ECONOMICBUSINESS&
I8th

ANNUAL REPORT

sc":"[}ig'`":.:2"

THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

I971

KOBE
ECONOMIC & BUSINESSREVIEW
lsth

ANNUAL REPORT<"I.I.g"'/,-THE RESEARCH INSTITUTE FORECONOMICS AND BUSINESS ADMINISTRATIONKOBE UNIVERSITY

197l

CONTENTS

Page

Environmental Pollution Problems from theView Point of Business Management........................Minoru BEiKA

1

Patterns of the Japanese Engineering Trade (1951--1970)...Fukuo KAwATA

13

Optimal Process of Economic Development ..................Hikoji KATANo

37

Wage and Behaviour Difference in Collective

Wage Bargainings of Japanese Shipping Companies-A Case Study of 'the Japanese Shipping Industry............,.....Hiromasa YAMAMoTO'
On Accounting Communication ...........,............,..............Isao NAKANo

49
63

ENVIRONMENTAL POLLUTION PROBLEMS FROM
THE VIEW POINT OF BUSINESS MANAGEMENT
Minoru BEIKA

1

The problems of business and its environment include technical innovation,marketing conditions, social environment, relations with government and otherinstitutions and so on. But the writer limits them here to the narrow meaningof direct or indirect environmental pollution.

The environmental problems in the narrow meaning have roughly two points
or two stages in the problem consciousness of the Japanese. One concerns the
aspect of environmental pollution or environmental disruption, the latter word

being used by Prof. Shigeto Tsuru of Hitotsubashi University at the International Social Scientists Meeting about environmental problems in Tokyo, 1970.
The other one concerns the human environmental problems, a term used internationally now, especially since U. Thant, Secretary General of the United Nations,entitled his report about these problems in May 1969: "Problems in Human
Environment." These distinctions are not suMcient. Of course, the former,
environmental pollution, is included in the human environmental problems.
However, the grouping into the two stages will be usefu1 for the understandingof the present problems in Japan.

II
In this chapter the problems of the first stage, environmental pollution,

are dealt with. Every one who reads and understands Japanese, can find theJapanese word, "Ko`-gai" in newspapers every day. In Japan, environmental
pollution has been grasped and expressed by this word, "Ko-gai." Until recent-ly, the concept of "Ko-gai" was interpreted in English as "public nuisance."
Rather conversely, "public nuisance" might be interpreted as "Ko-gai." "Ko"means " public," and "gai" means "damage" or `'trouble," or perhaps "nuisance."
In other words, it means that the activities of some one or some ones cause "da-mage" or "trouble" to the surroundings. Then more theoretically, it means
what we call "social costs" in private industrial activities. The term of social

costs, a concept developed by Prof. K. W. Kapp. means the burden, caused

2

MINORU BEIKA

socially by private enterprises, and thus originally liable to be absorbed as private

costs by them. They comprise air pollution, water pollution, noise and someother troublesome consequences accompanying industrial activities. The problems of social costs include a wider sphere, for instance, that of traMc conges-

tion, monopoly, research and development, land use and so on, but here we shalllimit them to pollution.
' Environmental pollution has existed in Japan for the last decades or longer.

But most of the problems of the old times, especially of those before the WorldWar II, were caused chiefly by certain single industrial factories in rural districts.

Each problem itself was very severe for the surrounding communities, andeven now some of them are stiil socially important. But they were relatively
limited to some specific districts. After the War, the economic conditions ofJapan, were for about ten years in the stage of reconstruction after war damage.

The Japanese economic development began in 1955, slow at first, and thenaccelerating. Accordingly, industrial activities were not only more highly concentrated in the existing central industrial districts, but also developed in many
new local districts. ' Particularly they increased since 1960.

The industrial development by private industrial firms has not always beenleft to be accomplished freely. The government has made general regional
development plans since about 1955, and led industrial activities to follow themto some extent. But actually, on one hand, industrial development has not always
followed to the desired way, and on the other, the government policies also havenot always been appropriate to lead the industrial activities. The regional
development plans themselves, and the planning have been relatively well integrated into the economic and social development, but the process of executing

them has not worked very well. Excessive concentration of industries and bad
use of land were found in the existing and newly industrial districts. As a result,environmental pollution, especially air pollution and water pollution, has rapidly
been caused by industrial activities, here and there. Long-range visions or plans

have been discussed earnestly, but there might have been lack of action programs
or consciousness of the process for their realization.

Roughly speaking, these phenomena seem to be due to the two causes. One
is related to national and local regional planning and their processes, and theother one is related to business policies of industrial firms. Sympatheticallyspeaking, Japan had never experienced such an enormous industrial development and was not ready to deal with these environmental problems.
The first cause stems from national and regional plannings. There is theterm of "comprehensive planning." It means that economic development andsocial development in a certain district should be well balanced and moreover

ENVIRONMENTAL POLLUTION PROBLEMS FROM 3

THE VIEW POINT OF BUSINESS MANAGEMENT

balanced functions should be realized in physical planning. This concept was tobe adopted for the general regional planning of Japan. But actually, the economic

development has preceded the social development and an unbalance was foundin the use of land. In other words, though planning itself seemed to be rather
appropriate, the land use for industries and the physical realization of planningwere not adequate, and environment consciousness was lacking. Such cases
were often found in national and local regional development processes.

The second cause concerns the business and management policies of industrial firms. After World War II, Japanese industrial firms have energeticallyintroduced many new management techniques from the U.S.A. and have appliedthem to their management and utilized them eMciently, such as marketing, indust-

rial engineering, quality control, management information systems and so on.
But at that time, they did not pay enough attention to environmental problems.

Management techniques as public relations (in the original meaning - now theword is degraded), and community relations, and consumer movements are related
to the business environmental problems. These techniques also were introduced
in Japan, at the same time, together with other management techniques, but they
were overlooked in their application, because there were no grave environmental

problems in Japan at that time. Necessarily, there was a somewhat insudicientenvironment consciousness. Top managements in Japanese businesses knew
about public relations and community relations as management techniques, butthey were not very sensitive to them. Therefore, in the study of business
management too, environment (in the wider meaning) has not attracted muchattention. There are few business management books in Japan mentioning
these subjects.

In these two or three years, air and water pollution and other pollution havebeen rising in industrial districts and certain industrial firms have been blamed

for their insensible behavior. The social costs caused by the private industrial
activities, and the social responsibility of business firms have been much discussed

in the business world. Far-sighted top managements themselves have recognized
their own social responsibilities. But environmental pollution problems are notso simple that they can be resolved in a short time, and moreover, there are not a

few environment-unconscious industrial firms.
The government has revised and corrected its general regional plan and forthe last several years social development has been given more priority in it.
The governrnent has established several laws to prevent environmental pollution,and local governments also have provided the relating regulations for these several

years. They have begun to fix minimum level for harmfu1 matter emitted
through activities of industrial firms. Adding to these policies, recently some

BEIKA
MINORU4

new means have been adopted. One of these is embodied in several kinds ofagreement. To reduce air or water pollution bellow a certain level, agreements
between the industrial firms and the local governments, in some cases, including

representatives of the local inhabitants, have been concluded. But it needs aconsiderable long time to find a satisfactory effectiveness. Such means now
just start. This is the Japanese environmental ppllution or "Ko-gai" problem
in its first stage.

III
The problems of the second stage concerning the hurnan environment comenext. While Japan is confronted with many unsolved problems of pollution,
it involves also, necessarily, the global human environmental problems. The
human environmental problems too are related to pollution caused by, industrial
activities, but they are so in greater dimension. They include a wider range andmore far-reaching problems. Human environmental problems are related to
all the aspects of our lives, and thus above the level of industrial activities. Te-

chnical innovation, urban concentration of population, motorization, many kindsof functional and physical conditions in urban living and our behavior as consu-

mers are causes of human environmental problems, as the report of U. Thanthas eloquently stated.

However, when deeper concern is given to these problems, it should berecognized that concentration of population, technical innovation, and urbanization are greatly connected with industrial activities, directly or indirectly. Ac-

cordingly, industrial firms and their top management should not be unconcernedwith these phenomena. Each firm or each top management, respectively might
not be responsible directly, but they owe their concern of this matter as membersof the industrial world.

The problems of the level of the human environment seem to be given more
attention in Western countries, while in Japan the problems of the level of pol-lution are given more importance, The first stage, environmental pollution
problems are equally acute in Western countries now, but they have already beenchallenged for decades. A part of them has been overcome. At the end of
1968, human environmental problems in Stockholm were indicated by the U. N.

In May 1969, as stated before, a relating report was made by U. Thant, He
emphasized the crisis of human environment. In February 1970, there was"President Nixon's Message to Congress on Environmental Pollution Control."O. E. C. D., N. A. T. O. and E. C. also have studied these problems. EspeciallyO. E. C. D. seems to dea! actively with the permissible level of pollution as one

ENVIRONMENTAL POLLUTION PROBLEMS FROM 5

THE VIEW POINT OF BUSINESS MANAGEMENT
of its subjects of discussion, in connection with unfair international trade com-

petition. Japan should tackle to the human environrnental problems, together
with the problems of pollution which she has been begun to challenge just now.

rv
Environmental problems thus appear in Japan at both stages at the sametime. Before Japan was ready to deal with the first stage or the problems ofpollution and absorb the social costs of industrial activities, Japan is inevitably

confronted with the human environmental problems in a greater dimension.
The writer will explain his understanding of this point in greater detail, andcompare it with the process in western countries.
We find in American and European countries the terms "industrial estate,""industrial district," and "industrial park." They are a sort of the physicalsystems. A certain number of industrial•establishments located in certain arrang-

ed areas, according to a land-use plan, and assured to maintain a good balancewith its environment; there is a public or private management body for maintaining its good external and internal conditions. It is "a planned and managed

industrial estate." This type of industrial estate was experimented with inManchester, England, in 1897, and in Chicago, U. S. A., in 1905, for the. firsttime. Both still exist and are developing.
Aside from these, early in 1900, the so--called "Garden City Movement" wasstarted' by Ebenezer Howard in England. Two model garden cities were experi-•mentally constructed by his Garden City Corporation. At that time, a few entre-

preneurs tried to beautify the environment of their factories. Several such
examples can be found in England and U, S. A. These trials show that the environmental problems had arisen through industrial activities at that time. Moreextremely to say, the land-use by industrial factories had begun to be criticized.

In England, 100 years had elapsed since the Industrial Revolution. Industries
had developed so enormously during this period that necessarily people engaged
in these industries concentrated in certain districts, and many industrial towns

had grown without any land-use planning. Then physical and social urban
problems arose here and there. The behavior of industrial firms perhaps could

generally be blamed for this. This was the back-ground or the enviionment
condition under which several trials by a few creative entrepreneurs, the develop-

ment of industrial estates, and the Garden City Movement were experimented
with. The same conditions existed in U. S. A. All these trials concerned environ-mental problems. They'were systematic attempt and a kind of physical system
in present terms. We can now find in U. S. A. 1,OOO and over industrial parks,

MINORU BEIKA

6

research parks and newly planned towns and, in England, 20 or over New Towns

thanks to the New Town Act and many industrial estates. These have been
experienced for the past 50 years. But such experiences have not been madein Japan until recently.

v
Public relations and community relations with business policies are the next

points. These managemcnt techniques also have been introduced into ourbusiness world after the War as a new knowledge. But they have practitionallybeen realized to a minor extent. Only "publicity" as part of the concept of public

relations has been developed, mainly a means for sales promotion.
The concept of public relations seems to have been formed in the last fifty
or sixty years in U. S. A. in the process of management execution. In the early
1900's, big businesses developed and some adopted unfair policies in their competition. This behavior was severe!y criticized by the general public. Reflecting

on this, some big businesses began to adopt business policies toward the public
in order to maintain better relations with various interest groups and so to recover

their confidence. In the 1920's, they met consumer movements, and so they
were inclined to become more public-conscious. At the end of the 1920's and the
beginning of the 193G's, their public relations policies were tested during theunemployment conditions in the world-wide economic crisis. They executed
seriously their business policies, with consideration of both self-intereSt andsocial responsibility.

In public relations, public means the interest groups of an industrial firm;
they are the customers, suppliers, fellow traders, gommunities, central and local

governments, labour unions, mass communications and so on. Public relations
as a business policy means that the firm should have good relations with its groups,

through management activities. Accordingly, their sphere is very wide.
After the War, business policies by public relations seemed to be inadequate,

and requiring more care and attention. People, citizens, and communities began

to have more environmental needs, and a better environmental climate. Moreover, environmenta1 pollution problems developed seriously. The social costs

caused by private enterprises were discussed. Industrial firms were often

blamed for pollution problems, The importance of community relations, abranch of public relations, began to be recognized by industrial firms in about
1950.

Community relations as business policies have gone through roughly threestages. The first was the "not to do -stage." It means: "not to given any

ENVIRONMENTAL POLLUTION PROBLEMS FROM 7

THE VIEW POINT OF BUSINESS MANAGEMENT
trouble through industrial activities to the community." Secondly: "to do theminimum for the communities," that is to assume the minimum obligation toward

the community as a so-called corporation citizen. Thirdly: "to cooperate actively with the community" consisting in philanthropic and educative activitiesof the community through financial and physical help to the community, andpassing know-how or management helps to the community.
It is said that since then environmental pollution and the social costs caused
by industrial activities have been challenged relatively well in U. S. A., throughbusiness policies like public relations and community relations internally, andnew physical systems like industrial estates and other land-use means, externally.
In spite of these activities, the industrial world could not avoid more sei'ious

environmental pollution because of enormous industrial developments, and thus
human environmental problems arose again, in the latter half of the 1960's and1970's. Some journals about "public relations" have called these phenomena acrisis in public relations, and a new dimension in public relations. This tooshows the recent problem-consciousness.

Recently, the top-management in Japanese businesses has generally been
conscious'of the community, and is community-minded, but this tendency springs

from the environmental conditions. Such is the Japanese dual environment
problem.

VI
How to confront internally this dual environmental problem, in business
policies, and through what systems to approach it externally, that is at present theimportant question.
At first, we will discuss the problem with regard to internal business policies

concerning the environment. Of course, it is wrong to presume all Japaneseindustrial firms have not adopted business policies regarding community relations. Rather we can say that some industrial firms have endeaVored to establish

good relations with their communities. They are found in the local industrial

districts, especially in single industry towns or company towns. In single

industry or company towns, managements have been community-conscious,and adopted policies leading to good relations, because their industrial activities

affect greatly the life of these communities, We can find many such cases intowns of the shipbuilding, metallurgical, and some other industries. Thesefirms have done much for their commmunities.
However, the business policies of these firms have not always been systematic,

and far-sighted enough; so to speak, the policies have come into being rather

8 MINORU BEIKA
naturally or unconsciously.

However, such cases can be found only in local single industrial districts.
In the principal industrial districts, there was until recently much less environ-ment-or-community-consciousness. In other words, many industriql firms
have not always been interested in their communities.
Therefore, it is very important now for them to establish business policies
for community relations, as one of the basic factors to confront the pollution
problems and to absorb the social costs caused by them.
In order to establish community relations, the industrial firms must executeinternal
and external policies. .
At first,, the top management must establish a basic external policy for community, and their complete internal company communication. Without goodinternal communication through organization, the firms can not establish goodcommunity relations, even if they establish a basic policy toward the community.

The challenge to environmental pollution must be based on their communityminded polices. The policies of community relations consist in the threestages: "not to do," "to do the minimum," and "to cooperate actively," as stated

before. Here, "not to do`' is the most important of all.
To establish good community relations, several factors must be considered:(1) A person of the top management must be in charge of community relations.

(2) Management staff for research and development of policies of community
relations is needed.
(3) From the top level to the lower management level in line organization, thesepolicies must be smoothly communicated.
Recently, a special section and staff responsible for environmental pollution
have been established in many Japanese industrial firms, and they will be obliged

soon by law to create responsible posts in their organizations. But all theseactions should be based on community-consciousness and its action programs.

The present environmental pollution should be solved as being one of theactivities of community relations in view point of wider-range responsibilities

by the firms. The environmental problems and community relations are linked
to the philosophy of present business firms.

' Environmenta! pollution in relation with management problems should bechallenged in the following processes as a base of thinking:(1) Recognize the existence of social costs as environmental pollution problems

caused by industrial activities. There are some cases where recognition
could induce them to settle their pollution problems and yet no private
costs arise, because environmental pollution is due to the unconsciousness

of industrial firms. -ENVIRONMENTAL POLLUTION PROBLEMS FROM 9

THE VIEW POINT OF BUSINESS MANAGEMENT(2) Contrive to absorb technically and organizationally the social costs in theprlvate costs.
(3) Solve pollution problem related to social costs by technical and management

innovations.
Through these processes, it can be hoped that the pollution problems offera chance to develop a higher level management, rather than being a troublesome

obstacle for progress. Such positive thinking and behavior of management are

most needed now.
VII
However, such internal positive action by the management is not yet enoughto solve all the problerns. We must also pay attention to external action, Thatmeans that the relations among industrial firms with each other, or with otherorganizations, are not indispensable. This is the so-called "systems approach."

Of course the concept of systems approach is used internally and externally.
But here it will be applied to external relations only.

Environmental pollution, in most cases, is not only due to the activities
by a single factory, but also to the accumulation of pollution caused by otherfactories. Therefore, industrial firms must not only endeavor to overcome theirown trouble, but also the accumulated phenomena must be faced and overcome.
In the latter case, administrative actions by the central and local governments

and other public organizations are necessary together with private actions byindustrial firms. But the importance of cooperative actions by private firms
should not be overlooked. These public and private actions should be organizedsystematically and management-orientedly. This means that positive cooperative actions by both sides are more desirable than legal and restrictive actions
alone.

Many experiments such as in industrial estates, industrial parks and new
towns mentioned before, are some kinds of the management oriented approaches
or systems approaches. The writer calls these types of physical experiments"the planned multi•-functional physical system." In other words, they are
creative designs to decrease non-planned and uneconomical results of environ-ment problems brought about by individual planning. This is the problem of
non-planning by accumulation of individual planning. The physical results by

non-planning must be overcome by some sort of physical systems. It is
indispensable for developing such creatively planned multi-functional physicalsystems that knowledge and experiments related with these problems areaccumulated and systematically and management-orientedly synthesized. These

10 MINORU BEIKA'

creativities need several factors for development:(1) The need for groups concerned to cooperate(2) The need to grasp and understand their respective functions, philosophies,

logic of behavior and problems to be challenged(3) The need of their research and development to realize an interdisCiplinary

approach(4) The need, at first, to approach systematically to grasp the actual conditions

related with the problems, and then secondly, to develop new systems tosolve the problems. ' •VIIISuch a systems approach has close relations with management techniques.

The term "system" has a wide meaning.
"System" has roughly the two meanings. One is the system which isnaturally or spontaneously formed and exists actually and can be found by researchand study of actual circumstances. The other is the system which is artificiallyformed to accomplish a certain aim, and is created for an optimum solution.
The former seems to have the two branches. One is related with the biologi-

cal or organic system. Recently such systematic thinking is connected with theecology or ecosystem to which great attention is paid now, regarding humanenvironment. The other is related with the mathematical system, which is
chiefly linked with the problems of the relationship of the factors quantitatively,

rather than the substance of the factors as in the biological system. To solve
the present problem, environmental pollution, we must first of all grasp systematically the actual condition. But how to integrate the biological system and themathematical system is now one of the problems in systems approach.

The latter system solving seems to be a technological system, and to befound in management science. The concept of this system can be applied to solve

many kinds of social and economic problems. Environmental problems are oneof the typical cases to which it can be applied.

Thus, the systems approach to environment problems involves two processes. The first is to grasp systematically the actual conditions, and to clarify the

focus points of the problems. The second is to create and organize an optimum
system to solve the problems. Of course, these processes are very diMcult, but
at least, they are the best way to challenge the environment problems.

In environmental pollutions problems, many kinds of public and privatebodies and individuals are complicatedly related with each other. Each bodymust be problem-conscious and cooperate-minded. Upon the base of this be-

ENVIRONMENTAL POLLUTION PROBLEMS FROM 11

THE VIEW POINT OF BUSINESS MANAGEMENT

havior, each body must endeavor to execute its social responsibilities in internalmanagement control and external cooperation to solve systematically the problemsby the technological and social systems approach.

