& BUSINESS

ioth

ANNUAL REPORT<`iills?,ttix

THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

l963

Copyright, 1963, by The ResearchInstitute forand Business Administration, Kobe

University

Economics

KOBE
ECONOMIC & BUSINESSREVIEW
ioth

ANNUAL REPORT<"I"Ei:"ltlr.i/e•

THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

1963

CONTENTS
Page

Revised Accounting Provisions of the Commercial Code ofJapan
with Special Reference to the Corporation Incorne Tax Law............,......,...................Susumu WATANABE

1

Social Accounting as an Instrument of Policy...............Nobuko NosE

13

Industrial Estates for Small Businesses in Japan .........Minoru BEiKA

25

Rise of the Mutual Financing Business in Japan......Tadakatsu INouE

35

The Introduction of European-Style Vessels in Japan:
A Historical Survey ........................,..........................Seiji SAsAKi

41

On Industrial Relations in Japan's Shipping Industry
with Special Concern on Personnel Management...............,......,,............ Hiromasa YAMAMoTo

53

Regional Disparities in the Brazilian Economy:
A Case Study on the Brazilian Northeast......Yoshiaki NrsHiMuKAi

65

The Basic Concepts of Going-Concern Valuation ............Jiro ONo

77

A Study on the Current Cost Theory of Fritz Schmidt......................,,..................... Isao NAKANODie Kostenbegriffe fUr die betriebliche Planung......Tetsuo KoBAyAsHi

89

103

Introducing Prof. Shinjo's "History of the Yen".......................,............ Zentaro MATsuMuRA

l15

REVISED ACCOUNTING PROVISIONS OF
THE COMMERCIAL CODE OF JAPANWITH SPECIAL REFERENCE TO THE CORPORATION INCOME TAX LAW
Susumu WATANABE

I

Accounting provisions of our Commercial Code were revised at the 40th
ordinary session ofthe Diet on April 13, 1962, and they are to come into force
on April 1, 1963. In view ofthe many differences existing between the revised

accounting provisions and the present Corporation Tax Law Enforcement
Regulations, the problem we take up here is, how the present Regulations
should be amended in relation to the revision of the Commercial Code, or
what adjustment should be made between corporate income computed inaccordance with the provisions of the Commercial Code and taxable income
under the Corporation Tax Law.
In considering this problem, however, a difference of viewpoints maylead to dissimilar conclusions. That is to say, one can assert that sinceaccounting provisions ofthe Commercial Code and the tax law have different
purposes and aim at dissimilar incomes, we have only to prepare financia!
statements for each purpose, needing no adjustment between them. In thiscase, an income computation of a business during a fiscal period would resultin the preparation of different independent sets of financial statements.

But in both fields we use the same accounting records as materials forincome calculation, and moreover no essential difference can be found in themethod of income calculation. Therefore, it is more effective and reasonable
to regard the income under the tax law as derived from the financial state-ments under the Commercial Code. Namely, the income by the tax law isdetermined on the basis of financial statements prepared according to theaccounting provisions of the Commercial Code, with necessary adjustments
for tax purposes added to it.
In fact, the Corporation Tax Law, hitherto, has adopted this principle, stating that a corporation liable to pay tax shall file with the government a return

within two months after the c}osing date of each accounting period, showing

the amount of the income of the accounting period concerned which is thebasis of assessment and the amount of the corporation tax on this income

1

2

SUSUMU WATANABE

ontheconfirmedsettlementofaccounts. Theconfirmedsettlementofaccounts
means the settlement of accounts of the accounting period approved at the gene-ral meeting of stockholders, or by the whole body ofpartners or by others corresponding to them as the case may be, and within two months after the closing
date of the accounting period the settlement of accounts should be confirmed
and a return filed.
Thus, the Corporation Tax Law does not, as a rule, require a corporation
to close the books so as to reflect the provisions of the tax law-to settle
accounts so that the computed annual profit shall directly show the taxable

income-but the taxable income is calculated on the basis of the confirmed
settlement of accounts of a corporation, with necessary adjustments added toit. The necessary adjustment, being made on the return in practice, is called"the adjustment in the return".
As a corporation does not necessarily close its books in accordance with
provisions of the tax law, there are some items which must be adjusted without
fail on filing the return, Adjustments are required (1) when its accounting
does not conform to the provisions of the tax law, and (2) when it does notreflect the fact. For example, when a corporation sets up a bad debts reserve,a reserve for retirement allowance, a price fluctuation reserve, etc., in excessof the amount permitted by the tax law, the excess should be adjusted in the

return. To take another example, to value a current asset at an amountabove or below the current price is not permitted by the tax law, so when
the computed profit or loss ofa corporation includes such valuation profit orloss, the excess should be adjusted in the return. These instances comeunder (1). Accounting not refiecting the fact is found when a corporation
makes its income too small by means of omitting some of its sales, or showing
some hypothetical purchases, etc., or when it lists fictitious assets or liabilities.

As taxable income should be computed in accordance with facts, when acorporation's accounts include these untrue items, adjustments should be
made.
Next, exclusion ficom taxable income of dividends received by a corporation, and the exemption from taxation of the income from the manufacture'of new staple commodities are approved on condition that they are stated assuch on the return. Certainly they also belong to a kind ofadjustment in the
return, but they differ in character from the above-mentioned ones. In thiscase, by stating them as such on the return, the intention of getting an application for those provisions is regarded to have been expressed. On the other
hand, there are those items that do not become effective unless they have alreadybeen included in the settlement of accounts of a corporation, i.e., the adjust-ment in the return shall not be approved. The tax law states as follows:

REVISED ACCOUNTING PROVISIONS OF 3

THE COMMERCIAL CODE OF JAPAN

Since by "a return based on the confirmed settlement of accounts" is meanta return based on the financial statements approved at the general meetingof stockholders or by the whole body of partners, on filing a return the follow-

ing points should be observed.
(1) The amounts ofvaluation profit or Ioss on assets and of depreciation
shall not be increased or decreased in the return, because such amounts must
not, as a rule, be other than the same amount that has been approved at thegeneral meeting of stockholders or by the whole body of partners.
(2) What are allowed to be treated in tax calculations as deferred assets
shall not be deducted from the amount of jncome in the return in cases wheresuch items are already listed as deferred assets in the financial statements

approved at the general meeting of stockholders or by the whole body ofpartners.

The existing tax law only limits the maximum amount of depreciation,and the depreciation is not compulsory for a corporation. Whether to charge
depreciation or not, and the amount to be charged, are at the discretion ofa corporation. Therefore, as to depreciation, the tax law regards what havebeen reported on the confirmed settlement of accounts as an expression ofthe

intention of tbe corporation, and disapproves the adjustment in a retum.
Thus, a corporation is not a]lowed to charge depreciation below the maximum
amount on a confirmed settlement of accounts and to increase depreciation
up to the maximum amount in its return. This principle applies also to the
deductions for various allowances and reserves. Likewise, when a corporation
lists as assets in its confirmed financial statements what are allowed to betreated as deferred assets by the tax law, they cannot be deducted from theamount ofincome in the return. Ifthe adjustment in a return were recognizedin such cases, the reported income and the taxable income would be so widely
alienated that the basis of computation of taxable income would be lost.•
Among items whose adjustment in a return are not recognized, we findthose different from the above-mentioned in character. For instance, inregard to governmental subsidies appropriated to capital expenditures,customer contributions to the cost of constructing facilities, gains on insurance

claims, gains on exchange ofproperties specified in the tax law and so forth,
it is approved to include rhe amount reduced in a deduction on the condition
that the book value of assers is reduced (this is known as `reduced entry'). In
other words, the special favor of deferment of taxation, which is the substantial

effect ef the reduced entry cannot be enjoyed, unless the reduced entry isadopted. Differing in character from the above-mentioned limitations, thecompulsory adoptions of such a procedure is considered as an unjust interference of the tax law with business accounting.

4

SUSUMU WATANABE

The existing Commercial Code has but very briefprovisions concerning
the valuation of assets. It states that movables and immovables, credits andother properties cannot be valued in excess of their current values, and fixed
assets of business may be valued at the amount of their acquisition or construction costs less reasonable depreciations (Commercial Code g34). Further,as to a fixed asset ofa corporation for business purpose it is disallowed to.put

a value above its acquisition or costruction cost. (Commercial Code g285)
But now through the revision of accounting provisions for corporations,valuation bases of various assets have come to be provided, accompanied witha prescription on allowances. And they have turned out to be different
from provisions of the tax law in many respects, making it necessary to findsome way of adjustment between them. In the following, we are going tostudy differences and ways of adjustment between them concerning important.

Items.
Il

The revised Commercial Code stipulates concerning the valuation ofcurrent assets as follows:

A current asset shall be valued at its acquistion or production cost. But
in cases where its current price falls far below its acquisition or production
cost, the current price shall be put, unless its price is expected to recover up
to its acquisition or production cost.
The preceding clause dQes not preclude putting the current price so longas it is lower than the acquisition or production cost. (g285-2)

As the chief content of current assets is inventories, we shall treat it as aproblem of valuation of inventories in the following.

The above provision is said to adopt the cost basis as a principle, theselecion of "cost or market, whichever is lower" basis being exceptionallyadmitted. Accounting provisions of the Commercial Code essentially aim
at the computation of business profit distributable for dividends and adhere
to the "increase in net worth" concept of assets which emphasizes their reali-

zable value. From this standpoint we can understand the admission of the"cost or market, whichever is lower" basis. But from the viewpoint of modern
accounting whose purpose is to achieve proper periodic income computation
by means ofperiodic allocation ofcosts, the "cost or market, whichcver is lower"
bagis cannot be supported, because it absorbs unrealized losses in the incomeof the current period, although it excludes unrealized profits.
As to the valuation of inventories the tax law approves a selection of thecost basis, the market value basis or the "cost or market, whichever is lower"

REVISED ACCOUNTING PROVISIONS OF 5

THE COMMERCIAL CODE OF JAPANbasis. (Enforcement Regulations g20)
The revised provision of the Commercial Code does not recognize themarket value basis. Neither does the Business Accounting Principles, from thestandpoint of excluding unrealized profits. Now the tax law should also comecloser to the modern income accounting and exclude the market value basis,
since the market value basis unreasonably leads to the inclusion of unrealized
profits in the income of the current period. Originally the tax law is said tohave approved the market value basis for the convenience ofsmal1 enterprisesthat do not keep accounts in good order. But the exclusion ofthe market value

basis would not cause much trouble in practice, for among the valuation
methods belonging to the cost basis, we find the last purchase cost methodor the gross profit method which is comparatively easy to apply. Further,

Article 17 of the Enforcement Regulations recognizes the writing up of
inventories to the extent of the market price, but to fu1fi11 the purpose of
excluding unrealized profits, reporting of a valuation profit of inventories

should not be approved.
The tax law prcperly recognizes the valuation on the cost basis. Thisbasis charges realized costs against realized revenues excluding unrealized
losses as well as unrealized profits. According to the Commercial Code,however, we cannot continue a valuation on cost, when the market value
falls far below the cost with no expectation of recovery of the price up to
the cost. But if a corporation wishes to continue the valuation on the costbasis for tax purposes in spite ofa remarkable decline of the market valueon the closing date (though such a corporation would seldom be found inpractice), the tax law should approve the writing up of inventories, once
written down to comply with the requirement of the Commercial Code, tothe cost in a return.

m
As to the valuation of fixed assets the revised Commercial Code stipulates
as follows:

A fixed asset shall be valued at its acquisition or construction cost, anda reasonable depreciation shall be made on each closing date.
In cases where ah unforeseen deterioration has occurred on a fixed asset,

reasonable reductions shall be made. (9285-3)
When a fixed asset has been acquired, it is proper to record it with its
acquisition cost. The provision of the tax law concerning the valuation of
fixed assets is the same as that ofthe Commercial Code. But a special problem
arises when the "reduded entry" method is taken with regard to govemmental

6

SUSUMU WATANABE

subsidies appropriated to capital expenditures (which shall be simply called
governmental subsidies hereinafter), customer contributions to the cost of
constructing facilities, gains on insurance claims and gains on exchange ofproperties. Namely, the tax law takes a step of not immediately taxing thegovernmental subsidies and so forth subject to the reduced entry (which means
making an entry at the actual acquisition cost less a certain amount specified
by the tax law. The amount thus reduced shall be called, hereinafter, thereduced value). In this case the basis ofdepreciation is the reduced value,

the amount deducted being excluded from depreciation. Thus, governmental
subsidies and so forth, though not immediately taxed in the year of grant, are

Iater made subject to taxation in instalments through underdepreciation(for the total amount of accumulated depreciation and residual value does
not come up to the actual acquisition cost).
But the reduced value is not clearly the acquisition cost. It is not reasonable for the the tax law to claim that the reduced value should be listed on theclosing balance sheet in order to enjoy deferment of taxation, in spite of therequirement of the Commercial Code to record the acquisition cost. Sucha claim must be looked en as an un.iust interference of the tax law with businessaccounting. Primarily the reduced entry method has derived from convenience for tax purpose so as to exclude from depreciation and transfer cost theamount ofgovernmental subsidies and so forth that was not treated as income
at the beginning. So the provision cf the tax law should be amended so as
to admit that the same effect as the existing reduced entry shall be grantedeven when fixed assets are recorded at their acquisition cost. This seems
attainable by a book keeping method which divides the acquisition cost of
a fixed asset into the part which may be depreciated or included in the transfer

cost and the part excluded therefrom.

