4.6

Nishi

63.9

1.4

@

28.0

@Higashi

23.0

Chikttsa
'

'

s
g
z

Meguro59.8

2.8

Setagaya

58.9

2.0

Asahi

43.5

1.8 L

Suginami

52.4

1.2

Joto

62.9

9.9

@Shibuya

39.0

O.8

Higashinari

62.2

7.6

Nakano

33.7

O.6

517

3.9

Toshima

36.3

1.1

Higashi-

36.2

1.5

Nerima

3Z6

O.6

Abeno

45.6

1.3

31.3

1.5

Taito

26.2

1.4

@Chuo

36.2

2.6

6.6

O.3

11.9

05

48.4

10.9

(BunkyoOtherdistricts

9.1

Miyakojima@Ikunosumiyoshi
Tennoji

Shinjuku

Chiyoda

1

17.4

>

1.1

,

i

Showa
@l

42.2

3.6

Naka

40.0

4.4

(D= Coasta1 region,
27.9[l3i =Hinter 'zone,

E
Ei

45.5

O.8

@ :Central zone of the city.

E

Tokyo-to & City of Nagoya=1949

EI

City of Osaka=1948

6.3

l 8.0

Kita

18.0

1.7

@Higashi

30.4

O.4

Minami

27.6

O.4
/

g

E
2.5

,

S

i
l•

I
E

pa

o
N
(II) The

Primary Metal Industry

Ilegional Structure of thelTokyo-to

City of

tl'

ll•

Osaka

City of Nagoya

1I

1il

Sections(ku)

Total

A
10.7

B

Sections(ku)

[l

A

B

Total

14.6

100.0

Nishiyodogawa

23.1

20.2

Konohana

1.6

1.4@Minato

t

17.1

2.9

Taisho33.6

22.6

Sumiyoshi

16.5

4.8

l

io6.o

A

B

Total •

15.4

100.Q

loo.e

Minami
@l

47.2

27.9

l 56.2

Minato32.0

28-3

Atsuta12.5

14.2

LMizuho

3.5@Nakagawa

2.2

22.6

15.2

Nakarnura

2.8

1.5

Nishi

3.4

1.3

Kita

Cections(ku)

ll

100.0

'L•

100.0

il

]

Koto

29.7

35.7

Minato1.0

O.5

o Shinagawa
ta

it

[

lr

50.9
1.9

10.5

1.8
12.9

:
il

l
l

T

i/

1

i

Edogawa

15.1

Katsushika

9.0

5.2

h

[
l

Adachi@SumidaArakawa
Kita

15.5

6.7

l

I!
Ii

6.4

r,/ ,) 41.o

l
i

!]

O.8

H
Ii'

I
'i

11

ll

18.6

5.2

]

l!

i

ll

Itabashi

29.0

Higashi-yodogawa
Oyodo

ll

14.0

9.7

8.6

2.7

12.1

3.3

7.4

O.7

ll

10.2 i

2.3 l

i'i'

13.2

"•

@Nishi

26.2

Naniwa4.5

Nishinari

21.0

O.5

•I
[[

]f

Fukushima

9.3

5

51.9

1
1

3.5

l

E
g
z
$

}
,

33.1
,

11.5

@
Higashi

4.4

1.6

1.1

;

Chikusa

6.1

O.5

1

S7.3

Meguro2.6

O.7

Miyakojima

11.8

O.9

Setagaya

10.0

1.8

Asahi

2.4

O.3

Suginami

O.2

Joto

17.8

12.1

Higashinari

. 9.4

4.6

gl:

1.8

@Shibuya

3.4
(S)

11.1

O.6

Ikuno

Toshima

2.1

O.2

Higashi

Nerima

1.8

O.1

Abeno

O.2

@Chuo

1.3

O.3

Chiyoda

1.1

O.5@=Centra! zone of the cityglg

Tokyo-to & City of Nagoya=1949

O.4

7:9

O.9

@Higashi
Minami

3.0

1.0

3.5

O.1

$
z
o
e
z
g
E
g

E

E
g

BunkyoOther districts

Kita

10.2

:31 =Hinter zone

City of Osaka=1948
1.7

O.4 i 3.4

O.3

sumiyoshi
Tennoji

Taito

1.6

(!)=Coastal region
20.6

NakanoShinjuku@Showa
INaka

3.1

2
E
:t

s
Z

'o
w

R
The Regional Structure of the(Ill)Cityof Osaka

Tokyo-to.9ections(ku)

A

B

Total

19.7

100.0

Koto

10.1

6.6

Minato

13.6

3.6

173

s.9

@Shinagawa
'Ota

100.0

29.6

15.7

Metal Products industry

10.5

Cityof Nagoya

Sections(ku)

A

B

Total

21.9

100.0

Nishiyodogawa

13.9

8.1

Konohana

1.8

1.0

o Minato

31.4

3.4

Taisho14.1

6.5

Sumiyoshi

4.9

O.9

Edogawa

415

7.7

Katsushika

50.3

10,8

Mgashiyodogawa

23.2

10.0

Adachi

25.4

5.9

Oyodo

19.9

4.2

@Sumida

40.1

13.7

Fukushima

28.0

5.1

33.5

6.8

59.1

3.9

Arakawa

50.3@Nishi

100.0

20.3

3.1

Naniwa30.5

2.2

Itabashi

9.3

2.3

Nishinari

22.9

6.7

A

B

Total

9.6

100.0

Minami@Minato

6,2

5.9

2.0

2.8

Atsuta7.2

13.0

Mizuho

10.3

10.3

15.9

17.2

Nakamura

13.4

11.4

Nishi

7.8

4.7

Nta

14.7

9.0

5.3

5.7

49.5

6.5

1oo.O

8.7

K
E
8
a
$
ge

19.9

@Nakagawa'
1

32.1

Kita

Sections(ku)51.9@Higashi

i

L

25.9

hikusal

Meguro14.6

2.1

Miyakojima

8.0

O.4

Setagaya

20.0

2.0

Asahi

35.4

3,O

Suginami

11.0

O.7

Joto

34.6

15.6

@Shibuya

18.5

O.7

Higashinari

36.5

12.6

Nakano

22.0

O.7

44.5

Z9

Toshima23.4

13

Higashi-

46.2

3.2

Nerima

22.3

O.7

Abeno

21,1

1.3

Shinjuku

18.2

1.4

Taito

44.7

3.3

@Chuo

24.8

.3.2

Chiyoda18.9

O.3

Bunkyo16.2

O.4

Other districts

4.2

2.3

8.2

@Ikunosumiyoshi@Ik2o,:a

21.9

O.8

Kita

18.6

1.4

@Higashi

7.5

O.1

Minasni

37.4

O.7

15.2

7.1

l 13.5$[l3} =Hinter zonez•@=central zone
Tokyo--to & City ofCity of Osaka =1948

x

8.6

6.4

Åë=Coastal reglon
44.8

Tennoji

17.2

2.2

Nagoya =1949

E
8
g
E
E
HU

$
E

s
:t
Ill

z

-o
or

8
(IV)

The Regional Structure ef the Machine Industry

CityofOsaka

Tokyo-toSections(ku)
Total

A

B

60.4 100.0

100.0

CityofNagoya

Sections(ku)

A

B

Total

62.1

100.0

tNishiyodogawa

62.3

12.8

Konohana

95.5

18.8

lSections(ku)

A

B

Total

68.4

100.0

@IMinami

46.2

6.1

Minato65.9

13.1

Atsuta73.1

185

Mizuho69.6

10.0

Nakagawa

59.6

9.0

Nakamura

82.9

9.9

Nishi

63.0

5.3

Kita

71.2

6.1

i

Hlgashi

83.7

125

I

Chikusa

38.5

O.7

100.0

100.0

r

Koto

55.7

11.8

Minato85.4

7.7

o Shinagawa
Ota

i

Eo.