IX
Japan has been confronted with the dual environmental problems as said
repeatedly. The problems of the first stage, the direct environmental pollution,

have rapidly increased, different from Western countries where it has been already dealt with for several decades. Japan has only recently begun to tackle

it, following the experiences of those countries. And yet at the same time,

Japan has been confronted with the problems of the second stage, the humanenvironmental problems, alike those countries. The problems of the second
stage are so diMcult to overcome that their solution has only just now begun to

be researched and taken up. Japan, too, must develop ways and means to overcome them, cooperating with the other countries.
Moreover, in Japan, there are certain characteristic circumstances, such as

narrow space, limited flat land, abundant population and rapid development.
Therefore, it is indispensable for Japan to create herself the ways and means
to overcome these problems. At the same time, Japan must internationalize her

industries and introduce freedom of trade and movement of capital. The importance of research and development of Japanese industries had increased great-ly. Research and development in the field of environmental problems seem tobe one of the most proper goals now. These problems or goals will constitutethe useful means for the promotion of the abilities of research and developmentin the business world. The approach is not only useful for the practice of social
responsibilities of the industrial firms, but also for the advance of business mana-

gement. The research and development stated here include not only the technical side, but also the management side.
In conclusion, the Japanese environmental pollution problems are not only
due to the behavior of industrial firms, and the process of th.e development ofbusiness management, but also due to the characteristic history of economic
development, and the natural, economic and social conditions of Japan.
Anyway, these problems need positive actions of public organizations, butthey must also energetically be taken up by the industrial firms through environ-ment-conscious internal business policies and external cooperation based on thesystems approach in a wider meaning. It will be their social responsibility
and a new chance for their creative development.

PATTERNSOFTHE JAPANESE ENGINEERING
TRADE (1951-1970)
Fukuo KAwATA
1. Introduction
The purpose of this article is to make clear some of the features in theengineering trade of postwar Japan. By engineering products (in French"ptoduits me'canigues et e'lectrigues") we mean machinery (electrical as well as non-electrical), transport equipments and precision instruments.

From 121 million dollars in 1951 the amount of export of engineering products from Japan increased 74 times to 8,941 million dollars in 1970, while thetotal amount of all commodities of her exports rose 14 times from 1,355 million

dollars in 1951 to 19,318 million dollars in 1970. The share of engineering
products in her total export commodities, therefore, came up from 90/. in 1951 to

460/. in 1970, showing their growing importance in the Japanese export trade.

On the other hand, the amount of imports into Japan of this kind of products
increased 38 times, from 61 million dollars in 1951 to 2,298 'million dollars in
1970, whereas the total amount of all commodities of her imports grew 9.4 times
from 1,995 million dollars to 18,881 million dollars. Thus the share of engineer-ing products in her total imports moved up from 30/. in 1951 to 120/. in 1970.
In the prewar days, the share of engineering exports and imports was 7.20/.
and 4.70/. respectively, while in the postwar years, these figures rose so rapidly
as to register in 1970 46.30/, in exports and 12.20/. in imports.

Development of theTable 1.

Year

Total Exports(A)

Total Imports

7. 2

(C)
951

8. 9

1, 99513. 8

2, 471

1, 03225. 5

4, 4918, 4522, on635. 2

19, 3188, 941

46. 3

Exports (B)2, Oll67
121
276

4, 055

1965
1970

1934-36928

1951

1, 3551955
1960

Source:Japanese Engineering Trade (in million dollars)Engmeermg B/A (e/.)

Engineering
Imports (D)D/C (O/,)

4.7

8, 169

45
61
142
435
760

18, 8812, 298

12. 2

Ministry of International Trade and Industry. Tsusho Hakusho (Annual
Survey of International Trade of Japan), Do, Nippon Boeki no Tenkai(Development of Japan's Trade), 1956. Do, Sengo Nippon no Boeki Nijunenshi(Twenty Years of Japan's Postwar Trade), 1969.

3.0
5. 7

9.7
9.3

FUKUO KAWATA

14

Although both exports and imports of engineering products increased remarkably, the growth of exports was especially rapid. (See Table 1.) In 1951,
the size of engineering exports was twice as large as that of engineering imports,
but in later years, especially in the latter half of the 1960's, the formers increased

more rapidly than the latters, so that in 1970 the ratio rose to four times.

The engineering exports also played a more important part than the engineering imports in the growth of Japan's total trade. For example, in the period
from 1951 to 1955, her total exports increased by 655 million dollars, of which
engineering exports took up 155 million dollars, that is, 23.60/. of the increase.

In the later period this figure came up to 37.00/. in the 195S--60 period, to44.20/, in the 1960=-65 period and to 54.90/. in the 196S-70 period, This meansthat more than half of the inciease of her total exports was made up of engineer-ing exports. This is chiefiy due to the large sums spent for investment in thisbranch of industry during the 1960's. On the side of import growth, the contribution of engineering products was not very large. In the 1951-55 period theshare of engineering imports in the increment of total imports was 15.70/.. This

figure came down to 14.50/. in the 1955-60 period, and 9.00/. in the 1960-65
period, but in the 1965-70 period it recovered to 14.40/o, the level of the 1955-60

period. (See Table 2.) The reason why the share of engineering imports in the
Table 2. The Contribution of the Engineering Trade to the Growth of Japan's Trade(in million dollars)
PeriodIncrease of
Total Exports.

(A)

Increase ofEngineering
Exports (B)

BtA (O/,)

Increase of
Total Imports(C)

1951-1955

655

516

2, 044

155
755

23. 6

1955-1960

37. 0

2, 0201960-1965

4, 397

1, 94444. 2

1965-1970

10, 866

5, 696

M.9

Increase ofEngineering
Imports (D)D/C (O/.)15. 7

2, 67881293
325

10, 7121, 538

14. 4

Source: Same as in Table 1

total imports or in the increment of total import failed to increase is that Japan

continued to import a growing amount of raw materials and fuels, accounting
for almost 600/. of her total imports. An international comparison as to the shareof the engineering trade in the total trade of the leading industrial countries,
reveals the fact that in all these countries the share of engineering exports in their

total export is larger than that of engineering imports in their total imports.
In the case of Japan, the percentages in the early postwar days are the small-

est both for exports and imports. The percentages of engineering exports,
however, rose gradually and in recent years, they have overtaken those of otherindustrial nations, while the percentages of her engineering imports have come up

14. 5
9. 0

PATTERNS OF THE JAPANESE ENGINEERING

15

TRADE (19Sl-1970)

so slowly that

now they remain the samllest among leading industrial.
natlons.

(See Table 3.)
Table 3.

'Ihe Shareof the Engineering Tradeof Leadingin the Total Trade

Industrial Countries (in O/,)

U. K.

France

Italy

Year

U. S. A.

Germany

1955

35. 0

40, O

37. 3

16. 4

20. 0

IZ3

1960

34.4

43. 8

43. 1

24. 7

27. 7

23. 2

1965

36. 9

46. 2

42. 0

26. 3

30. 3

31. 2

1967

40. 2

45. 0

41. 9

29. 0

33. 9

36. 6

1968

42. 2

45. 7

42. 0

29. 4

34.4

37. 9

1969

43. 8

46. 0

42. 0

30. 9

35. 0

38. 6

5.2

Japan

Exports

Imports
1955

3.9

4.6

3.7

10. 5

11. 1

1960

10. 0

9.6

7.5

14. 4

13. 0

9.0

1965

15. 7

13. 2

10. 5

20. 0

14. 9

9. 6

1967

23. 4

14. 4

13. 4

22. 1

16. 7

8. 7

1968

26. 2

14. 5

14. 6

23. 9

17. 9

9.8

1969

29. 1

15. 8

15. 4

24. 5

19. 0

10. 6

Source: The Bank of Japan, lnternational Comparison Statistics

Note: Figures relate to machinery and transport equipments (SITC 7).

The ratio of exports to delivery shows us the degree of importanceof theforeign market for the engineering industry of each country. This ratio

differs

not only according to branches but tto countries as well.
As for the engineering industries as a whole, Japan's ratio ranks fifth,

follow-

ing that of Italy, Germany, the United Kingdom, and France. In eachindivi-Table 4. International Comparison of Ratio of the Engineering Export to

Delivery (1966) (in O/,)

U.S.A.
(1965)

Germany U. K.

France

Italy

Japan

Non-electric Machinery
Electric Machinery

12.0

51. 0

36. 1

29. 0

(78. 4)

11. 1

4.8

27. 6

19. 3

17. 8

(40. 9)

14. 6

Transport Equipment

5.4

54.4

30. 5

(25. 7)(29. 0)17. 7

Precision Instruments

8.8

62. 0

32. 4

23. 4

(88. 8)

31.7

7.4

45. 9

3L 9

(24. 8)(49. 2)

15. 3

Total

Source : OECD, The Engineering Industries in North America-Europe-Japan 1966-67
Paris 1967.
Kikai Kogyo Kenkyukai (Research Society of the Engineering Industry),
Nippon no Kikai Kogyo, (The Engineering Industry of Japan) 1969
Note: Percentages in parentheses are derived from the estimated figures of delivery

by the OECD•

16

FUKUO KAWATA

dual branch, Japan occupies the fifth place with the exception of the preeision

instrument branch where she takes the fourth place. In general, Germany and
Italy hold upper positions, while the United States and Japan lower. France

and the United Kingdom take the intermediate places. (See Table 4.)

II. Commodity Pattern of the Engineering Trade
Engineering products are usually classified into four categories: that is,(1) non-electric machinery (machinery, other than electric) (in French "machines
non glectriques"), (2) electric machinery, apparatus and appliances, (3) transport

equipment, and (4) precision instruments (including watches and clocks). The
first group covers, for example, internal combustion engines, mgtal-working
machinery, textile machinery, agricultural machinery, oMce machines (including

electronic computers), sewing machines, mining and construction machinery,mechanical handling equipments and so on. (It should be noted that the electronic computers are included not in the electrical machinery, but in the oMce
machines.) The second group includes, for instance, heavy electric machinery,
television receiving sets, radio receiving sets, tape-recorders, insultated cable

and wire for electricity. The third group comprises such items as railway locomotives, rolling stocks, automobiles, motor-cycles, aircrafts, ships, and boats.
The fourth group consists of such kinds of commodities as scientific instruments,

binoculars, cameras, 8 mm cinecameras, watches, clocks, and the like.
The relative importance of these four groups varies according to exports orlmports.

1. Exports
As for export, non-electric machinery played an important part in the early
postwar years, but later their relative weight declined gradually, whereas theshare of electric machinery, though small at first, rose steadily throughout the

postwar period. Precision instruments accounted for less than 10 per centthroughout this period.
Transport equipment took up the largest share (except in 1951) through the

postwar period. (See Table 5.) Such predominance of transport equipments is
one of the characteristics of the engineering exports from Japan. This is becauseof her active and eMcient shipbuilding industry.

Each of the four groups of the engineering products is composed of various
articles. The composition of each group on the export side will be analysed in
the following.

(a) The non-electric machinery group

OF THE JAPANESE ENGINEERINGPATTERNS

17

TRADE (19Sl--1970)

Table 5. Commodity Pattern of the Engineering

Export from Japan(in million dollars)

Non-elctricElectric

Transport

Precision

Machinery

Machinery

Equipments

Instruments

276

61
97

1, 032

212

433

96

2, 976

624

16
33
291
865

1, 243243

8, 9412, O062, 8853, 443

628

Total

Year

Amount
1951
1955
1960
1965
1970

121

33

11

119

27

Percentage

1951
1955
1960
1965
1970

1oo. O

50. 3

13. 2

27. 3

9.2

100. 0

35. 0

12. 0

43. 2

9.8

1oo. O

23. 5

29. 7

37. 8

9.0

1oo. O

21. 0

29. 1

41. 8

8.1

1oo. O

22. 4

32. 2

38. 4

7. 0

1951-55

155

1955-60

756

17
258

157

574

ss
314
810

2, 0202, 200405

Increment

1960-65

1, 94436
115
412

1965-70

5, 965

1, 382

Source:16
147

Sameas in Table 1

Exports of Non-Electric Machinery

Table 6.

classified by Main

Items

(in million dollars):..s.g.soog•x"'ES8.,O•

N-ua
.8cog

:'-Ov-e)u)/yg•,•..qoodi

bo9.fi2r.S

ut
.2,

re

Year

sa-s-..g

6fr

a.e.s"Nomg•go},o.

Amount
10

15

zz
39

E•mcr"

--

1951

61

1955

97

26

1%O

212
624

47

55

1965

82

es

1970

2,oo6

196

129

1951

1oo.O

23.8

37.8

1955

1oo.O

27.0

40.0

1960

1oo.O

22.0

25.8

--

1965

1oo.O

13.1

13.3

IL7

1970

1oo.O

9.8

6.5

6.56.0-mrm24329---3.816.5

Percentage

Source :Sameas in Table 1

Note:

SITC 7161273

131120
6.4
5.5

18 FUKUO KAWATA
The main anicles of non-electrical machinery exported from Japan are inter-

nal combustion engines, oMce machines, metal-working machinery, textile ma-chinery, sewing machines, mining and construction machinery, mechanicalhandling equipments, bearings, and so on. In the early postwar years, textile
machinery and sewing machines held an important part, but in later years theirposition came down. In recent years, oMce rnachines, especially desk-top
calculators have made remarkable advance, taking up the first place in the non-electrical group. In 1970, the amount of exports of desk-top calculators reached

181 million dollars. (See Table 6.)(b) The electrical machinery group
The main items of electrical machinery exported are heavy electric machinery, (e.g. generators, motors, transformers and so on) telecommunicationequipments, tape-recorders, domestic electric equipment, insulated wire andcable, and the like.

The most important of all are telecommunication equipments which comprise chiefly TV sets and radio sets. In the 19SO's their share in the total electricmachinery was negligible but in the latter half of the 1960's it increased suddenly

Table 7. Exportsof Electrical Machinery(in million dollars)by Main Items

classified

:..o

di

ofwhich:

'dO

-

-N

.9

,9stpt8-otsodiF:igeee

Year

m

"o"

e."Bv,o.,Åío.pt-AÅí8

Total

me

noen.>.-

i'gR'Sfotr.gg"enE

g'sn

8mer

Amount
1951

16

3

2

1955

33

5

3

-3

145

ss

-1

1960

291

20

15

1965

865

63

30

417

1970

2,865

293

85

1,404

384

695

112

451

1951

1oo.O

20.4

12.5

1955

1oo.O

15.4

9.3

10

-3

-

9.8

3.5

9.2

13.3

49.9
25.0
24.2

3.2

3.9

16.5

217

-so

-9
eo

Percentage

1960

1oo.O

6.8

5.1

1965

1oo.O

4.3

3.5

m
48.0

1970

1oo.O

10.4

3.0

49.0

Source: Same as in Table 1

Note: SITC 72-

PATTERNSOF THE JAPANESE ENGINEERING 19
TRADE (1951--1970)and strikingly, reaching in 1965 and 1970 about one half of all electrical exports.

Other main items are tape-recorders and heavy electric machinery. The
former increased suddenly like TV and radio sets, while the latter decreased its

share, although it recovered a little in 1970. The fact tells us that Japan ishandicapped in the export of heavy electric machines, in spite of her splendid
Table 8. Exports of Transport Equipment classified by Main Items(in million dollars)
Year

Total

Railway
Vehicles

Road
Motor

of which:
Ships

VehiclesPassenger
Cars

Buses &
TrucksMotor-

1
16

1
10

115

2
5
oo
85

162

eo3

394

an

cyclesAmount
1951
1955
1960
1965
1970

3

33
119
433

11

1, 243

41

3
10
os
266

3, "2

72

1, 337

1oo. O

8. 2

9. 0

1oo. O

9.4

8.3

1oo. O

5.0

1oo. O
100. 0

22

16
78
288
748
1, 410Percentage

1951
1955
1960
1965
1970

5.7

49. 5

4.1

O.4

65. 7

22. 1

O.5
3.7

13. 9

2. 4

66. 5

3. 3

21. 4

9.3

6. 8

13. 0

60. 3

2. 1

39. 0

26. 3

11. 4

11. 2

41. 0

Same as in Table 1

Source:SITC 73

Note:

Table 9.

Year

Precision Instruments(in miliion dollars)

Exports of

Total

Binoculars

Camerasclassified by Main Items

8mmCinema Watches&
CamerasClocks

mount
1951

11

3

1

1955

9

1960

27
96

6

16

16

1965

as

as

58

23

26

1970

628

32

147

45

1so

ercentage
1951

1oo.O

27.0

10.0

1oo.O

31.8

22.2

1960

1oo.O

16.6

17.0

12.4

12.9

1955
1965

1oo.O

11.6

24.1

9.5

10.7

1970

1oo.O

5.1

pm.4

7.2

20.8

Source :Note:

Sameas in Table 1
SITC 861+864

.
-12

1

2

4

6.3
3.6

20. FUKUO KAWATA
success in the !ight electric machines. (See Table 7.)(c) The transport equipment group
The principal articles of transport equipments are railway vehicles, roadmotor vehicles, ships and so forth.

The most distinguished item has been ships, although its share has lately
been diminishing. In contrast, road motor vehicles have recently been increasing their share, approaching the ratio of ships. (See Table 8.)(d) The preeision instruments group
In the early postwar days, binoculars were the most significant item, but inlater years their share declined heavily, coming down from 320/. in 1955 to 5e/.

in 1970. Taking the place of binoculars, cameras increased their percentage,in 1970, to 230/.. The proportion of watches and clocks also increased during

the 1960's, although in the 1950's their share had decreased. (See Table 9.)

2. Imports
On the import side, non-electric machines hold the major part except in
1951. This differs from the commodity pattern on the export side, where nonelectric machinery takes third place following electric machinery and transport

equipment. Electric machinery ranks second and transport equipment takes
the third place. Precision instruments come last as they do on the export side.
Table 10. Commodity Pattern of Engineering Imports into Japan(in million dollars)
Year

Total

Non-electricElectric

Transport

Precision

Machinery

Machinery

Equipment

Instruments

Amount
1951

61

13

3

41

3

1955

142

92

17

23

9

32

1960

435

282

sc

87

1965

760

451

111

154

1970

2,298

1,262

478

4os

"

151

Percentage
1951

1oo.O

21.0

5,5

68.0

5.6

1955

100.0

65.2

12.3

15.9

6.6

1960

1oo.O

64.7

7.9

20.0

7.4

1965

100.0

59.2

14.6

20.4

5.8

1970

1oo.O

54.9

20.8

17.7

6.6

Increment
1951--55

81

79

14

18

6

1955-60

293

190

17

1960-65

325

169

77

M
67

23

1965-70

1,532

811

367

252

107

Source: Same as in Table 1

12

PATTERNSOF THE JAPANESE ENGINEERING 21
TRADE (19r,1-1970)(See Table 10.)Each of the four groups of imports consists of various articles. The breakdown of each group will be made clear in the following.

(a) The non-electric machinery group
OMce machines, especially computers, are the most eminent item, taking up
about a quarter of the total imports of non-electric machinery. Metal-working

machinery comes next to computers, followed by textile machinery. Noteworthy
is the fact that the proportion of internal combustion engines for aircraft has
been rising gradually, according to the increase of aircrafts operated in Japan(See Table 11.)(b) The electrical machinery group
Heavy electrical machinery, semi-conductor devices, and electric measuring

equipment are the important commodities, each accounting for about 200/o ofthe electrical imports. Telecommunication equipments are now less significant
in percentage, although they were responsible, in 1951, for 660/, of the electrical

goods imported into Japan. (See Table 12.) Her imports are now limited to
special articles, such as radars for ships and aircrafts, wireless equipments foraircrafts and so on.