The revised Commercial Code provides that reasonable depreciation
on fixed assets shall be made on each closing date. This requirement is quite

natural from the standpoint of accounting provisions of the Commercial Codehaving as its chiefobject the computation ofprofit distributable for dividends.
Here the depreciation is understood to be forced, whether revenue is suMcient

to cover it or not. On the other hand, depreciation in the tax law is not com-pulsory, but only limits the maximum amount of annual depreciation. Theoretically, depreciation should not be influenced by the size ofprofit, and it isproper to determine taxable income as the amount after deducting reasonable
depreciation. Therefore, it seems proper that the tax law takes a step towards

compulsory depreciation. When depreciation becomes compulsory, thecarry-over of under depreciation will no longer be recognized, for a reasonable

depreciation constitutes an expense for a business and it is not proper toREVISED ACCOUNTING PROVISIONS OF 7

THE COMMERCIAL CODE OF JAPAN

compute distributable profit or taxable income Ieaving proper depreciation
unconsidered. If the profit before depreciation is insuMcient to absorb thereasonable depreciation of the year, a deficit will result. The carry•-over andcarry-back of this deficit should be approved to continue as before, for it would

lead to excessive taxation on a business and confiict with the principle ofequitable taxation, only to tax the incomes of profitable years but to neglect
deficits of unprofitable years. We believe that the disapproval of carry-overof underdepreciation is never incompatible with the recognition of carryover and carry-back of deficits,

The "reasonable depreciation" in the Commercial Code is understoodto mean disapproval of not only a depreciation below the reasonable amountbut also a depreciation above it. Consequently, a problem arises when theextraordinary depreciation recognized in the Special Taxation Measures Law
exceeds a reasonable depreciation. The amount of the extraordinary depreciation (the excess of depreciation charged by a corporation over the amount of
reasonable depreciation) has the character of a retained profit in the year when

it is charged. The present tax Iaw states that the amount of depreciation
deductible in computing the income is what a corporation has charged within
the maximum amount. But it is proper to change the provision so that an extraordinary depreciation can be deducted from gross income in the computation of taxable income even when it has not been treated as an expensein the income statement of a corporation, when it is an extraordinary depreciation which has an implication of tax policy.

IV
As regards the valuation ofstocks the revised Commercial Code prescribes
as follows:

Stocks shall be valued at their acquisition cost. The provisions of Article 285-2 shall be applied to stocks having stock exchange quotations.

Stocks without stock exchange quotations shall be written down to areasonable amount when the financial position of an issuing corporation has

markedly grown worse. (g285-6)
The revised Commercial Code divides stocks into (1) those having stock
exchange quotations and (2) those without them, requiring a different valuation basis to be applied for each of them.
Concerning stocks having stock exchange quotations, it provides that whencurrent prices on the closing date lie far below their acquisition costs they are

to be valued at the former, unless their prices are exPected to recover up to
their acquisition costs. Or instead of adopting this basis, it is allowed, in8

SUSUMU WATANABE

all cases, to value them at current prices on the closing date, so long as these
are lower than their acquisition costs.

The present Commercail Code prohibits a valuation in excess of the current price. So the valuation basis for stocks of the Commercial Code has now
been greatly changed as in the case of current assets. Namely, according
to the new provistion it is disallowed to take a valuation profit into accountwhen the current price exceeds the cost.

In compliance with the present Commercial Code, the existing tax law
admits of taking a valuation profit due to a rise in the prices of stocks into
accounts, and it is possible to write up their book value to the current prices.

In accordance with the amendment of accounting provisions of the Commercial Code, it is reasonable to revise the tax law so as to disapprove the valuation at the current price above the cost, for from the standpoint of computationof taxable income it is also inappropriate to make unrealized profit an objectof taxation.

Concerning stocks without stock exchange quotations the revised Commercial Code takes the cost basis, except when the financial position of an issuing

corporation has become markedly worse. On the other hand, the tax law
recognizes writing up or writing down to the extent of the current prices.
It is proper for the tax law to disapprove the valuation at the current price
above cost for the same rcason that was stated as to stocks having stock ex-change quotations. On the other hand, when the current price has fallen
below cost, the tax law may well approve write-down of stocks to the extent
of the current price even when the financial position of an issuing corporation

has not markedly grown worse, on the same ground that justifies the "costor market, whichever is lower" basis with inventories. Therefore, the tax
law should retain the provision of write-down of stocks without stock exchange.
quotatlons.

The tax law has provided in 1962 a secial valuation basis relating tostocks held for the purpose of controling other corporations.
Under the tax law the valuation of stocks held for the purpose of controlling other corporations is treated in the same manner as the valuation of fixed
assets. In other words, they are, as a rule, to be valued at their costs and write-

down is disapproved except in a special case where the current price of stock
has fallen owing to the degradation of the financial condition of an issuing
corporation. A fall in their value not resulting from the degradation of thefinancial condition is not recognized as a reason fbr a write-down. As to
stocks held for the purpose of controlling other corporations it is approved towrite up their book value to the amount of cost or maket whichever is the lower,
but a valuation profit in excess of it is not to be included in the income.

REVISED ACCOUNTING PROVISIONS OF 9

THE COMMERCIAL CODE OF JAPANConsequently, so far as financial statements submitted to the general
meeting of stockholders are to be prepared in accordance with the provisionsof the Commercial Code, adjustments in a return should be approved relating

to the difference between the Commercial Code and the tax law.

v
Organization expenses, issue cost of new stock, bond discount and interest

during construction has been recognized as deferred assets by the existing

Commercial Code. In addition to them, the revised Code has approved asdeferred assets the initial cost of business, development expenses, experimental

and research expenses and bond issue cost.
The tax law treats as deferred charges the expenses paid by a corporation
whose utility lasts more than one year after the date of expenditure, andrecognizes the following deferred charges (or prescribes following items to betreated as deferred charges).

The first group. To this group belong organization expenses (whichmeans expenses paid for the purpose of organization and to be borne by the
corporation concerned. They include rewards paid to promoters and the registration tax paid for incorporation), interest during construction, stock issue
cost and bond issue cost (excluding bond discount). As regards these expenses,
it is admitted either to treat a total amount as deductions in the year of expenditures or to treat a part ofthem as deductions carrying forward the remainder as deferred charges to be amortized at any time from the following account-ing period. According to the Commercial Code, organization expenses should

be amortized within five years after the foundation of a company, by anamount not less than equal to the division for each period. Similarly, theissue cost of new stocks should be amortized within three years after the issue
ofnew stock, and bond issue cost within three years after the bond issue (butwithin the term of retirement if it expires within three years). As to interest
during construction, whenever the dividend of a year is in excess of six per
cent of the capital, the amount equal to or more than the excess is required
to be amortized. Since the tax law approves amortizing these expenses at any
time as one likes, the settlement of accounts in accordance with provisionsof the Commerical Code never runs counter to the tax law.
The second group. The initial cost of business, development expenses
and experimental and research expenses belong to this group. All of these
expenses may be deducted as expenses in the year of expenditure, or all or partof them can be treated as an asset. However, that part of these expenses
which was treated as an asset may be amortized in five years. Thus, the10'

WATANABE
SUSUMUtreatment is different from the expenses belonging to the first group, in thatthe amount carried forward as an asset may not be amortized whenever one
likes.

According to the Commercial Cbde the initial cost of business is to beamortized within five years after the commencement of business, development expenses and experimental and research expenses within five years after
the expenditures, by an amount not less than equal to the division for eachperiod. Therefore, there is no fundamental dl'fference between the Commercial Code and the tax law.
The third group. Besides, there are many items that are to be treatedas deferred charges in the tax law. In other words, we find many items thatcan not be deducted all at once in a period of expenditure but to be treatedas deferred charges in order to comply with the tax law.
While the deferred assets under the Commercial Code are extremely
limited, there are many deferred charges in the tax law. Such a difference
arises from the fact that the Commercial Code considers an asset on the basisof the "increase in net worth" concept (viz. whether it is transferable orconvertible into money) but the tax law takes it from the viewpoint of periodic

matching of cost and revenue.
Most of the items which are to be treated as deferred assets taxwise but
are not recognized as deferred assets under the Commercial Code, however,can be considered as expenses required to get some right or long-term benefit(intangible assets) and seem to have suMcient quality to be listed on a balance

sheet under the Commercial Code, too.

VI
As regards allowances the revised Commercial Code p. rovides as follows:
When an allowance is set up and shown in the liability section of a balance
sheet to provide for a specific expenditure or a loss, its object shall be madeclear on the balance sheet.

When an allowance of the preceding paragraph is put to a different use
from the stated object, its reason shall be shown on the income statement.
(g 287-2)

But allowances approved by the tax law are very much limited incomparison with the Commercial Code.
In regard to allowances and reserves, whether the amount put in them aretreated as deductions or not is a matter of great importance from the standpoint ofthe tax Iaw. As the extent ofallowances approved by the Commercial

Code is larger than in the tax law, there i's no problem between them.

REVISED ACCOUNTING PROVISIONS OF 11

THE COMMERCIAL CODE OF JAPAN

Namely, allowances and reserves which can be included in deductions under
the tax law will be naturally reflected in the financial statements ofa company

prepared in accordance with the Commercial Code, and items shown on thefinancial statements but not allowable by the tax law, can be cancelled in
the return by the corporation.
?X 'k-wh ]SC V# va 1;a 3 7tlliue 3S( zz es I3L e}2 lilF 3.iZtr g 6D kas ut tzc J 6 iiA yP,i[l dy -zz -Gh 2]t, 7o

SOCIAL ACCOUNTING AS AN INSTRUMENT
OF POLICY
Nobuko NosE

Introduction

As a result of the recent developement in the theory of social accounting,it is now fairly generally recognized that we may consider some effects of theuse of national accounts on the course of the economic policy. There are,of course, different systems of social accounting including Professor Colm's
forecast(i), or Professor Tinbergen's(2) works, but now we have the concise
systems of Professor J.R.N. Stone`3' or Mr. A.T. Peacock(`', which are basedon the works of ProfessorJ.R. Hicks(5' and of the late Lord Keynes.(6'Also it is apparent too that objectives ofpolicy will be attained by meansof various combinations of elements in social accounting according to theircharacters.

This paper points out the suitability of national income accounting as
an instrument ofpolicy, especially under the conditions ofpost-war economy.
For this purpose, we submit a summarized model for the appliance of national
income accounting to the concrete objects of policy.
Before considering the problem in detail, it is interesting to note thatthe recent development of national accounts is based on the most important
objects ofJapanese economy as well as other capitalistic economies, especiallyafter the war. And in this field, the most advanced is U.K. economy.(7'Since the 1941 Budget was framed in the U.K., there was a necessity to make

(1)
(2)
(3)

(4)
(5)
(6)
(7)

G. Colm, "Public Revenue and Public Expenditure in National Income", lncorne and Wealth,voL l 1937.
-)

J. Tinbergen, "On the Theory of Economic Policy", 1952.
J. R. N. Stone, "Measurement of National Income and Construction of Social Accounts",
1947. Stone, "Fundctions and Criteria ofa System of Social Accounting", Income and
Wealth, series 1, 1951. Stone and G. Croft-murray, "Social Accounting and Economic
Models", 1959.
H. C. Edey and A. T. Peacock, "National Income and Social Accounting", 1954.
J. R. Hicks, "The Social Framework", 1942.
J. M. Keynes, "Income and Fiscal Policy of Great Britain", E. J., Dec., 1937.
As the historical survey ofsocial accounting, see N. Nos6, "On the Theory of Social Account-ing", 1961. pp. I9-36.

13

NOBUKO NOSE

l4

an estimate ofthe resources available for the conduct ofthe war. In the mean
while, there was a borrowing from the U.S. in I945. And during these periods,

there was a deficit which encroached on consumption and investment. But
we had an epoch in 1947, where overall planning of the economy was held by
the govemment. This latter planning urged the U.K. Budget to design thebringing about of fu11 employment without inflation under the maintenanceof economic stability from 1949.
Theoretically, the complication of their national income analysis as
well as national income accounting emerged the annual series of statistics ofnational income and expenditure which was designed to throw light on the
problems of economic policy, and this is promoted by the Blue Paper.
The activities of' the government at present are, therefore, directed towards

several objectives as Professor Colm(8' or Mr. A,R. Ilersic(9' write: (1) themaintenance of a high and stable Ievel of employment, so-called `fu11 employ-

ment' ; (2) the most equitable distribution of'wealth and income compatible

withtheattainmentofthemaximumnationalproducts; (3) themaintenanceofan adequate rate ofinvestment; (4) the maintenance of external stability
in the balance of trade; (5) the stability of prices. But if we rearrange
these objectives, the first two objectives are the most important, because theother three objectives belong to the former two objectives. In other words,
fu11 employment without inflation and equitable redistribution are main objectsof their economic policy,

We shall disuss the problems of attaining these objectives in such a way
as to use the instrument of social accounts connected with the historical andpolitical economy in U,K., and we shall raise some questions concerning
this.

I
Social Accounts for Full EmPlo2ment
We begin with the problem for attaining the full employment level .7V*,
which is the primary aim, as indicated above. As is well known the measure-ment of .N* will be gained by the level of national income r*, which corresponds to JV*, approximately as well as the measure of economic welfare.
0ur problem induces us, therefore, to solve the maximum level ofnational
income not exceeding r* and without inflation. This means we get a solutionof" any policy to attain r* putting i't as the `target'.

(8) Colm, ibid.
(9) A. R. Ilersic, Government Finance and Fiscal Policy in Post-War Britain, 1955. p. 15.

SOalAL ACCOUNTING AS AN INSTRUMENT OF POLICY15
Let us assume that this aim is realized for a particular year under the condition of multi-sector market, and therefore, it should be necessary to introduce

social accounts in our analysis.

According to the fundamental model of Mr. Peacock, social accounts
are summarized as follows, if we can calculate each propensity to spend ofincome for each sector in an economy:Jv,5== EawJ, (i=1, 2,...., 5) ....... (l),j=1where T, is the income of i-sector and a a,, is the propensity to spend from2J
to i-sector. If we classify the points main concrete situations, one is the case(A) in which all a,, s are constant, which means all tax rates are constant in

the government sector, which government expensiture increases, and theother is the case (B) where at Ieast one a,, is variable, e.g. the rate of income

tax changes, with increased or decreased government expenditure.