46.8

75.7
67.1

Åë Minato

14.6

Edogawa

37.0

2.2

Katsushika

36.3

2.5

Adachi

53.7

4.1@Sumida35.5

3.9

Arakawa

59.2

3.9

Kita

56.0

2.7

Itabashi

36.1

2.9

1[

t 19.2

'

51.3

8.1

Sumiyoshi

78.4

5.4

yodogawa
Oyodo

60.0

9.1

70.0

5.2

Fukushima

59.6

3.8

33.1

O.7

@Nishii

1.9

Taisho,Higashi-

22.2

50.5

[

y

26.1

Naniwa61.8

1.6

Nishinari

54.9

5.7

'

J @i(
42.0

1@
1'i

s

g

ll

12.7

K

47.4

24.6

t

Meguro71,3

3.4

Miyakojima

79.5

1.5

Showa
@l

Setagaya

51.2

1.6

Asahi

59.9

1.8

Naka

Suginami

71.6

1.5

Joto

45.6

7.2

@Shibuya

59.6

Nakano56.7

O.6

Toshima

61.3

1.1

Higashi-

Nerima

70.9

O.8

O.8

Shinjuku

14.2

O.3

Taito

40.9

1.0

@Chuo

72.2

3.1

Chiyoda61.8

O.3

Bunkyo37.e

O.3

Otherdistricts

83.2

15.1

9.8

Higashinari

53.1

6.5

44.6

2.8

.49.4

1.2

Abeno

74.0

1.6

Tennoji

65.9

O.8@lkunosumiyoshi':31 =Hinter zone$z$@= Oentral zone

ax

Tokyo-to & Cl'ty ofCity of Osaka=1948

5.0

72.5

2.0

@Higashi

47.9

O.3

Minami

53.2

O.3

8.1

@=Coastal region
23.4

Kita

gli,9 il:l

2.6

Nagoya=1949

g
:

g

S
E
e
8:x

'

[il

:t
il

2

o
N

-o
o
o
(V) The Regional Structure of theTokyo-toPrecision

Machine Industry

City of Osaka

City of

Nagoya

•!

;

A

B

9.0

1oo.O 100.0

Koto

4.3

6.1

Minato

O.4

O.2

4.9

5.6

Sections(ku)Totalo Shinagawa

'

ota

6.5

Sections(ku)

l214

B

Total

r1.3

100.0

Nishiyodogawa

O.5

5.0

6.3

Katsushika

4.2

2.0

'MinatoAdachi

5.2

2.6@Sumida

14.0

10.4

100.0

O.4

2.5

4.8

2.1

100.0

100.0

@lMimami

O.1

O.2

}

e.2

yodogawa
Oyodo

2.6

19.2

1.4

4.9

Fukushima

O.1

O.4

a

[

33.5

Q.2

O.2

Kita

4.9

1.6

Naniwa2.9

3.6

Itabashi

25.4

13.6

Nishinari

1.0

5,2

s
g
z
$
ge

L

@Nishi

6.4'Atsuta

7.0

19.1

Mizuho

3.0
O.1

34.8

Total

8.1

lgl ts'l;..hi

Higashi-B

Minatos @'ASections(ku)Konohana

9.5

Edogawa

ArakawaA

16.7@Nakagawa '

25.6

!.7

2.8

Nakamura

O,8

1,O

Nishi

25.6

22.9

Kita

2.5

3.3

9.2

14.8

5.6

1.1

@Higashi
Chikusa

48.5)e[ i12.,

(Il)Meguro1!.3

3.5

Miyakojima

O.5

O.4

Showa
@I

6.2

3.5

Setagaya

18.6

4.1

Asahi

2.1

3.0

Naka

9.6

6.7

Suginami

17.1

2.4

Joto

1.8

13.8

Shibuya

21.8

2.0

Mgashinari

O.8

5.0

Nakano9.9

O.7

Toshima

13.1

1.6

Nerima

4.9

O.3

Shinjuku

67.5

Taito

IQ.8

1.7

@Chuo

14.6

11.4

@IkunoÅë==Coastai region
40.5

3.6

11.0

Mgashi-sumiyoshi

O.6

O.7

Abeno

3.8

4.0

Tennoji

4.1

2.6

15

O.4

Chiyoda18.1

O.6

Bunkyo46.7

2.7

Otherdistricts

9.3

11.2

16.8

$
z
$

@= Central zonefi

City of Osaka=1948
O.7

1.0

@Higashi

44.4

14.2

5.7

1.8

Mimmi

[l31 = Hinter zone

Tokyo-to & City of'Kita .

l 10.2

Nagoya=1949

g
:
g
iiii

17.0

pa

E
g-

t

:
E

E
E

g

-o
(VI) The Regioma1 Structure ofTokyo-to

B

Total

100.0

1.7

MinatoO.1@Shinagawa
Ota

O.7

3.7
1.2

Total

10.0

100.0

Nishiyodogawa

2.8

2.5

Konohana

O.2

8.7

4.7

Adqchi

11.1

5.8

13.8

12.1

as.9

14.7

12.2

2.2

@

1.0

Katsushika

ItabashB

Minato2.8

2.6

K- ita.

A

O.2

6.0

6.2

Arakawa

City

Sections(ku)
100.0

1.5

Edogawa@SumidaTextile Industry

City of Osaka

Sections(ku)

Koto

tlte

7.7
1•2

O.5

O.4

Sumiyoshi

11.0

3.6

yodogawa
Oyodo
Fukushima@Nishi

A

B

Total

O.7

100.0

ol Minami

1.2

O.8

Minato

15.3

17.4

14.2

Z6

9.9

6.0

4.2

O.5

1.5

Nishinari

1•7

}

fi

O.8

-

@-

Atsuta2.1

2.5

Mizuho2.9

2.2

Nakagawa

9.4

9.0

a
gg

Nakamura

10.3

7.6

'Nishi

18.5

24.8

Kita

33.5

34.6

Higashi

6.5

zo

Chikusa

12.1

2.6

21.3

69.0

(ll)

O.2
1.0

K
E

ge

32.7

Naniwa100,O

6.7

TaishoHigashi-

48.8

O.1

Sections(ku)
100.0

l

of Nagoya/LMeguro4.8

1.2

Miyakoiima

Setagaya

5.0

O.9

Suginami

4.0

O.5@Shibuya

7.8

O.8

Nakano9.0

O.9

Toshima

12.1

1.9

Nerima

18.6

1.7

Shinjuku

3.2

O.8

Taito

8.3

2.4

@ehuo

3.6

1.3

O.8

O,2

2.5

O.6

26.4

31.3

[gh.k':,dg•

Other districts

54.2

20.2

Showa
@I

12.4

5.7

Asahi

27.6

6.6

Naka

4.2

2.5

Joto

8.3

7.3

Higashinari

8.4

5.7

Ikuno

7.9

3.3

Higashi-sumiyoshi

26.2

6.2

Abeno

16.9

2.8

1

Tennoji

8.2

O.8

Kita

9.4

5.0

5.3

@Higashl

Z8

O.6

Minami

15.1

1.2

7.9

@•

l 8.2

O=Coastal region
52.9@@l =Hinter zone$z
B@=Central zone
Tokyo-to & City of Nagoya =1949

City of Osaka=1948'

The above statistics include the

6.8

clothing industry.

liii

g
N

g
s
gH

z
k,

e

e

112

MINORU BEIKA(3)(2) The Textile Industry (including the clothing industry)
The three cities have only under 10% of our textile industry workers,
and then this industry workers also only 10% of all industrial workers ineach city, because this industry has relatively more transportability ofmaterials and products than the metal and engineering jndustrjes. This
industry is located commonly in the hinter zone in the cities, especially in theriver-side regions, i. e. the north-east in Tokyo, north and north-east in Osaka,and north in Nagaya. The coastal regiori of each city has few plants ofthis industry. Especially, it is a noteworthy fact, that higher and final stages(hosiery, clothing, finishing and dying processes etc.) are main parts of thisindustry in the cities. These stages of this industry are market-oriented, andthe three cities are the centers of internal and external markets. The
spinning factories, mostly accompanied by the weaving processes, are largesized, and are located in the country districts, and the specialized weaving
factories, consisting of small or middle sized factories, are localized swarm-

ingly in a considerable number in the country districts.

As shown in the table VI, about 50% of the workers of this industry
work in the inner zone of each city, and the @ zone in Tokyo and Osaka,
the @ zone in Nagoya are river-side regions. 'Though the subdivision ofthis industry is not shown in this table, the hosiery industry and clothing

industry are the representatives of the localized industries in Tokyo andOsaka, and these industries are of small factories, and have concentrated
severally in some inner parts of each city.

(4)(3) TheChemicalIndustry
The three cities have aboUt 20% of our chemical industry workers, and thisindustry has about 10% of ali the industrial workers in Tokyo and Osaka, andabout 5% in Nagoya. Since the chemical industry comprise many kinds ofindustries which have different business features, large-sized or middle-sized,

material-oriented or mqrket-oriented, producer's goods or consumer's goods,
etc., it is very diMcult to generalize, what are the main location factors of
this industry. But the factories of this i'ndustry in such central industrial

STRUCTURE OF INDUSTRIAL DISTRICTS IN JAPAN 113
districts as these three cities, are, relatively speaking, market-oriented kinds,

while a large part of the factories of this industry in the country districts,

belong chiefly to the material-oriented kinds. Therefore, the former are
generally middle sized factories and consist of chiefly consumer's goods ones,

and most of the latter are large-sized and consists of producer's goods ones.