(c) The transport equipment group
It is noticeable that the share of aircrafts registered is as high as 610/, of thetransport equipment imports in 1970, running far ahead of road motor vehicles
and ships. This is due not only to the expansion of Japanese air transportation
Table 11. Imports of Non-Electric Machinery classified by Main Articles(in million dollars)
Year

Total

OMce

Machines

Of which:

Metal-

Computers Working
MachineryInternal

TextileCombustion

MachineryEngines for
AircraftAmount
1951
1955
1960
1965
1970

76

1
13
74
95

8
16
50

21

as

168

102

77

100. 08.6

19. 5

1oo. O

14. 0

9.0

1. 4

4.8

13
92
282
546

53

14

133

1, 262

322

2.5
1

14

Percentage

1951
1955
1960
1965
1970

1oo. O

18. 8

5. 0

26. 5

5. 5

1oo. O

24. 0

13. 9

13. 8

6. 6

5.7

1oo. O

25. 5

19. 3

13. 4

8.0

6. 1

Source: Same as in Table1

Note: SITC 71

FUKUO KAWATA

22

Table 12. Imports of Electrical Machinery classified by Main Articles
Total

Year
Arnount (inHeavy

Telecommu-

Electric

nication

Machinery

Equipment

Electric

Semi-

Measuring

Conductor

Equipment

Devicesmillion dollars)

1951
1955
1960
1965
1970

M

8

111

18

478

93

2
4
10
11
53

1oo. O

4.2

66. 2

1oo. O

30. 0

21. 2

1oo. O

23. 5

29. 4

14. 7

1oo. O

15. 9

9. 9

20. 4

6.2

1oo. O

19. 4

11. 0

18. 3

19. 3

3
17

O. 1

5

5

23

7

87

92

Percentage

1951
1955
1960
1965
1970

Source: Same as in Table 1

Note: SITC 72
Table 13. Imports of Transport Equipment classified by Main Articles

Year

Total

Passenger-cars

Aircrafts

Ships

1
4

249

25
4
29
sc
61
61. 0

Amount (in million dollars)

1951
1955
1960
1965
1970

41
as
87

IM
4os

14
6
9
28

M

M

81

Percentage

1951
1955
1960
1965
1970

1oo. O

ss. 6

3. 5

1oo. O

os. 2

17. 5

16. 2

1oo. O

10. 8

50. 5

33. 4

1oo. O

18. 2

52. 6

22. 1

1oo. O

13. 3

61. 5

14. 9

Source: Same as in Table 1

Note: SITC 73
but also to the purchase of huge aircrafts (for example, Boeing 747). The importof passenger cars also increased in 1970, owing to the reduction of tariff for small

sized cars. (See Table 13.)(d) Theprecisioninstrumentsgroup
Scientific and optical instruments take the major part of precision instruments

imported into Japan, one half of which consists of measuring instruments. Watches and clocks accounted in 1951 for 540/., but later the percentage decreased
to 100/. in 1960. In the latter part of the 1960's, their share began to increase,

PATTERNS OF THE JAPANESE ENGINEERING

23

TRADE (1951-1970)

Table 14. Imports of Precision Instruments classified by Main Articles

Amount(inmillion

Scientific&Optical`

Total

Year

Instruments

Watches&Clocks

dollars)

1951

4

2

1955

9

7

1960

32

29

3

1965

4

33

11

151

115

36

Percentage
1951

1oo.O
1oo.O

46.0
80.8

54.0

1955
1960

1oo.O

89.7

10.3

1965

1oo.O

76.0

24.0

1970

1oo.O

76.0

24.0

1970

2

19.2

Source: Same as in Table1

Note: SITC 861+864
reaching 240/. in 1970. This is mainly due to the increase in the import ofcheap pin-lever watches. (See Table 14.)

Ill. International Comparison of the Commodity Pattern in the Engi-

neering Trade
1. Exports
In the 1967-1969 period, Japan ranks fourth among the leading industrial
nations as for the total amount of engineering exports, following the UnitedStates, Germany (F. R.), and the United Kingdom. The place ofJapan differs,

however, according to the group of engineering products. In respect to thenon-•electric machinery group, Japan ranks sixth. This means the weak competitiveness in the trade of this kind. Japan, however, occupies the second place,following the United States, in regard to precision instruments. Electricalmachinery is also the strong side of Japan. Here Japan takes the third placefollowing the United States and Germany. Japan ranks fourth as for the amountof transport equipment exported, following the United States, Germany, and theUnited Kingdom, but the difference in the afuount between the United Kingdom
and Japan is very small. The figures in Table 14 refer to the average of theperiod ranging from 1967 to 1969. The Japanese figure in 1968 and in 1969,
however, amounted to 2,236 million dollars and 2,631 million dollars, while thatof the U. K. amounted to 2,184 million dollars an'd 2,S71 million dollars respec-tively. Consequently, Japan came up to the third place in 1968 and 1969. The
strength of Japan in the category of engineering exports is chiefly due to her ship

KAWATA
FUKUO

24

building industry. The amount of ships exported from Japan during this period

occupies the top place, far exceeding that of other nations. Germany comesnext to Japan in respect to the export of ships, but the amount is less than one
third of that of Japan.

The comparison of the percentage of each category discloses to us that in
all countries except Japan non-electric machinery accounts for -more than or
about 400/. of the engineering exports. It is only in Japan that this kind of pro-ducts takes only little more than 200/., This reflects the comparative weakness

in this branch of Japanese industry. On the contrary, the percentage of ships
exported from Japan shows an astonishingly high level, disclosing the relative
strength of Japan in this field. Japan enjoys also an advantageous position in
the electrical machinery exports. This is chiefly because of her strong telecom-

munication equipment industry, whose products exported account for almost
half of the total exports of electrical machinery. (See Table 15.)
Table 15. Commodity Pattern of Engineering Exports from Leading Industrial

Countries (1967-69 average)
U. S. A.

Germany U. K.

France

Italy

Japan

Amount (in million dollars)

Total

15, 420

12, 276

6, 7464, 112

3, 6625, 445

Non-Electric Machinery

6, 486

5, 5843, 101

1, 6311,'754

1, 211

Electrical Machinery

2, 3242, 0371, O187oo

710

1, 544(907)(Telecommunication

(619)

(508)

(262)

(129)

(144)

Transport Equipment

5, 6323, 882

2, 253

1, 545

1, 0582, 200(Ships)Precision Instruments

(1ca)

(294)

(175)

(117)

(74)

(1, 068)

949

772

373

237

141

476

1oo. O

1oo. O

1oo. O

100. 0100. 01oo. O

22. 2

Equipment)

Percentage

Total
Non-Electric Machinery

42. 0

45. 5

46. 0

39. 6

47. 9

Electrical Machinery

15. 3

16. 6

15. 1

17. 0

19. 4

28. 3

(Telecommunication(4. 0)(4. 1)(3p 9)(3. 1)(1. 9)(16. 7)Equipment)

Transport Equipment

36. 5

31. 6

33. 4

37. 6

28. 9

40. 4

(Ships)Precision Instruments(O. 7)(2. 4)(2. 6)(2. 9)(2. 0)(19. 6)

6. 2

6. 3

5. 5

5.8

3. 8

8.7

Source: United Nations, Commodity Trade Statistics

Note: SITC 71, 72, 73, and 86

2. Imports
The place of Japan is at the bottom of the leading industrial powers withregard to the value of engineering imports, not only in total, but also inevery individual category of engineering products. The percentage of nonelectric machinery in the total engineering imports of Japan reaches about 600/.

PATTERNS OF THE JAPANESE ENGINEERING 25
TRADE (19Sl-1970)

during the period from 1967 to 1969. This ratio is the highest among advanced

countries. The main items are computers, metal-working machinery and textile
machinery.
Among the four categories the share of non-electric machinery shows the highest figure in each country's imports except for the United States, where the per-centage of transport equipment shows the largest ratio owing to the enormous
amount of automobile imports. The percentage of electrical machinery for all
countries is nearly the same, centering around the level of 200/.. The share of

precision instruments imported into these six countries fails to come up to

the level of lOO/.. (See Table 16.) •Table 16. Commodity Pattern of Engineering Imports into Leading
Industrial Countries (1967-69 average)
U. S. A.

Germany1 u. K.
'

France

Italy

Japan

Amount (in million dollars)

Total

i

8, 3803, 4373, 072

3, 703

1, 8891, 359Non-electric Machinery
Electrical Machinery

2, 2101, 415

1, 5201, 887

1, 521

Transport Equipment

4, 113

Precision Instruments
Percentage

140

750
954
319

571
710
267

670
869
278

924
390
412
163

802
242
189
126
100. 0Total

1oo. O

1oo e1oo. O

100. 01oo. O

Non-Electric Machinery

26. 4

41, 4

49. 5

51. 0

49. 5

59. 0

Electrical Machinery

18. 2

21, 7

18. 6

18. 0

20. 8

17. 9

Transport Equipment

49. 0

27, 7

23. 2

23. 5

22. 8

14. 8

Precision Instruments

6. 4

9, 2

8.7

7.5

8.7

9. 3

Source: Same as in Table 15

Note: SITC 71, 72, 73 and 86

IV. Geographical Pattern of the Engineering Trade ofJapan
1. Exports
The principal markets of Japanese engineering products are the Unitedand South East Asian countries. Since the beginning of 1960's, the share of
the United States has been rising, whereas that of South East Asian countries
has been falling. For instance, the percentage of the former rose from 18.80/,
in 1960 to 34.80/. in 1970, while that of the latter fell from 37.60/. in 1960 to 21.60/,

in 1970. Thus, the relative position of these two markets has been reversed.
It is a noteworthy fact that these two markets are so important as tb absorb morethan one half of the Japanese engineering products. The large amount of export to South East Asian countries is partly due to the economic cooperationFUKUO KAWATA

26

of Japan with these countries. Western Europe is the third largest inarket, whose
share increased from 12.10/, in 1960 to 17.40/o in 1970. The percentage of Africa

remained rather stagnant showing 10.80/, in 1960 and 10.50/. in 1970, although

it increased to 16.20/. in 1965. The share of Latin Arnerica was reduced byhalf from 13.00/, in 1960 to 6.10/. in 1970, notwithstanding the increase of theexport value rising from 133 million dollars in 1960 to 588 million dollars in 1970.

Oceania is expected to be a promising market, but its share is not very large atpresent. The percentage of the Sino-Soviet market is also quite small today.
(See Table 17.)
Table 17. Geographical Pattern of Engineering Exports frorn Japan(in million dollars)
1970

1965

1960
Destination

Amounto/oAmounto/oArnounto/o

1, 023

1oo. O

2, 975

1oo. O

8, 9411oo. O

386

37. 6

783

26. 4

1, 938

21. 6

(37)
(40)

(3. 6)(49)(94)(1. 6)(3. 3)(3. 1)

(296)
(344)

2. 8

196

2. 2

12. 1

13. 4

1, 555

17. 4

2. 1

83
399
123

2.8

EEC

29
124
21

4. 1

580

6. 5

(Germany)(11)(1. 0)(61)(2. 0)(267)(3. 0)

EFTA

M

5. 3

199

6. 7

637

7. 1

(U.K.)(12)(1. 1)(49)(1. 6)(279)(3. 1)

Total
South East Asia
(S. Korea)(Taiwan)West Asia
Western Europe(3. 9)(3. 8)

North America

2oo

19. 5

759

25. 4

3, 114

34. 8(U.S.A.)(189)(18. 8)(707)(23. 6)(2, 841)(31. 8)Latin America

133
111

13. 0

195

6. 5

ms

6.1

Africa

10. 8

as

16. 2

934

10. 5

(Liberia)(76)(7. 5)(366)(12. 5)(577)(6. 4)

Oceania

21
20

2. 0

115
158

3.8
5. 3

353
265

3.9
2.8

Sino-Soviet Area

1.9

Source: Same as in Table 1

Note: SITC 71, 72, 73 and 861+864
Exports to Liberia consist principally of ships under the fiag of convenience.

2. Imports
The sources for the supply of engineering imports center on North America

and Western Europe. The supply from these regions together comprise in 1960
980/. and in 1970 970/. of the Japanese engineering imports. This is because
other regions have not been able to export engineering products in large quanti-ties. The United States is by far the biggest supplier, accounting in 1960 for
630/. and in 1970 for 610/. of the total engineering products imported into Japan.

PATTERNS OF THE JAPANESE ENGINEERING 27
TRADE (1951-1970)

Western Europe comes next to the United States, recording 350/. in the 1960's
and in 1970. The proportions of EEC increased from 18.50/. in 1960 to 21.10/.
in 1970, while that of EFTA decreased from 16.20/. in 1960 to 13.50/. in 1970.
Thus the difference of the ratio between these two areas has widened. In 1970,

even the share of Germany alone surpassed that of the EFTA countries put
together. The percentage of the United Kingdom which showed 8.60/. in 1960rose a little in 1965, but declined to 5.60/, in 1970. (See Table 18.)
Table 18. Geographical Pattern of Engineering Imports into Japan(in million dollars)
1960

Arnount
Total

SouthEastAsia(S.Korea)(Taiwan)West Asia
WesternEurope

EEC

435
O.5
su

-O.3
153

1965

Amount

o/o

1co.O

'
m
m
35.0

760
2.1

H
-9.6
298

1970

Amount

o/o

o/o

1oo.O

2,298

O.2

37

1.7

1.3

(6)

(O.2)

(20)

(O.9)

39.2

803

O.4

1oo.O

-

35.1

81

18.5

158

20.8

483

21.1

(607)

(13.8)(115)(15.2)(334)(14.5)

EFTA

71

16.2

139

18.2

311

13.5

(U.K.)

(37)

(8.6)

(72)

(9.5)

(128)

(5.6)

274

63.0

428

56.2

1,425

62.1

(267)

(62.0)(416)(55.0)(1,412)(61.2)(Germany)

NorthAmerica(U.S.A.)

LatinAmerica

2.9

O.6

3.2

O.4

1.4

Africa

2.2

O.5

14.1

1.8

5.1

Oceania
Sino-SovietArea

O.4

.
m

O.8

-

23

S6

4.3

3.3

Source: Same as in Table 1

Note: SITC 71, 72, 73 and 861+864
Imports from Africa consist chiefiy of ships from Liberia.

It is to be remarked 'that the percentage of South East Asian countries inengineering imports, though negligible, has recently been increasing. 'V. Geographical Pattern of Trade in Important Categories of Articles'
1. Exports(1) Exports of Non-electric Machinery
The principal markets for non-electric machinery are the United Statesand Asian countries, followed by Western Europe.
The United States raised its share from 14,70/. in 1965 to 20.40/. in 1970,(1.0)

KAWATA
FUKUO

28

chiefly because of its rapid import increase of oMce machines, especially desk-top

calculators. In contrast, Asian countries are the chief market of such articles

as metal-working, textile, mining and construction machinery. The main articles exported to Western Europe are ofice machines, bearings, sewing machines

and mechanical handling equipments, although this market absorbs various
kinds of non-electric machinery. (See Table 19.)
Table 19. Exports of Non--Electric Machinery classified by Regions(in million dollars)
1970

1968

1965
Destination

Amounto/oAmounto/oAmounto/o100. 0624

1oo. O

1, 167100. 02, O06South East Asia

281

45. 0

544

46. 6

730

36. 5

(S. Korea)(Taiwan)West Asia
Western Europe(26)(4. 2)(143)(12. 2)(142)(7. 1)(35)(5. 6)(92)(7. 8)(i14)(5. 7)

14

2. 3

6il,

10. 2

3.8
9.6

15. 3

Total

EEC

33

5. 2

45
113
87

5. 9

31
306
190

(Germany)(15)(2. 4)(29)(2. 5)(94)(4. 7)

3.1

1. 5
9. 5

EFTA

16

2.5

North America(U.S.A.)

1oo

16. 0

36
249

2L 3

85
461

23. 0

(92)

(14. 7)(227)(19. 5)(408)(20. 4)Latin America

31

6. 2

24
14
68

5.0

5.2
3.6
4.0
5.7

123
88

6. 1

Africa

61
42
47
67

108
160

5. 4

Oceania
Sino-Soviet Area

2. 9
14. 2

Source: Same as in Table 1

Note: SITC 71(2) Exports of Electrical Machinery
Almost one half of the electrical machinery flows into the United Statesmarket, while the share of Asian countries, the second largest market, remains
about 200/. and Western Europe, the third largest market, takes about 100/. ofthe electrical goods exported from Japan. The main articles exported to theUnited States are telecommunication equipments such as TV sets and radio
receivers, which account for about 600/o of the total. Next come tape-recorders,

comprising about 200/. of the electrical exports to the United States. Heavyelectrical machinery and domestic electric equipment are also principal exports,
but their weight is very small as compared with that of telecommunication equip-

ments. Asian countries import chiefly telecommunication equipments, heavy
electrical machinery, tape-recorders, and domestic electrical equipments. Wes-

4.2

4.3

8.0

PATTERNSOF THE JAPANESE ENGINEERING 29
TRADE (1951-1970)
tern Europe also imports telecommunication equipment, tape-recorders andheavy electric machinery in fairly large amounts but the imported amount ofdomestic electric equipment is very small. (See Table 20.)
Table 20. Exports of Electrical Machinery classified by Regions(in million dollars)
1970

1968

1965

Destination

AmountO/eAmounto/o.tkenount

o/o

865

1oo. O

1, 812

1oo. O

2, 865

1oo. OSouth East Asia

208

23. 9

44-5

24. 5

603

21. 1

(S. Korea)(12)(1. 4)(26)(3. 0)(72)(141)(2. 6)(Taiwan)

(61)
(78)

(3. 4)

West Asia
Western Europe

32
81
39

2.9
8.7

4. 5

4. 2

M

3.9

3.7

87
355
198
134

3es

45. 7

53
159
75
67
909

3. 1

9. 4

50. 1

1, 425

49. 8

(376)

(43. 5)(847)(47. 0)(1, 328)(46. 5)

62
33
30

7.2
3.8

6.7

3. 4

4. 1

O.5

122
57
42
26

186
ee
eo
32

6.5
3.4
2.8
1.1

Total

EEC
EFTA
North America(U.S.A.)
Latin America
AfricaOceania
Sino-Soviet Area

3.6

(4. 3)

3. 1

2.3
1. 4

Source: Same as in Table 1

Note: SITC 72(3) Exports of Transport Equipment
The important markets of Japanese transport equipments are the UnitedStates, Western Europe, Africa and the Asian Countries. The principal commodities exported to the United States are land transport equipments such as
passenger cars, motor--cycles, trucks and busses, whereas those exported to Wes-

tern Europe and Africa are mainly water transport equipments such as tankers

and cargo boats. The Asian countries import both kinds, although the ratioof road motor vehicles is larger than that of ships. (See Table 21.)(4) Exports of Precision Instruments
The leading markets of Japanese precision instruments are, in the order of
their magnitude, the United States, Western Europe, and the Asian countries.
The United States takes about one third, Western Europe about a quarter, and
the Asian countries about one fifth of the exports in this category.

The principal commodities are cameras, 8mm cinecameras, binoculars,
watches and clocks. All of these items are enjoying steady expansion. Particularly watches, especially wrist watches, have been marking a remarkable advance(4. 9)

12. 3

6. 9

4.7

FUKUO KAWATA

30

Table 21. Exportsof Transport Equipmentclassified by

Regions(in million dollars)

1965

1970

1968

Destination

Amounte/oAmounto/oAmounto/o

1, 243

1oo. O2, 236

1oo. O3, 443

1oo. O

20. 8

13. 7

14. 4

469
61
733
86
372

13. 8

442
40
515
85
322
401

19. 7

North America

259
31
187
16
121
172

17. 9

1, O18

29. 6(U.S.A.)(1ss)(12. 7)(364)(16. 5)(915)(26. 6)

Latin America

es
415

6.7
33, 5

212
513

9.5

Africa

22. 9

231
730

21. 2

(Liberia)(364)(29. 4)(429)(19. 4)(575)(16. 7)

Oceania
Sino-Soviet Area

49
47

3. 9

98
15

4.4

140

4. 1

O. 7

oo

L7

classified by

Regions

Total
South East Asia

West Asia
Western Europe

EEC
EFTA

2,5
15, 1

1, 3

9,7

3.8

1. 8
23. 0

3.8

1. 8
2L 4
2. 5
10. 8

6. 7

/

Source : Same as in Table 1
Note: SITC 73
Table 22.

Exports of Precision Instruments(in millien dollars)

1965

1970

1968

Destination

Amounto/oAmounto/oAmountQ/o243

1oo. O441

1oo. O628

1oo. OSouth East Asia

36

14. 7

21. 8

136

21.6

West Asia
Western Europe

6

2, 4

ee
12

2.7

17

2.7

as

27. 2

103

23. 2

161

25. 6

EEC

35

14, 3

106

16. 9

29

12, 2

58
ss

13. 3

EFTA

8. 7

45

7.2

North America

91

37. 6

162

36. 8

2oo

33. 3
(30. 4)Total(U.S.A.)(81)(33, 3)(149)(33. 8)(1eo)

Latin America

16

6. 5

6.5

Africa7

2. 9

Oceania
Sino-Soviet Area

11

4, 6

IO

4. 0

29
12
18
9

ng
20
25
13

Source: Same as in Table1

Note: SITC 861+864
into the Asian market in recent

2. Imports(1) Non-electric machinery

years.

(See Table 22.)