(A) If the paramcters including the rate of taxes are constant, andonly government expenditure increases, which is a case of well-known `alternative budget policy', we have the relation ofay, =- AAi' aG, .............. (2)if the government expenditure is put on i-sector, where A = F6,,-a,,i but
a,j --- O, and A,, is co-cleterminant. This gives us the relationdaGt = ri,, a2t •••••••••••••• (3)Since the autonomous government expenditure, during a given year increases national income as indicated, we may calculate the necessary increased

level of government expenditure in an inverse relation. If we set r* == r,+ ay,* as the full employment level of national income, we can easily guessthe level of aG* from the equation(3).
But it should be remembered, in this case, that the repercussions of thegovernment expenditure cover all sectors, and there is an increase ofnational
income at factor costs as well as at market prices. This involves the dangerof inflationary effects in the Keynesian sence, because, under constant propensity to spend, all incomes of ali sectors increase, which government saving
increases also. There were situations in the U.K. from 1945, at which forrow-ings from the banks were very great to the post-Korean boom of 1950-I951,
where living costs and ways became higher while fu11 employment was secured.
This expresses merely a simple state, When the autonomous expenditure16 NOBUKO NOSE
is paid for benefit services to the consumers, e.g. subsidies for food, hospital,

health insurance, etc., as shown in the 1945 Budget, the inflationary effects
on national income wil! prone an additional contribution to economic welfare
if it is connected with high real productive capacity.

[For Reference] ............ Numerical Examples ...
The relation we indicated above for example, is numerically, estimatedas follows, according to the data by Mr. Peacock`iO' in the U.K. I952.
Original tableau of national accounts in 1952 is,
cr

dr

Firms

Firms

Households Government Rest of

the World

105

29

Households

112

Government
Rest of the World

30

Capital

13

5

4

Total

155

127

48

2

Capital

Total

19

155

15
17

127

48

1

3

3

22
3

(355)

22

we may arrange this in a matrix form,:

155 O O.83 O.60 O.67 O.86
l27
O O.3I
O OO
48 =O.72
O.19 O.15
O O.33

O OO.02
OO
O.14
223O.09
O.09
OO

155
l27
48
3
22

as is well-known `Transaction Matrix'.
On the Ground, from equation (2), we get

1 -O.83 -O,60 -O.67 -O.86-O.72 1 -O,31 O O
0 O O 1 -O. 14-O,09 -O.02 --O,09 O 1

A== -O.l9 -O.l5 1 ---O.33 O =O.087.
Then, if newly autonomous government expenditure valued 2
the sector of firms (Business Sector), and according to the= O.303, we can get a relation corresponding to equation (2) asiS PUt irltO
calculation of Ai3

follows:

O.303
ayi ]== o.os7 Å~2 == 3•5 Å~2 == 7
We can conclude from this, as an inverse relation, that i(10) Peacock, ibid., p. 85.

fwe expect add i',

SOCIAL ACCOUNTING AS AN INSTRUMENT OF POLICY!7
tional national income 7 as a target, we may put government expenditure tofirms valued 2. This is the essentical idea of national income accounting.
(B) The other case concerning fu11 employment policy is under the situation in which at least one rate of tax changes with variable government expenditure. In this case, we may guess that the policy through the national accounts
will have less effect on the national income, because repercussions may occur
as the result ofnet effects. This gives us the relation.

aLv, == Afi' aa,, + AAt' aG, ........ (4)if any a,J changes and government expenditure is settle in i-sector.
As a result of this repercussion, the necessary government expenditure will
be smaller than that of case (A), because the government saving from increased

tax revenue will be substitutable with the government expenditure. It shouldbe, however, clearly remembered that there are three points which are valuable
in a dispute.
First, an increase of tax-rate, e.g. an increase of rate of indirect tax forfirms, means an increased government saving in national accounts, while
it is a decreased disposable income in the Keynesian sence, and it serves to anincrease government contribution to welfare unless it is not delivered forunproductive objects. This is proved by the facts and the efforts of U.K.
Budgets from 1927 to 1953 since the Colwyn Commitee critisized the regressive
effects of indirect taxes. Second, the problem is the best choice of how to
obtain taxes. Although we are interested only in a simple linear combinationin national accounts, it will be possible that some taxes will have effect on

consumption or investment. Therefore, the variable policies will havesecondary effects on the elements of' national income, including rather unstable investments. These happen, as we can guess, at Investment Allowancesin 1948-'49 and increased consumption in the i944 Budget. Considering
these effects, a policy should be forward for the object of minimizing
volatile private investments. Third, we will suppose that a change of indirecttax-rate has better effects than a change of government expenditure for our
object, as the national income at factor cost, the measure of real product, will
be smaller than that of case (A). Thus it will be recognized that any procedure in which all financial factors are considered adequately is the best policy

for full employment without inflation.

[For Reference] ......... Numerical Examples .....
Let us assume that an indirect tax rate a3i, for firms changes and government expenditure pours into firms the same as in case (A), we have the numerical relation on the basis of 1952 U.K, national accounts as follows:NOBUKO NOSE

18dy, = Illi3i da,, + -4Aii!- dG,

O.647 O.303= "o:os77 da3i + o.os7- dGi= 7.4 Å~ da,, + 3.5 Å~ dG,
Then if we assume dy, =7just the same as case (A) and additional government expenditure dG = 1.5, we get the rate of the change of the indirect tax
for firms

da,, = 7 - 314 Å~ 1'5 .. o.236 .
This concludes that a warranted level of national income with additional7(flOO m) will be attained through increasing the rate ofindirect tax for firmsby 23.60/,, the decreased rate is O.14 = O.19 (1-O.236), and with the additional

government expenditure to firms by 1,5 (flOO m) that is smaller than that ofcase (A). And we may have some complexed combinations for the object ofnational account system, only if we arrange these elements adequately and approximately after considering the points discussed above in this context.

II
Social Accounts for Income Redistribution

The second important object ofpolicy relates to the redistribution of thenational income in order to maintain an adequate standard and stable levelof the welfare of the nation, In the opinions of the economists, economic wel-fare depends on the appropriate distribution of income on the ground thatthe object of production is satisfactory to corisumer's wants and the structureof modern taxation should assist this situation, which is recognized from data

during and after the war.

When we take a social accounts system as an instrument of policy,
this problem will be treated as an application of the analysis described above.
It involves the contents (1) the total level of national income is unchangeable,but (2) the rate of taxes and the propensity to spend of the government sector
will be changeable. In the processes, there will occur the intermediate offset

of incomes among multi-secors.
Corresponding to equation (4), we have the relation in this casedy,=F-t-Ai!L da,, F EIi`' dG,=o..... (s).

SOCIAL ACCOUNTING AS AN INSTRUMENT OF POLICY19
It is, however, rather diMcult to enquire processes of a substantial redis-

tribution owing to changes of elements in the government sector. But wemay discuss this further some detail. One effect is considered from the revenue
side, and the other from the expensiture side of the government sector. First,
as has been pointed out in the preceding context, on the revenue side, we havesecondary effects of taxation on consumption and investment. For example,
a decreased rate of indirect taxes causes increased bargaining power of the
low income class as pointed out by Professor Hicks, an increased rate of death
duties means disturbing amassing of wealth of high income class, and so on.
Second, as for the expenditure side, policy for investment will be incentives

to production and capital accumulation unless it does not cause inflation andkeeps a stable level. But from the point ofview ofnational economic welfare,the expenditure for social services and benifits, e.g. subsides for consumption
goods and houses, etc., will be rather superior to high unstable spending to firms

and will cover the disadvantage of deterrent effects of taxation. This was thesituation in 1938-'48 U.K. Budget and the fiscal policy after the War for retired

men or landlords, where propensity to consume became higher while scarcity
of savings occured.

Generally speaking, there is a contradiction between the spending po]icy
and tax policy, between sellers' market and buyers' market. But the objectof modern economic policy should be to get an exact solution of national income

redistribution to attain a stable and high standard of welfare. And we may
predict the point graphically as follows, and it is possible to solve in multi-

sector national accounts system,

Y(GNP)
1]

1

l
l

Y(G)

'

1
i
1
'
I

1

Y(t)

where point P is the most adequate solution to maximize social welfare, andthe object of policy should be to arrange all financial factors to achieve thepoint corresponding to the stable level of national income under the conditionNOBUKO NOSE

20

ofmulti-sector market. This is the idea to which we shall attempt to give content in the future.
This seems a reasonable solution, since there is an optimal solution forredistribution, but we can not neglect concrete political problems and th6
administrative system as is well shown in the history of' public finance in U.K.
As is pointed by Mr. Ilersic, every reform ofthe tax structure is based on somepolitical situation, like introducing the progressive income tax in 1909, death

duties in 1949, especially after the War. And so, the political choice of theart of tax and items of expenditure are the most important for attaining themost equitable distribution of national income through public policy. Thisshould be noticed when we use national accounts as an instrument of policy.

[For Reference] ............ Numerical Example ....
If we assume, for example, an indirect tax rate a3i and government
expenditure for firms C, change, and additional spending is 1.5 (S 100 m),
we get from the relation
7.4 Å~ da,, + 3.5 Å~ 1.5 = O,da,, == -O.71
As a result, an indirect tax rate a,, decreases from O.19 ( == 1 - O.71) to O.13,

while government expenditure based on the other tax revenue increases l.5({100 m).

III
Social Accounts for Economic Stabilit]
It was mentioned in the introduction of this paper that some of the otherobjects of policy to be dealt with have dependence on the first and the second
main objects. But there are considerable differences also for the other threeobjects of policy in analyzing those under national accounts system.
First, we should consider the object ofthe maintenance of an adequate rateof interest. This problem was a great concem in the 1945 U.K. economy,
where much borowing from banking systems was held, like Roosevelt's New
Deal policy in the U.S.A.
In the absence of monetary factors in national accounts, it is rather diM-

cult to solve this problem directly. The monetary policy wM have effect on
the liquidity preference both through transaction money and through speculative money.
As is well known in the Keynesian Theorem,

M == M, + M, == r(Ci ') + L, (r)OF POLICYAS AN INSTRUMENT
SOCIALACCOUNTTING
Then national accounts estimate only national income which relates totransaction money M,. On the other hand, the rate of interest concerns
the money stock. It is interesting to rate, however, there may be somerelation between national accounts and the monetary system in order to solve
this problem. If we assume velocity of money in all sectors v, and then rates
of' liquidity in sepculative markets 6,,, we get a relation as fo11ows,

M,=;. "ts2,j+F6.M,, .••••• (6),M ==XM, ............... (7).
tNational accounts relate only to Xa,,2,, but if it would be possible tojintegrate `Flow of Funds System'
to it,(i" we may trace the effect of a change inthe rate ofinterest. When total M =XM, is unchanged, rates of speculationt the rate of interest, which will have some effect onchange with a change oftransaction markets especially through investment markets. In an inverse
relation, we might arrange an adequate level of the rate of interest indirectly

through national accounts system.
Second, as for the maintenance of external stability between exports
and imports, the object will be easily treated through ex-ante estimationof the rate of exports and imports in the same way as we discussed in the preceeding contexts. It is reasonable in this case that there is a discrepancy frominternal changes between the rate of imports and exports which is as similar

to that between government expenditure and tax revenue. Imports havean advantage for productivity in some contexts but not so whenever they do
not coincide with productive power. As for exports, the situation is vice versa.

That is the main problem in the U.K. orJapanese Economy after the War.
Finally, we have an object to stabilize prices. The policy for this object
depends on the fu11 employment policy without inflation which we have discuss-

ed already. In the U.K. economy after the Korean boom of 1950-'51, living(11) This thema is the most recent and there are two types. First is (A) OEEC, Statistics of Sourcesand Uses of Finance, 1948-1958, 1959. This method based on Prof. J. J. Polak, "Monetary
Analysis of Income Formation and Payment Problem", Staff Papers, vol. VI, No.1, Nov., 19. 57.
Second is (B) Board of Governors of The Federal Reserve System, Federal Reserve Bulletin,
Aug., 1959, pp. 828-25. For the present status of money-flow accounting, See G. Dorrance,"The Present Status of Financial Accounts: A Review of Recent Developments", 1961.
Income and Wealth series, IX. For the present status of Financial Accounts and the inte,gration problem (with National Accounts) in Japan, See The Board of Economic Planning,

Japan, "Report of the Commitee on the National Economic Accounting", 1962. and N.
Nose, "The Integration Problern in Social Accounting," Kokumin-Keizai-zasshi, vol. 105,

No. 6, pp. 62-79.

21

NOBUKO NOSE

22

costs rose with increased wage rates, and these divergences belonged to therather unstable increase of national income. Theoretically we may guessthat any price of any object will rise or fall in accordance with an increase or

decrease ofincome in any sector, but not proportionately and not continuously.

The strategic policy for income is variable, then prices become variable.
Therefore, the stabilizing policy through national accounts, which is the firstmain object of policy, is necessary for stabilizing prices, only if the latterhas not negatively dangeorous incentives to the productivity of national

economy.

IV
Conclusions and Some Problems
We have explored, by means of the system of social accounts, ways inwhich some objects of policy may be able to influence the final object for
attaining the national economic welfare of the nation. At the same time,
we have shown how an appropriate choice of such financial factors may preserve
equitable policies for fu11 employment without inflation or adequate redistri-bution, avoiding unstable changes rates of interests, balance of payments
and prices.

Although the model we have used is rather abstract and involves anurnber of simplifying assumptions, in some cases they are only propositions,

we may put some light on how to use national accounts as an instrument of'policy.