These chemical factories in the three cities are mostly locate'd i'n theriverside regions of the hinter zone in each city, but a few kinds have beenfound in the coastal regions. As shown in the table VII, about 50% of thisindustry in Tokyo and Osaka is located in the inner zone adjoining the coastal

region, and only exceptionally, the coastal region in Nagoya occupies 64% of

her chemical industry. But in Nagoya, there are relatively few chemicalfactories, and such statistical result as above stated, has been produced by
one large chemical fertilizer factory, which is located in the coastal region.

(5)(4) The Printing and Publishing Industries
Mural or Central District Industries

The printing and publishing industries have occupied 9.8% of all theindustrial workers in Tokyo, 5.7% in Osaka, and 3.6% in Nagoya. But thethree cities occupy 54% of the whole country in this industry, and then thisindustry is characteristically one of the representatives in the city-centre
located industries.

As shown in the table VIII, the factories of this industry are not only
concentratedly located in the central district in each of the three cities, butalso are the most important .Qf the industries in the central district.
Moreover, the central district is the othce and shopping zone, and has few
indtistrial factories, and then the printing and publishing industries may be
the only representative industry in this zone. Especially, in Tokyo and Osaka,these districts, (@ zones), have 60e,/e or over of this industry, and yet in some

sections of these districts, the workers in this industry have reached in
number to one half or more of all the industrial workers in these sections.
Even in Nagoya, where this industry has less importance, it has reached to34%e in the central section. It is quite apparent, that this industry is market-

oriented, and the best markets are found in the othce and shopping centerin the large cities.

p
-pt
(vll)

The Regioma1 Structure of the Chenicttl Industry

Tokyo-toCity'

Sections(ku)

A

B

Total

8.1

100.0

Koto

5.6

5.7

Minato

4.0

1.8

8.0

7.0

o $hinagawa
Otaof Osaka

Sections(ku)

A

B

Total

10.2

100.0

Nishiyodogawa

10.7

9.5

@lMinami

Konohana

12.8

10.8

Minato

25.8

64.0

5.6

O.9

AtsutaO.3

O.7

Mizuho

O.2

O.4

L6

3.3

Nakamura

1.3

2.0

Nishi

5.7

15.8

Kita

100.0

100.0

Sections(ku)

A

B

Total

4.7

100.0

g
l64O

18.7

4.4

Minato@Ig:.`Sl,Ooshi

6.3

4.2

2.9

Edogawa

19.4

9.3

Katsushika

7.7

4.7

Adachi

6.2

3.8@Sumida

8.9

9.0

5.3

3.7

@NishiArakawa

City of Nagoya

Higashi-

53.8

4.5

27.9

31.a

Oyodo

10.3

5.4

Fukushima

17.4

10.3

2.7

O.3

sumiyoshi@Nakagawa

52.8

Kita

22.0

14.6

'

Naniwa8.7

1,5Itabashi

14.1

8.7

Nishinari

7.2

4.3

z
g
ge

26.6

O.9

z

2.4

5.1

@Higashi

O.9

2.1

Chikusa

2.8

1.3

l

l

6.4

24.3

Meguro

9,2

2.6

/

ts

Miyakoiima

1.0

O.3
1.4

I

Setagaya

13.8 i1

2.8

Asahi

6.0

Sumida ,

1!,O

1.6

Joto

s.e

6.9

I
5.8
l

O.7

Higashinari

5.1

3.4

3.1

1.3

6.7

1.5

4.7

O.7

@Shibuyai13.6@IkunoI

NakanO

9.9

r

1.1

' Toshima

20.2 l3.7

lHigashi-sumiyoshi!

kNerima

10,7 li

Abeno

1.1

@lgh.:W.a g:; g..g})@= Coastal region
16.3:;l :Hinter zonel@=Central zone
Tokyo-to & City of Nagoya==1949

I
I

iXShinjuku

4.9

Taito

7.1

2.4

1

Tennoji

1.4

Kita

3.1

1.6

@Chuo

1.7

O.7

6.8

@Higashi

18.2

1.3

Minami

5.9

O.4

Chiyoda2.4

O.7(Bunkyo

5.9

1.6

Other districts

4.3

5.8

8.5

5.3

O.8

City of Osaka =1948

33
L

m
3
g
g.
ts
ag

E
g
$
N
p
9
$

z

2•)

g
si

Z

H
pn
e

H
or
F--t

(VllI)The Regional Structure of

the Printing and Publishingindustries

City of Osaka

Tokyo-to

City of

Nagoya11Sections(ku)A

B

Sections(ku)A

B

Sections(ku)

A

B

Total

9.8

100.0

Total

5.1

100.0

Total

3.6

100.0

Koto

Nishiyodogawa

MinatoKonohanao Shinagawa

3.2

9.0

@

MimatoLllg.a.is}.,o.,,,i ol Minami

N

i

O.3

i

1.8

Arakawa

4.3

17.0

Fukushima@Nishi

Kita

NaniwaItabashi

Nishinari

2.3

23.2

3.2

32.1

Nakamura

yodogawa
Oyodo

Adachi@( Sumida

Mizuhol

Higashi-

5

I@Nakagawa

Katsushika

Nishi
3.7

Kita

23.5

@HigashiI
Iztn

Atsuta1

rEdogawa

7.5

ur-

I

Ota

g
l 1.4

Minato[g

Chikusa

MeguroMiyakejima

Setagaya

Asahi

Suginarni

Joto@Shibuya

4.5@Ikuno'ToshimaMgashi-

Nerima

Abeno

13.1

10.8

Taito

15.2

4.3

e.o

15.1

Chiyoda

85.3

21.1

Bunkyo66.1

15.1

Otherdistrlcts

2.0

2.3

os.8

H

3.0

20.7

34.0

37.0

@l =Hinter zone

@1'
@ =Central zone

Tennoji
43.9

@

2.1

sumiyoshi

Shinjuku

2.4(DÅ}Coastai region

Mgashinari

4.5

Nakano

Showa

@Naka

-ta

52.0

54.1

@Higashi

25.3

3.8

Minarni

22.e

3.5

61.4

$

g

Tokyo & City of Nagoya=;949

S

City of Osaka=1948

z•

s

l
p

"-

118

MINORU BEIKA(6)
Industrial districts in each of the three cities have been respectively
characterized by several particular industries, due to the locational specialityof each industry as above stated. In the summary, the coastal region has
been highly characterized by the metal and engineering industry, especiallythe larger factories of the primary metal industry, without exception. The
inner zone adjoining to the coastal region, i. e. the east in Tokyo, the west

and the eastern region bordering the central zone in Osaka, and the northand the south outside of the central zone in Nagoya, has not only a consider-able part of the metal and engineering industries, especially the middle orsmall-sized factories of the relatively higher stages of this industry, but also

this zone is the principal district of the textile industry and the chemicalindustry in the large cities ; in other words, many kinds of industries haveconcentrated accumulativeiy in this zone. The central zone of each city is

characterized by being ornce and business and shopping centers and thenthe printing and publishing industries are the representative industries inthis zone.

Thus, a large part of the other industries than those above stated, havealso concentrated in the inner part bordering the central zone of the threecities. The rubber, paper, glass, and food and drink industries belong to theones above stated. The inner part in Tokyo (especially the (ED zone), has 71%
of the workers of the rubber industry, 72 %e of the paper industry, 41 e,ie of theglass industry, and 34.7% of the food and drink industry, and, the @ and (i!)
zone in Osaka has 81.8% of rubber industry, 87.9g/e of paper industry, 71.2%

of glass industry, and 71.2% food and drink industry. These industries inboth city consist of, relatively, middle and small sized factories.

(7)
With the industrial growth of the urban districts of the large cities, thesuburban districts have gradually developed into industrial activity. Therefore, it is necessarily indispensable, that the suburban and adjoining districtsof the large cities are included in the research of the structure of theindustrial districts. Now the writer analysed only about the suburban

STRUCTURE OF INDUSTRIAL DISTRICTS IN JAPAN 119
districts of Osaka, (the so-called Han-shin industrial districts). It may besummarized as follows :In the metal and engineering industries, the suburban districts havechiefiy the factories belonging to the intermediate or final processes, some ofwhich are .large sized machine or electric machine factory, some of which
are very small sized and have localized in several localities, while, in theurban districts, the lower-stages and higher stages of large factories are
Iocated jn the coastal region, as before stated.