2. 8

4.0
2. 0

7.6
3. 2

3.9
2.1

PATTERNS OF THE JAPANESE ENGINEERING 31
TRADE (1951-1970)

The principal articles of non-electrical imports are oMce machines, especial-

ly computers, metal-working machinery, textile machinery, and internal combustion engines for aircrafts. The suppliers are almost limited to the United Statesand Western Europe. In 1970 the United States accounts for 520/. and Western
Europe for 450/.. The United States is stronger, as a supplier, in oMce machines

and internal combustion engines for aircraft, but she is weaker than Western

Europe in metal-working machinery and textile machinery. (See Table 23.)
Table 23. Imports of Non-Electric Machinery classified by Regions<in million dollars)
1965

1968

1970

ProvenanceAmount

o/o

451

U.SA

229

Western Europe

207

46. 0

EEC

115

25. 6

mo

27. 4

(Gerrnany)(France)(85)(18. 8)(16)(19. 5)(238)(18. 8)(14)(3. 1)(24)(2. 9)(13)(2. 9)(31)(3. 7)(49)(42)(3. 8)(Italy)

EFTA

91

20

(U.K.)(48)(10. 7)(65)(7. 9)(Switzerland)(16)(3. 5)(40)(4. 8)(Sweden)(17)(3. 8)(26)(3. 1)

Total

Amounto/oAmounto/o1oo. O822

1oo. O

1, 262

1oo. O

57. 0

421

51. 1

690
539

54. 6
42. 8

188

14. 9

(86)
(50)
(35)

(6. 8)

Source: Same as in Table 1

Note: SITC 71(2) Electrical machinery
The main commodities of electrical imports are heavy electrical machinery,

telecommunication equipments, and electric measuring equipments. In 1970
the United States is responsible for about 700/o and Western Europe for about
200/, of electrical imports. The United States is, as a supplier, far stronger thanWestern Europe in respect to the above important commodities. (See Table 24.)

(3) Transport Equipment
The major comrnodities of transport equipments imported are aircrafts,
passenger cars, and ships. In this field the United States is the biggest supplieraccounting for about three quarters of the total imports., while Western Europe
remains far behind. (See Table 25.) Almost all aircrafts are imported into Japan

from the United States. More passenger cars, however, are supplied by Western

Europe than by the United States. In 1970 the former furnished 30 million
dollars of passenger cars while the latter 23 million dollars. Ships are chiefly

imported from Western Europe and Liberia.

(3. 3)(3. 9)(2. 8)FUKUO KAWATA

32
Table 24.

by Regions

assi fied

Imports of Electrical Machinery cl(in million dollars)

1968

1965

1970

ProvenanceArnounto/oAmounto/oAmounto/o

111

1oo. O241

1oo. O478

1oo. O

U.S.A.

70

63. 0

ik'

72. 0

341

71. 2

Western Europe

40

36. 0

23. 1

103

2L 9

EEC
Germany

18

16. 2

?g

12. 5

61

12. 7

11

10. 0

6.7

33

6. 9

Italy

1

12

2. 5

France

O.2
2.5

8

L6

Netherlands

2
3

O. 2

g

O. 1

1. 4

EFTA

21

18. 1

10, 1

7
39

U.K.
Sweden

12

10. 8

5.0

20

5
2

O. 4

O. 2

8

Total

Switzerland
South East Aisa

O. 3

O. 2

O. 5

TaiwanHong Kong

O.4

Source:

iZ

g
,

8.2
4.2
16

L2

7

1, 4

2. 1

28

5. 8

15

3. 1

7

1, 4

6

1, 2

1. 2

O.5

S. Korea
Note:

,2

Sarne
as in Tablel 'SITC 72
Irnports from South East Asia are chiefly semi-conductor

devices.

tt'
Table 25. Imports of Transport Equipment classified by(in million dollars)

Regions

1968

1965

Amounto/o1970

Amounto/oAmount

o/o

154

1oo.O

175

1oo.O

4os

1oo.O

U.S.A.

95

60.0

112

M.O

302

74.4

WesternEurope

30

19,5

co

23.1

93

22.9

16

10,4

19

11.1

os

11.8

13

8,4

16

9.1

42

10.3

O.5

O.3

O.2

4

1.0

13

8,4

20

11.3

45

IL1

Total

EEC
.,Gerrnany
Netherlands

EFTA

'

U.K.
Sweden

10

6.5

13

7.4

16

3.9

O.7

O.5

2

1.1

13

3.2

Norway

L3

O.8

4

2.2

13

3.2

'

8

4.5

5

1.2

Others;Liberia

Source: Same as in Table1

Note: SITC 73
Imports from Lib. are ships.
emaPATTERNS OF THE JAPANESE ENGINEERING 33
TRADE (19Sl-1970)(4) Precision Instruments
Precision instruments imported are divided into two classes; the first includes

scientific and optical instruments and the other watches and clocks. The main
suppliers are, as in other fields, the United States and Western Europe. Although

the United States furnishes more precision instruments, her superiority overWestern Europe is not as large as in other branches. For example, in 1970,the share of the former is 520/o, while that of the latter 450/..'

As for scientific and optical instruments, the percentage of the United States
reaches a high of 700/., while her share in watches and clocks is only about 100/..

Western Europe, particularly Switzerland, holds the overwhelming supremacy
for the imports of watches and clocks into Japan. (See Table 26.)•'
Table 26. Imports of Precision Instruments classified by Regions<in million dollars)
1965

1968

1970

ProvenanceAmounto/oAmounto/o"1oo. O89

1oo. O

22

50. 0

45

50. 5

79

52. 2

Western Europe

22

50. 0

41

45. 9

67

44.6

EEC

8.6

19. 5

16

17. 6

29

19. 3

Getmany

6

13. 6

11

12. 4

21

13. 8

France

O.7

2

3. 4

Total

U.SA

Amount,151

o/o1oo. O

Italy

1. 3

3.0

2

2.2
2.2

3.3

2.2
2.1

EFTA

13. 2

30. 0

25

29. 3

ss

25. 3

Switzerland

9

22. 0

18

20. 2

29

19. 2

U.K.

3

7.0

5

5.6

6

3. 9

2.3

1. 5

Others: Taiwan

O. 1

Source: Same as in Table 1

Note; SITC 861+864'
VI. international Comparison of Geographical Pattern of the Engineer''tt

1. Exports .

The principal markets of the United States are Canada and Western Europe;

these two markets accounted in 1969 for 31.50/o and 25.60/. respectively. In

contrasr, Germany, France and Italy largely depend upon Western European
market, where intra-regional trade of the EEC plays an important role. The
weight of the United States market is not very large for these three European

nations, particularly not for France, whose dependance on the United States

Table 27. Geographical Breakdown of the Engineering
Industrial Countries (1969) (in million

U.SA.

Total

U.K

Gerrnany

Exports(i)from Leadingw"

dollars)

France

Japan

Italy

Amounto/oAmounto/oAmounto/oAmounto/oAmounte/oAmount%16, 380

1oo. O13, 375

1oo. O

7, 0901oo. O4, 5991oo. O

4,103

1oo.O

6, 1651oa O

1, 680

12. 6

7ss

11. 1

205

4.4

352

8.6

1, 832

29, 6

st

O.8

176

2.8

U.S.A.

Canada5, 194

31. 5

170

1. 3

328

4. 6

ss

O.8

Latin American

2, 286

13. 8

601

4. 5

333

4.7

249

5.4

3e3

7.4

355

5. 7

4, 20625. 68, 45763. 2

2, 720

38. 5

2,396

58.5

817

13. 2

2, 34814. 3

4, 52233. 8

1, 313

18. 5

2 654
'
1 791
'

57. 6
39. 1

1,486

36.2

265

4.3

1, 346

8. 2

2, 973

22. 4

799

11. 3

65

O.4

510

3.8

ax

3. 4

569

Republics

W. Europe

{

EEC
EFTA
E. Europe

573

12. 5

486

11.8

am

5. 3

288

6. 2

310

7.5

95

L5

8.0

170

3.7

218

5.3

ac3

3.3

132

2.8

115

2.8

331

5. 3

575

12. 5

133

3.2

581

9.4

17

O.4

11

O.2

ss

O.9

Middle East

665

4.0

me

3. 6

Australia, New Zealand,South Africa

803

4.9

425

3.1

926

13. 1

Other African countries

am

L6

287

2.1

402

5.7

40

O.3

6

China (Main-Land)
Japan

811

4.9

195

1. 5

95

1. 3

ns

O.6

no

O.7

Other Asiari countries

977

5. 9

487

3. 6

521

7. 4

156

3. 4

163

3.9

1, 651

26. 8(Sterling Area)(2, 418)(14. 8)(1, 575)(11. 8)(2, 170)(30. 6)("2)(9. 4)(490)(12.0)(1, 067)(17. 3)(Developing Countries)(4, 443)(27. 0)(1, 898)(14. 3)(1, 983)(28. 0)(1, 237)(27. 9)(850)(20.3)(2, 856)(46. 3)

Source: Same as in Table 14

Note: (1) SITC 7

vc
x
c
o
x
>
$
>
H
)•

PATTERNSOF THE JAPANESE ENGINEERING 35
TRADE (1951-1970)
market is quite small, registering for example in 1960 4.40/., The exports of
the United Kingdom are directed chiefly to Weste"rn Europe and the sterlingarea, the percentages of these two main markets were in 1969 38.50/. and 30.60/,
respectively, while the United States rnarket accounted for only 11.10/..

Japan concentrates her exports on the U. S. A. and on Asian countries,
Western Europe ranking third in importance. The ratio of exports to developing countries to the total of exports is by far the largest for Japan when comparedwith other advanced nations. This is one of the characteristic features of Japan's
trade.

The share of developing countries as a market of the engineering trade is
the smallest for Germany and the largest for Japan, that of the other four coun-tries lying in between. The magnitude of the engineering exports from Japanto developing countries, ranks, second, following the United States. (See Table27.)

2. Imports
The United States is supplied with engineering products chiefly by Canada,Western Europe and Japan. The dependence upon Canada is largest, followedby that upon Western Europe and Japan, Notwithstanding the small weight ofJapan as a supplier to other industrial countries, the United States purchases a

relatively large amount of engineering products from Japan. The comparatively

large dependence of the United States on Canada and Japan is one of the mainfeatures of the United States' engineering imports.

On the other hand, the dependence of Japan's import upon the UnitedStates is so large that the percentage of her imports from there goes up to ashigh as 600/., far surpassing the corresponding figures from other countries.

Germany, France and Italy are supplied with engineering products chiefly byWestern Europe. Their dependence upon Western European sources rises ashigh as 700/. to 800/,, while the share of the United States as provenance ranges

from 150/. to 200/.. The United Kingdom remains half way. Although her
dependence upon Western Europe is larger, the United States accounts fora fairly high percentage as her supplier. (See Table 28.)

Vn. Conclusion
The patterns of the Japanese engineering trade differ widely when comparedwith those of other leading industrial nations.

1. The first point is that, in comparison with other countries, Japan depends
upon the United States to the highest extent not only as a market but as a source

FUKUO KAWATA

36

Table 28. Geographical Breakdown of Engineering
Countries (1969) (in million

Imports into Leading Industrial
dollars)

U.K.

Germany

U.S.A.

ProvenanceAmounto/oAmounto/oAmounto/o

9, 7681oo. O3, 939100. 03, 166

1oo. O

18. 7

1, 24439. 4

4, 201

43. 0

676
10

O. 2

58

1. 8

3, 40635. 0

3, 08278. 0

1, 68653. 2{

2, 19922. 6

2, 12253. 7

1, 22538. 8

1, 130

11. 6

22. 6

1, 735

17. 7

389
53

12. 3

Japan

892
101

Total
U.S.A.

CanadaWestern Europe

EEC
EFTA

France

Total

2. 5

L7

Japan

Italy

4, 217

1oo. O2, 366100. 01, 501100. 0O.3

Western Europe

3, 44382. 0

1, 82472. 0

2, 780os. o

1, 443

oo. 8

15. 0

356
20

15. 0

902
16
518
307
208

60. 0

O. 2

487
7

20. 6

, Canada

651
12

15. 5

U.S.A.

{

EEC
EFTA
Japan

631
52

12

1.1
34. 2
20. 4

13. 8

O.8

Source: Same as in Table 14

Note: (1) SITC 7
of supply as well.

2. The second point is that ships hold an important part among engineering
products exported by Japan. This is quite different from the export structureof other countries.

3. The third point is that the share of developing countries as markets for en-•gineering exports is the largest in Japan and the amount of exports directed tothese nations is the second largest only to that of the United States. '4. The fourth point is that Japan generally exports capital intensive products
or producer goods, such as heavy machinery, to developing countries, and labour
intensive goods or consumer goods, such as light machines, to industrial nations.

5. The fifth point is that as regards labour intensive commodities, for example
transistor radio receivers, the competition with developing countries, such as

Hongkong, Taiwan, and South Korea, has recently been growing keener owing
to the rising wage costs of Japan, so that Jqpan's share in this branch has been

declining, especially on the United States market. This tendency will bestrengthened with the implementation of preferential tariff schemes for the
products of developing countries.

In order to expand her engineering trade, Japan should, therefore, shift
her emphasis from light or simple machines to heavy or sophisticated machinery.

OPTIMAL PROCESS OF ECONOMIC DEVELOPMENT
Hikoji KATANo
I. Introduction
Many descriptions of development processes have been given over theseyears('): some of them show us the optimal patterns for development.{2> However, these do not consider the process with debt-servicing.(3) The objectiveof this study is to investigate an optimal development process with debt-servicing.

This study is in the line of the "two-gap" theory to be developed towards a direc-

tion mentioned above.(`) And it will be developed in terms of Pontryagin's
maximum principle.(5)IL Theoretical Framework
Development processes of developing economies start with utilization of
net capital infloWs from abroad. However, this sort of net capital inflow may
be not donation from abroad, but is to be paid back to the lending countries undercertain conditions. We consider the developing countries to be self-sustainedat the time when these two stages (both borrowing and debtd-servicing) will becompleted. And, we consider further that their economies will realize a target
rate of growth of GDP at the time they realize their self-sustained situation.
Variables and parameters to be used in the following arguments are defined
as follows.

V: GDP
I: investment
S: domestic savings
S*: potential domestic savings

M: imports
M*: minimum import requirement

E: exports
F: net capital inflow(1) As the most typical one, we refer to [3].
(2) See, [1], [2], [4] and [5].
(3) [2] does implicitly consider this sort of problem, but is not decisive.

(4) This study mainly depends on [3].
(5) See [6].

38 HIKOJI KATANO
C: consumption
2: investment growth rate
p: investment productivity
s: marginal saving rate
. savmg rate
a: average
pt: marginal import rate.
m: averagelmport ratee: export growth rate
As an initial situation of development, we postulate the conditions

Vo, Io, So, Mo, Eo, S*o, M*e, Co=given,

Io'S*o>M*e-Eo,
where the net capital inflow is determined by the saving-gap (Ie-S*o). And,for some time, investment shall be financed by both domestic savings and net
capital inflow.

I=:S+F
Investment grows at A, which is limited by a certain upper bound,

O$RSI*,The upper bound investment growth rate is determined by either an absorptive
capacity of investment or the ability to finance by net capital infiow.(G} GDP

increases due to investment for constant investment productivity, 'ti-pl,
where we assume fu11 utilization of capital equipment. The increase of GDP
generates both certain increases of domestic savings and import requirements.

S==sV•-th==pttz'

The marginal saving rate has its upper bound, and the marginal import rate has

its lower bound. •sS s*
pt*$ptThe upper bound of the marginal saving rate is set so as to keep the per-capita

consumption over its minimum level, and the lower bound of the marginal importrate is set so as to keep import requirements over the minimum level necessiaryfor maintaining current economic activities. Exports grow at e,.
E==sE,OPTIMAL PROCESS OF ECONOMIC DEVELOPMENT 39
where the growth rate of exports reflects the endeavour for export promotion.

After some time in the development process, the trade gap (M*-E) becomeslarger than the corresponding saving gap.

I--S*<M*-E
In such a situation, the net capital inflow from abroad is determined by the trade-gap. Generaily, the net capital inflow from abroad is determined by the do--minant gap in the saving and trade gaps.

F=max. [I-S",M*-E]
When the net capital inflow is determined by the saving gap, the actual importrequirement becomes

M=I-S*+E)M*.
And, in case that the net capital inflow is determined by the trade gap, actual

domestic savings become

S= I-M*+ESS*.
In the development process, investment is financed only by domestic savings. At this time point, this economy transforms its characteristics from net
capital inflowing to net capital outflowing; this economy goes to the stage of do-

ing debt-servicing. And, after the debt servicing is completed, this economy
can enjoy its self-sustained situation. Here we define the time point at which
the developing economy switches from net capital inflowing to net capital outflowing as T, and the time point at which it attains the self-sustained situation

as T. Then we get the equation
9J;"(t) d'+J.'F(t) dt==O•
where q stands for a coeMcient to show the debt-servicing conditions.
After the self-sustained situation is realized,(a) both internal and external equilibria will be maintained

I-S=-M-E==O,(b) the target growth rate of GDP will be realizedg"===a"P, .

and (c) a warranted rate of average imports to GDP will be kept

M===m*V.
We postulate constant investment productivity, so we get the equation

40 HIKOJI
KATANO'
S==a*V.
On the growth process to self-sustenance, in order to maintain the abovementioned conditions, the change in investment is controlled by the equationi== a*PI+ (a*P - s)E.

Thus the time path of investment in this sort of growth process is:I(t) =ITe"'P(`'T)+ET[ea'P(t"T)-ee(t-T)]

t;?T •

Here, in order to maintain the postulated target growth rate, the equation' a"P=s •should be satisfied.

'
III. Realization of a Self-sustained Situation in Minimum Time Horizon'
As mentioned above, the development process towards a self-sustained
situation is described as a process from a postulated initial situation[Vo, Io, So, S*o, Mo, M*o, Eo l Io-S*o<M*owEo]
to a specified terminal situation[V. I., S., M., E. I I.-S.=M.-E.==O].
Here we consider an optimization to realize the above-mentioned process inminimum time horizon.
This optimization problem is mathematically formulated as follows:
To find the time patterns

IEi3, ) ,.,..

to minimize the functional

J:d,subject to(1) t=-PI(2) i===2I(6) [3] considers that the upper bound of the investment growth rate is determined by theabsorptive capacity of investment. However, we think, the ability to fihance net capital
inflow should be considered as an important element to deterrnine it as well.

OPTIMAL PROCESS OF ECONOMIC DEVELOPMENT 41[21 il}•=m=-s/r.s+E ] f.,F....,Ls[gl iiii--it.."' 'E ] f.r F=-M-E(7). E--eE(8) F==max [I-S, M-E](g) gJg2 F(t)dt+JZF(t)dt-o(10) O$2$2*(11) sSs*(12) ptSpt(13) Vo, Io, S,, M*o, E,==given(14) Io-S*o<M*o-Eo(15) IT=a'VT(16) M.==m*I7.

(17) I.-S.=M.-E.=O
As for the economic meaning, the problem is to find the optimal time patternsof investment growth rate, marginal saving rate, and marginal import rate so as

to terminate the development process in minimum time horizon.
To determine the optimal solution for the problem stated above, we use
Pontryagin's Maximum Principle.
Introducing five auxiliary variables pi(t) (i-- 1,..., 5) which are correspondingto V(t), I(t), S(t), M(t) and E(t) respectively, we define the Hamiltonian as follows :(ls) H--1+p,ti+p,i+p,S+p,Al+p,E
The necessary conditions for time patterns A(t), s(t) and pt(t) to be optimal are:(a) the control variables [l, s, pt] are chosen so as to maxirnize H subject to condi-

tions (1)N(17);(b) there exist continuous functions pi(t) (i=1, ..., 5) which, together with thecontinuous functions V(t), I(t), S(t), M(t) and E(t), satisfy the following canonicaldifferential equations• aH(19) P,-oV• eH(20) P,=OI(21) b3==- Ooh,

42 HIKOJI KATANO(22) b,---8MH(23) b,--gg(c) if the time patterns of control variables are optimal, the maximum value of

H is zero through O=<t$T,(24) maxH=O,
We have postulated that the saving gap is larger than the corresponding
trade gap at the initial situation, the following equations can be effective forsome time after the initial time.

ti-- PIi- 2I(25) S-sti

ha=i-S+E.
E==
sE
In this case, the Hamiltonian takes the form(26) H=-1+[p,p+(p2+p4)R+(p,-p4)sP]I+(P4+Ps)eE•
And the differential equations of auxiliary variables become:(27) P,-i,-fo,-O(28). p,=--[p,K9+(P,+P,)R+(P,-P,)sB](29). p,--(P,+P,)s
Here it is clear that pi, p3, and p4 take their values at certain constant values

through O$tST.
To avoid distinction of many cases in the mathematical solution, we willconsider only the most feasible case among them. The case, which we consider
in the following argument, is to be derived under the following assumptions:(30) p,(O)+p,>O(31) p,-p,>O(32) p,+s*(P,-A)>O(33) p,-pt*(p,-p,)<O
For the equation system (25) and (31), the marginal saving rate does always
take its maximum value. In this case, full potential domestic savings are mo-OPTIMAL PROCESS OF ECONOMIC DEVELOPMENT 43
bilized. And, so long as [p,(t)+p,] is positive, the investment growth rate

obtains its maximum value. Thus we have(34) p,(t)+p, =Ae-2't- [Pi+S*le3-P4)]P,
A -[P,(O)+P,]+ [Pi+S*(RP.3-P4)]P .
Now we have assumed the condition (32); there exists a time point T, such that

P2(Ti)+P4 =O,

P,(T,)+b,<O,
so that, for v suMciently small,R(Ti+27)= :O•
Then equation (34) has the solution, for Ti<t,(35) P,(t)+P,----[P,+s*(P,-P,)]i9(t-T,),so that [p2(t)+P4] remains negative for T,<t. In this situation, the investment

growth rate becomes zero for Ti<t.