One approach is to proceed with the above analysis including government
sector. On the revenue side, the theory of shifting and incidence oftaxation
under multi-sector market is necessary. It will be composed ofeach analysis
for each tax under the present tax structure. On this point, we should examine
further government's depreciation policy e.g. extraordinal rate of depreciation
for tax purposes.
On the other side, the public expenditure, is fa' irly easily proceeded throughmulti-sector multiplier theorem, after considering the effects of government
activities.

We have treated social accounts as an instrument of policy rather
economically. But it should be the most important problem of how wedefine `government sector' and `government activities' as well. There aresome complexities and discrepancies in this matter, because, in some cases
there are' differences between the administrative or institutional divisionand the functional di'vision of sectors. For example, in capital account, wehave a different division ofsector about same articles, i.e. pianos or motor-cars,

23
SOCIAL ACCOUNTING AS AN INSTRUMENT OF POLICY

etc. This is one ofthe main reasons. Thus the rearrangement ofdivisions
for government sector will be necessary. Still more, we must promote thestudy of the input-output accounts and integration of two macro accounts toanalyze the effects of economic policy on multi-sector in detail(i2'.

Finally, it should be notice that national accounts as an instrument ofpolicy has some limitation especially contributed from the point of view ofthe political system and of economic function. It sheds some light on theproceeding plans of national economy by arranging some financial factors
between revenue and expenditure, which the role that this method is able toplay in attaining some political objects is limited. This un-suitability is oneof the most important problems which must be disputed in the future.

(l2) See Stone & Croft-Murray, ibid. "National EconomicAccounts of the UnitedStates", 19S8.
Conference on Research in Income and Wealth, "Input-Output: An appraisaP', 1955. T.
Barna (ed.), "The Structural Interdependenceofthe Economy", 1955. As the present status
of integration of the social accounting systems, N. Nos6, "The integration problem", ibid.

INDUSTRIAL ESTATES FOR
SMALL
BUSINESSES IN JAPAN
Minoru BEiKAI
The modernization and rationalization of small businesses have been
one of the most important industrial problems in Japan. Therefore many
policies for the problem have been planned and executed by the Government,
but the changing conditions around a small business continue to raise many
diMcult problems. Recently the construction of "industrial estates for small
businesses" has drawn the attention of the industrial world in Japan, as a

newly planned unique policy by the Government. This idea was initiatedvoluntarily by several small business groups two or three years ago, and since

1961 it has been formulated with the financial aid of the government, andhas been recommended to small business firms by the local public bodies.
Many projects for establishing industrial estates of small business groups havebeen planned, some of them have already been completed and still otherprojects are now under construction.
So-called industrial estates can be usually found in American and European countries. But industrial estates inJapan planned chiefly for combined
activity by small manufacturing firms in certain kinds of industries are stillrather rare as stated above. The writer intends to explain the outline andsignificant role of these estates in small business problems in Japan.

ll
The general problems of small business in Japan can not be dealt withhere, because they have many cemplicated aspects and are related to various

other economic and social problems. The principal subject in this article
is what is the meaning of `industrial estates" in small business problems inJapan.
The industrial estate fi r small businesses stated here, has some special
characteristics different from the so-called ones in American and European
countries, as follows. Some of the small business firms in certain kinds of'manufacturing industries form co-operative organizations to construct an
,`

25

26

MINORU BEIKA.industrial estate on a suitable site, the estate being planned to attain theefficient co-operation of the participating members, not only in physical facili-ties for manufacturing, distributing, and employee welfare, but also in othereconomical and social activities. Accordingly, industrial estates are one of

the most effective means to modernize the management and technology of asmall business by co-operative activity. Moreover, these can be used topromote urban redevelopment, more or less, since each small business firm
which has been dispersed within a residential or shopping district to bringundesirable land use, have to maintain their own desirable conditions and toadjust to their surroundings.

Several original plans were initiated by a few groups of small business
firms in clothing, wood working, and engineering industries, since the beginning of 1960. The inducing motives were labour shortages due to their small

scale, the undesirable environment of their sites, and severe competition
caused by large scale enterprises and their own business policies.

Just at that time, the summer of 1960, the Joint Japan-United Nations
Team in the Hanshin Metropolitan Region (the writer was on the Japaneseteam) recommended in their report on a planning and action program for thedevelopment of the Region, that industrial and commercial estates for small

businesses should be developed for their modernjzation and urban redevelopment. The recommendation suggested that these estates could provide
truck facilities, utilites, rented building space and some credit, management
and clerical services for small business firms, and that they might be located inareas where particular economic functions were already placed or might berelocated in other more suitable areas.

These recommendations and experimental plans led to governmental
action to realize the project of industrial estates for small businesses formally.

The Government provided encouragement for co-operative action by small
industrial firms through forming an industrial estate with oMcial financial
aid. The Government decided to assist in the realization of 10 industrial
estate projects in 1961 and 20 projects in 1962, throughout the whole country.
In 1963, 30 industrial estates and 10 commercial estates are planned to be

developed. Of course, there are a considerable number of other projects
which anticipate othcial assistance in the near future, and many other voluntary projects under preparation. The outline ofthe 30 projects under realization with oMcial aid as stated above is shown as fo!lows.

INDUSTRIAL ESTATES FOR SMALL BUSINESSES IN JAPAN

Industrial Estates for Small Businesses by official financial aid in

1961

Prefecture Name I. E. (Cooperative) No. of Firms Kind of lndustries
Hokkaido

Sapporo Woodworking Center 44

Chiba

Funahashi Industrial Cooperative
93
Federation

Shizuoka

Osawawatari L E. 22

Shizuoka

Shizuoka Engineering l. E. 47

27

Woodworking
Metallungical, Engineering,
Chemical, Textile, Food

Area

M2

l80,OOO
140,OOO

Transportation Equipment

86,OOOEngineering

165,OOO

Gifu

Gifu Engineering L E. 90

Engineering

Aichi

Toyota Engineering l. E. 22
Toyama Engineering Center 39

Engineering

430,OOO
230,OOOEngineering

120,OOO

Osaka Clothing l.E 52

Clothing

430,OOO

Okayama Okayama Engineering Center 32

Engineering

120,OOO

FukuokaEngineering

Toyama
Osaka

Total

Northern Kyushu Industrial Coop. 22

10 463
Industrial Estates in

190,OOO
2,1oo,OOO

1962

Hokkaido

General Engineering l. E. 69

Metallungical,-- Engineermg

700,OOO

Tochigi

Ashikaga Knitting L E. 21

Knitting

200,OOO

Ibaraki

Ibaraki Switch-board l. E. 21

Switch-board

Niigata

Kashiwazaki Engineering l. E. 41

Engineering

ShizuokaHamamatsu Engineering Coop. 34

Engineering

138,OOO
138,OOO
165,OOO

Shizuoka

Shimizu Woodworking l. E. 21

Woodworking

148,OOO

NaganoNaganoDaiichi Precision L E. 30

Precision Industry

204,OOO

Nagano Woodworking l. E. 28

Woodworking

100,OOO

Ishikawa

Kanazawa Josei Engineering I. E. 26

Engineering

54,OOO

Aichi

Nagoya Men's WearLE 22

Men's Wear

100,OOO

Mie

Yokkaichi Engineering l. E. 26

Engineering

177,OOO

Fukui

Sabae l. E. Federation 53

Dye, Grass Frame

1,270,OOO

Osaka

Osaka Wemen's Wear l. E. 43

Clothing

165,OOO

Hiroshima

Engineering

170,OOO

Kochi

Tomo Engineering Coop. Federation 84
Kochi Woodworking I. E. Federation 52

Woodworking

445,OOO

Fukuoka

Kokura Higashitani Engineering Coop. 21

Engineering

Oita

Oita Engineering l. E. 21

Engineering
Engineering

188,OOO
62,OOO
100,OOO

Nagasaki Engineering 27

Engineering

165,OOO

Saga
NagasakiNagasaki

Total

Saga Engineering 25

Sasebo Engineering 20

20 685Engineering

70,OOO
4,760,OOO

28

MINORU BEIKA

III

The industrial estates for small businesses under construction seem tohave considerable merit in overcoming the present diMcult problems of small
business firms in Japan. This is especially due to their special characteristics
different from modern large-scale industrial enterprises.

Small business firms in Japan are chiefiy family-owned or relative-owned.
Therefore the management of a small business by the owner himselfS tends
to seek both the prosperity of the business and the happiness of the family or
the relatives. Both aims may be coincident in some cases, but in many othercases, both may confront each other. Because, for the object of realizing theprosperity of the business, the management might have to absorb externalfunds and employ competent management talents outside the family or
relatives, so that the power of control by the owner or the family might benecessarily decreased and moreover the management (the owner) would haveto deal with new more troublesome management problems. In cases where
the firms do not have the chance to develop their business in such ways as
stated above, they might inevitably be forced to give up their independence
to some degree for some joint business activity with other small firms.

To attain the happiness of the family, the business policies might be soconservative or passive that the management tends to attach importance tobusiness security and to avoid confronting complicated problems. Generally

speaking, hitherto, a considerable number of small business managements
in Japan, tended to prefer the latter business policy, or to take standpoint of
the happiness of the family, rather than the former, or the policy of businessprosperity, at any crisis where they would be obliged to decide their policies.
The development of industrial estates for small businesses seems to meanthat positive policies to desire the prosperity of the business surpass the former

tendency stated above. The industrial estates' need is for the managements(the owners) of constituent small firms to emerge from the status of a familybusiness. This is because, for developing industrial estates, the constituent
members who had dispersed sites for apart and had been able to operate theirbusiness independent from each other physically, now must come together in
one certain area and construct their plants and other facilities, according tointegrated plans and standards to some degree, so that they should not only
co-operate in some of their business activities with each other, but also would

inevitably compare their business performance, wage level, machine andequipment, and business results, and then should necessarily endeavor todevelop their business more positively for overcoming their business differences.

IN JAPAN
INDUSTRIAL ESTATES FOR
SMALLBUSINESSES

29

It is worth paying attention now to the fact that such a rather drastic policy

has been adopted independently by some groups of small business firms inJapan, and that even though there is severe competition in this age of in-novation it has brought out such a creative management behavior. The
leading causes for such management behavior in small business firms are thelabour shortage and lack of competent management talent, due to their small-scale, and the following causes coming from the increasingly undesirable
environment of their old sites. They are necessary urged to endeavor to levelup their productivity to that of 1arge-scale enterprises, by overcoming their
weaknesses as much as possible. The industrial estate is seen to be one ofthe
most effective means to level up the productivity ofsmall businesses since theywould be able to co-operate in their business and relative activities on theestate, outgrowing their former individualistic behavior. On this point,
the writer can find a positive meaning in the governmental pelicy of encouraging the industrial estate of small businesses.

In the U.S.A., the policies of the Small Business Administration havelaid emphasis on financial aid and management guidance for individual firms,
supporting their independence exclusively. Therefore it does not intend tolead them to organize co-operative activities, or combine their businesses.
In Japan, on the contrary, the policies to help small firms, include endourage-

ment for co-operative activities, such as co-operative purchasing, selling,

manufacturing and amalgamation in some cases. Because there are so manysmall business firms in Japan they tend to fall into a too excessive competitionin order to coexist and develop. In spite of many experiments to improve
such undesirable conditions, these diMcult problems have been endured as
before. Thus the type of industrial estates is a forward step in approaching asolution to such problems. It especially means that the managements of small
business firms have shown their decisiveness in trying to solve their problems.

Recently small businesses in Japan have shown two remarkable trends intheir industrial development, and the development of the industrial estateis one of them. The other remarkable trend is the jumping up in the levelof small businesses, based on their creative business policies in the innovationage. The latter course also led them to-depend upon business-minded policies different from their former family-centered attitude. One of the real
evidences is the establishment of a secondary market in stock exchanges, andthe formal preparation to establish a corporation for financial-aid to growing
small firms. Since the major subject of this article is industrial estates forsmall businesses, the writer shall cut short further discussion on this problem.

30

MINORU BEIKA

IV
Some cases of industrial estates for small businesses in Japan are illustrated below:(1) The industrial estate of' small engineering industrial firms.

One industrial estate has almost finished construction at some distancefrom the Hanshin industrial• region. This estate has about 122,OOOm2, consisting of 32 small-sized industrial firms. Some of these firms had co-operated

with each other from several years ago chiefiy in taking orders from a certain

large-sized industrial machine factory. They had been located at different
places around a middle-sized city (Okayama). As the city had grown larger
gradually, most of them were confronted with the undersirable conditions of
their surroundings which were residential and had traMc congestion problems,
and their industrial ediciency had been disturbed by old-type machines andequipments. The unsuitable layout had unbalanced their business development. As a result, they could not employ capable trained labourers. Moreover, several new large factories belonging to metallurgical and petrochemicalindustries had began to develop on the reclaimed land near Okayama city,and small engineering industrial firms could expect new markets by thisdevelopment. Necessarily they were forced to adopt some drastic means forovercoming these obstacles and obtain their expected new market,
They devised a kind of industrial estate and put forward their plan.
Just of that time, the government policy for industrial estates of small busi-

nesses had begun. They realized their plan, prompted by the government
policy. Several other firms participated in this plan. But considerable time
elapsed before the concemed industrial firms reached an agreement with eachother to co-operate in the plan and overcome the many troublesome obstacles
concerning legal procedures. Because it belonged to one of the early representative plans the co-ordination between the central and local governments

and between different concemed departments of the government had not yet
been sufficiently completed. Therefore it must be emphasized that the excellent business leadership of the staff and the strong co-operation of themembers of the estate have overcome these many obstacles.
This industrial estate has constructed each plant building with a unified

design, and has common employee welfare facilities such as a dormitory for

new young employees, a common meeting place and some recreational
facilities. Their plan also includes having some common new special machines

and equipments through which the member firms can co-operate for theirmodernization. Actually the employee welfare facilities have helped them

31
INDUSTRIAL ESTATES FOR SMALL BUSINESSES IN JAPAN

to overcome the labour shortage to some degree. Moreover, they have tried
to raise productivity in their manufacturing activities by reducing the productivity discrepancies among themselves. Perhaps these efforts will leadthem to enlarge their capacity of taking more orders by their increasing industrial specialization so as to improve the foundation for their development.
However, this industrial estate has several difficult problems. Most of
the participating firms are very small-sized and have too old-type machines
and equipments, and moreover it needs their further exertion to achieve thedesirable co-operative activity in their industrial estate. The land use of theold site of each firm has not yet been planned well for urban redevelopment.
This is the other important problem.
(2) The industrial estates ofsmall clothing industrial firms.