In the textile industry, the suburban districts have been somewhat
characterized in the same way as in the urban districts ; that is, this industry

has Iess importance, and consists of the higher and final stage factories
in these districts.

The chemical industry has no distingished characteristics in the suburban districts, because there are relatively more cases, that the factories ofthis industry are Iarge-sized in general and located scatteredly in particularsites often by their natural and technical requirements and then thesefactors have not produced their particular regional features.
The suburban districts have relatively less factories of the other indus-

tries than the above stated, but the food and drink industry has been
considerably found in these districts too. Accordingly, the metal andengineering industries are the representatives in the suburban industrial
districts.

(8)
The location theory is said, in some cases, to be an assumption that theindustrial factory may be dealt with as " point " existence, while agriculture

must be regarded as extensive existence in itself. But the industrial enterprise is also a real existence, and its economic activities are to have somespatial problems in itself, and then it is to be also an extensive existence.

The present industrial factories, and enterprises have developed to largesized, and very large-sized ones, and then they have had to face some of thespatial problems more or less in the two dimensions.
In the first, the present industrial enterprise has often its head ornce in
one place, and its selling odices and several factories in other places ; in otherwords, the economic activities of the industrial enterprise have diversified ing

The Industrial Structurd of the Hanshin Districts(IX)(The Suburban of Osaka)
All industrial workersl

City and county

Meta! and engineering
industry(Dec. 1949):'l

TextileChemical industry

industry'

Osaka-shi

170,445

88,251

51.7%

19,313

11.3%

16,7839.8%[
1*i Sakai-shi

20,13911,O06

54.6

4,560

22.6

1,269

Fuse-shi

12,117

7,635

63.0

1,280

10.5

Nakakawachi-gun

11,311

5,634

49.8

2,247

19.8

Yaorshi
Kitakawachi-gun
Moriguchi-shi
Toyonaka-shi

3,412

907

26.5

1

1,356

39.7

7,354

3,979

54.1

r

2,047

27.8

548
652
241
698

1,504

1,083

71.8

293

44.3

Ikeda-shi

1,632

1,249

76.5

l

Toyono-gun

2,910

1,716

58.8

302
180
139
222

20.0

660

A

6.3
4.5

5.7
7.0
9.4

24

3.6

7.6

300

10.3

27.2

26,21818,552

70.71

2,364

9..2

1,615

6.1

6,174

3,462

56.0

1,726

27.9

312
58

447
353
450

7.2

6.4

45

26.1

1

Muko-gun

4,840

2,403

49.6

Nishinomiya--shi

5,036

1,302

25.8

Ashiya-shi
Kobe-shi
Akashi-shi
Akashi-gun

172

Total

1.1

7.2

8.9

51,276-27,154

72.4

2,257

4.4

1,190

2.3

2,601

1,699

65.3

49

1.8

2,727

1,496

54.8

70
124

2.6

330,531

187,81756.8

38,557

11.6

24,664

7.4*1 Belong to Osaka Prefecture(include Osaka City), *2

Belong to Hyogo Prefecture

z
8

8.5

1

*2Amagasaki-shi
Itami-shi

ij

4.5

ge

STRUCTURE OF INDUSTRIAL DISTRIcr[['S IN JAPANits location. The problem of these regional or physical diversification inthemselves is to be the other than the organization problem in the functionof the enterprise, but both problems are interrelated not a little. The
spatialness of the economic activities in the enterprise is not to be set aside

in the study of business administration. But the writer will study this point

in another chance.
In the second, the present industria1 factories have built up the industrial
districts, and yet the industrial structure in their districts has been charac-

teristically formed by several kinds of the industries, due to the land use

competition among them. These characteristic structure of the industries
depends,on the positive and negative location factors of each factory in theirindustrial districts. In this article, the writer aimed to study these problemsof the leading industrial districts in Japan.

121

N
N

'rokyo-to(bysections)

Adachi
Itabashi

Kita
Katsus.hika

NetimarakawaTo/shima

gs

NakanoNNBunkyoTaito

SumidaShinjuku

ucrinaml'

K
Es

Edogawa.edChiyodaoo

Shibu•a.

Koto

NSetaaa

Minato"so'lrSLCShi nagawa

f

w
tu
xN
>

.-

(classificati'on

TokyoBayOta

ct

Zdl<tsbythew

moo

Zone

Zone
lliglilil@zone

M@ZoneSTRCUTURE OF INDUSTRIAL DISTRICTS IN JAPAN 123

Osaka-shi(bysectiens):e..

Higashiyodogawa

..

Asahi

J

41i.

et

yodo

Nishiyodogaw

JOIitheKita
Joto

Fukushimu,.:.{Konohana

Hiashi'si

MinatoMinemiHiashittari

Naniwa-tTennojikun(c]assificetion by the writer)

OSe('eee)ttt[[[[[[[[II (z) zone

Taish
NishinariAbeno

g@ zoneHigashisumiyoshi

Sumiyoshi,

ww @ Zone

n@ zon,124

MINORU BEIKA

Nagoya-shi(by sections)

Kita
Nishi,

Higashix

Nakamura

Chikusa

Naka.

Showa
Nakagawa
MizuhoAtsutaMinato(classification by the writer)"'t't

MinamiI]I[[[O @ zone

ge @ Zoner- -:'tIse Bayrw @ Zone

O@ Zone'NOTE ON THE ZAIBATSU COMBINES
Tadakatsu INoUE

1
The dominating combinations in Japanese business before and during
the war were popularly known as the Zaibatsu. Of these, four were especially outstanding, namely, Mitsuj, Mjtsubishi, Sumitomo, and Yasuda.
The economic spread of the four biggest combines may be estimated fromthe following summaries about the range of their investments in 1946, justbefore their dissolution.i)

A. TheMitsuicombine
The basic structure of the Mitsui combine had several levels : the Mitsuifamilies; the top holding company named Mitsui Honsha; the principal
subsidiaries of Mitsui Honsha : the ordinary subsidiaries of Mitsui Honsha ;and the underlying corporate network of lesser subsidiaries. This structuralform was also common to three others.
I. The Mitsui families owned 63.8 per cent of the capital stock of Mitsui

Honsha.
II. Mitsui Honsha had investments of more than 10 per cent in 75
companies engaged in banking, importing and exporting, shipping, manufacture, mining, and so on (the Mitsui famiiies sharing in the investments).
The total paid up capital of these subsidiaries amounted to \2,652,234,OOO.

1) The information has been obtained mainly from Holding Company Liquidation
Commission, Zaibatstt and its dissolution, Tokyo, 1951.

125

126

TADAKATSU INOUE

III. These subsidiaries of Mitsui Honsha were traditionally classified
into two groups, that is, the principal and ordinary groups. The principal

group consisted of 22 companies which were capitalized wholly or mainlyby the Mitsui families or Mitsui Honsha and which were often holding
companies themselves. Of these, Mitsui Trading, Mitsui Mining, Mitsui
Chemical Industry, and Mitsui Steamship (which were all designated as theholding companies by the Holding Company Liquidation Commission Ordinance) together had imvestments of more than 10 per cent in 87 companies
having total paid up capital of \538,722,OOO (excluding 14 companies inwhich they shared their investments with the Mitsui families or Mitsui
Honsha).
IV. Of the ordinary subsidiaries of the top holding company, Hokkaido Colliery & Shipping and Tokyo Shibaura Electric (which were designatedas the holding companies in the dissolution proceedings) together had
investments of more than 10 per cent in 112 companies having total paid up
capital of \307,665,OOO (excluding 7 companies in which Hokkaido Colliery& Shipping shared its investment with the Mitsui Honsha or above mentioned principal subsidiaries).

V. In all, the Mitsui families, the top holding company, and six subholding companies together had investments of more than 10 per cent in 213

companies which accounted for 9.5 per cent of all the paid up capital in
Japan (excluding 61 foreign resident companies).

B. TheMitsubishicombine
I. The Iwasaki families owned 47.8 per cent of the capital stock ofMitsubishi Honsha, the top holding company of the combine.

II. Mitsubishi Honsha had investments of more than 10 per cent in 41
companies engaged in the major industries, finance, and commerce of Japan(the Iwasaki families sharing in the investments). The total paid up capitalof these subsidiaries amounted to \2,150,670,OOO.