(36) 2(t)==O for T,<t. .
Even though the investment growth rate is zero, a certain level of investment
is processed at every time point, so that the level of GDP increases at a certain

rate at every time point. In this process, domestic savings increase in accor-

dance with the increase in GDP. Thus there exists a time point T, when savings can finance investment. At this time point T2, the economy passes fromits net capital inflowing stage to its net capital outflowing stage. And, on the
net outflowing stage, the economy can be self-sustained when the debt-servicing

process ls over. •.
Now we consider the case where the trade gap becomes larger than thesaving gap, Let T3 be the time point when the trade-gap becomes equal to the::ViglgiogwasP:• After the tiMe point T3, the development process can be described

V-PI .
.I=2I-•(37) S=i.th+E
th=pttiZii===eE
In this case, the corresponding Hamiltonian is defined as44 HIKOJI KATANO(3s) H=-1+[p,p+(p,+p,)2-(p,-p,)ptP]+(P3+Ps)eE•
Considering this Hamiltonian, the differential equations of auxiliary variables are--i(39) p,=p,==P,=O,i(40). p, =-[P,i9+(P,+P,)R-(P,-P,)FtP],(41). p,==-(P,+P,)s•
For the equation system (37) and (31) with constant p3 and p,, the marginalimport rate takes its minimum value, so that the import requirement is maintained at the level that is needed for keeping the current economic activities.

And, we have considered [p2(T,)+p4] to be negative. However, we havep,>p, due to (31). So that we can not have a definite sign of [P,(T,)+P3].

But we proceed our argument under the assumption that(42) P,(T,)<O.
In this case, the investment growth rate is still kept at the zero level.

Now we have a time path of [P2(t)+P3](43) P,(t)+P,={-[IP,-(P,-P,)2*I9]}(t-T,)•
But, considering the condition (33), there exists a time point T, such that

P2(T4)+IP3=O,

P2(T4)+i3<O,
so that, for v suMciently srnall,2(T,+?7)=2*.
Then the equation (43) has the solution, for T4<t,(44) p,(t)+p,==Be-Z'(t-rD+ -[Pi-(P23.-P4)pt*]P ,''
B=[P,(T,)+P,]+[Pi-(P3A-.P4)#*]P ,''so that [P2(t)+P3] remains positive for T,<t. Thus the investment growthrate takes its maximum value for T4<t.
To summarize the arguments mentioned above, we have the following time
paths of control variables,(a) First Stage (O f{ts:T,)R(t) =R*s(t) == s*(b) Second Stage (TiSgtS:T2)

OF ECONOMIC
DEVELOPMENT
PROCESSOPTIMAL45

P2(t)+P3

P2(t)+P4

T2

Tl

T4

T3

o

T

Eig. 12(t) =Os(t)=s*(c) Third Stage(T2 Sg t S; T3)z(t)-os(t)==s*(d) Fourth Stage(T3 E{;[ tS{I T4)

a(t)-op(t)-pt*(r,s;tsgT)(e) Fifth Stage
Z(t)= 1*pt(t)==pt*

However, we have never mentioned a terminal time point T.

In ourproblem, the terminal con ditions are difined in the state variables not
auxiliary variables. Now we consider the time paths of state variables into determine the terminal time point T and the switching time points

in theorder

r3, T4)• The time paths of state(a) First Stagevariables in the respective stages are as(OSt-<Ti)

I( t) = Ioe2'`pv(t)=Vo+ z*

Io [e2'`- 1]

s*(t)-

S*o+s*[IZ(t)'Vo]

M(t) -

I(t)-S*(t)+E(t)'(Tll T2)
follows :HIKOJI KATANO

46

E(t)= Eoee'(b. c) Second and Third Stages (r,f{;tST3)
I(t) = Ioei'riV( t) = V,,+ i?I,e2'ri(t- T,)

See(t)=S*r,+S*[V(t)--Vr,]

M(t)-=I(t)-S*(t)+E(t)E(t)=E.,ee(`"i)(d) Fourth Stage (T3St-<T4)
I( t) = Ioe2'TiJ)'T(t)= V.,+tel,e2'T'(t-T3)

S(t)-I(t)-M*(t)+E(t)M*(t)= M*e+pt*[V(t)- Vo]
E(t)=E.,ee(t'r3)(e) Fifth Stage (T,s{tsT)
I(t)= I.,e2'(t-T,)

V(t)=V.,+ zP. I.,[e2'(`rr`)-1]

S(t)-I(t)-M*(t)+E(t)M'(t)=M*r,+pt"[(t)'VrJ
E(t)=E.,ee(`-r`)(f) Terminal Situation
I( T) = a" V( T)

E(T)--m*V(T)Now both the terminal time point (T) and the switching time points (Ti, T2,
T3, T4) can be determined by the following five equations.

(45) I(r,)-S"(T2)==O(46) I(T,)-S*(T,)-=M*(T3)-E(T3)(47) I(T)-a'l7(T)(48) E( T) -m" V( T)(49) 9J,TS(i-S*)d'+J.r,S(I-S")dt+J.T,(M"-E)d'=O''t.

The equation (45) shows the situation where investment is financed only by do-

mestic savings. The equation (46) implies the situation where the saving-gap
is equal to the trade-gap, The equations (47) and (48) stand for the terminal

47
OPTIMAL PROCESS OF ECONOMIC DEVELOPMENT

conditions. And the equation (49) gives the completion of the debt-service

payment.
Thus the optimal process of economic development can be determined.
However, we can not always expect the above-mentioned type of optimal process.
The type of process depends on the given conditions (initial conditions, terminal

conditions and values of parameters). Here we have considered only the mostfeasible case in an economic development.

rv. Economic Meaning of Optimal Development Process
The optimal process of economic development, which is mentioned above,
has the following economic meanings.
In the earlier stages, the investment growth rate should be kept at a levelas high as possible. The upper bound of the investment growth rate is determined either by the absorptive capacity of investment or the ability to financeinvestment funds. Thus if we can expect to increase the absorptive capacity ofinvestment and manage to finance investment funds to be required, the economic
development process can be effectively processed.

After the investment reaches a certain level, it is maintained at the levelfor some time. And, after some time, the investment grows again at the maximum rate. Thus, in the terminal situation, it reaches the target level. Whilethe investment growth at the earlier stages is financed by both domestic savingsand net capital inflow, the investment at the later stages is supported only bydomestic savings.

The investment growth at maximum rate in the earlier stages helps to growGDP at an accelerated rate and to mobilize domestic savings as well as possible.

Here the increase in domestic savings should be supported by the developmentof capital goods industries in the economy concerned. In this development
process, there exists a situation where investment can be financed only by domes-

tic savings. And, after the situation is realized, the economy can refund thedebt service. Thus the economy can be self-sustained after it completes thedebt servicing.

Exports of the economy grow at a certain rate which reflects the economy's
effort to promote its exports.
In the earlier stages, we consider, the saving-gap is larger than the trade-gap.

Due to this postulation, the import requirement is financed by both export-earnings and the saving-gap in the earlier stage of development process. On the other

hand, when domestic savings increase and investment is financed only by domes-

tic savings, the import requirement can be financed only by export earnings.

HIKOJI KATANO

48

In such a situation, debt-servicing can be expected.

In the development process, investment reaches a certain level, and it ismaintained at the level for some time. In this sort of process, correspondingly,

import requirements may decrease. However, there is a certain level of importrequirements below which it can not go, This lower bound of import requirement is set by the minimum import requirements which are required for maintaining current economic activities at any time point. When the import require-ments are held at this minimum level, imports increase in accordance with thegrowth of minimum import requirements. In this situation, the saving-gap issmaller than the trade-gap. And domestic savings are larger than investment
which is financed by the trade balance. This sort of situation is maintained
until debt-servicing is completed.

These are the outlines of the optimal economic development process.
This shows every facts of the optimal process of economic development. And
this also suggests some theorems of development economics.

REFERENCES[ 1 ] Bose, S. "Optimal Growth and Investment Allocation," RES, Vol. 36 (1968).

[2] Chenery, H. B. and MacEwan, A, "Optimal Patterns of Growth and Aid: The Case of
Pakistan," in The Theory and Dest'gn of Economic Development, ed. I. Adelman and E.

Thorbeck, 1966. '[3] Chenery, H. B. and Strout, A. M. •"Foreign Assistance and Economic Development,"
AER, Vol. 56 (1966).
[4] Dixit, A. K. "Optimal Development in the Labour-Surplus Economy," RES, Vol. 36(1968).
[5] Katano, H. "Optimal Strategies for Development: The Case of India," The Develeping
Economies, Vol. 8 (1970).
[6] Pontryagin, L. S., et al. The Mathematical Theory of Optimal Process, New York: Interscience Publishers, 1962.

WAGE AND BEHAVIOUR DIFFERENCE IN
COLLECTIVE WAGE BARGAININGS OF
JAPANESE SHIPPING COMPANIESA Case Study of the Japanese Shipping Industry

Hiromasa YAMAMOTO
Due to the lack of statistics and other data materials on wage it is quite diM-

cult to report on seamen's wages. In this paper it is intended to examine thebehaviour of the six big shipping companies of Japan in collective wage bargainings.

In 1964 the Japanese shipping industry experienced the amalgamation ofshipping companies on a large scale. In consequence six big shipping companies

emerged. They include the Nihon Yusen Kaisha Line, the Mitsui-OSK Line,
the Kawasaki Steamship Company, the Yamashita-Shinnihon Steamship Company, the Japan Line, and the Showa Kaiun Steamship Company. All of them
are engaged in various kinds of ocean-going ship operations and compete witheach other. Then, how have they behaved in their collective wage bargainings?
This is the concern of this study.
Before entering into the problem a preparatory survey on collective bargaining in the shipping industry and the characteristics of payment of seamen's wages

may be useful.

Bargaining of the Japanese Shipping Industry andof
Wages
Payment

I. Collective

the

1. 0rganizations of Collective Bargaining
In the Japanese shipping industry the organizations for collective bargaining

have changed considerably. With the end of the World War II, trade unionism
among Japanese seamen, which had been prohibited by the government during
the war, was immediately revived, In 1945 the All Japan Seamen's Union wasorganized on a national basis. It represented both licensed and unlicensed
ratings. Representing the employers, the Japan Shipowners' Association maintained collective bargainings with the union on an industrywide basis. In 1951

the union succeeded in introducing into the industry minimum wages according
to jobs.

50

HIROMASA YAMAMOTO

In 1955 unified collective bargainings came to an end. In reluctance tothe uniform wage agreements, the coastal shipowners organized their own bargaining groups on a regional basis and began to bargain separately. Also in theocean shipping sixteen large shipping companies organized the predecessor ofthe "Gaiko Romu Ky6kai" and other companies formed two more groups forcollective bargaining in the same year. Therefore on wage issues the union had
to bargain with different employers' groups and conclude agreements separately,

though the union concluded a uniform agreement with the joint committee of
employers' groups on hours of work, the minimum wage rates and several otherissues in which employers found common interests.

The amalgamation of shipping companies in 1964 had no great influenceon the organization for collective bargaining. Since 1965 there have been two

employers' organizations for collective bargaining in ocean shipping. One ofthem is the "Gaiko Romu Ky6kai" which represents 19 large companies including the "big six."

The agreement between the G. R. K. and the union is effective for a year
and usually it is renewed in April.

2. Payment of Seamen's Wages
The payment of seamen's wages on Japanese-flag ships is very complicated.
A glance at the wage clauses in the trade agreements does not reveal the actual
wage rate which specified seamen will be paid. In determining the wage rate ofspecified seaman, two kinds of wage rates, i.e. the minimum wage rate and thepersonal wage rate must be taken into consideration. Minimum wage rates according to jobs are the minimum monthly wage rate that a seaman is guaranteed

to receive when he is assigned to a certain job aboard ships. When the periodof his service in the same job increases, his minimum wage rate will increase

according to the length of the service. Minimum wage clauses are uniform forall employers' groups.

With regard to the personal wage rate, the seamen's union negotiates witheach employer and concludes individual agreements. The personal wage rate
is longevity pay in character. The personal wage rate is composed of the initial
wage rates for different qualifications and the additional increase of rate accord-

ing to the length of service with the company.

When a seaman is aboard ship, his personal wage rate is regarded as his"basic monthly wage rate aboard ship" if it is larger than the minimum wage
rate of his job. If the opposite is true, then the minimum wage rate becomes
his wage rate aboard ship. In calculating the amount of various kinds of allowances and overtime rates, "the wage rate aboard ship" is taken as a base.

WAGE AND BEHAVIOUR DIFFERENCE IN COLLECTIVE WAGE 51
BARGAININGS OF JAPANESE SHIPPING COMPANIESAIthough the payment of wages during paid vacation is also based on the wage
rate aboard ship, the personal wage rate is taken as a base for the period of staying

on land as a reserve member of the company's crew or a trainee in a special study

course regardless whether it is larger or smaller than the minimum rate.

The personal wage rate is peculiar not only for the employment system ofJapanese seamen in general, but especially for the hiring policy of large shipping

companies. Since World War II most Japanese shipping companies have employed seamen as permanent employees. For large shipping companies it has
become common practice to select and hire employees exclusively from new
graduates of the merchant marine academies or new trainees of the training course.

As a rule they do not hire seamen who have been employed by other companies.
In addition, they encourage continuous service within the company through wage
advantages. By adopting the personal wage rate the companies pay higher wages
to a seaman, as the period of his service within the company increases even if
he fulfils the same duty. In case ofpromotion the priority is given to the seaman

who has a longer period of service if the other qualifications are equal. In
consequence employees of large companies have a disadvantage when they change

to another company. The hiring policy of large companies discourages the
movement of seamen among companies, by which the wage level among companies might tend to become equal. Then, can we find differences of wage rates

among the "big six"? .
'II. Individual Agreements on Wages by the "Big Six"
1. Personal Wage Rate
As we have described in the preceeding section on personal wage rate, theseamen's union negotiates with each company separately and signs individual
agreements. Personal wage agreements provide for the initial wage rates anddifferent increments of rate according to the length of service and qualifications.

The initial monthly wage rates are applied to new employees who have no experience of service on board ship.
Table 1 presents the initial monthly wage rates of the "big six" and also thestandard, the highest and the lowest rates among the G. R. K. (Hereunder weshall denote the "big six" companies as Company A, B,...and F.)
Among the "big six" there was little difference in the initial wage rates in 1968.

Most of them concluded agreements at the standard rate. The same thing took'

place in other years. 'Detailed material on the increments of the personal rate is not available.

However, the average personal wage rates of companies and the rate of increase

HIROMASA YAMAMOTO

52

(Yen)

Table 1. Initial Monthly Wage Rates of 1968

Unlicensed

2nd Mate(i)2nd Engineer{i)"VttireC/ asSsS operator<2)A

28, 3oo24, 2oo

18, 3ooBt/24, 160c

tt

24, 200tt
17, 850

D

tt
tt

t/
24, 3oo

18, 350E
F

tl

24, 200tt

Standard
Highest28, 3oo24, 200

18, 3oo30, 800

26, 1oo

19, 100

Lowest28, 290

24, 160

17, 450

Name of Company

Rating(3}18, 300

GRK(1) Graduates of the two national Merchant Marine Academies(2) College graduates(3) Men 18 years old and over who finished the national unlicensed personnel training

coursein comparison to the previous year is at hand. The average personal wage rates

among companies cannot be compared, because the composition of the labour
force according to age and period of service within a company varies. In order

to compare the personal wage rates of companies, it becomes necessary to
standardize the composition of labour of each company. Therefore, by meansof the rate of increase of the average personal rate, we estimate the average
personal wage rates of the "big six" as it would be if the composition of thelabour force according to age or period of service within the company would besame among the "big six." One part of the result is shown in Table 3.
According to Table 3 the differences of the estimated personal wage ratesof the "big six" were in the range of 10 per cent in the case of othcers and about
3 per cent in case of unlicensed ratings, while the difference between the highest

rate and the lowest atnong member companies of the G. R. K. amounted to 20
per cent in the case of licensed ratings and 10 per cent in case of unlicensed

ratings. This difference must come from the different amounts of longevity
paid by the companies. Some companies put more stress on longevity pay whileothers do not. So far as our estimate is concerned, there is no clear movement
among the "big six" to set personal wage rates for employees at the same level,
though most of the initial wage rates among them are at the same level.

Our estimate on personal wage rates of various companies does not present
the actual figure of wage rates which are applied to seamen when aboard ship.
As we have mentioned already, higher rates in comparison with his personal wage

rates and the minimum rate of his job are adopted as "wage rate aboard ship"Table 2.

Average Personal Wage Rates of Companies

1967

Average
Averageageyears ofservlcewith the

1969

1968

personal

Averageyears oflncrease

wage rate
(yen)

age

within thecompany

Average

Average

Average
Rate ofservlce

Rate ofmcreasepersonal

wage
rate

Average
Averageage(yen)company

years ofservlcewithin the

Average
Rate oflncrease

personal

wage
rate

(yen)

company

lioensed ratings

A

11. 1

5. 9

47, 274

B

31. 5

12. 2

3.6

49, 131

c

32. 4

9. 7

5.1

D

34.0

11. 7

4.6

53, 064

33. 8

11. 6

4.6

60, 172

35. 3

12. 8

5. 4

55, 484

35. 7

13. 3

3.9

63, 4so38, 026

32. 4

9.8

4.9

47, 526

9.8

41, 528

32. 6

9. 1

6. 1

43, 651

33. 5

9.4

4.9

54, 947

35. 0

13. 3

4.4

51, 391

35. 3

13. 6

4.9

58, 828zge•E.

zthee•

E

34. 1

12. 5

8.0

45, 268

F

34. 4

10. 8

7. 4

45, 045

34. 2

10. 7

3. 9

48, 573

34. 0

11. 6

4.5

55, 747

ss. 4

10. 7

6.2

44, 676

34. 0

10. 9

5. 2

49, 628

34.4

11. 2

4. 6

57, 684

unlicensed ratingsi•li/segt

A

27. 0

12. 5

3. 8

31, 021

33. 6

14. 9

3. 2

34,406

33. 3

14. 7

3. 1

39, oo7

B

33. 1

15. 1

2. 8

30, 836

33. 3

15. 6

4. 2

32, 905

34. 3

16. 4

3. 1

40, 035

C

31. 6

12. 3

3.9

24, 853

31. 8

12. 7

3. 5

31, 443

6.8

26, 173

30. 0

10. 3

4.5

27, 241

30. 1

11. 9

3. 9

34, 574

D
E

32. 6

14. 2

6. 5

29, 193

33. 5

15. 1

3.6

33, 216

34. 1

15. 8

4. 2

38, 816

F

32. 6

12. 7

6.0

29, 902

31. 9

12. 1

3. 3

32, 122

32. 0

12. 9

3.4

37, 764

31. 8

14. 1

4.8

27, 858

32. 8

13. 4

4.0

31, 976

32. 9

13. 7

3.5

37, 529

GRK

/sz
E,:•

31. 8

GRK

to:

l:'i

N
8

HIROMASAYAMAMOTO

54
Table 3.

Adjusted Average of Personal WageRates of Companies
1969

1968

Averageyear
ofservice

withinthe

company

Averageyear

Personal

wagerate(yen)

ofservice

A=1OO withinthe

Personal

A=100

wagerate(yen)

company

licensedratings
ABCDEF

13.0

56,282100

13.5

65,521

12.8

55,484

98.6

13.3

63,45012.7

54,42296.7

IL851,237

9LO

13.6

52,06992.5

11,852,47993.2

14.9

34,4os1oo

15.7

40,2161oo

15.9

33,32096.8

16.4

40,03599.5

14.5

ss,45597.2

13.9

31,921

92.8

15.2

33,336

96.9

97.3

13.8

33,945

98.7

101.4

.11.614.013.3

1oo-61,03459,98160,091

unlicensedratings
ABCDEF

m16.116.015.2-40,60339,,14240,789

11l101.0

of a specified seaman. But no data are available for estimating wage rates aboard

ship of the various companies. Therefore we have to give up any comparison of

wage rates aboard ship among the "big six." The only point that we cancontend is that the differences of the wage rates aboard ship might be smaller

among the member companies of the G.R.K. than those of the personal wage
rates. According to union sources, in 1968 the member of seamen to whomwere applied the minimum rates amounted to 18 per cent of the total seamen
being employees of the member companies of the G.R.K. However, among the"big six" any possible effect of the minjmum wage rate upon the wage rate aboard

ship was uncertain. We can not say any thing on the difference of the wage
rates aboard ship between seamen of the same age or the same job employed bythe "big six."