One industrial estate of clothing industry for men's wear is now undei
construction in the northeastern suburb of Osakany-city, and the other for

women's wear is under preparatiGn in the southern suburb of Osaka. The
former estate has about 430,OOOm2, consisting of52 industrial small-sized firms,

and the latter has about 165,OOOm2, consisting of 43 firms. These projects
have in general the same characteristics as the engineering industrial estate
stated above, in their aim of industrial modernization and urban renewal.

But as the clothing industry has some special business features in its
industrial organization, their projects for industrial estates have implied their

special intention for some alteration (or modernization) in their industrialorganization. The firms in the clothing industry have been based on thesubcontract system, so they have manufactured themselves some parts of theirproducts in their own small plants, but they have subcontracted many of theirorders to many smaller subcontracters belonging to the house-hold industry
type concentrated in the urban districts. They have a wholesalg function too.

However, the recent labour shortage which has been brought about by the
rapid industrial development and the change in the population structure in
Japan, has affected their subcontract system greatly so that they are now
confronted with the necessity of adopting some new policy in their manufacturing system. They made their decision to meet the changing conditions
by this new project of an industrial estate. It means that they are outgrowing their semi-manufacturing state, not depending on the small subcontracters

so much. Therefbre this type of industrial estate has another meaning ofchanging their industrial organization, different from thc case of the engineering industry stated above.

This project faces more diMcult problems. Each firm is relatively morecommercial-minded than manufacture-minded in its chara.cteristic. Accordingly the management of the firm most necessarily emphasize the change of32

MINORU BEIKA

thinking attitude and business policy in the new industrial estate. Although
they are to move their manufacturing divisions to the estate, in the case of the

men's wear industry, their head oMces and sales oMces are to remain in theold sites, and therefore it is anticipated that their overhead cost will increase

and the urban redevelopment program will be less than expected in the caseofthe engineering industrial estates. Moreover some ofthe small subcontracters might be deprived ofa considerable part oftheir orders. It also is a pro-blem to be solved with the project of the industrial estate. However, theindustrial estates are expected to have a great and good influence on thedevelopment of the clothing industry in the future.
(3) The case of the voluntary industrial estate of wholesaJe firms.

Several wholesale dealers in Kyoto have voluntarily put forward theirproject of an industrial estate in the southern suburb of Kyoto which is thesecond center of textile business in Japan. This estate proposes to obtain asite of about 115,OOOm2 to 165,OOOm2, consisting of 30 or 50 textile wholesale
dealers, of whom 8 dealers have already started the first step in the project.

The active members of this estate have planned this project to avoid thetraMc congestion near the old sites in the central urban district and to develope their business more positively by building this new suitable environment.

The new site is near the new modern highway (from Kobe to Nagoya), Thisis a voluntary project.

It seems that this project has two important problems. The first one
relates to the voluntary project. The voluntary planning might be threatenedwith conflict concerning a desirable land use pattern. The second one is that
this is the first project of a wholesale function, not a manufacturing function,

In view of the urban land use or urban redevelopment, several functions
relating to the business or commercial activities in the urban district should be

expected to be decentralized and moved to the suburban districts of central
cities in Japan. The industrial estate stated above is an experimental one.
The estate of a manufacturing industry can be relatively easily and effectively
located on a suitable site, since the estate can chiefiy be the place of the manu-

facturing fi nction. On the contrary, the new estate for wholesale traderequires more essential factors for the trading function, especially such as thepossibility ofeasy contact by the customers (both buyers and sellers). Therefore, the project of' the wholesale estate must be planned more minutely basedon carefu1 preparation. The Government also seems to intend to develop
several wholesale industrial estates during 1963.

The three kinds of industrial estates stated above are some of the representative cases in present projects of industrial estates going on now.

INDUSTRIAL ESTATES FOR SMALL BUSINESSES IN JAPAN33v
In short, the recent attempts of industrial estates for small business inJapan are expected to be one of the most effective means for their deveiopment by overcoming their weakness. Perhaps a considerable number of theseprojects will be successfu1 in the near future. However, recently it is fearedthat some of the new planning of industrial estates imitating earlier projects
tend to be too stereotyped, lacking the fiexibility to fit the respective actual

business features of the industries. Most of the early projects seem to befound on carefu1 study and preparation, but several recent projects do seemto be based on such carefu1 arrangement and some of them might be only
imitations of the former plans. The policy of industrial estates by the govern-

ment can be expected to be more flexible to suit the actual business featuresof each industry in the type and its condition of the industrial estates, And
yet it is expected now that the industrial firms themselves will be more creativein their projects and experiments in forming industrial estatcs.

RISE OF THE MUTUAL FINANCING
BUSINESS IN JAPANTadakatsu INouE

I

From the beginning of the 20th century, the system of mutual finace,
known in Japan under the general title of "Mujin," come to be made use of
as a profit-making concern - so far the Mujin had long been on a mutual
aid basis. According to an investigation made by the Ministry ofFinance in
1914, the first profit-making Mujin company was the Ky6ei Chokin & Co. ofTokyo, founded in 1901 with a capital of 10,OOO yen. Since then, stimulatedby the successfu1 operation of the firm, company after company was established.

In l913, the year ofthe highest upsurge ofthe Mujin enterprise, the numberof undertakings reached 1,115. This development is much the same evolutionary movement as occured when mutual insurance was taken up by jointstock companies.
II

Before I give an explanation of how the mutual finance business was
carried on in its formative years, it is necessary to make a few preliminary
remarks on the traditional mutual financing society, known under the various

names, such as "Mujin-K6," "Tanomoshi-K6," "K6," etc.
1. The Mujin-K6 is formed by a certain number of persons, livingin the same village or town, or engaging in the same trade, or worshippingat the same temple or shrine.

2. The members agree to subscribe a certain sum periodically and to
divide the proceeds periodically by drawing (ballot), or by bidding (auction),or by both.
3. When there is a special benificiary, for whose benifit the Mujin-K6 isformed, the subscriptions at the first meeting are advanced to such beneficiarywithout interest, or even as a free-gift. In the first case, the beneficiary has topay his subscriptions from the second gathering like all other members. In
the second case, he has nothing whatever to pay and usually in return undertake the collection and administration of subscription while the Mujin-K6

35

36

TADAKATSU INOUE

continues in existence.
4. From the second meeting, or in cases where there is no special benefi-

ciary, from the first meeting, the paying out to member begins by drawing,or by bidding, or by both.

5. When the method of drawing is adopted, it is pure chanch to whom
the advance will go and he who may require it most urgently may have to wait
the last meeting, where he should draw nothing but the bare money he has paidin month by month. Therefore, in order to correct this unfairness to thosemembers who receive money towards the end of the series of meetings, up to
say about half the number of drawings, a percentage at a decreasing ratio is

deducted from the prize-money; and after half of the members have drawn
their money, this small percentage is added to the prize-money at an increasing ratio. For example, the prize-drawers Nos. 1, 2 and 3, etc. would
receive their money minus say 3 per cent., 2 per cent. and 1 per cent., thebiggest deduction being made for the first prize-drawer and the proportionately smaller deduction for the second and third drawers, etc. After half of themembers have been so dealt with, the sums deducted from them are added tothe advance made to the other half of members, the last member recieving thelargest addition to his prize.

6. Where the subscriptions are allocated at each meeting by bidding,those members- in need of ready cash compete for the advance, in that theystate their willings to accept so much below the total amount due to them.
Let us suppose that there are fifty subscribers and that the meetings are held

once a month and that the duratic-n extends over fifty months and that thesubscription is fixed at a yen a month and consequently thas the total sum
due to each member amount to fifty yen. And then, let us assum that, whenthc time come round for the third paying out of fifty yen, member C, E, G
urgently require to be accomodated on account of financial embrassment andthat C is willing to accept forty-five yen, E forty yen, and G thirty-five yen.
Naturally G's bid, being the lowest, is accepted; consequently he must sacrifice fifteen yen, that is, thirty per cent. ofwhat he would eventually pay in,or ifhe could wait, receive back at the last meeting. This difference offifteen
yen is equally divided either among all the members, excepting the successfu1

bidder G, or among all those members who had not yet obtained an advarice.
llI

The Mujin enterprise, which made its first appearance about 1901, wasa development from the system of mutual finance organized on such a manneras described in the preceding pages, It should be natural, therefore, that

RISE OF THE MUTUAL FINANCING BUSINESS IN JAPAN 37
the former bears a strong resemblance in its method of finance to the latter:it recruits a number of persons; it collects a cetain sum from the members
at regular intervals; it advances the proceeds to a member at each meetingby the mothod of bidding, or by drawing, or by both; and it allows the repay-

ment of advances by instalments. However, we cannot deny that there are
two points of difference between these two systemg, which are as follows:-

1. Whereas the Mujin K6, sometimes called "Tanomoshi K6" orsimply "K6," is an association formed for the mutual aid of the members, theMujin enterprise aims to make a profit out of its financial service to the cus-

tomers.

2. Whereas the whole working of the mutual Mujin is based on the goodfaith of members, we find in the business Mujin that there is no mutuality

among the members and each member has only to deal with the promoter,
not with his fellow members. Thus, in the latter, the loss arising from the eva-sion of payment of subscription or repayment of advance is guaranted by thecompany itselfl Here will be found one ofthe chief reasons why the numberof the profit-making Mujin companies increased by leaps and bounds ina decade following the founding of the Ky6ei Chokin & Co. in 1901.

IV
The method to draw a profit out of the Mujin may be devided into thetwo: the Tokyo-and Osaka methods.
1. The Tokyo method
The company charges a certain sum as commission to each member
equally whether he had received an advance or not. The result is that eventhe total amount of subscriptions paid by the member who draw his moneyat the end of the series of meetings should excess what he gets at the last

meeting. Generally speaking, the T6kyo method seems to be favorable tothose members who urgently require to be accomodated.
Table A shows an early example of this method adopted by the Ky6sei
Chokin Company of Tokyo. In this case the company charges fifteen yen
as commission to each of sixty-three members equally whether he hadreceived the contracted sum of three hundred yen or not.

2. The Osaka method
The company charges a commission only to those members who hadreceived an advance. A portion of this commission may be used to pay aninterest to the well-to-do members who receive money toward the end of theseries of Mujin meetings. The result is that the total amount of subscriptions
ofthe Iast member is Iess than the sum he gets at the last meeting. In general,38 TADAKATSU INOUE
the Osaka system seems to be favorable to the members whose-interests lie inmoney-building.
Table B shows an early example of this method adopted by the Ky6ei
Chokin & Co. In this case the member who receives the contracted sumof one hundred yen at the last (fifth) meeting pays his subscriptions at
a decreasing ratio which total ninety yen, thus getting the difference often yen as an interest. On the contrary those members who obtain theadvance at the early meetings have to pay back with a considerable
sacrifice. For example, the first prize-drawer pays in 117.70 yen against

the advance of one hundred yen. Trough such arrangement the company
can expect to earn the surplus totaling 756.50 yen.
.Besides the difference between the total amount paid in and the total
amount ofthe loan contracted, the Mujin enterprise gets a considerable profit
through the administration of the surplus fund.

Income and Outgo
A Mujin organized by the Tokyo method()ontracted sum to be loaned......300 yen.

Membership......63.

TABLE A

Meetings are held every twenty days.
Subscription

Order

of
Meetings

Subscription
after Loan

before Loan

MemberJ

Surn

ship

yen

Total

yen

5

63

315

2 (bidding)5

623( n )

561

5
5

1 (drawing)4( n)5 (drawing)

Total
Amount of

Total
SumMembership

yen

yen

Subscription

Loan
Contracted

(B)

(A)

yen

Surplus(A)-(B)

yen

yen

315

300

15

1

o
5

31S

300

15

2

10

315

300

15

5

3

15

315

300

IS

5

4

20

315

300

15

5

o

310

5

305

5

60

300

59

295

:•

i

61 (drawing)

5

3

15

5

60

300

315

300

15

62 (bidding)

5

2

10

5

61

305

31S

300

IS

63

5

1

5

5

62

310

315

300

L5

10, 080315

9, 76519, 845

18, 900

945

Total

315

39

BUSINESSIN JAPANFINANCING
RISE OF THEMUTUAL
Income and Outgo

A Mujin organized by the Osaka method
Contracted sum to be loaned.
Membership......50.

Total
Loan
Amountof Contracted

Order

Subscription

Subscription

before Loan

afterLoan

Meetings

SumMemberTotal

Sum MemberTotal

ship

1 (drawing)
2 (bidding)

3( n)
4( D)
5( B)
6( n)
7( D)
8( B)
9( ,, )

10( D )
11( B )
12( n )
13( D )
14( B )
15( x, )16( D )
17( B )
18( n )
19( D )
20( B )
21( " )
22( D )
23( B )
24( n )
25( D )
26( B )
27( " )
28( D )
29( B )
30( n )
31( D )
32( B )
33 ( xt )34( D )
35( B )
36( n )
37( D )
38( B )
39 ( ,, )40( D )
41( B )
42( " )
43( D )
44( B )
45( n )
46( D )
47( B ))
48( tt49( D )
50

Total

yen.

Meetings are held every twenty days.