III. Of these subsidiaries of Mitsubishi Honsha, there were 27 principal

subsidiaries including five designated holding companies-Mitsubishi Heavy
Industries, Mitsubishi Trading, Mitsubishi Mining, Mitsubishi Electric Mfg.,

and Mitsubishi Chemical Industry. These five companies together had investments of more than 10 per cent in 134 companies having total paid up
capital of \696,841,OOO (excluding 17 companies in which they shared theirNOTE ON THE ZAIBATSU COMBINES

127

investments with the Iwasaki families or Mitsubishi Honsha).
IV. Of the ordinary subsidiaries of the top holding company, Mitsubishi

Steamship (which was designated as the holding company by HCLC Ordinance) had investments of more than per cent in 34 companies having total
paid up capital of \269,219,OOO.

V. In all, the Iwasaki families, the top holding company, and six subholding companies together had investments of more than 10 per cent in 152

companies which accounted for 8.3 per cent of all the paid up capital in
Japan (excluding 52 foreign resident companies).

C. TheSumitomocombine
I. The Sumitomo families owned 83.3 per cent of the capital stock of
Sumitomo Honsha, the top holding company of the combine.
II. Sumitomo Honsha had investments of more than 10 per cent in 29
companies chiefly engaged in the heavy industries of Japan (the Sumitomofamilies sharing in the investments). The total paid up capital of these subsidiaries amounted to \1,247,340,OOO.

III. Of these subsidiaries of Sumitomo Honsha, there were 25 principal
subsidiaries including five designated holding`companies - Seika Mining,
Fus6 Metal Industries, Sumitomo Electric Industries, Nippon Electric, andNippon Chemical Industrial. These five companies together had investments
of more than 10 per cent in 106 companies having total paid up capital of\674,492,OOO (excluding 31 companies in which they shared their investmentswith the Sumitomo families or Sumitomo Honsha).
IV. In all, the Sumitomo families, the top holding company, and fivesub-holding companies together had investments of more than 10 per cent in
119 companies which accounted for 5.1 per cent of all the paid up capital in

Japan (excluding 16 foreign,resident companies).

D. TheYasudacombine
I. The Yasuda families owned nine-tenth interest in Yasuda Hozensha,
the top holding company of the combine.

II. Yasuda Hozensha had investments of more than 10 per cent in 30
companies chiefiy engaged in banking (the Yasuda families sharing in theinvestments). The total paid up capital of these subsidiaries amounted to\480,846,OOO.

intercorporate Stock Ownership in the Mitsui combine, 1946
(Unit : One

Stock

IMitsui

TaishoChemi- Mitsui Mitsui Nippon Marine Oriental Mitsui
iLife Incal
Steam- Ship
Flour & Fire Cotton
IndusHonshaMining r
InTrading j Families
BuildingshipMillsurance try[ MitsuiCompanyMitsui

Mitsuishare)

Total

(A)

A

B

surance

Mitsui Honsha

1,540

6 357 OOO6 440 040

64.4 10 OOO OOO

1,020

200,ooO 1,060,235

53.0 2 OOO OOO

29,5001,500

Mitsui Mining

4,786,640

48,7902,OOO 21,540

Mitsui Trust

46,2301,800

Mitsui Life

Insurance
Mitsui Chemical

Industry

10,OOO
491,501

i 44o oool

Mitsui Real

EstateMitsuiSteamship
Mitsui

Agriculture& Forestry

Mitsui Ship

Building
Mitsui Precision

Machine &

e)j
i
i
l

1
1
F
ig sooll
126,0321
t/lI
1
i
1•

1,O19,5001

l

t)
tl
193,320 •5,052,290 63.2 8 OOO OOO
J)
50,OOO 98,030 16.3 600,OOO
sp

st

20,OOO 30,OOO 75.0

40,OOO4so,ooo 2,411,501)r99.2 2 430 OOOl

1 O19 500 72.8 1,400,OOO

g

99.9

209,OOO

400,OOO1 O14 OOO 84.5 1,200,OOO

lr

1,992,562
200,OOO

99.6 2,OOO,OOO

Engineering
Nippon FlourMill
Mitsui

Warehouse

198,333[!
300,OOOI

1
I
i[
II
l

14,150
E
i

i

>:

:

63,OOO 208,832
20,OOOg

100,OOO100,OOO100.0 100,OOO

J)

594,OOO

1,792,562i

Stock

(B)

4,OOO

828,215

oo

Total
Isssued

81,500Mitsui Tradingpro212,483' 53.1

400,OOO

300,OOO100.0

300,OOO

Taisho Marine& FireInsurance

1

222,190

8,403

400

230,994 50.2

460,OOO

51,OOO

51,OOO 39.2

130,OOO

617,890

617,890 88.3

700,OOO

Sanki
Engineering

329,700

329,700

96.9

340,OOO

Toyo Rayon

251,730

316,73044.8

705,500

498,600

38.3 1 300 OOO

Tropical

Produce
Orienta! Cotton

Trading

Toyo K6atsu
Mitsui Oil &Fat Chemical
Industry
Mitsui Light

1,OOO

22,OOO450,OOO

26,600so,oee400,OOO

Metal
Mitsui Wooden

21,300Mitsui Lumber

600,OO(

Ship-Building

14,OOO

60,OOO

325,480

3,OOO
135,OOO

4,OOO

Holding CompanyLiquidation Commission,

Zaibatsu and its dissolution

pr

g
2
8

400,OOO100.0

400,OOOg349,780 38.9

900,OOO

g

199,OOO 99.5

200,OOO

2•

600,OOO100.0

600,OOO(Tokyo, 1951), pp.98-99.

g
g

8

130

TADAKATSU INOUE

III. Of these subsidiaries of Yasuda Hozensha, there were two desig-

nated holding companies. These two companies Oki Electric and Oki
Electric Securities together had investments of more than 10 per centin 29 companies having total paid up capital of \36,943,OOO (excluding one

company in which 0ki Electric Securities shared its investments with the
Yasuda families and Yasuda Hozensha).
IV. In all, the Yasuda families, Yasuda Hozensha, and two sub-holding

companies together had investments of more than 10 per cent in 57 companies which accounted for 1.6 per cent of all the paid up capital in Japan(excluding 2 foreign resident companies).

2
The most important device by which the sphere of the Zaibatsu's
influence was extended was through the investments of the Zaibatsu families, the top holding company, and certain subsidiaries. The tables on pages

84-85 and 87 are intended to indicate how the intercorporate ownership in
the Mitsui and Mitsubishi combines served to create and hold their combine
power. Of twenty-two principal subsidiaries of the Mitsui combine, threewere under the complete control of the Mitsui famliles or Mitsui Honsha.

In fourteen of them, combine ownership, including intersubsidiary stock
holdings, ranged from 50.2 to 99.9 per cent. In only five others it fell to 44.8,
39.2, 38.9, 38.3, and 16.3 per cent. In Mitsubishi's eleven big subsidiaries, thecornparable figures ranged from 25.3 to 76 per cent. It should be noted thatthe ownership of 15 or 20 per cent of the voting stock of a company isgenerally assumed to carry with it working control.

3
The power of the Zaibatsu combines was not, however, limited to thecontrol which they secured through the device of holding companies and sub-holding companies. That power was also brought about by other methods.
First, through their control over the financial organs of the country, theZaibatsu combines could possess a certain degree of influence in the affairsof their debtors. However, banks in Japan, it should be noted, did not carryon investment banking business. In the Zaibatsu combines, therefore, control

Inbercorporabe Stock

Ownership in th e Mitsubislti Combine, 1946

(Unit:One share)
itsu-

x...

XxCompany MitsubishiÅ~

Stock x
Mitsubishi

x

bishi

Mitsu--

bishi
Heavy ElectricIndus-

Honsha tries

Mitsu-

Mitsu-

bishi

bishi

Mitsu- Mitsu-

Mitsu-

bishi

bishi
Steel

Ware-

bishi

Mfg• Mining Trading house Bank Mfg•

Iwasaki

ChemiFamilies
cal
Ind.

Total

(A)

520 2 294 600 2 328 8oo

31,6802,OOO

HonshaMitsu-bishi

tt

)t

A
B

Total
IssuedStock(B)

485 4,800,Ooo

Heavy

Industries
Mitsubishi
Electric Mfg,
Mitsubishi

MiningMitsubishi

Trading
Mitsubishi

343,OOO

4 524 366}"

340,OOO

66,944780

1,063,950
3,474,524

22,400807,350

26,666

12,OOO
13,332

8,ooO
3,332

6,666

14,9993,332

g

8,OOO1,071,950

44.6 2,400,OOO

z

40,200 3 557 124t)

43.9 8,145,OOO

20,OOO 895,677

44.7 2 Ooo OOO)e187,300

2,OOO 189,300 47.3

400,Ooo

241,OOO

6,OOO

247,OOO 66.7

370,OOO

EstateMitsubishi Bank

817,698

Mitsubishi Trust

114,320

Mitsubishi Oil

180,OOO

Warehouse

Mitsubishi

Mitsubishi

Steel Mfg.
Mitsubishi

Chemical Ind.