2. Semi-annual Extra Allowances. In addition to the monthly payment of wages, it has become the customof the Japanese shipping industry to give semi-annual extra allowances in Juneand December to all seamen. Ordinarily the seamen's union has individual
negotiations and makes agreements on this allowance with each company. The
amount of the extra allowance is unstable in its character and varies largely

depending upon a boom or slump on the shipping market. This fact lets expect

WAGE AND BEHAVIOUR DIFFERENCE IN COLLECTIVE55WAGEBARGAININGS OF JAPANESE SHIPPING COMPANIESa large variance of the amount of extra allowance paid by the companies even forthe same period. Then, what was the reality in this regard among the "big six"?

The agreements express the amount of the extra allowance in terms of percentage of the basic rate which is one and a fifth of the average wage rate aboard

ship applied by each company. Table 4 presents the terms of agreement on theextra allowance for the "big six." The terms of agreement showed considerable

differences during the period of our study among the member companies of the
G.R.K. According to the order of the rate of agreement against the basic rate

nineteen companies belonging to the G.R.K. were grouped into three, i.e. thehigher, the middle, and the lower group. Among the "big six"the rate of agreement varied over a rather wide range in 1966 and 1967 though the range narrowed

in 1968 and 1969. In 1966 three companies of the "big six"were found in thehigher group and the other three in the middle group. In 1967 Company E
belonged to the middle and company F to the lower while the other four belonged to the higher group. In 1968 and 1969 four companies belonged to the high-er group and company E and F to the middle.
Table 4. Semi-annual Extra Allowances
1966

The rate of

demandagainst thebase

A

The rate ofagreement
against the
base

1967

Amount ofextra

allowance(yen)

The rate of

demandagainst thebase

The rate ofagreement
against thebase

Amount ofextra

allowance

(yen)

6oo

4ee

245, 268600

445

231, 907

600

510+a
510+a

287, 466 + cr

550
550

470

214, 057

6oomo

257, 410

550

470

198, 443

6oo

5oo

242, 220

470

420

201, 797

470

249, 1oo

470

420

1ee, 446

470+a
470+a

443

235, 857

Highest6oo

499

245, 628

510+cr289, 822

430

am

Lowest390

163, 904450

410

2ca, 566

B
C

D

E
F
GRK

1968

A

289, 822 + cr

1969

600

537

335, 287

320

530+a

372, 453+cr

6oo

533

322, 670

3oo

528+cr3ss, 402 + a

6oo

513

290, 327

310

530

357, 744

6oo

510

277, 446310

528

329, 171

E
F
GRK

550

sw
mo

3oo, 630

3oo

515

355, 886

288, 9oo

3oo

505

326, 810

Highestam

537

335, 287320

530+crss3, 402+ cr

Lowest450

430

236, 6M

250

420

266, 129

B
C

D

am

HIROMASA YAMAMOTO

56

Table 5. Per Capita Net

Profit

A

B

c

D

E

F

1965

1oo

75. 7

47. 5

67. 9

30. 0

33. 5

1966

1oo

os. 5

63. 7

68. 3

49. 1

55. 5

1967

1oo

sc. 2

81. 7

60. 9

63. 7

M.9

1968

1oo

95. 0

61. 9

56. 1

48. 5

52. 9

1969

1oo

83. 9

47. 1

6L 6

38. 1

65. 2

What caused the difference of the rate of agreement among the "big six"?
A possible explanation might be found in the difference of the company profits

or in the difference of the productivity of labour. The per capita net profitof the "big six" is tabulated in Table 5. However, the per capita net profit
does not explain adequately the grouping or the ranking of the "big six" as forthe rate of agreement on the extra allowances. The differences of the per capita

value added among the "big six" neither corresponds to the difference of therate of agreement among them. (As for the per capita value added, refer toFigure 3.)

In contrast, the year-to-year comparison of the rates of the agreements amongthe "big six" reveals the next fact: among the "big six" Company A and B, C
and D, and also E and F signed agreements of the same or a very similar levelof the rates of agreement though several exceptions can be found when consideredover the whole period of the research. This finding suggests that companies
determine the rates of agreement in consideration of those of the other companies.

Or possibly one company follows the rates of agreement of another, disregarding

any profit difference which may exist between them.

III. Estimated Wage Earnings and Per Capita Value Added
1. Comparison of Per Capita Personal Expenses and Per Capita Seafaring
Labour Costs
Using the statements of accounts handed to the Securities and Exchange
Council, the per capita personal expenses and the per capita seafaring labourcosts of the "big six" are calculated by each company on the base of their closing

accounts of March 1965 through March 1970. Figure 1 shows the differenceof the per capita personal expenses among them, setting the expenses of Company
A as a base for each term. From Figure 1 it appears that the per capita personal

expenses of the Companies C, D, E, and F moved in a similar pattern to Company

A and the differences between these companies and Company A were gradually
reducing. In the case of Company B the difference with Company A was smaller

WAGE AND BEHAVIOUR DIFFERENCE IN COLLECTIVE WAGE 57
BARGAININGS OF JAPANESE SHIPPING COMPANIES

than with the other four in the earlier stages, and from the closing date of March

1968 the per capita personal expenses of Company B exceeded those of Company
A.

Fig. 1. Per Capita Personnel Expenses

(e/o)
120
110

B
A

100
90

t.-..E-t --..nt
.;'
hg -!

x

80

s

SN

70

x

XxJ'/X

N-.'

L----+-t

y7

7

F

c

z- V

D

60

oMar.1966 Mar.1967 Mar.1968 Mar.1969 Mar.1970
Mar.1965

closing date Sept. Sept. Sept. Sept. Sept.

Fig. 2. Per Capita Seafaring Labour Costsno (o/o)

A

100
90

80 >-

B/E

't'--""; .;-t4-ss.svf'"

Di--'--uJ-""'fhL ..- CF

70

o Mar.1965 Mar.1966 Mar.1967Mar.1968Mar.1969Mar.
closing date

Fig.

Sept.

3.

Sept. Sept. Sept.

Value Added per Capita

(%)

A

100

90
80

Sept.

E

"-ii-"

70 -->-4
-X
60 xx
v

/1"

s-

-" -tZ" -....--

/
-/

CD
xi
B
-t
.=-"3

F

50
o

Mar.1965 Mar.1966 Mar.1967 Mar.1968Mar.1969Mar.

closing date Sept.

Sept. Sept.

Sept.

Sept.

58 HIROMASA YAMAMOTO
The personal expenses include not only the labour costs of seamen but also

the costs of oMce clerks and workers on land. Therefore the personal expenses
are not adequate for the purpose of estimating the trend of seamen's wage earn-

ings. For this purpose a much better alternative may be found in the per capita

seafaring labour costs. The seafaring labour costs are composed not only of
the wage costs but also of other cost items which an employer has to burden,i.e., costs of fringe benefits, employers' contributions to social insurance for sea-

men and so on. Although the per capita seafaring labour costs which are calculated here include cost items other than wages, it might be allowed to use themas an alternative for seamen's average semi-annual wage earnings in the broadest

meanmg.
In a similar way to Figure 1, Figure 2 shows the difference of the per capita

seafaring labour costs among the "big six." Figure 2 presents the following
findings :(1) The differences of the per capita seafaring labour costs among the "big six"

were decreasing,(2) After the closing data of March 1968 Company B maintained a comparable

level with Company A,(3) At the closing data of March 1968 four companigs, i.e., C, D, E, and F
showed resembling trends, and maintained the level of 80N90 per cent of. the base, and ,(4) Differences of the per capita seafaring labour costs were smaller among the"big six" when compared with those of the per capita personal expenses.
In other words, the labour costs per seamen showed smaller differences thanthe labour cost's per oMce clerks.

'
2. Productivity of Labour and Relative Share of Labour
No indicator is available for physica! productivity of labour in the shipping

industry such as the per capita ton-miles of cargo carried during a year. However, as indicators for the potential physical productivity of labour in the shipping

industry per capita the transport capacity (deadweight tonnage of company fleet

Å~average cruising speed!number of seamen employed by the company) andthe per capita fixed assets may be used.

In the case of "big six," these indicators do not correspond to the changeof the per capita personal expenses and the per capita seafaring labour costs.

(See Table 6 and 7.) This result might have been predictable, because in the
shipping industry the level of freight rates and the sales of cargo space infiuence
greatly shipping earnings and the level of wage earnings is expected to correspondto shipping earnings rather than physical productivity of labour.

WAGE AND BEHAVIOUR DIFFERENCE IN COLLECTIVE WAGE 59
BARGAININGS OF JAPANESE SHIPPING COMPANIESThen, as a next step, let us check the trends of value added per capita for

the "big six." Figure 3 shows them. For four periods from the closing dateof March 1965 the difference of value added per capita among the companies
varied considerably. However, for the whole period the trends of companies
B and C show resembling patterns. Campanies D, E, and F also show resembling patterns during the period from March 1967 to March 1969. At the closing
Table 6. Deadweight Tonnage of Company Fleet per Seaman

NameofCompany
Closingdate

March 196S
March 1966
March 1967
March 1968
March 1969
March 1970

A

B

c

D

E

F

'1oo

106.9

139.8

131.0

106.5

140,6

1oo

1oo.O

146.0

136.5

129.4

168.4

1oo

92.7

138.3

142.0

133.6

165.0

1oo

86.6

111.9

114.3

104.9

128.7

1oo

85.0

118.0

116.7

117.6

118.2

1oo

90.1

112.7

128.1

130.2

131,7

Table 7, Per Capita Fixed Assets

XName of Company

A

B

c

D

E

F

March 1os5

1oo108. 4114. 71ca. 9101. 5

99. 4

March ,1966

1co

69. 1

108. 4

ss. 6

87. 2

os. 3

March 1967
March 1968
March 1969
March 1970

1oo

M.9

ss. 9

83. 6

75. 6

75. 1

1oo

71. 9

108. 4

85. 4

84. 4

82. 1

1oo

70. 7

103. 9

83. 9

88. 5

76. 6

1oo

79. 3

93. 4

79. 4

82. 2

78. 2

Table 8.

Relative

A

B

c

D

E

F

Sept. 1964
March 1965
Sept. 196S
March 1966
Sept. 1966
March 1967
Sept. 1967
March 1968
Sept. 1968
March 1969
Sept. 1969
Maich 1970

30. 7

31. 1

25. 4

ax o

34.4

29, O

28. 0

29. 3

23. 4

as. o

34.6

30. 1

36. 5

33. 0

25. 8

27. 5

32. s

30. 7

32. 5

35. 3

26. 9

29. 4

41. 1

29. 0

32. 0

33. 0

25. 6

29.8

35. 2

27. 6

31. 1

so. 4

24. 9

27. 1

ns. 4

as. 8

.so. 9

35. 8

25. 8

31. 3

31, 4

31. 1

29. 3

31. 1

24. 7

so. o

34.0

32. 4,

29. 7

36. 3

ee. 1

31. 3

33. 2

34. 3

30. 2

34. 5

26. 9

32. 5

33. 6

32. 2

31. 3

39. 1

31. 3

30. 8

36. 6

M.O

31, 2

42. 2

so. 6

as. 4

ss. 4

31. 4

Average

31. 1

34. 3

26. 7

W.4

34. 0

so. 7

Closing date' XH-'Å~

X!)!!!Ilge{-9glmpany

Settlement terrnX

Share of Labour

60

HIROMASAYAMAMOTO

date of March 1970 the difference between the companies decreased to about
twenty per cent at the largest.

When we compare the trend of value added per capita with that of the percapita personal expenses and the per capita seafaring labour costs for each company, the movement of the latters do not correspond to the former at all for threecompanies, i.e., the Companies B, C, and E. In the case of these three companies

it is possible to conclude that the change of value added per capita had little
influence upon the per capita personal expenses and the seafaring labour costs.

The relative share of labour by the "big six" is presented in Table 8. Company A averaged 31.3 per cent of the relative share of labour for the whole period,and its figures at each closing date were stable in comparison with the others.
It is worth whi!e to note that the companies C, D, and F kept their average relative

share of labour at a similar level to Company A or lower than Company A, though
the per capita personal expenses and the seafaring labour costs of these companies

remained at lower levels than those of Company A.
If it is permitted to use the per capita seafaring labour costs as an alternative

for the seamen's average wage earnings in its broadest meaning, then we may
draw several conclusions from the above observations. The companies C, D,
and F were able to maintain a comparable level of the relative share of labour

with Company A, because they kept the seamen's wage earnings at a level lower
by 10 to 20 per cent than that of Company A. The relative share of labour ofCompany E became higher due to the fact that its level of wage earnings wascomparable with the Companies D and F. In the case of Company B, due tothe decreasing difference of the seamen's wage earnings and the superior positions of wage earnings of all employees for several periods in comparison with
Company A, its relative share of labour was pushed up to a higher level than thatof Company A.

rv. Conclusion
In the preceeding section we have pointed out the relationship between the
differences of the wage earnings among the "big six" and their relative share oflabour. The movement of differences of wage earnings do not, needless to say,allow an explanations of the movement of the differences of wage rates between

these companies. Even when uniform wage rates in the shipping industry prevail, the different composition of labour force among companies as to age, theperiod of service within a company and so on may result in differences of wage

earnings among them. Different length of overtime hours also causes different

wage earnmgs.

WAGE AND BEHAVIOUR DIFFERENCE IN COLLECTIVE WAGE 61
BARGAININGS OF JAPANESE SHIPPING COMPANIES

However, we should keep in mind the fact that the rates of agreement on
extra allowances of the "big six" can be grouped into three and that this group-ing does not correspond to the difference in company gains. This fact and therelationship between the differences of wage earnings and the relative share oflabour will indicate the companies' behaviour and their performance in the col-lective wage bargainings with the seamen's union. Company A seems to havetaken the leadership among the group of the "big six" at the table of wage bar-gainings. Company B might have set wage rates for its crew similar to thoseof Company A, in no relation to the movement of the per capita value added dur-ing the period of our obsevation. The companies C, D, E, and F might have gettheir wage rates lower than those of Company A. In other words, we may
conclude that there has been no tendency among the "big six" for setting theseamen's wage rates at similar levels, though the difference of wage rates among

them might have been decreasing due to the efforts of the seamen's union.
Our conclusion on the behaviour of the "big six" in collective bargainings

must be tentative. More observations and materials should be added to cometo a conclusive aMrmation.

ON ACCOUNTING COMMUNICATION
Isao NAKANO
Recent years have seen a revolutionary change in the research methodology

in accountancy. Once we often heard various discussions on "true," "actual"accounting figures whereas in these days the emphasis is placed upon the "usefulness" of accounting information to its receivers. Thus accounting has cometo be redefined as "the process of identifying, measuring, and communicating

economic information to permit informed judgements and decisions by usersof the information."(i)It seems this development of the information theory approach to accounting

has been initiated by Professors Norton M. Bedford and Vahe Baladouni.{2)By applying a general communication model and several important concepts
in the information theory they have succeeded in providing a new promisingframework for further accounting research in a user-oriented way. In this paper

we will adopt the same research methodology and try to apply to accounting
processes several concepts in the information theory which still remain almost
untouched by the accounting researchers.

I. A General Communication Model
We will start by showing below the communication model by Claude E.

Information TransTnitter Regeiver Destination
sourceSignalReceived
signalNoisesourceFig. 1. Schematic diagram of a general communication system(S)(1)

Statement of Bast'c Accounting Theory, American Accounting A'(2)

Norton M. Bedford and Vahe Baladouni, "A Communication Theory Approach to(3)

Claude E. Shannon and Warren Weaver, The Mathematicat Theory of Communication,ssociation, 1966, p. 1.

Accountancy," The Accounttng Review, Oct. 1962, pp. 650-659.
The University of Illinois Press, UrbanalChicago/London, 1969, p. 34.

64 ISAO NAKANOShannon (Fig. 1).

Short explanations on the components of this communication system will
be given below.

(1) The information source is a source of messages to be communicatedto the destination. In the accounting context this will correspond to the "business entity."(2) The transmitter is a mechanical device and1or a person (or persons)that will operate on the messages to produce signals suitable for transmission

over a given channel. (This activity is called "encoding.") In telegraphy wehave an encoding operation of converting human speech etc. into a sequence of
signals of the Morse code. The transmitter in business accounting is the "accounting information (d-generating) system" which produces a set of technicalterms and numerical values as an expression of the result of business operations
and of the financial position of a firm.

(3) The channel is the medium used to transmit the signals from transmitter to receiver. (Ex. a pair of wire, a band of radio frequencies) In businessaccounting the "financial statements" serve as the channel. During transmission,or at one of the terminals, the signals may be perturbed by "noise." Fig.1
indicates the noise source acting on the transmitted signal to produce thereceived signal.

(4) The receiver is a performer of the inverse operation of that by thetransmitter; it reconstructs messages from the signals. This operation is called"decoding." In accounting this function is performed essentially by the processof "financial statement analysis."(5) The destination is the person or object for whom the messages areintended. The destination of accounting information may be considered as thejudgement or decision-making activities done by the receivers of the information,

relying on the accounting messages.

Concerning the accounting communication system composed of these elements the most important fact for us is that no messages can be encoded or de-coded with 1000/, fidelity. "Just as in human 'communication signals may be
perturbed by noise, so do signals in human communication suffer distortion.
Thus the quality of messages is subject to variation introduced by noise."(i) Thisis also the case in the accounting situation. "Noise in accountancy may be defined as those factors that interfere with the quality of accounting messages."{2)(1)Norton M. Bedford and Vahe Baladouni, "A Communication Theory
Accountancy," The Accounting Review, Oct. 1962, p. 656.

(2)

Ibid., p. 656.

Approach toON ACCOUNTING COMMUNICATION

II. Informationand Entropy

According to the information theory "information" means those signals(or messages as expressed by the signals) which provide "instruction to select"from among alternative hypotheses or possibilities with the result of reducing
the uncertainty of the selection which existed before receiving the "instruction."

Some pieces of information serve to decrease the uncertainty of the selection
to a great degree. They induce us to select such a possibility with a relatively

low a priori probability. They can be said to possess a comparatively large
amount of information (information content). On the other hand, information
leading to the selection of a highly probable possibility can change the uncertainty situation little, so that its information content is small. Hence the amount of
information varies inversely with the a priori probability of the possibility selectedon the basis of the information.
This relationship is formulated as follows:

19i=log2
P,(1)

where ei denotes the information content of a reliable message instructing
to select a possibility whose a priori probability was Pi.

Example 1: The probability that Company A would not suffer a loss inthis period was estimated to be 800/, and that of suffering loss to be 200/..

And the published current financial statement shows the realization of a net
incorpe. In this case the information content of this income information is
calculated :1

9i=10g2o.so == O•322 (bits).
The information content of the message telling the incurring of a loss would

have been1

9'i=10g2o.2o=2•322 (bits).
This concept of "information content" of a signal or a message leads toanother important concept in the information theory, called "entropy" H(X),
which means the average of the information contents of all possible signals or
messages from a given information source (ex. a business entity).

Hence

nl
H(X)==2,=,Pilog2
p. (bits) (2)t65

ISAO NAKANO

66

where Pi is the a priori probability of the possibility i occurring.

Example 2: Assume the business entity as an information source in Example 1 above emits with 800/o probability the message, "A non-negative income
has been realized this period" and with 200/o probability the message "a loss has

been incurred this period." The "entropy," that is, the average amount of information of this source isH(.X)=O•80 log, 6.lso +O.20 log, o.12o -=O.722 (bits)'
In the absence of noise there exists a one to one correspondence between

any emitted message xi from an information source and the received messageyi (where i=1, 2, ..., n).

This is a characteristic of a "noiseless channel" (Fig. 2)

xy

Xl Yl
X2
-- Y2
Xn Yn
(Fig. 2)Just as the entropy H(X) of a source of transmitted messages has been conceived, so can the entropy H(Y) of the set of the received messages be definedas the average of the a priori uncertainty about which message yi would bereceived or the average amount of information of the receivable messages, andformulated as follows:m 1'
H(Y)=2,.--,p(orj)iog2 p(y,.) (3)Where p(yi) means the probability of yi being received.
In the noiseless channel p(yj)=p(xj), so that

H(Y)-1i.;p(yi) iog2 p(},) =:i.lp(xi) iog2 p(i.,) -=H(X)The average amount of information successfully transmitted over a channel

is generally expressed as I(X, Y). Using this symbol

I(X, Y)-=H(10=-H(Y),that is, no loss of information is possible on a noiseless channel.

The above suryey would suggest the possibility of developing the conceptof "ideal accounting communication" as a "noiseless" accounting channel. But
in this paper we are more interested in the actual situation of a "noisy channel,"so that an analysis of noise and an application of this concept to the accounting

ON ACCOUNTING COMMUNICATION 67
process will be attempted in the following.