TABLE Bof.....100

5. 00
5. 00
5. 00
2. SO
2. 50
2. 50
2. 50

2.50
2.50
2.50
2.50
2.SO
2.50
2. 00
2. 00
2. 00
2. 00
2. 00
2. 00
2. 00
2. 00
2. 00
2. 00

1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1. 50

1.50
1. 00

1.00
1. 00
1. 00
1. 00
1. 00
1. 00
1. 00
1. 00
1. 00
1. 00
O. 50
O. 50
O. 50
O. 50
O. 50

90. 00

50
49
48
47
46
45
44
43
42
41

40
39
38
37
36
35

34
33
32
31

30
29
28
27
26
25
24
23
22
21

20
19
18
17
16
15

14
13
12
11

10
9
8

250. 00
245. 00240. 00

117.50115. 00

112.50110. 00
107. 50
105. 00
102. 50
100. 00
97. 5095. 0074. 0072. 0070. 0068. 0066. 0064. 0062. 0060. 0058. 0056. 0040. 5039. 0037. 5036. 0034. 5033. 0031. 5030. 0028. 5027. 0025.50
16. 00
15. 00
14. 00
13. 00
12. 00
11. 00
10. 00

9. 00
8. 00

ship

o
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30
2.30

7

7. 00

6

6. 00

5

2

2. 50
2. 00
1. 50
1. 00

1

O. 50

2.30
2.30
2.30
2.30

2, ee9•O o

12.70

4
3

o
1

2
3

4
5t

6
7

8

9
10
11

12
13
14
IS
16
17
18
19

20
21

22
23
24
25
26
27
28
29

30
31

32
33
34
35
36
37
38
39

40
41
42

43
44
45
46
47

48
49

o

2.30
4.60
6.90
9.20
11.50
13.80
l6.10
18.40
20.70
23.00
25.30
27.60
29.90
32.20
34.SO
36.80
39.10
41.40
43.70
46.00
48.30
50.60
52.90
5S.20
57.50
59.80
62.10
64.40
66.70
69.00
71.30
73.60
75.90
78.20
80.50
82.80
8S.10
87.40
89.70
92.00
94.30
96.60
98.90
101.20103.50105.80108.10110.40112.702,81'7.50

Subscription

Surplus(A)(B)(A)-(B)

250.00247.30244.60124.40124.20124.00123.80123.60123.40123.20123.00122.80122.60103.90104.20104.50104.80105.10105.40105.70106.00106.30106.60
93.40
94.20
9S.OO
95.80
96.60
97.40
98.20
99.00
99.80
100.60101.40
94.20
95.50
96.80
98.10
99.40
100.70102.00103.30104.60105.90107.20106.00107.80109.60111.40113.20100. 00
100. 00
100. 00
1OO. OO
100. 00
100. 00
100. 00
100. 00

150. 00
147. 30
144. 60
24. 4024. 2024. 0023. 8023. 6023. 405,756.50

100.00100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00

100.00100. 00

100.00100.00100. 00
100. 00

100.00100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00
100. 00

5 OOO. OO'

23.20
23. 0022. 8022. 60

3. 90
4. 20
4. 50
4. 80

5.10

5. 40
5. 70
6. 00
6. 30
6. 60
6. 60
5. 80
5. 00
4. 20
3. 40
2. 60
1.80

A
A
A
A
A
A
A
A O.1. 0020
A O. 60
1. 40

A 5.4. 80
A 3. 50
A 20
A O.1. 9060
A O. 70
2. 00

3.30

4. 60
5. 90

7.20

6. 00
7. 80
,9. 6011.40
13.20
756.50THE INTRODUCTION OF EUROPEAN-STYLE VESSELSIN JAPAN: A HISTORICAL SURVEY
Seiji SAsAKiI

Our opinion that the modernization of Japanese shipping wastheoretically accomplished through the regular development of a common
carriage system with modern European-style vessels after the Meiji Restoration,is based on the following two premises;l) The past Japanese shipping business remained at the stage ofprivate carrier with Japanese-style sailing vessels.

2) The actual start for modernization was made with the introductionof European-style vessels due to urgent but uneconomical demands.

The first problem can be easily understood by men of good sense andhas been described already quite frequently by author. Now as there will
be no need to dwell upon it at length, we will point out a few facts briefly;

the Japanese owned only out-ofLdate sailing vessels before the MeijiRestoration. The greater part of such Japanese-style sailing vessels were
the property of the merchants and were operated to carry their own cargoes(private carriage), even though some historical pioneers of the common

or semi-common carriers Iike the Higaki-Kaisen and the Taru-Kaisen
certainly were recognized during the Tokugawa Era. -The former werecalled "Kaizumi-Sen" and the latter, "Chinzumi-Sen".- Moreover, it
seems that almost all of the vessels of the Taru-Kaisen and the Higaki-Kaisenreverted to private carriage type in the latter part of the Tokugawa Era andthe beginning of the Meiji Era.

The second problem is itself much more unquestionable. No one candeny the actual historical fact or order. There has even been some explanations that the introduction of modern European-style vessels showed themodernization ofJapanese shipping itself. Though we must keep our eyeson the more important fact that the last and most substantial content of themodernization of any shipping industry (or shipping business) should be foundin the transition from private carriage to common carriage, the real initiativeof introducing European-style vessels and its effective role in the development of the common carriage type has to be given a close attention.

41

42 SEIJI SASAKI
On the other hand, correct and deep research into the introduction
process of European-style vessels is particularly important in relation to

the general distortion of many previous studies on our modern shipping
industry, as they overestimated the development of some earlier special-usedsteamships and some chartered steamship companies. They interpreted too
simply the modern shipping business as nothing but transportation by steamers, and were likely to overlook the slow but steady growth of numerous
Japanese-style sailing vessels and their owners. We must remember thatearly Japanese modern shipping as a whole consisted of a minor force ofprivileged steamship companies and a major force of many average shipowners without protection. The fo' rmer became the so-called "Shasen"group and the latter, the "Shagaisen" group after the middle of the Meiji
period. The co-existence, especially the competitive relation, between bothforces is very distinctive and is an interesting phase for us to study.

II
Table (p. 43) shows us clearly two historical facts: first, European-stylevessels, either steamers or sailing vessels, were imported before the Meiji
Restoration; second, the steamers were greater in number than European-stylesailing vessels at the beginning.

The most direct and strongest motive which compelled our country
to abandon its national isolation policy was nothing more than the four
"Black Ships", that is, the steamers, under the command of General Perry.
This led to the emergent import ofsteamers as naval ships for national defense.

The two wars which took place during the first decade of the Meiji Era accelerated this tendency.

So far as it came mainly from such a military or defensive necessity, theearly introduction of steamers hardly brought a simultaneous quick evolution
in Japan's general commercial transportation business. All average shipowners continued their possession of old-style sailing vesse!s. On this point,
there was a very clear discord between the early emergent introduction of thesteamer and the general growth of our modern shipping business. It might
be said that our country did not import the modern European shipping business, even if it did introduce the many modern European-style vessels in
the earlier days. In fact, all of the European-style vessels, either steamers or

sailing vessels, which were imported before Meiji, belonged to the Tokugawa

shogunate and some of the strDnger feudal clans like the Satsuma, theChoshu, the Mito, etc, From a few reliable historical sources the navigationof the "Kisho-Mara", which was operated by a famous merchant, Jirosaku

IN JAPAN:
THEINTRODUCTION OF EUROPEAN-STYLE VESSELSA HISTORICAL SURVEY

43

Table I European-style vessels in Japan after !870

Steamer

1870

Total

Sail

NumberTonnage

NumberTonnage

NumberTonnage

3S

15,498112, 45446

17, 953

1871

71

20, 934

31

7, 909102

28, 843

1872

96

23,36435

8, 320131

31,684

1873

110

26, 08836

8, 483

146

34, 571

1874

118

26, 12041

9, 655IS935,77S

1875

149

42, 30444

8, 834

193

51,1381876

159

40, 248

51

8, 790210

49, 038

1877

183

49,10575

13.648258

62,753

1878

195

43, 899

123

19, 624318

63, 523

1879

199

42, 763174

29, 551373

70,3141880

210

4L 21S329

48, 093539

89, 3091881

189

39, 30S

360

43, 354549

82, 559

1882

199

39, 874389

48,583597

88,4591883

218

42, 250378

45, 611594

87, 861

1884

226

46, 448357

43, 689583

90, 1371885

228

88, 765358

50, 772586

131, 537

1886

227

92, 415349

46, 592576

139, O07

1887

252

107, 808342

45, 220594

154, 128'

1888

281

121, 627

338

45. 227

619

166, 904

1889

311

134, 548329

44, 253

639

177, 774

1890

335

142, 997

304

40, 267638

182, 237

1891

3.S3

147, 574

278

38, 539630

185,082

1892

375

157, 147

229

34, 163614

191,3101893

400

167, 490

218

33,666618

201, 156

1894

461

263, 629

196

32, 103657

295, 732

1895

528

321, 374

173

29, 322701

350, 696

Source; The Meiji-Unyu-Shi (History ofTransportation in Meiji Period), Shipping, pp. 682-69.
Before 1884, registered tonnage, after 1885, gross tonnage and after 1880 only registered vessels.

Kano, under the order of the Tokugawa-Shogunate in 1867, and which
engaged three voyages of round trip a month between Edo (Tokyo) andNaniwa (Osaka) under the regular schedule, seerns to be the first steamer

that engaged in the commercial transportation business. She has been
given the title "Joki-hikyaku-sen" (Steam-packet-boat) in our history. On
the other hand, there were also a few very small steamers in those days,
which engaged only in short-haul and very small-scaled passenger service

between Edo and Yokohama. The "Oiran-Maru" and the "Inage-Maru" were
famous as examples.

44

SEIJI SASAKI

However, these early coasting services of 'steamers during the late Toku-

gawa Era were so accidental or tentative that all of them came to an end
within a very short period. We must pay attention to the opinion that places
doubt concerning the substantial execution of transportation services of theabove-mentioned "Kisho-Mara" because of lack of suMcient reliable data toprove her real navigation.
The beginning of the Meiji Era brought no sudden or instant change
in our shipping business, though a few experimental steamship services
were made in the main route ftom Tokyo to Osaka, and more short-haulpassenger services were carried on in limited spheres Iike Tokyo Bay, Osaka
Bay and the Inland Sea of Seto. We can not recognize any definite or successfu1 modern shipping business or firm until the establishment of the "Kaiso-

Kaisha" in 1870-though it may have been in 1869.

The navigation of the "Naniwa-Maru" which was operated by the
Osaka Unjo-sho, a department ofthe Meiji Government, between Tokyo andOsaka in 1867, was indeed the earliest attempt ofa large-scaled transportation

service with the then large-sized steamer after the Meiji Restoration. She
engaged a regular oMcial round trip voyage from April of that year as theabove-memtioned "Kisho-Mara" had done or had planned to do. But she
was distinctly a special ship so far as she belonged to the government, andher captain was naturally a foreigner (the English). The carriage of thegeneral public and cargoes, even if they were permitted to use her, wereseldom done under such limited conditions as stated, "oMcial use is the prime

object of this steamer, and private passengers and their cargoes are only
allowed to go on board under our special kindness."
In September of the following year, the Hokkaido Kaitakushi, a commissioner ofcolonization for Hokkaido, also began a transportation businessbetween Hokkaido and the main land with two European-style sailing
vessels, the "Kanrin-Maru" and the "Shohei-Mara" which were given to the
local government by the Dajo-kan, the Cabinet or the central government.
Two steamers were added to their fleet afterwards, so that the business scale

might be enlarged gradually. However, it had also not only such a limited
character that its first aim was the transporting of official goods and thereafter

the loading of civil cargoes as a form of side-work, but it showed in fact nosatisfying business results throughout its existence. The result was that alltransportation business to and from Hokkaido had to be transferred to the
new Kaiso-Kaisha as soon as it had been established in 1870.

This steamship company, the earliest in our country, was a semi-oMcial
firm too; for the establishment of this company, itself, was planned by the
Meiji Government so that it was givcn not only as much direct aid or pro-THE INTRODUCTION OF EUROPEAN-STYLE VESSELS IN JAPAN: 45
A HISTORICAL SURVEY
tection as possible, but was also strongly controlled by the government.
The fleet consisted of steamers and European-style sailing vessels. Somebelonged to the new Government and others belonged to the clans. Of
course, the imported steamers played the most active part. Although thiscompany dissolved after less than one year without any practical success, inaddition to its above-mentioned special semi-oMcial character, it was undoubtedly the first steamship company in our country which aimed at carrying
the general public and its cargo along with governmental goods. Our modern
shipping business can be said to have originated with this company.
All attempts of the early sea transportation business-including that of
the Kaiso-Kaisha- which were carried on by European style vessels imported
during the late Tokugawa Era and the early Meiji Era, had a very special andlimited characteristic as above-mentioned. These engaged, first of all, in
oMcial transportation and had a strong and direct connection with the govemments, either the Tokugawa Shogunate, the Meiji Government or some ofthe stronger clans. The Kiman Steamship Company and the TsukumoShokai-the origin of the Mitsubishi Kaisha and the Nippon Yusen Kaisha-,both of which were established somewhat later than the Kaiso-Kaisha, werealso similar special firms; for the former had a close connection with the Kishu
clan, while the latter was originally established under the strong protection of

the Tosa clan. Without such a chartered situation and privilege no steamship company had any chance of surviving. Even such strong protection did
not always mean the successful development of each company without theirown spontaneous effOrt or by a.ccidental opportunity.