1,020,940

265,Ooo

3,OOO

2,OOO

210
1,200

60,OOO 60,OOO

54,254

877,162 32.4 2 700 Ooo

36,400151,920)t

25.3

600,OOO

300,OOO 75.0

400,Ooo

309,539 1 520 940

500,OOO

Jt

297,905z

91,420 5{366510 26.8 20,Ooo,OOO

Mitsubishi

s
S•

g
ge

76.0 2,Ooo,OOO

872,444 38.7 2 251 580

I}

Ibid., pp. 114-115

'

co

132

TADAKATSU INOUE

through investment banking had no place. Secondly, through the operationsof their trading companies, the Zaibatsu combines were able to control not

only the larger concerns who sold through these cannels, but also themultitude of small producers and merchants who depended on those trading

companies for working capital as well as for the means of reaching themarket. Lastly, through appointment of officials, interlocks, or dispatch of

special representatives, the Zaibatsu combines could bind the disparate
combine elements into unified instruments of business power. The following

tables show the interlocking directorates between the top holding company
and the major subsidiaries in the Mitsui and Mitsubishi combines.

Interlocking Directorates between Mitsui Honsha and the Major Subsidiaries, 194s

Major

Mitsui
Mitsui

HonshaTrading

Mitsui

Mitsui

MiningMitsuiLife

MitsuiChernical

Insurance Industry

Trust

MitsuiReal
EstateMitsui

Subsid iaries
Mitsui

Agriculture

Mitsui

Mitsui

Mitsui

Ship

Machine &Firehouse rnsurance
Tradingteamship & Forestry

Building

Managing

Director

Precision

TaishoWare- Marine

nglneerlng

Oriental

CottonMitsuiShowa Hokkaido
Wooden Mitsuio!liery &Aireraft
ShipShipping
Lumber Mfg•
Building

President
ManagingDirector Director
Managing Director
Managing Director
Managing Director

Director
Director
Director
Director
Director
Director
Director
Director

Director
Director
Director

Director

Director

Director

President

Director

Director
Director

AuditorPresident

Director
President
President
President

Director
President

Director
President

Director

AuditorPresident

Director
Director

President

Auditor
AuditorPresident

Holding Company Liquidation Commission, op. cit. pp. 102-103.
Inberlocking Directorabes betvveen Mitsubishi Honsha and tlte Msjor Subsidiaries, 1945

Major

Mitsubishi

HonshaPresident
Vice-PresidentManagingDirector

Mitsubishi

Mitsubishi

Mitsubishi

Mitsubishi

Heavy

Electric

Industries

Mfg•

Mining

Trading

Director
Director
Director

Director
Director
Director

Director
Director
Director

Director
Director
Director

Mitsubishi

Mitsubishi

Warehouse Bank
Director
Director

Director
Director
Director
Director
Director
Director
Director
Director
Director

Auditor
Auditor
Auditor

Auditor
Auditor
Auditor

Auditor
Auditor

Auditor
Auditor
Auditor

Auditor
Auditor

Mitsubishi

Mitsubishi

President
Director

Mitsubishi

Mitsubishi

ChemicalSteelMfg.

Ind.

Director

Director

Director

Director

Auditor

Auditor
Auditor
AuditorEstate

Trust

Oil

es

Mitsubishi

Steamship

Nippon Mitsubishi
NipponChemical Architectural
AlumiInd.

num Machinery

Steel

Director
Director

Director
Director

Managing Director

ManagingDirector

Mitsubishi

Subsidiari

Director

Director

AuditorPresident&Fire
Insurance InsuranceJapan

Mitsubishi

Optica1

PaperMfg

Director
Director

Director

Tokyo
Marine MeijiLife

Director

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AuditorDirector

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Director
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AuditorDirector

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Director
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President
Ibid, pp. 116-117

ON THEMODEL-BUILDING FOR

SOCIALACCOUNTING DESIGN
Nobuko Nosft

INTRODUCTION
Since the first publication of the working system of the social accounts
by R. Stone,i) model building for economic circulation and social accounting

design to realize the model have been developed successively in the social
accounting theory. In these works, much attention has been paid to the roleof the set of sector accounts to represent the Keynesian National Income
circulation. Contrary to these works, the present paper will be occupied

with building the Marxian model for income structure and its social accounting design against the Keynesian model, Recently, in pure economics,
we find some devices which try to study the relations of effective demand(in Keynes' sense) to productive power (in Marx's sense), i. e. the devices by

J. Robinson, L. R. Klein, S. Tsuru and others. What is devised in pure theory

should be carried out in applied economics. Thus, constructing the Marxian
model for national jncome circulation, we have measured the national jncorne
in Japanese economy in ` Kobe Economics and Bus. iness Review ', No. 2, 1954.
Our intention, however, has not developed as the social accounting approach,being limited to represent only the income structure by Marxian model. So,

1)

R. Stone. Measurement of National Incom & The Construction of Social Ac-

2)

counts, United Nations 1947.
Nobuko Nos6, On the Structure of the National Income Distribution in Japan.
Kobe Economic & Business Review, No. 2.

135

136

NOBUKO NOSft

this paper will apply the same idea to social accounting model, in comparison with two models and their social accounting systems. And, in the analysjs of the characters of two schools in social accounting field as the applied

economics, we shall contribute to the progress of pure economics and theimprovement of economic design for national income research.
The procedure by which this paper is described is as follows :i The Keynesian model versus Marxian model in pure theory
ii The Stone system versus Marxian system in social accounting
iii Comparison of two systems by setting the examples

iv Conclusions
g 1. The Keyttesian Model yersus Marxian Model in Pure Theory
In macroeconomic analysis, it is the main problem of the model building to find out how to set the circulation of national income in the main
articulated systems ; and so in social accounting as the macro accounting.

Founded on the abstract value theory, the division of national income tothese aggregates is the definitional problem. Now, following the Keynesian
approach, the national aggregates as the main variables are national income

Y, investment I, consumption C and saving S, called Keynesian aggregates.
It is the national income Y, one of these aggregates, that have significant

meaning compared with Marxian system, because the definition of Keynesian national income stimulates the other Keynesian aggregates, I and C.
These aggregates are defined in Ch. 6 and Ch. 7 in his ` General Theory 'i)

and in many articles by his followers. The Keynesian National Income isdefined in three dimensions, i. e. productionl appropriation and outlay. Fromthe view of production, the national income is the sale of products andservices minus user cost, that is equal to the consumption and Investment,

while the national income is the sum of the income of population in thesociety as a whole which are engaged in the production of products andservices, and is equal to the sum of the consumption from the income andsaving. To define the national income as the equivalent in the three dimensions on this way, which is no more than the production in Keynesian
sense, then the word " production " would include the production of physicalproducts and production of services. Therefore, consumption jncludes theoutlay of consumption goods and services indifferently, so far as they are1) J. M. Keynes, ` The General Theory of Employment, Interest and Money ' 1936.

137
ON THE MODEL-BUILDING FOR SOCIAL ACCOUNTING DESIGN
purchased for consumption purpose by final consumers. And it is irrespective of the final consumer's richness or social conditions around him. On theother hand, Keynesian Investment js necessarily equal to the productive
power, which is defined as net increment of the capital equipment (fixed
asset and inventory), so this definition is irrespective of the investment
outlay for production of physical products and for production of services.
Also, saving, which is defined as residual income, is one of national aggregateslike consumption and irrespective of saver's social condition and his behavior.

The equations which represent the relations between these aggregatesare Keynesian Identities. Keynesian Identities consist of YLiC+l, YEC+S

and Si-L and are the economic models, with which the national income
circulation might be grasped in details. So, we are immediately able to set
the Keynesian tableau for national income circulation from these identities.
Keynesian tableau, not only gives the prototype of Stone's system in present

Social Accounting, but telis us the economic design in national income
statistics and econometrics.

Next, let us examine the other side Marxian theory. How are theMarxian aggregate defined and what is the Maxian tableau by this definition?

We shall try to find Marxian definition about national aggregates invol. I. `Mehrwert ' as jts classical use.2) In other works, we find Marx's
definition on productive labor in his ` Das Kapital '3) and in recent Marxian
theory of national income i. e. by Koziolek,4) na"sueB,5) which are informative for our task to set the model.