Ill. Noise"Noise" in the context of the information theory means "disturbances which
do not represent any part of the messages from a specific source".(i) And ac-

cording to Shannon and Weaver we must distinguish between "engineering
noise" (distroyers of signals or simbols as such) and "semantic noise" (disturb-

ing factors not of signals but of the meaning or message to be transmitted by
the signals).(2}

Examples of engineering noise: the sporadic impulsive noise of "atmospherics" in radio reception, crackling and hissing noises on the telephone andGaussian noise produced by the random superposition of a great numbers of
independent causes.{3) In accounting communication, errors of calculations
and deliberate manipulations of income, etc. which cause objects of accounting

measurement to be uncorrectly encoded and reported may be said to illustrateengineering noise.

Examples of semantic noise: consider the case where a girl says to a youngster, "I love you" intending a lie or an irony but he takes it literally. This kindof misunderstanding may arise from: (1) his lack of experience in cummunication, (2) his insuMcient knowledge of the communication partner and / or (3)his scarcity of understanding of the communication environment. Such causesof unsuccessful decoding with no effect on signals as such we would like to call"semantic noise."
It is our opinion that the most important cause of semantic noise in accounting communication is the general price level change as well as the specific pricechanges. Were it not for these price changes, a 100/. increase in the current
income of a given company computed according to the historical cost principle
would signify the same rate of increase in its real income (free from the influencesof the price changes) at the same time. But in case the price changes do occur,
the realization of a 100/o increase in the "historical cost" income may correspondto a 50/. decrease in the real income. This possibility means that the correct
decoding of the trend of the real income from the transmitted signal of the historical cost income can be subject to disturbances because of the price changes,
so that the price changes do work as a sort of semantic noise provided the message(1) Colin Cherry, On Human Communication, John Wily and Sons, Inc., New York, 1961,

p. 307.
(2) Claude E. Shannon and Warren Weaver, op. cit., p. 26.
(3) Colin Cherry, op. cit., p. 199.

68 ISAO NAKANO•
intended for transmission in accounting is the real income figure.

Before illustrating how the price changes as semantic noise will influence
the effectiveness of the accounting communication, it is necessary to give somepreliminary explanation of noise in general. In the absence of noise the receiv-

ed signals and the decoded message from the signals are the same thing as thetransmitted signals and messages. But when there is noise, "the received noisy
signals do not completely represent the messages from the source, but constituteonly evidence of those messages."(') No assurance exists that the received
message y represents the transmitted message x faithfully, but there is just theconditional probability p(x ly) with which the former would signify the latter.

The receiver has no other way of arriving at the transmitted signal x than byresorting to his "best guess" on the evidence of the received message y. Hence"the process of communication in the presence of noise is essentially one ofinference."(2)And this necessity of additional inference for the determination of the transmitted signal or message even after the receipt of the signal will suggest that noisy

signals cannot decrease the prior uncertainty of the communication situation tozero, and that the information content of a noisy signal is smaller than that of anoiseless signal by the amount of this remaining uncertainty. To give an exact
mathematical expression to this situation, two variants of the entropy concept
will be defined in the following.

(a) Joint entropy H(X,Y): If the probability of an event X being x, andthe other event Yyj at the same time, that is, the probability of ajoint event(xi, yj) is expressed as P(xi, yi), where X denotes the transmitted message andYthe received message, then 'H(x, y)=-l.lii p(xi, yi) iog p(.l, yj)

The joint entropy measures the average uncertainty as to what will be sent

and what will be received in a communication process.

(b) Conditional entropy H(X1Y) and H(YlX): H(X1Y) is supposed tomeasure the average uncertainty of what value an event X will take in case theother event Y takes a given value. Hence•1

H(X L Y)==l.li), P( yj)P(eci lyj) iog p(., l y,)i=;.li)i. P(xL, yj) iog p(., i yj)(1) Colin Cherry, op. cit., p. 200.
(2) Ibid., p. 200.

ON ACCOUNTINTG
COMMUNICATION

69

where P(xi 1 yi) denotes the probability of X being x, when Y is yj.

In the communication process H(X ] Y) is the measure of the average uncertainty as to what signal has been sent that remains after the reception of a noisy
signal yi because there are plural alternative signals which could have been trans-mitted. Hence the average amount of information realizable (that is, reallycapable of communication) on a noisy channel I(X, Y) is defined as the difference

between the entropy of a given transmission source H(X) and H(XI Y) which iscalled "equivocation."I(X, Y)-H(X)-H(X 1 Y)
In a noiseless situation H(X l Y) is zero.

Similarly, H( Y IX) measures the average uncertainty of what value an event

Y will take in case the other event X assumes a specific value. Hence

1ll(Y IX)=-2 P(xi)P(:yi l xi) log

i.i P(yj lxi)
1=;.Il]j P(xi, yj) iog p(yj lx,)

In the communication situation H(YIX) measures the average uncertaintyof what signal will arive at the destination when a signal has been sent from atransmitter. And since the actually communicated amount of information canalso be calculated as a decrease in the uncertainty of the receivable signal ormessage,

I(X, Y)-Ll( Y)-H( Y 1X)
According to Shannon there exists the following relationship:

I(X, Y)-H(X)-H(X l Y)==H( Y)-H( Y 1X)-H(X)+H( Y)-H(X, Y)
Now we can see that a noisy channel is a channel where all or part of thereceived messages correspond to possibly transmitted plural signals or messages,
and it can be illustrated as in Fig. 3.

X. Y XY

XI
x2YI. y2 :) :7K [:;l;i/Y3Fig. 3

X3

Y3

X4

Y4

Now we are in a position to mathematically calculate the undesirableof the price change as a sort of noise'in' accounting communication on theeffectbasis

ISAO NAKANO

70

of a hypothetical example and thereby to conclusively justify our interpretationof the price change as a noise.

Assume that the only message to be transmitted in accounting communica-tion is that the real income figure of Company A has increased or decreased
this year in comparison with that of last year.(i) As explained above, there exists

a possibility that a difference can occur between the transmitted message and thereceived message because an income figure on the basis of historical cost is used
as a signal for the transmission of that message. Our assumptions are: (1) thisbusiness entity as an information source produces with 700/o probability the mes-sage that the current real income has increased and with 300/. probability the
inverse message that'it has decreased: (2) the use of historical-cost-based income

figure as an encoded signal for the above message in this situation of price changes

results in misunderstandings on the receivers' part sometimes such that (a) an
actual transmitted message of an increase in real income is properly decoded assuch with 900/. probability but the same message is decoded as realization of adecrease in real income with 100/. probability (perhaps in case of a drastic pricedecline), (3) the message of a decrease in real income leads to the same message on

the receivers' part with 400/, probability, but the same transmitted message
induces the receiver to decode it as an increase in it with 600/. probability (maybe due to a price rise). These hypothetical possibilities are figured below (Fig. 4).

X (alternative messages

Y (possible messages
on real income asa result of decoding)on real income which
are to be encoded}
900/o

70%

INCREASE

30%

DECREASE

INCREASE

The business

entity

60%

loo/o

40%

DECREASE

Fig. 4The

probabilities of the joint events ofpaired transmitted

messages andreceived messages are calculated as follows:

P(+,+)(2)=-O.70Å~O.90=O.63
P(+, -)== 070. Å~ O.10=O.07

P(-,+)=O.30xO.60-=O.18
P(-, -)==O.30Å~ O.40 =O.12(1) The discussion in this section does not depend on how to define "real income," so long as

this is something different from historical-cost-based income. '(2) e.g. P(+,+) means the probability of the joint event occurring where the message to be
encoded and that as the result of decoding are both "increase," and P(+,-) the fotmer"increase" and the latter "decrease."

ON ACCOUNTING COMMUNICATION 71

11+O•301og2 o.3o ==O•88 (bits).
'.'. H(X)==O.70 log2 o.7o'11+O•18log2 o.6oH(xtY)=O.63 log2 o.go+O•07 log2-6T.lo11+O•12log2-o.4o =O•62 (bits).

I(X, Y)-H(X)-H(XIY)-=O.88-O.62-O.26 (bits).
These calculations will prove the validity of our proposition that pricechanges work as a sort of noise in accounting communication, The actuallycommunicated amount of information I(X, Y) is largely cut down by the amountof "equivocation" H(X1Y). This equivocation can be considered as a mathematical expression of an undesirable effeÅët (information loss) of price changes,

and wg think one of the problems of accounting measurement in the environment of changing prices lies in overcoming the effect of price changes as a se-

mantic noise so that I(X, Y) can be increased to the maximum by the reductionof the "equivocation."

rv. Redundancy
One of the common devices to cope with noise in the communication process
is, according to the information theory, to introduce redundancy at the stageof the encoding operation. By "redundancy" is meant the existence of interdependence among the signals or messages to be transmitted (i.e. creation of thepredictability of a forthcoming signal or message on the basis of the already receiv-

ed ones) which has been created by the use of excessive or redundant encoding

rules or conventions above the minimum necessary for the communication.(')
And a distinction must be made between "syntactic redundancy" (the redundancyof cummunication signals as such) and "semantic redundancy" (an excess of
messages for a given communication).

An example of syntactic redundancy: suppose that in communicating
a sequence of independent letters, each letter has unnecessarily been repeated

twice. Ex. "ABKLT" has been transmitted as "AABBKKLLTT." This
redundant rule has added the same number of excessive signals as the mini-(1)

Claude E. Shannon and Warren Weaver, op. cit., pp. 13-14. Colin Cherry, op cit., pp.

(2)

According to Shannon, the syntactic redundancy is formulated as one minus the reiative
entropy (H/HMAx). This relative entropy is the ratio of the entropy of a source to115-120.

the maximum value it could have while restricted to the same symbols. (Claude E.
Shannon and Warren Weaver, op. cit., p. 56)

72 ISAO NAKANO
mum necessary for the communication, but it has not changed the message to
be transmitted by these signals. This constitutes an example of syntactic
redundancy.(2)An example of semantic redundancy: the sentence, "he is a hard worker,
that is, he studies hard" not only denotes syntactic redundancy in the sense of
unnecessary repetition of signals, but is also an example of semantic redundancy
as a repetition of the same message.

In the absence of uncertainty surrounding communication or of the dangerof distortion or destruction of transmitted signals or messages by noise, redun-dancy is unnecessary for communication, even cutting down the communication
eMciency (per symbol or per second), so that it must be avoided as far as possible.

A telegram is a good example. As an addressee of a telegram usually knows inadvance the aim of the communication, the personality and the special usage ofwords of the addresser as well as his current situation, the former can und'erstandthe telegram worded with a minimum of redundancy. For the addresser there
is enough time available for the composition of sentences with minimum redundancy which will be easily understood by the receiver at the same time. In otherwords telegrams are usually sent and received in a situation of scarce semantic
nolse.

More common forms of communication, however, are subject to various
kinds of uncertainty and noise, Ex. uncertainty of speech sounds or acoustic
patterning, uncertainty of language and syntax, environmental unceitainties
due to street noise etc., and recognition uncertainties (resulting from unequal

degrees of communication experiences or knowledges about the topic shared by

the partners). As shown here, "there are many sources of uncertainty, yetspeech communication works. It is so structured as to possess redundancy at
a variety of levels, to assist in overcoming these uncertainties,"(i) In a conver-sation "redundancy may be put in, in a changing, patchwork manner, momentby moment" watching and listning to the reaction of the partner to judge how
far he understands the words, while in writing" the writer cannot observe hisreaders and can only make priorjudgement of their diMculties. His writings are
therefore premeditated and usually conform more closely to the rules."<2}
In the following we will reconsider the above example of syntactic redun--dancy, putting it ifi a noisy situation. Suppose that in the communication ofthat sequence of English letters occurrence of noise has completely hindered thereception of the letters corresponding to a, (i--1,2,3-) below,

AABaia,KLLTa3(1) Colin Cherry, op. cit., p. 277.
(2) Ibid., p. 120.

ON ACCOUNTING COMMUNICATION 73
The foreknowledge of the rule that each letter will be repeated twice allows
one to reconstruct the lost messages as follows.

ai==B, ' a2=K, a3=T
From this example we can conclude that in the presence of noise an adequate

degree of redundancy is indispensable for a reliable communication. And thisconclusion will suggest that some way of introducing redundancy may be a goodmeans to assure the transmission of the maximum amount of accounting information coping with price level changes as semantic noise.

V. An Example of Redundancy Introduced into Accountancy
The Multi-Dimensional Measurement
Let the message of whether the historical-cost-income figure in the ith pe-riod has increased or not in comparison with that in the i-lth period be express-

ed as Ai, and the message about the increase or decrease of the real income of

the ith period with that in the i-lth period be denoted as B,. And we assume
that the criterion of relevance(') requires the communication of both messages
to the interested parties. In the absence of price changes as a semantic noise
the histbrical-cost-based income figure coincides with the real income figure,and hence the sequence of historical-cost-based income figures as is reported in, practice simultaneously conveys both kinds of messages Ai 'andthe accounting

and Bi each period. 'A,B, A,B, A,B, (1)the the the
2nd 3rd 4th
periodThe historical-cost income calculation providing the set of income messages(Ai, Bi) is influenced by the price changes such that the message Bi in the set(Ai, Bi) is more or less perturbed or destructed as figured below:

A,(B,)A,B,A,(B,) (2)(where the letters in parentheses denote destructed messages).
Suppose that anticipating such a situation we measure for each period not
only the historical-cost income but also the real income "explicitly" in accordancewith the theory of the price level adjustment or the specific current cost valuation. A characteristic of this "explicit real income" in comparison with the "implicit real income" (the Bis in (1) above) is that the former income figures are(1) Cf. A Statement of Basic Accounting Theory, op. cit., p. 9-10.

74 ISAO NAKANO
free from the destruction due to the price changes as a semantic noise.
A message about the increase or decrease of the explicit real income in theith period when compared with that in the i-lth period shall be Bi. And further

we assume that the explicit real income is measured some way and shown withthe historical-cost income figure in the same accounting report for every period.

In this case the sequence of the communicated messages is chronologicallyshown as

A,B,B, A,B,B, A,B,B, (3)the 2nd the 3rd the 4th

period period period
The reporting of Bis in this sequence (3) shows the introduction of thosemessages which would be redundant in the absence of the price changes asa semantic noise, that is, the introduction of semantic redundancy. And thisdevice will make it possible to successfu11y communicate Ai and (Bi and 1 or Bi)
to the interested parties overcoming the effects of any violent price change (asa semantic noise).

A,(B,)B,A,B,B,A,(B,)B, . (4)(The letters in parentheses denote destructed messages by noise.)
The above explanation will suMce to show that the essence of the "multi-

dimensional income measurement" as a device of concurrent communication,of plural different concepts of income consists in introducing a sort of semantic

redundancy into accounting messages in order to cope with the price changes as

semantic noise. (The best example of this kind of accounting report is foundin the illustrative income statement proposed in ASOBAT,{') where the revenues
as well as the expenses are all valued twice, once on the historical cost basis andshown in the "Historical Cost" column, and once more on the current costbasis and reported in the "Current Cost" column.)

VI. Implications of These Interpretations for Accounting Communications
Thus far we have tried to develop and justify our interpretations of theprice changes as a semantic noise and the multiple measurement as a device for

introducing semantic redundancy into the accounting process. What are theimplications of this conclusion?

Logically there seem to be two ways to overcome the undesirable effect of'(1) A Statement of Basic Accounting Theory, op. cit., pp. 81-95.

ON ACCOUNTING COMMUNICATION
any semantic noise. One is by introducing redundant messages into accounting
for enhancing the probability of correct deceding while no effort is made to sup-press the occurrence of the noise itself. Multiple measurement denotes suchan attempt. And the other way is by trying to provide the interested groups
with enough additional information about the business firm concerned (ex. physical information) as well as about its environment, to enable them to grasp the fu11

meaning of the received accounting messages (historical-cost information). By
this means the receivers of accounting information will have been notified in sucha way-that is, their decoding capacity will have been so much improved-thatprice changes will stop working as a semantic noise to them. As mentioned
above, this situation is similar to that in which addressees of telegrams will usual-ly find themselves. Of cource, whether to include this additional informationin accounting reports will depend on the definition of accounting.
It would be dithcult, perhaps even unwise, to adopt any one of these devices

to the exclusion of the other at this development stage of accountancy. We
could even conceive a third possibility, an attempt to introduce semantic redun-dancy into accounting messages and moreover furnishing plenty of additional
business and environmental information for the improvement of the decoding
capacity at the same time. But an undeniable fact is that considering the generaldesirableness of promoting the understanding of a business enterprise by theinterested groups, more and more additional non-•accounting information should
also be communicated to them besides the experimentation of introducing seman-tic redundancy into accounting messages,

75

KOBE ECONOMIC & BUSINESS REVIEWCONTENTS
NO. 1 (1953)
Present Day Significance of Free Ports..........................................Gifijiro Shibata
Development of Devaluation-Problem in Post-War Japan. . . . . . . . . . . . . . . . . . . . .Klyo2o Mlyata

Japan's Trade with South and South-East Asian Countries..................Fukuo Kawata'Ihe Exchange Control Policy in Post-VV'ar Japan...........................Masahiro Ful'ita
On the Oflicial Statistics of Foreign Trade in the Post-War Japan.........HikoJ'i Katano
On Business History..................................................................Tadakatsu Jnoue

Problems of Regional Industrialization in Japan.................................Minoru Beika

A Research of Wage Income in Post-War Japan.................................Nebuko Nose'
Revaluation in Japan...............................................................Susumu PVatanabe

Last-In, First-Out Inventory Method under
the Japanese Tax Law................,......................,..Munehiro Masuxaki

NO. 2 (1954)
Movements for the Establishment of Free Ports in Japan...............Ginjiro Shibata
Japan's Trade with Latin America in the Post-War Years..................Fukuo Kawata
The Maritime Competitions in the Early Meiji Era..............................SaiJ'i Sasaki
Two Deflations in the Showa Era......,.........................................Masahiro Fuj'ita

Estimation of the Effectiveness of Devaluation on
Balance of Payment Deficit in Japan..............................Hiko.ii Katano

The Recovery Method of the Japanese Shipping Industry
in Post-War Period.................,...........................Hiromasa Yamamoto
Business Accounting and Tax Accounting....................................Susumu Watanabe
Spatial Characteristics of Industries Relative to Their
Business Features ......................................................Minoru Beika
Stages in Factory Organization.................,.................................Tadakatsu Inoue

Accounting for Fixed Assets Revaluation: Recent Views in Japan...AtTunehiro Masuxaki
On the Structure of the National Income Distribution in Japan............Nobuko Nose'

NO. 3 (1956)
Industrialization and International 'I'rade..........................................Fukuo Kawata

Econometric Determination of Foreign Exchange Rate of Japanfor 1926-2953 ..................................................,.........Hikoii Katano

Present Status of Japan's Shipping................,...............................Gi'njiro Shibata

The Distinction between "Shasen" and "Shagaisen" as Historical
Concepts in Japar)ese Shipping..........................................Sec'1'i Sasaki

The Banking System in the Middle Meiji Era (1870-1910)...............Masahiro Ful'ita
Disposition of Cost Variances in Japanese Tax Law••...................Susumu JVatanabe
Sttucture of Industrial Districts in Japan..........,....•.,........................Minoru Beika

Note on the ZAIBATSU Combines.......,...,..........••.................,...Tadakatsu Inoue
On the Model-Building for Social Accounting Design........................Nebuko Nose'

NO. 4' (1957)
The Impact of Exchange Pplicy on the International Economy
of Japan during the Period 1930-1940.....................Laurence P. Dowd
A Note on the Recent Tr.ends of Japan's Foreign Trade.....................Fukuo Kawata

The Development of Overseas Banking System in Japanin the Meiji Era....................................,.................Masahiro Fuiita

More on the Structure of National Income Distribution in Japan .........Nobuko Nose'
Reconstruction of the Theory of Purchasing Power Parity ..................Hikoji Katano
Tramp Shipping Freights and International Trade...........................Gi'njiro Shibata.
A Little Study on the Transition from the Sailing Vesselto
Steamer in Japan .......,....................................................Sec'1'i Sasaki

On the Regulating Policy of Japan against the Shipping
Conference - Especially in Relation to the Refusal of
the Entry to New Comers ....................................Hiromasa Yamamoto
The Price Fluctuation Reserve System in Japan...........................Susumu PVatanabe

Locational Problem in the New Major Branches of JapaneseIndustries from 1954 to 1956 .,........................................Minoru Beika
Business Problems in an International Situation..............................Tadakatstt Inoue