UI
Behind the early introduction of steamers and the establishment of a few

privileged steamship companies, however, there were a large number ofJapanese-style sailing vessels and their owners who continued their work as
private carriers. In the actual ratio of shipping tonnage or of transporting
capacity theJapanese style sailing vessels were the most important and central
force. This distortion or mixed situation in which there were a considerable
number of modern European-style vessels, especially steamers, with some pioneering but privileged steamship companies, while all average and traditional
shipowners stiH adhered to their old-style sailing vessels and unprogressive
business type, that is, the private carriage, was a very important peculiarity ofthc then Japanese shipping situation.

An evolutionary rule, "from older and worse to newer and better" isnaturally fit in the historical progress of ships, All sea-carrier companies

46 SEIJI SASAKI
either Japanese or of other nations, have been and are even now looking
constantly for newer and better ships from the time of the oldest dug--outs
or reed-rafts in prehistoric days to the newest atomic-ships. Setting apartboth the older and newer ships, the appearance of the clipper, barque andschooner in the latter era of sailing vessels was no exception to the aboveevolutionary rule. Those newest and best sailing vessels showed us alreadythe dawn ofa new age in the middle of the nineteenth century and evensuggested the further conclussive transition from sailing to steamer type.

The real modernization process ofJapanese ships that had been accomplished during the period from the Iate Tokugawa Era to the middle of the
Meiji Era, was also not only very natural but was common to that of ships ofother countries; for everywhere there was a clear progress from older anddated ships to newer and better ships and it finally showed in the transition

from sailing ships to steamers. Therc are, however, the following few very
important characteristics which must be definitely remembered:

1) Each newer and better ship which was selected in turn was not a
spontaneous growth in our country through any new device or effort on thepart of the nation or shipowner. The Japanese people merely imported
better ships which had been designed and built in advanced shipping countries.

2) Two distinctive methods can be recognized in the actual introduction process of the newer and better European-style vessels in place of theJapanese vessels, as it has been above-mentioned briefly and will also be more

fully stated Iater on. These are in themselves not only very important andinteresting but bring forth all other specialities in the farther developmental

process ofJapan's modern shipping industry.

IV' The two distinctive trends in the modernization process of shipping inJapan resulted apparently in a simple difference between the quick or slow
introduction of the steamer. While in the former the steamer was introduced
directly and from the outset, in the latter it was done indirectly and as asecond step that had been attempted continuously but clearly after the firsttransition to European-style sailing vessels. When the Japanese traditional
shipowners made up their minds at 1ast to substitute their old Japanese-stylesailing vessels for newer and better ships, they selected at first the European-style sailing vessels that were clearly more modern and advanced than theirown sailing vessels but were undoubtedly not as up to date good as the mostmodern steamers. In the beginning, they merely introduced the better

THE INTRODUCTION OF EUROPEAN-STYLE VESSELS IN JAPAN: 47
A HISTORICAL SURVEY
ships within the sailing vessel types, and did not yet fecl a great interest in

the steamers. They finally began introducing the newest and best ships thesteamers after about 1888. 0n the other hand, almost all ofthe early steamship companies which had already employed the large-sized steamers from theoutset were not only the privileged shipowners but were new-comers in shipping

circles and were few in number. They were able to approach the steamers
more freely and progressively by reason of their inexperience and historicaldisinterest in the shipping business as compared to the many traditional ship-owners.
In brief, one of the most important reasons that led to the modernizationofJapanese shipping in those days was the unquestionable low-eMciency of
their own sailing vessels. It showed very clearly the fact that the Japanesestyle sailing vessels were old and bad and should be replaced by the Europeanstyle vessels, even though they were sailing vessels. Apart from the immaturity and many interior limitations of the then Japanese national economy asa whole, the inferiority of the Japanese-style sailing vessels was mainly due tothe long isolation policy, which prohibited the building of large-sized (sailing)

vessels-l635-1853-and of navigating abroad-1636-1862.
Of course, there were some developmental progress in our navigation andshipping business with such infantile Japanese-style sailing vessels even during

the Tokugawa Era; for there were many coastal trade routes in spite of thelack of oceangoing voyage. These sailing vessels which were engaged onsuch main routes as Edo/Kamigata, HokkaidolHokurikulBakan/Osaka, andKyushulHyogo (or Osaka) were very prosperous and even became comparatively large in scale due to the mollifying order on the prohibition ofbuilding large ships (1638)-this mollifying measure was only available formerchant-ships (cargo-boats). On the other hand, there were also many
eMcient middle•-sizedJapanese sailing vessels that were at first called "Kohaya"-meaning "a fast vessel"-and afterwards became well-known by the summary group-name "Taru-bune" (Taru-Kaisen). This fast and ethcient sailing vessel group and another group, named the Higaki-bune (Higaki-Kaisen),which was defeated by the former group, were very famous in our shipping
history because of their capable navigations between Edo and Kamigata andbecause of their foremost position as common carriers, as it has already been

mentioned.
The actual progress inside the Japanese-style sailing vessels, however,
was not only smaller in scale than that of the European-style vessels, but
did not show such an epoch-making development to newer and better ships
in the rigid meaning; for the appearance of larger or better sailing vessels

in our country was negligible compared to the epoch-making design of the

48

SEIJI SASAKI

Clipper in American and European shipping circles, more so when comparedwith that of the steamer. So fa' ras the data that the author of this article hasgathered to date, there is no positive proof to show any actual employment of aJapanese-style sailing vessel over 1.000 koku-roughly converted into about

100 tons-before the Meiji Restoration by any famous traditional ship-owners who had carried on their own navigation actively and gradually cameto modernize their vessels and business type. Some long--lived men, whowere either seamen or had shipping interests in some sailing vessels during
the former half of the Meiji Era, have also told us from memories of their
youth or hearsay from seniors that almost all of the so-called Sengoku-bune(sailing vessels of 1.000 koku) had a really small capacity of about 700-800
koku, and that it was in many cases only a simple popular name for thc comparatively large-sized Japanese-style sailing vessels. The author has alreadyproved the fact that the enlargement of' the Japanese-style sailing vessels
began just after the first decade of the Meiji Era.

Therefbre all progress including the slight enlargement in the size ofship during the Tokugawa Era was really very much limited and partial, eventhough it is impossible to deny any change at all. It was undoubtedly far
less than the progressive transltion in foreign shipping circles. As such, theinfantile Japanese-style sailing vessels had to be replaced by newer and better
ships, first of all, in order to modernize Japanese shipping as whole.

v
The above-mentioned process of the modernization of ships in Japan canbe grasped from the viewpoint that it also conformed to the general rule,"from older and worse to newer and better" which in itself is a natural andtheoretical process. Indeed the evident difference between the low productivity ofJapanese-style sailing vessels and the high productivity of European-style vessels was a basic and purely economical reason to modernize thethen Japanese fleet so quickly. Nevertheless, we can not attach great importance to this economical reason only; for it is insuflicient to explain thereal modernization process in our country that had two clear different trends.

The earliest introduction of European-style vessels was hardly basedon any economical reason or demand. The European-style vessels weremainly imported by the govemment not by individial shipowners. Moreover,such an advanced introduction did hardly act as the stimulas for thesubsequent general employment of European-style vessels by well-known
traditional shipowners.

To explain this background more exactly, we must look into the thenTHE INTRODUCTION OF EUROPEAN-STYLE VESSELS IN JAPAN: 49
A HISTORICAL SURVEY
real protective policies that were put into practice in order to introduce
European-style vessels. SAvrith both the major universal or all-inclusive
protective policies and the minor special limited regulations like the rulesof' the captain, mate and engineer's certificates for European-style vessels
or the rules of the ship--money, a number of direct decrees for introducing

new style vessels were promulgated by the Japanese government, either
Tokugawa Shogunate or the Meiji Govemment in those days. Above all
the fo11owing four ordinances are well-known and most important. Two
were promulgated by the Tokugawa Shogunate and the rest by the Meiji
Government; the three top ordinances were positive while the last was negative.

We have to place main attention on such mutual relations and on changes in
the passage of time.

A) Proclamation for releasing the prohibition against building largesized vessels in 1853;"Though the building of large-sized vessels was strictly prohibited hitherto,
it shall be permitted for each feudal clan to build such large vessels, because

the need has just become pressing........"B) Proclamation for perrnitting the building of+ large-sized vessels for thewhole nation in 1861;"Even for both the farming population and trading class it shall be permitted to own large-sized vessels. They can build them at their own option

henceforth. When they want to buy any foreign vessel, they must givenotice to the government oMce in the nearest port. The owner of such alarge-sized vessel can operate it freely and widely inside the country. Ifthey are unaccustomed to this kind of operation business, they can easily
get such government aids as the use of mates and seamen."
Both were well-known, epoch-making shipping policies that were put
into force without delay as soon as the Tokugawa Shogunate repealed theirlong national isolation policy. However the former was clearly a special
limited permission for each feudal clan to build and own large-sized vessels

including European-style vessels. There was undoubtedly a military or
national-defense aim behind this proclamation. On the other hand, we
can easily imagine that the introduction of steamers was not a direct andimportant aim of this proclamation at least in the early days, as it was yet
impossible to build them in our country.

The latter proclamation had certainly a greater importance than theformer in the sense that the road toward the building of large Europeanstyle vessels was opened to the whole nation. Moreover it even showed asomewhat economical intention by this proposal of encouraging such newstyle ships and new operation business beyond only that of the national

SEIJI SASAKI

50

defense consideration. However, it was fairly questionable whether thesteamer became an object of this encouraging proclamation. From thelimitation of navigation inside this country, the main object should rather

have been sailing vessels either of the Japanese-style or European-style.
It was above all most important that no European-style vessels, either ofthe steamer or sailing vessel, was owned by any private shipowner throughout the entire period of the late Tokugawa Era in spite of the encourage-

ment.

C) Two Decrees of1869
The Meiji Restoration Government also issued anew somewhat similar
encouraging proclamations under almost same consideration for national
defense. The first decree of 1869 had in fact much the same characteristic
as the above-mentioned proclamation of 1853; "Each feudal clan hithertobought navy ships from foreigners without using any third party, resultingthat they frequently imported very old roughly built, coarse articles in
return for large sums, and consequently they were in financial diMculties.
Hence every clan government must give notice to the local port-authority ifthey want to buy such foreign vessels. Then the authority will investigate
and give suitable advise."This decree was clearly issued as a warning to all clan governments
which had bought bad European-style vessels so frequently during the
Tokugawa Era. It brought this fact to light, and showed that all past encouragements for introducing European-style vessels had no really satisfactory effect on our country. So far as the quick consolidation ofa modernnavy fleet was required under the then military or defensive emergency, thegovernment ought to have been more carefu1 as to the capability ofsuch newstyle vessels. The new Meiji Government which took the place of the Toku-

gawa Shogunate did not yet have suMcient power and depended mainly on
the support of some ofthe strongest feudal clans. Ifthese clan governments
had been in needy circumstances, it would have brought about great political instability. Here was the main reason why the new government dared

to issue this decree anew and repeatedly. Another fact must also be
remembered that the simple expression "a large-sized vessel" used in the
proclamation of 1853 was changed (specialized) into that of a Europeanstyle vessel, though it was not yet limited to only the steamer.

Another encouraging decree for introducing European-style vessels
was issued in October of the year. This was in fact much the same as theProclamation of 1861, although there were a few note-worthy points asfollows; 1) the fact that it was a simple and perfect repetition of the use of

new European-style vessels, and the decree showed in itself a lack of thatTHE INTRODUCTION OF EUROPEAN-STYLE VESSELS IN JAPAN: 51
A HISTORICAL SURVEY
kind ofship among the general public until the Meiji Era. 2) It was very

important that the word "steamer" in the phrase "the European-stylesailing vessel and the steamer" was clearly used for the first time. It was,however, quite questionable whether the real employment of new modern
ships, either steamers or sailing vessels, could be accelerated so easily by
this dicree alone.

A more basic, direct and strong encouragement was made in January of 1870
in the form of a "Cabinet Notice" (Dajokan fUkoku). It was the well-known"Merchant-ship Rule".

D) Merchant-Ship Rule of 1870
This encouraging policy was much more distinctively expressed and had
a clearer principle as follows; "The locally-constructed ships are so easily
wrecked injuring life and cargo that they are more likely to cause national

losses. For that reason the government has determined to remodel themerchant fleet with large-sized European style vessels in the future. The
owners of the new style ships will be able to expect strong governmental

support...." The first and clearest principle of the new Meiji Government to modernize quickly the Japanese merchant shipping by the basic
and large-scaled introduction of European-style vessels were just decided.
It is not altogether unreasonable when a shipping history book describedthe enactment of this decree as one of the greatest epochs in the Meiji
shipping history, because it was the first time that greater emphasis wasplaced on the most original and economical purpose of modern shipping
business rather than on national defense or military purpose.

Nevertheless, we must be discreet in estimating its emphasis upon
the economical view-point; for no actual development has yet beenbrought forth only by such a decree. It is to be doubted whether thegovernment and nation were truly and always aware of the necessityof such modern merchant ships. We are accordingly unable to agreewith the description on the above-mentioned book as it stresses a quick
and large-scaled increase of European style-vessels since that year. In
spite of this decree and the other encouraging policies that have alreadybeen stated in this article, the average Japanese shipowners continued fora long while to own and operate their traditional Japanese-style sailing

vessels. It must be well remembered that such Japanese-style sailing
vessels, even if very old-fashioned, rathr increased after this decree wasissued. (see Table ofp. 43)

The above-mentioned four or five proclamations were the most wellknown and important encouragement-laws for introducing European-stylevessels, and each had a positive intention apart from any real effect they

52

SEIJI SASAKI

had. We shall end this article by pointing out another negative decree forlimiting the building of large-sized Japanese-style sailing vessels. It was theorder prohibiting the building of Japanese-style sailing vessels Iarger than
500-koku.
"Large-sized Japanese sailing vessels beyond 500-koku shall be forbidden
to be built after January of the 20th year of Meiji."This cabinet Notice was issued in July of 1885. The many above-mentioned positive policies did not always lead the average shipowner to employ
modern and better European-style vessels especially the steamer. So that,
another policy, even if negative, had to be added in order to accomplish theperfect and quick modernization ofour merchant fleet. Here a new historicalmeaning to a prohibition order was born. Of course, there were some noteworthy economic developments behind the enactment of this order; first, theactual transition from Japanese-style sailing vessels to European-style sailing

vessels was promoted on a full scale after the Satsuma Rebellion (1877);
second, the tonnage ofsteamers was also increased to a certain degree, though

it depended mainly on the special development of a few privileged steamship companies. On these points the iiegative policy was a kind of interesting bell that was rung at the last round in the race for the modernization ofJapanese ships.