According to their idea, the national income circulation forms a contrast
against the Keynesian system : the former distinguishes (1) physical national

income by productive Iaborers from gross monetary income (this is equivallent to Keynesian Y), (2) capitalists' income from laborers', besides we may
add, (3) Investment for productive use and the latter is irrespective of thesethree points. Namely, national income is the sum of the value products
which are annually created by productive laborers and is equal to the value

K. Marx, ` Theorien tiber den Mehrwert.' Bd. I.

2)3)

K. Marx, ` Das Kapital. ' Bd. I.

4)

H. Koziolek, ` Zur marxistisch-Lenistischen Theorie der Nationa:einkommens '.

5)

A. IIanbueB, ` Bonpocsl TeopzH HagMoHaJsHOTO noxoga KallvaTaJIllcTIIuecHoro
o6mecTBa ', < Boupocsi oKoHoMHKll No. 11, 1953 v.

NoBuKo NosE

138

(V+M) which deduct the consumption value of constant capital C from thewhole value of social products (V and Mare wage and profit respectively).
Then, productive labor is defined as the labor which creates the value in use,

and we may call the sectors, which employ the productive laborers andproduc eth evalue in use, the productive sectors: agriculture, forestry,mining, construction, manufacturing, and transportation, communication andwarehousing (in so far as they have direct relation to production).

The creation of national income is carried out only in the productive
sectors. From the view of appropriation, for the first place, national income
is divided among the capitalists and laborers in productive sectors as profit .

and wages respectively. This stage is the original distribution of National

Income.
According to Marx, after the original distribution, the re-distributive

process which is the metamorphasis of the first phase and then the rearrangement of the social demand structure would be taken into consideration.
This process is brought out by introduction of unproductive sectors (i. e.
circulating cost sector and consumption cost sector).
The circulating-cost sector, that consists of commercial sector and financial sector, recieves a part of productive capitalists' profit as circulatingcost. The consumption cost sector is so called service sector, which consistsof institutes for health, study and living, cultural association, and transpor-

tation, communication and warehousing in so far as not any direct relation
to production. All the services by this sector are purchased by the householdof productive laborers and capitalists. These unproductive sectors receivea part of national income in compensation for the services they offer andthen the value product are allotted to the laborers and capitalists in these

sectors. Moreover, wage and profit in the productive sectors and unproduc-tive sectors Vi Mi, V2 M2 respectively, components of the gross monetary
income Y (correspond to Keynesian Y), are paid for consumption by laborers

and capitalists C., Kand investment for productive and unproductive useli I2 respectively.

Let us put the ideas, to see the relation between these aggregates, into
the following identities.

X = V, +M,+ V,,+M2,
Y= Vi+ V2i+ V22+Mi+M2i+M2o.
Y= C,,+K+Ii+I2

ON THE MODEL--BUILDING FOR SOCIAL ACCOUNTING DESIGN 139
So, we can understand that the Marxian tableau for national income
structure have dual phase in the circular flow of Xand Y, including theprocess by the function of public finance.

The social demand, being sum of the expenditure by capitalists' andlaborers' earning after the redistribution, consists of the consumption bylaborers and capitalists, investment for productive use and for unproductive
use by capitalists. So, the conception of Marxian national income, is far fromthe Keynesian concept which takes the national income as equivalent valueon three dimensions, and then the components of his national aggregates are
as follows : national income in physical sense X, capitalisVs profit in pro-ductive sector and in unproductive sector Mi M2 respectively, Iaborers'

wage income Vi V2.
Next, Iet us now turn to the problem whether the above Marxian tableau
is operational tool for our objects or not.

The Keynesian tableau is very useful in applied enonomics, notwithstanding the defects of its super macrGscopic and one-sided character.
0n the other hand, as the statistical data is not founded on Marxian real
categories, so we must first from Y flow and then arrive at X fiow. And
then it should be the second process to start at supeficical circulating
structure for our obiect to apply the model to social accounting design.

Moreover, if we need to compare two systems, we must set the objects
on the samed imension. For these three reasons, we must construct the
another model which can be comparable with Keynesian one formally andbe usable as social accounting design.

The model then runs in the following form: (VVi, W2, Ri, R2, Cw correspond to va, V2, Mi, M.., C. in above identities respectively and S iscapitalist' saving)

Y= W,+ UZ,+R,+R,
Y= Cw+K+Ii+I2
C.= Wi+ W2
K+S==R,+R,
S== I,+I,
Having the less consolidation than Keynesian Identities, our Identities
are characteristic of :1. Production of physical products only as main substance of productive

power, distinguished from production of services as sub element for pro-

NoBuKo NosE

140

ductivity, 2. Difference between wage income and profit, being divided by
the different behavior on the stage of expenditure.

Allotting the investment to Ii and I2 and the cong. umption to C. and K,
our model seems positive on the point that it suggests explicitly the funda-

mental relation between final demand and productive power.
These Identities, based on the Marxian idea, would be comparable with
Keynesian Identities.

g 2. Stone System versus Marxian System in Social Aceounting
To make the Identities in above section to be the Social Accounting
model, two arrangements are necessary :1. to make Identities to be accounting Identities,

2. to set the sector to represent the Identities in articulated system.
The reason is that the set of accounts and sectors are necessary in social

accounting of which object is to research the national income structure bysector accounts.

First, we take the the social accounting model founded on Keynesian
Identities. In Stone's system as representatives, both design design ofaccount and of sector--are realized concretely.i) As for the design ofaccount, three Identities of Keynes give the principle to construct the operating a 'c, appropriating a 'c and resting a 'c, respecting three economic activi-

ties production, appropriation and adding to wealth.
All the transactions are classified to three accounts, according to the kindof economic activity, In Stone's social accounting system, having intension

to represent the production, appropriation and saving-investment in Keynesian sense by accounting structure, Keynesian conception for aggregates,
above mentioned, are also adequate here.
Next, we turn to the definion of sectors. In Keynese's theory, there is

no explicit explanation about economic unit which is included in social
framework, and at most, represents the household and business enterprise
implicitly. In the consolidation process of individual economic unit to sector

which organize the national economy, the explicit sector division would beindispgnsable. So, in Stone's system, being founded on Keynesian notion,
sector division is cannot but institutional division, not functional. In Stone's

system, the fundamental sectors are Business, Government and Household.
1)

Stone, ibid. and see. Stone, The Standardized System of Social Accounts, 1952

ON THE MODEL-BUILDING FOR SOCIAL ACCOUNTING DESIGN 141
Then, the working system in Stone's model, represents the Keynesiannational income circulation• by the set of above three sectors with threeaccounts.

On the other hand, we inspect the social accounting design by Marxian

notion. Our Mafxian model, already stated in previous section, have had
dual purposes: (1), to start at Y to be comparable with Keynesian modeland (2), to scrutinize the Marxian national income structure. In our Marxiansocial accountjng design, this intention being taken over, formally it issimilar to and comparable with Stone system, but the essential principleof the former is fundamentally different from the latter. The social account-ing design, founded on Marxian idea, is intended to represent the circular.
flow of physical national income -- creationby productive sectors, iVstransfer to circulating-cost sectors, division to capitailsVs household andlaborer's in productive sectors, transfer to service sectors which sell theservices to household, redistribution by Government, the accumulation(investment) in productive business sector, in unproductive business sector

and in capitalisVst's household , restoring the transaction structurecaused by over simplification in Keynes-Stone system.

Comparing our model with Stone's, we notice that the basic differenciable point between .them is sector division. In our system, productive

sectors, unproductive sectors, government, capitalisVs household and laborer's household are necessary at least. So, our system has five sectors

with three accounts, while Stone system has three sectors with threeaccounts.

g 3. Comparison of Two Systems by Setting the Examples
To make clear the essential difference between two systems, we shalltry •to compare two systems (1) in mathematical transaction matrix formand (2) in the hypothetically constructed table.

Now, we premise the following condition ;i same scale of circulation in two systems,
ii the value of all transaction is represented in terms of money,iii the same form of account,iv as for the sector, Stone system has three sectors and our five sectors,

and in the former sector, 1, 2, 3 tepresent the business, government andhousehold, while in the latter 1, 2,•••••-5 are the productive business,

unproductive business, government, capitalisVs household and'laborer's

NOBUKO NOSft

142
householdv closedsystemvi black ink in public financevii the service which is supplied by government is neglected.
( I ) The comparison of two system in Transaction Matrix.i)

Now we take the matrix VVand set W=: VV :•.,jp. The elements of W
consist of v;i, j;a, B and v is the kind of trasaction,i 1' are the activity thatare the object of transaction and represent the accounts in which the transactions, are classified and a B is the sector and Wia,ip is the transaction ofwhich incoming is VVi.-and outgoing is VVffjB.