NO. 5 (1958)
History of Yen- Its Developments in the Japanese Economy (1).........Hiroshi Shinio
Fundamental Features of the Accumulation of Capitalin the Late Meiji Era ..........,.....................................Masahiro Fwfita

Some Aspects of Japan's Trade with South andSouth-East Asia, 1950-1957 ...............................:..........Fukuo Kawata

Curves of Diminishing Values of Japanese Merchant Ships
in Proportion to Their Age ..............,...........................Ginjiro Shibata

The Modernization of Japanese Shipping Based on theTransportation of Hokkaido Marine Products ........................Seri`i Sasala'Development of the Marine Insurance Industry in Japanin the Meiji Period .............................................Hiromasa Yamamoto
A Assimilagtio do Imigrante Japones no Brasil .................................Hiroshi Saito

Rate of Profit and rnternational Specialization of Production ............H7ikoji Katano
Replacement Cost and Lifo Cost............,...................................Susumu Watanabe
Spatial Problems of Business Activities....,........................................Minoru Bec'ha
The Nature of the Morgan Control .............................................Tadakatsu Inotte

On the Effect of Accelerated Amonization for Tax Purposes ...............IVobuko Nosti

NO. 6 (1959)
History of Yen- Its Developments in the Japanese Economy (2).........Hiroshi Shinio
The Central Banking Policy in the Meiji Era...........................,.....Masahiro Fuiita

Economic Growth, Balance of Payment and Capital Movement .........Hikoji Katano
World Trade and Japan's Export-1953--1957-..............................Fukuo Kawata
Alguns Aspectos da Mobilidade de Japoneses no Brasil........................Hiroshi Saito
Problerns of Emigrant-Transportation in Japan . . . . . . . . . . . . . . . . . . . . . . . .Hiromasa Yamamoto

Port Labor Conditions in Japan ...................................................Gi'njtTro Shibata

The Development of the Concept "Operator" in Japan ........................Serl'i Sasaki
Single Industry Towns in Japan......................................................Minoru Belka

On the Application of the Social Accounting
Principle to Business Accounting.......................................Nbbuko Nosg
Valuation of Work in Process ...................................................Sttsunnt Watandoe

Developmental Stages Relating to Theories
of Stock-Equity Accounting ...,.........................................R)tnji' Takeda
On the Rate of Interest in Business Administration .........,..............•••••••••Jiro Ono

Various Classes of Data Processing by Means of Electronic
Computer .....................................................................Hideo'Kitani

Company Histories in Japan ........................Tadakatsu Inoue and Yoshiro lkttshima

NO. 7 (1960)
Japanese Emigration and Its Effect on International Payments............Gi'njiro Sin`bataOne-to-One Correspondence between Goods and Factor Prices............Hikoii K7atano
The Gold Standard and Banking Capital in Japan ........................Masahiro Ful'ita
World Trade and Economic Growth .............................................Fukuo Kawata

Singularity in the Structure of the Seamen's Union of Japan......Hiromasa Yamamoto
Some Refiections on Inter-Comparability of Social Accounting ............Nobuko Nose'
The Meaning of Inventories ...................................................Sust{mu Watattabe

Structure of Income Determination on the Balance Sheet ..................Ryuii Takeda
On the Value of Stock Rights and Its Significancein Corporate Finance............................................................Jiro Ono

Business Features and Management Policies of Industrial
Enterprises in Local Districts of Japan..............................Minoru Beiha

NO. 8 (1961)
The Industrial System and Industrial Education in Southeast Asia Now on
the Threshold of Reform, and Japan's Position Therein......Kiyoze Mlyata
Industrial Structure and Educational System in India.....................Tadao Miyashita
Industrial Education in India......................................................Tadao Mlyashita
Technical Education in India.........'.............,...,...........................Tadao Miyashita

Industrial Structure and Vocational Education in Thailand .................."Fukuo Kawata'Ilhe Industrial Structure and Industrial Educationin the Philippines ...................................................TerLichi Yamasaki

Industrial Structure and Vocational Education in Indonesia.........Hiromasa Yamamoto

NO.9(1962) ,Problems in Port Administration and Finance in Japan.....................Gi'niiro Shibata
Types of Early Modern Japanese Shipowners.......................................Ser:'i Sasala'On the Employment System of Seamen in Japan .....................Hiremasa Yamamoto
A Study on Japan's Invisible Trade.............,..................................Fukuo Kawata

Problems of Industrial Location Relating to Regional Development inJapan ...........................................................,...............Minoru Beiha

The System of Inside Contracting...................,............................Todakatsu Inoue

A Critique on Professor Mahalanobis Model of Economic
Planning in India .....................,...................................Hikoji Katano
National Income Concepts: Reconsidered .............,............................Nobuko Nose'
Some Problems of tlie Insta1lment Basis ........................,............Susumu VVatanabe

On the Purposes of a Going-Concern Valuation and Its Natures ...............Jiro Ono
Die Betrachtungsweise der neueren betriebswirtschaftlichen
Kostentheorie............................................................Tetsuo Kobayasnt

NO. 10 (1963)

tt

Revised Accounting Provisions of the Commercial Code of Japan-With Special Reference to the
Corporation Income Tax Law-...........................••••..Susumu PVatanabeSocial Accounting as an Instrument of Policy .......,............................Nebuko Nosi
Industrial Estates for Smal1 Businesses inJapan.................................Minoru Bec'ka
Rise of tlie Mutual Financing Business in Japan ...................••......Tadakatsu Inoue

The Introduction of European-Style Vessels in Japan:
A Historical Survey .........................................................Ser:'i Sasaki

On Industrtal Relations in Japan's Shipping Industry - With
Special Concern on Personnel Management-............Hiremasa Yamamoto
Regional Disparities in the Brazilian Economy:
A Case Study on the Brazilian Northeast.................. Yeshiaki Nishimukai
The Basic Concepts of Going-Concern Valuation .............,......................Jiro One

A Study on the Current Cost Theory of Fritz Schnidt .....................lsao Nakano

Die Kostenbegriffe fttr die betriebliche Planung..............................Tetsuo Kobayashi
Introducing Prof. Shinjo's History of the Yen ...........................Zentaro Matsumura

NO. 11 (1964)
Accounting.Profit and Taxable Income.......................................Susumu Watanabe
On Integration in Economic Accounting......................................,......ATobuko Nosi
Uber ,,Cost AÅëcounting Standards" in Japan..........,......................Tetsuo KobayaShi
A Note on the Lohnann-Ruchti Effect.............................,...............lsao Nakano

Management Approach to Regional Development Problems in Japan......Minoru Beika
A Research Report on Othce Automation of Middle-Scale Cities in Japan......liro Ono
Die Geschichte der Privatisierung....,...........,..................................Masaya Okada

Recent Trends in the Balance of Payments of Japan........................Fukuo Kawata
Long-Term Finance in Post-War Japan (1)....................................Masahiro Ful'ita

A Chronological Table of Modern Japanese ShippingNo. 1: 1600N1799 .........................................................Sei'i Sasaki

The Continuous Employment of Searnen in American Shipping
Industry .........................................................Hiromasa Yamamoto

Some Problems of the Brazilian Economic Development Plan
(1963-1965) ......................................................Yoshiaki Nishimukai

NO. 12 (1965)
Special Depreciation and Reduced Entry....................................Susumu PVatanabe
Electronic Data Processing System in Japan....................................Minoru Beika

A Chronological Table of Modern Japanese ShippingNo. 2: 1800rv1912 ...,..................................................Sei'i Sasaki

Overseas Operations of Japanese Business Enterprises in Brazil.........Tadakatsu Inoue

A Note on Economic Accounting for Govemment Sector.....................Nobuko Nose'
International Liquidity and the Tokyo Meeting of the International
Monetary Fund.........................................................Masahiro Fuj'ita

Intersectoral Transaction Table with Endogenous Forejgn Trade Sector
in the Indian Economy: 1955/56....................................Hikoji Katano

The System of Reserved Members for Seamen before World War II- The Employment System of Seamen in Japan -. . . . . .Hiromasa Yamamoto
On the Automation of Banking in Japan...................................................Jiro Ono

A Presente Etapa do Desenvolvimento Econ6mico do Japio......... Yoshiaki Nishimukai
Kostentheorie und dispositiver Faktor.....,....................................Tetsuo Kobayashi
Grundprobleme der Privatisierung...................................................Masaya Okada

NO. 13 (1966)
Annual Income under the Corporation Income Tax Law...............Susumu Watanabe
Trade Controls in Occupied Japan (1945N1949)..............................Fuktto Kawata

Patterns of Domestic Shipping Services- Characteristics of Japanese Coas twise Shipp ing - . . . . . . . . . . . . Ser: 'i Sasaki

Approaches to the History of Individual Business Units..................Tadakatsu Inoue
Cumulated Cost Ratios for the Japanese Economy in 1955.....................Nobuko IVose'
Accelerated Growth of National Income..........................................Hikoii Katano

Technological Development and Labour Relationsin the Japanese Shipping Industry........................Hiromasa Yamamoto
Brazilian Position in the Latin American Free Trade Association...... Yoshiala' Nishimukai

Infotmation Specification for Business Management (I)--A Case Study-............................................................Jiro Ono
Die Privatisierung der PreuBag......................................................Masaya Okada

NO. 14 (1967)
A Return on the Confirrned Settlement of Accounts.....................Susumu Matanabe

Problems of Regional Indu$trial Development
Relating to National Plarming in Japan...........................Minoru Bec'ka

The Deve!opment of Japanese Trade with the British
Commonwealth in Asia................................................Fukuo Kawata
On the Kihansen (Japanese Wooden Coastwise Vessels)........................Sei'i Sasaki
Approaches to Company History..............,....................................Tadakatstt Inoue

Cumulated Cost Ratios for the ECAFE Countries..............................Nobuko Nose'
International Liquidity Controversy in Japan (1)...........................Masahiro Fuiita

Investment Criterion for Maximizing
the Rate of Capital Accumulation.................................Hikoji Katano

Peculiarities of Maritime Labor-With Special Reference to the
Supply of Maritime Labor-...,..........................Hiromasa Yamamoto
Los Estudios Del Brasil En El Jap6n-Con Referencia a las Ciencias Sociales...............Yoshiaki Nishimukai

NO. 15 (1968)
Characteristic Approach for Regional Development in Western Europe
and U.S.A.-Relating to the Case in Japan..................Minoru Beika
Export Patterns of Leading Industrial Countrie$..............................Fukuo Kawata
The Early Development of Kobe Port................................................Sei'i Sasaki
Rise of Modern Shipbuilding in Japan and Promoters........................Tadakatstt Inoue
A Note on the Redistribution of Profits.............................................Nobuko Nose'

International Liquidity Controversy in Japan (2)...........................Masahiro Fuiita

Factors to Determine the Relative Share: The Case of India............Hikoji Katano
Maintenance of Capital Based on Earning Power ....................................Jiro Ono
Recent Changes in Japan's Trade with Latin America and Brazil. . . . . . Yoshiaki Nishimukai
Some Inventory Accounting Problems................................................Isao Nakano
Organizational Slack and Adaptive Behaviour in the Firm..................Hideki Yoshihara

NO. 16 (1969)
The Change of Regional Characteristics of Industries in Japan............Minoru Beika
Functions of Screen Account ..,.........,............................................Nobuko Nose'On Mr. Stoleru's Optimal Policy for Economic Growth.....................Hikoii Katano
A Note on Shorter Working Hours for Seamen........................Hiromasa Yamamoto
Objectivity Reexamined ..................................................................Isao Nakano

A Note on the Behavioral Theory oE Innovation,..........................Hideki Yoshihara

NO. 17 (1970)
An Outline from OMce Management to MIS in Japan........................Minoru Beika
Japanese Economic Growth since the Meiji Restoration:
A Social Accounting Approach ....................................Nobuko Nose
Efficiency of Optimal Growth Policies for Development...........,............Hikoii Katano

Decasualization of Dock Labour-Experiences at the Port of Kobe-..................Hiromasa Yamamoto
The Characteristics of Recent Corporate Mergers in Japan........................Jiro Ono
Estudos Brasileiros no Japgo .............,............................... Yoshiaki Nishimukai

A Note on the Integration of Economic Theory
and Organization Theory ..,.......................................Hideki Yoshihara

KOBE UNIVERSITY ECONOMIC REVIEW 16, 1970
Edited by Faculty of Economics,
Kobe University, Kobe, JapanCONTENTS
PIanned Supply of Liquid Funds to State Commercial andIndustrial Enterprises in China ..................,........ Tadao Miyashita

Optimal Degree of "Self-SuMciency" of Food:
An Extension of Bhagwati-Srinivasan's "Optimal
Intervention to Achieve Non-Economic Objectives"......Osamtt Tanaka
An Extension of a Discrete Version of Pontryagin's
Maximurn Principle and its Simple Application...............Nobuo Okishio
On the Income of the New Middle Class...,...................................Toshimasa Mukai

Rising Trade of Urban Land Value in Japan, 1955-1969 ...............Kikunosuke Ohno
Balanced Growth in the Putty-Clay Model....................................Hideyuki Adachi.-lltlll--..,1-..,i---tt--.,..tlt..,+dttld-...tP-...il---t-d,...lt...-ittll---..-1-.,,--tl-t-1....t-,.,-ltllt---..dt...,i-dtt---....ti..,--tlll--...dl....qdl-dlid-...t+,i.-ditll14,..tl...---lit---'..,l-...-lltl-d-.

THE ANNALS OF THE SCHOOL OF
BUSINESS 'ADMINISTRATIONKOBE UNIVERSITY 1969
Edited by the School of Business Administration,

Kobe University, Kobe, JapanCONTENTSZur Optimalen Planung des Produktionsprograrnms bei
Einzelfertigung ......................................................... Herbert Jacob

Die Entwicklung des Management Accountings in der GegenUberstellungzu dem Financial Accounting ................................. Kaxuo Mixoguchi
On the Development of Marketing Studies in Japan,.......................... Yukichi Arakawa

A Quarterly Econometric Model of the Japanese International
Service Transactions: 1961-1968 .............................. Ahihiro Amano
Zum Problem der Eliminierung der Konzernzwischengewinne............Masatoshi Kuroda
Recent Studies of Public Enterprise in Britain;
A Review Article ...................................................... Hiroshi Sasaki
d-t----..-"-.t-tlfti-1-t-tl-ttt--dli"---t'..i-',ttiitlli4ttte/'tt--/plL4-dtt,+--'tt411etdb-/ttr--tt--elllilt-t,-lq'.t-iltdT/t'',lt"..-tilli/t"',tt'.t/dilll-lt',dt'',tl-Iid---".-t''..ttllrt--''tld".-t-tll---".t"

KOBE UNIVERSITY LAW REVIEWInternational Edition No. 7, 1971
Edited by Faculty of Law
Kobe University, Kobe, JapanCONTENTS
Takashi Hara and China (1)......................................................Tsttyoshi Masuda

The Japanese Judiciary in the Whirlwind of Politics.....................Takeo Hayakawa

THE RESEARCH INSTITUTE FOR ECONOMICS AND
BUSINESS ADMINISTRATION, KOBE UN!VERSITYHISTORICAL SKETCH
In 1919, a research organization named the Institute for Commerce wasfounded in Kobe Higher Commercial School, one of the chief predecessors ofKobe University, with a gift made by F. Kanematsu & Cornpany, a leading
mercantile firm in Kobe. The organization was designed to carry on and facilitate integrated research on business and commerce and to formulate andpublish the resu!ts of these studies and investigations in such form as to makethem available to the business community.

With the founding of Kobe University of Commerce, successor of Kobe
Higher Commercial School, in 1929, the Institute extended its research activities by adding several divisions. One was the famous Latin-American
Library, which soon becarne the center of research in this field in Japan. A
room for statistics equipped with various computing machines was establishedand began publication of 1ayo Kst'xai Tokei monthly and Sekai Boeki Tokeiannually. A filing room was prepared to deposit press clipping files systematicallyarranged by topics and dates. Another room was designed to become the centerof all possible original records and data having to do with the beginning andprogress of Japanese business.

On the campus of Kobe University of Commerce, another organization
named the Institute for Business Mechanization was founded in 1941 utilizing

business machines donated by the IBM Corporation and others. With
Professor Yasutaro Hirai as its head a broad and forward-looking plan forbusiness mechanization in Japan was developed.

In •1944, Kobe University of Commerce changed its name to Kobe University of Economics. After the war, however, the University was consolidated with three other col!eges in Hyogo Prefecture to become Kobe University.

With this development, the two Institutes were also arnalgamated into the
Research Institute for Economics and Business Administration, Kobe University. At present, the Institute, with its twenty fu11-time professional staff

members, carries on studies and investigations in international economy,business administration, and information systems in Japan.

LOCATION AND
BUILDINGSThe Research Institute for Economics and Business Administration is
located on the campus of Kobe University, Rokko, Kobe. It is a three•-storiedbuilding named the Kanematsu Kinenkan and has a floor space of about 2,900
square meters, which includes a president's room, forty-one oMces, six rooms
used as a library, a room for statistics, three conference rooms, etc. Adjoining
is a one-story building recently built to install business machines.

ORGANIZATION
Unde; the directorship of the president, the Institute operates with two
research groups, each has five sections respectively. Each research groupand its sections are as follows:

A Group of international Economy(1) International Trade(2) International Finance(3) Maritime Economy(4) Economy of Latin-America(5) International Law of Economy
B Group of Business Administration(1) International Management(2) Business Administration and Information Systems(3) Accounting(4) Business Statistics(5) International Labor Problems
Besides the regular work of the Institute, research committees may be createdto carry on any special work requiring the joint study of academic and businesscircles. At present, there are three committees, that is, International FinanceCommittee, the Committee of International Economic Cooperation and Overseas
Business Operations in 1970's and Information Systems Committee.
For convenience and greater eMciency in carrying out its research activities,
the Institute has a general oMce which is responsible for 1) the collection andpreservation of a comprehensive collection of books, periodicals, pamphlets,and original records and data of finance, trade, commerce, industry and businessgenerally; 2) the classification, cataloguing, indexing, arranging, annotation andcompilation of these research materials; and 3) the formulation and publicationof the results of the investigations and studies accomplished by the professional
staff members of the Institute.
As an aMliated institute, the Documentation Center for Business Analysis
has been established. It is the first systematic information facility in thefield of business administration in Japan that has been recognized andauthorized by the Ministry of Education. The purpose is to collect and to
make intensive control of all kinds of materials on business administrationand to make them available to scholars, universities, governments, and businessworld with the aid of modern documentation techniques.

I
,

;
[

RESEARCH INSTITUTE FORECONOMICS a BUSINESS ADMINISTRATIONKOBE UNIVERSITY

it

l
l
i
l
i

I

I
I
I

Director: Seiji SASAKI

lt

Secretary: Tatsuo KUReDA

l
i
l
l
i
I
i
l

i

GROUP OF BUSINESSGROUP OF INTERNATtONAL
ADMINISTRATION RESEARCHECONOMIC RESEARCHll Fukuo KAwATA
Professor of Regional
I
I Minoru BEIKA Prefessor of Business:

Study on Latin Ameriea
Dr. of Eeonomics

l

i
:

E

l, Seiji sAsAKI

Professor of Maritime

l
l
l
I

Dr. of Economics

l Jiro YAe

Professer of International

EconomyiltratlonTadakatsu lNouE Professor of lnternationalllt: Taru KANo:

Professor of International

I

Law

1

:, Masahiro FUJITA

Professor of InternationallFinanceDr. of Economics

I
I

I Hikoji KATANo

t
i

l
l

Professor of Internatienalll

iAssoeiate Professor of
Hiromasa YAMAMOTO
Maritime Econornyl Yoshiaki NtsHIMUKAt Associate Professer of Reii! Kazuhiro IKAWA
1

l

l
I

l

i

gional Study on Latin
Arnerica

KOBE

ROKKO,

Statistics
Dr. of Business Adrnin-

lstratlon

1
l

l
l
l
i

Isao NAKANo Associate Professor of
Accountingl Hideki YosHIHARA Assoeiate Professor of
g
l
I
i'

l

InternationalManagement

Hiroshi SADAM[cHl Assoeiate Professor of

Business Statistics
Ph. D. in Econometrics

Research Associate ofInternational Trade

OMce: The

Akio MoRl Professor of Business
FinanceilDr. of Econoinics
Ph. D. in Statistics
1

ManagementlDr. of Bttsiness
AdminiBtrationli Nobuko NossE Professor of Businees

Trade

i

l
I

i'

Dr. of Econornics

E

I

lt

FinancellAdministration andInformation Systeme
Dr. of Business Adminis-

KanematsuMemorial Hall

UNIVERSITY
KOBE, JAPAN

d-4t[-d---J---------P-L--p---vH----ts--t-Ap----------L------y----4ny-------------tApj-"--ny-S4--------ny-Iil,