The incomings in two systems are
Yia=2 a:•.,JB (v=a, b,•••, k, l),where, i, 7'=1, 2, 3 and a, B are 1, 2, 3 in Stone system and 1, 2,•••, 4, 5 in oursystem.
This is arrangeable into matrix form

Y=AY

Then, Y=yi.= (;l:)
VY3a'A=(iii,li a.klil:)A Y is diagonal matrix of Y, and I is column vector of 1, thenIf we defineA
AY=(AY)I=VVI,andwr=Y
So we are able to derive the transaction matrix of W:

A
W=AY.
As the difference between two systems, is derived only from the definition on the element a, B, so `formally' we have the social accounting
system in the same form.
Then, it would be noticed that, in its monetary form, our system is notdistinguished from the stone system, except the definition on the element a, B.

(ll) Next, we compare two systems under the hypothetical table, sothat we may contrast their real meaning of the systems.2)
1) As for Stone's theory of transaction matrix, See. `Simple Transaction Models,

Information & Computlng; The Review of Economic Studies, vol. XIV, No.49.
1951.-v52.
2) As for Stone system, see. ` The Relationship between Input-output ana!ysis andNational Accounting.' p.211-14.

Stone Sysbem
IappropriatingI

operating

tu

1

.s

v

N uon

a

goods&servicesbsubsidies

12

3

1

2

resting
3291510482

7787

o
Z
8
s

N

1

2

3

g

1420

500

110

g

1040

ti"

tu
Åë

es

o

2

1
tu
.E

v
" uQ

2

za

3

.g

2437

d directtax

8
802

e

indirecttax

3220

f

dividendandinterest

10360

wagesandsalaries
h transferpayment

z

1402

8

depreciation.savmgkborrowing2

j.savmg3

g.savmg

.s

6

905

g

j

ee

2

operatingprofit

i

1

pt

g
c

le

o"Q

ed

g
9

3

g
8
E

320
620

450
730
25

325

215

:
8

z
z

-

pt

ee

1

1

a

goods

b

subsidies2

3

apperopriating
4

5

1

2

3

4

p

m

I

I

operatingptplresting
5

1

2

3

4

5

1845 470 6810 1018 402 500 110

5684 1750

528

a
bo

q
'PN

2

M di

ko
a
o

g

.N

servlces

5121070 320 2882

250 103

4

Z

5

fi

8

1

d operating

surplus2

d operating

surplus3"a9&

subsidies

c

3

tu
'p"

b

4

N

5

1

e

direct tax

findirect tax

gdividend & interest

o
Z
o
m
ptN

1327
1110

431 3712520 760

505 40e 324
20

h transfer paymant

600

h transfer paymentiwages and salaries

8934 1426

jdepreciation402

k savmg1borrowing

134 1268

391

25 200j depreciation
2
.e)o

Htth

e

k saving
1 borrowing

3

k saving
1 borrowing

4

k saving
1 borrowing

48
339
15
525

o
Z

B

es

325

g
g
s•

5

k
l

g
U"z

Uo

.Zq
E•ge

i'

o
w
m
m
H
a
z

-

pt
en

146 NoBuKo NosE
The preceding examples to compare two systems would explicitly show
us that the sale of products and services 7784 in operating a/c of businesssecter in Stone system is divided to 5684 as sale of products to operating
a!c in productive business sector, 1750 as sale of products to operating a/cin unproductive business sector, 350 as sale of commercial service tooperating a!c in productive sector, 103 as sale of cons'imption service tooperating a/c in unproductive business sector, in our system. On the other

hand, gross investment 1420 in resting a/c of business sector in Stonesystem, is divided in to resting a!c of prductive business by 1018, and a!c of

unproductive business by 402, while gross investment in household sector in
Stonesystem is restated as gross investment in capitalsVs household in oursystem.
From these considerations, our model gives the clear explanation forstage and direction of national income circulation, that is not possible
enough to be indicated by Stone's system, and bring a view which tells us
the relation of the productive power and the effective pemand.

Now we have started at monetary circulation. This premise is techni-

cally needed to make our system to be compared with Stone-Keynesiansystem and to Marxian tableau into the operational form.

Our model is necessary reform of original Marxian tableaa, so we must
prove that our system is reduceable to original model. We should do this byan application of transaction matrix to the ` real ' transaction.

We start at matrix Y= AY which denotes our transaction model withfive sectors. By row vector x== (iXll) , we denote the phYsi6ai hationhi pro-ducts X, by k, we denote the ratio of the value of physical products to grossmonet4ry income and putk=(kOo' ko02 k83 ), and by k ., we denote the ratio ofthe value of physical products to the earning in each sector and put k'=
le iO O OO

O'x. Oo 't.oO "".`.. O . Then, the circulation of X derived from circulation of Y,

ooo ok,being equal to X=kY =kAY, and X=kX, so we denote X=kkAY. Here
V==(via,i'p), and we might say that k is a matrix to defiate the monetary

ON THE MODEL-BUILDING FOR SOCIAL ACCOUNTING DESIGN 147
income to the physical national income, and le' is a matrix to apportion
the physical national income among each sectors. And, response matrix is

VV==lek'AY. From above, it is proved that our model'is superior than
Stone's in so far as it exibits the national income circulation in details andis proper reform of original Marxian model. Our model, by further dividing

the productive sector to capital goods sector and to consumption goods
sector, could represent the Marxian tableau of whole social products circulation (reproduction-schema), and explain the cubic relation between the

productive power and the effective demand.

g4. Conclusion
Founded on Marxian idea, we have constructed a social accounting
design. Of course, these models cannot be realized without the aid from thepractical field, i. e. the aid of the income statistics which gives the statisticaldesign. So, the approachment in two school is not only necessary in theeconomics, but in the statistics. And the real use of our social accounting
design is pending on it.
Help and Advice for constructing the tables by Assistant Miss Mitsu Ogawa of
Re3earch Institute for Economics and Business Administration, Kobe University,
should be particullarly acknowleged.

THE RESEARCH INSTITUTE
FOR ECONOMICS AND, KOBE UNIVERSITY.
BUSINESS ADMINISTRATIONThe Institute was founded in 1919
attached to Kobe University (the Ko--

be Higher Commercial School at thatIl

lfg ggils lt
I/•Etime) with an endowment fund of F.
Kanematsu & Co., Ltd., the pioneer
firm of Japan-Australia trade, which

provided the school with a building

and a fund to carry on researchwork. In 1949, the Institute became
an oMcial organization attached to
Kobe University, maintained by the national treasury.

The aim of the Institute is to carry on
Industrial Economy in its two teams of research

the scientific and synthetic study ofwork, namely, the Research Teamof International Economy and the Research Team of Business Administration. The
former comprises five sections, each taking

charge of research work on Foreign

Trade, Marine Economy, International Finance, International Rules and Agreements. Area Study on Latin-America ; the latter comprises four sections,on Commerce andeach of which undertakes to do research work on Business Management, Accounting,Rationalization of Industry and Labor Problems.
Besides these regular research sections, we have horizontal study groups closely

related to the regular research sections to carry on special research work by aCommittee of Specialists. In the field of international economy, two committees for
special study, the Committee on Asian Economy and the Committee on Latin American

Econorny, have been organized; and in the field of business administration theCommittee on Company Accounting has been formed. The said special research workis carried on by the faculty of the Institute and by extra-Institute and extraUniversity research workers.
The results of the research work are published in the Kobe Economic & Business
Review, the Kobe University International Economic Review and the Kobe University

Business Review (each published annually) and in the monthly journal " Kokumin
Keizai Zasshi " (Journal of Economics and Business Administration), and sometimes
in book form on specific themes.
The Institute has a research staff of 20 members and a secretariate of 12 clerks.

t---;--:iltti----J.i-S---J-l-t--lttt-t4t-.t--.-.--Jt-lttttttttt.4t-.tt--.itttt.4tttJtt--i----ti4--t-t-Jt;4--.-4---t-"t--tt-tst-i --i- --J --a -iSi--4i4--iii i- St-t-i'i'i

I THE RESEARcH tNSTITuTE FOR: EcONOMICS & BUSINESS ADMINISTRATIONi KOBE UNtVERSITY/,
Director: Ginjiro SHIeATAl/ Secretary: Teshio HARA'l GROVPOFINTERNATIONAL 11 GROUPOFBUSINESSl ECONOMICRESEARCH i ADMINISTRATION RESEARCH
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Professor of International [' Susumu WATANABE

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Professorof [nternationa] i' Minoru BETKA

Trade and Marine i

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Trade i

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