(1962. 8. 29)

ON INDUSTRIAL RELATIONS IN JAPAN'S'SHIPPING INDUSTRY

N4rlTH SPECIAL CONCERN ON PERSONNEL MANAGEMENT
Hiromasa YAMAMoTO

I
Introduction

The recent survey on human relations ofJapanese seamen on board
ship pointed out several interesting facts.(i' When the personalities of workers
in different industries were examined in relation to their positiveness, extrover-sion, leadership and sociability, the personality of seamen were on the average
the most inactive in comparison with other industry workers, such as the con-struction, chemical and mining industries. The survey also showed the low

morale of Japanese seamen in general. The most characteristic findings
were that there was little difference between the morale of officers and thatof the unlicensed personnel, and that the morale of low grade officers was lower
than that of the unlicensed personnel, in contrast to the usual findings that the

morale of staffs are generally much higher than that of the workers. The
findings of the survey regarding the inactive personality and the low moraleofJapanese seamen may suggest the inadequacy of personnel administrationin Japanese shipping companies.
On the other hand in relation to the reduction of the basic work week
the coJIective bargaining between shipowners' association and the Japan
Seamen's Union which began in November 1961 failed to reach an agreement and resulted in the ten-day strike in April and May of 1962. In the strike

600 vessels amounting to 2.1 million gross tons were stopped and the Ioss offreight earnings amounted to 1100 million yen which was a big shock to ship(2)owners.

Of course Japanese shipping companies have not necessarily neglected
the importance of labor management. However, in the application of labor( 1 ) Bureau of Seamen, Ministry of Transportation, "Research Report on Maritime Labor"
No. 11., and see also, T. Nishibe, "Human Relation ofSeamen on board", Maritime Labor,Vol. 15., No. 1., p. 39. ff.

(2) The Japan Maritime News, May 11, 1962.

53

54

HIROMASA YAMAMOTO

management mostJapanese shipping companies have paid more attention toindustrial engineering so as to reduce the vessel operating costs by meansof the adoption of newly designed vessels and to decrease man-power,`3'
while they are not so much concerned, from our point of view, with the improve-

ment of human relations among seamen or the revision of the procedures forcollective bargaining.

The purpose of labor management is, as is wellknown, to attain the maximum profit through the improvement of the efliciencies of labor in the enterprise. The system of Iabor management is composed ofindustrial engineering,
the personnel administration, and the labor relation administration. Industrial engineering deals with the distribution of different kinds ofjob workers
in the production process and the determination of the standard work amountfor eachjob. The personnel administration is concerned with human relationsin the enterprise for the purpose of improving the incentives of workers, while

the labor relation administration deals with collective bargaining and theenforcement of the labor agreement.

The above-mentioned three branches of labor management do not standseparately unrelated to each other. Industrial engineering is the means ofimproving the efficiency of labor in relation to production technics, while thepersonnel administration pursues the high eMciency of labor through the im-provement of human relations in the enterprise. Along with the development of industrial engineering technics the role of each worker becomes
gradually less in the whole production process and the content of each job
becomes simpler. As a consequence the worker loses his joy in his work andshows a low morale. At this points the personnel administration becomesof greater concern to the management on how to improve human relationsin the enterprise. Therefore industrial engineering and the personnel administration are in the close supplementary relationship with each other during thedays of innovation. Also the personnel administration and the labor relation
administration are closely interdependent, because both of them are concernedwith the same workers though there is some difference in the sphere of theirapplication; the former regards the workers as employees of the enterprise
while the latter must regard the workers as laborers who stand against the

management. Therefore the technics of labor management should be appliedwith consistency. However skillfu11y and deliberately some technics of labor(3) By the adoption of the automatic or remote control apparatus of vessel operation, the crew
members of newly built Japanese cargo boats have been reduced on the average to forty men
from the fifty needed on ordinary cargo boats. K. Takeuchi, "Automation ofships and theworks system of Seamen", Maritime Labor, Vol. 15,. Vol. No. 3, p. 26.

55
ON INDUSTRIAL RELATIONS IN JAPAN'S SHIPPING INDUSTRY

management are applied, it cannot attain the presupposed effects, if there arecontradictions among the technics which are enforced against different sphereof workers. In addition, for the adequate application of' labor management,
it is necessary to do research and recognize the characteristics of labor andworking conditions. The points we mentioned above may be well known,
but we should recognize them anew. Because of the recent development ofvarious technics in Iabor management and their introduction into the enterprise we may tend to overlook the necessary consistencies of labor management
technics on the one hand, and the characteristics of maritime labor demanding the special attention of the personnel administration on the other band.

II
Characteristics of maritime labor and the morale ofseamen

The life and working conditions cf seamen are not only in many ways
different from those of workers on land, but are also affected by the peculiar
risks of the seas. In case of a worker on land, once he has finished his work, he

has usually no further contact with his companions or employer and can spend
his leisure hours at home or in other places as he likes. In contrast a seaman
is almost always confined to his vessel; consequently, he has no chance to enjoy
his home life and to spend his leisure hours on land so long as he engages inthis work. The vessel is not only the work place of the seaman but is also

where he has to lodge and spend his free hours during voyages. When aseaman has finished his voyage after several months or even after more thana year, he may at last regain contact with his home and society on land.
Further more, all seamen including both licensed officers and unlicensed
personnel are organized into a quasi-military hierarchy, at the top of which
stands the captain. They must obey orders promptly and are under the tightcontrol of their superiors. The possible occurance of unforeseeable accidents,
shipwrecks and so on necesitate such a severe labor force controlling system.
Moreover the seaman must be ready for emergencies even during his free time
so long as he is on board.
In addition, the crew of a vessel is composed of the deck, engine and stew-

arddepartments,eachdepartmentincludingmanydifferentkindsofjobs. The
work place of the departments are quite separated from each other, and eachseaman is on duty at different hours ofthe day. Therefore seamen are almost
always in close and continuous contact with only the small group of seamenin the same department, having few contacts with other members of the crew
though they work and lodge in the same vessel. Under such conditions muchfriction between a seaman and his companions or with his superiors is apt

56

HIROMASA YAMAMOTO

to occur while he may also fall quite easily into a lonely sentimental state,
Due to the above-mentioned peculiarities of the seaman's working condition it is natural that he is apt to feel restrained, isolated and monotonous.

There are too many factors which discourage the morale of seamen in theirworking conditions.
Recently it has been reported that in several industries the morale ofworkers has shown a marked fall because of the adoption of automation."'With the introduction ofthe automation process, workers who could formerly
recognize their role in the production process have gradually become singlecapacity workers fu1fi11ing only a minor part in the whole production. Consequently they can no longer feel the delight of making products so complain
about the monotony of their work and grieve that machines have taken theirplace. That the necesity of research and prompt improvement of humanrelations in enterprises has been felt is due to such worsening influences ofautomation upon the morale of the workers. However, it is quite necessary
for us to recognize that the low morale ofJapanese seamen is not necessarily
due to the introduction of automation but is due to the peculiar working conditions ofseamen that are far different from those of workers on land. Ofcoursein theJapanese shipping industry the adoption of automatic or remote control
apparatus ofvessel operation has also been in process. But at the present stage

it may not be an important factor in lowering the morale of seamen or be adisappointment to seamen with their working conditions, because automation
has been adopted only in a minor part of the whole vessel operation.
If the low morale of seamen is due to the peculiarities of their working
conditions as mentioned above, for the purpose of raising the eMciency ofseamen and to improve human relations it is necessary to remove the isolated,lonely and also restrained sentiments that are peculiar to them. In theapplication ofpersonnel administration in the shipping industry special consideration should be given to the following points; the improvement of living

space and food on borad; how to spend free time on board; human relations between oMcers and unlicensed personnel during off duty hours; andthe training ofship officers for personnel administration,(5' Welfare facilities

for seamen in ports, such as hotels, rest houses where seamen can meet theirfamilies and spend time with their hobbies, and hospitals are also necessary.

(4) S. Susuki, "Change ofLabor and Labor Management" in Labor Problems ofJapan: Labor
Management, 1961. pp. 226-27.
(5) Because searnen are out of the reach of the personnel administration staff for long periods
during voyages, the training of personnel administratiofi for ship officers is more important
than in those of other industries.

57
ON INDUSTRIAL RELATIONS IN JAPAN'S SHIPPING INDUSTRY

In newly-built Japanese vessels, especially in case of tankers, many
improvements are found in the living space of seamen such as provisions for
wider spaces for living, installation of room coolers and the provision for theirprivacy. In domestic ports the shipping companies have provided welfare facilities such as lodging houses for employees other than sailors' homes, hospitals

operated by the Welfare Association for Seamen, and other local public bodies.
And in the last few years sailor homes for Japanese seamen have been built inseveral foreign ports, New York, Calcutta and Singapore.(6' As for the welfare
facilities on board we can point out only the provision of libraries on a small

scale and the publication of newspapers, Therefore more effort is necessary
for the improvement of welfare facilities and for the active application of

personnel administration on board through which seamen can enjoy sports
and other recreation drawing them away from the peculiar sentiments ofseamen. Only then theimprovementof human relations among seamen andtheir rising morale can be expected.

In the preceeding paragraphs we have pointed out the importance inimproving human relations among seamen so as to raise their morale. But,
no matter how well human relations are improved and how thoughtfully
the living space on vessels are provided, they alone are not effective to remove
completely the causes for the lowering of morale in seamen - especially theirdisappointment in the fact that they must work away from their homes for suchlong periods, We should keep in mind that the wage level and wage structure

have in general a close relation with the morale of workers. Making theworker conscious that his wage is a correct approximation value of his work is

an essential means to raise the morale of the worker. It may be consideredthat the most essential factor which affects the morale of' the worker is thewage rather than human relations, and it is especially true when the wageof the worker is in the lower level. Can it be said that there is any relation

between the low morale ofJapanese seamen and their wages ? Before answering this question immediately, as a hint to consider this problem it is better to

see Rapping's explanation on the historical trend of wage level of American(7)
seamen.

In the United States the historical trend of seamen wages showed a considerable increase in comparison with workers in other industries during the last

forty years. As the cause of this increase Rapping pointed out two factors,( 6 ) S. Ohara, "Welfare Services for Seamen in the Postwar Years," Maritime Labor, Vol. 15.,

No. 1., pp. 35-6.
( 7 ) L. A. Rapping, "The Subsidy and Labor Cost" in "the Economic Value of the United States

Merchant Marine" 1961, p. 182. ff. esp. pp. 212-17.

58

HI ROMASA YAMAMOTO

that is, the impact of seamen unions upon wage and the emergence Gf premiums for their work as compared to other industrial workers on land.
Regarding the latter he made the following hypothesis. In company with
the improvement of working conditions of workers on land and also with thegeneral improvement of levels of living during the last forty years, job-seekers
would less and less prefer to go to sea because of the peculiarities of seamen's

working conditions. In other words, in company with the general improvement of levels of living the disutility of working conditions for seamen have been

increasing when contrasted with those of other workers on land. Therefore,
unless they can gain higher wages than in other occupations which need similar
degrees ofvocational training and skill as seamen,job-seekers would not choose
to go to sea. Consequently, seamen have gotten a favorable wage differential

than other workers on land. Though Rapping's hypothesis does not necessarily have statistical proof,(8' it gives us many suggestions regarding the low

morale ofJapanese seamen and the cause of the scarcity in the supply ofseamen.

In Japan the postwar economic recovery has made possible the raisingofthe general level ofreal wages, and workers have enjoyed improved consumption and leisure hours in and out of' their homes. Under these circumstancesof civil life it is certain that the seaman tends to dream of his home life, andthat in contrast he will have a distaste for maritime labor because of its restrain-

ment and separation from home. The fact that in the last several years a considerable number of mercantile marine college graduates and other vocational
training schools for semen entered into services on land other than shipping,though they could easily find posts in shipping companies, may suggest thatin their opinion seamen wages were not adequate when their labor and working conditions were taken into concideration.(9' According to the survey of( 8 ) In estimating the emergence of wage differentials due to the peculiarities of seamen's emp-

loyment, Rapping's conclusion was based on the fact that the rates of wages increase of
seamen and similar occupations having the peculiar conditions ofseafaring were much larger
than that of manufacturing workers during the comparison period. However, the wage levelis influenced strongly by several factors, such as the unions impact, productivity of labor,change of employinent and oligopolistic condition of the industry, etc. But he did not take
into account the influence of those factors on wages. Therefore he considered implicitlythat they influenced in a similar manner all occupations in question. But his assumption is
not adquate. Consequently his conclusion is not valid unless his assumption can be proved.
( 9 ) Though the demand of shipping companies for new graduates from mercantile marine colleges and seamen training schools doubled during 1958-60, graduates of mercantile marine
colleges entered other services than shipping in 1960. More important is the fact that applicants for various seamen schools, colleges and training courses decreased to half during thesame period. The Bureau of Seamen, Ministry of Transportation, "Demand and Supply
of Seamen" (pamphlet) Aug. I961., pp. 4-6. Ministry of Transportation, "White Paperof Shipping, 1962" 1962. pp. 106-7.

ON INDUSTRIAL RELATIONS IN JAPAN'S SHIPPING INDUSTRY
59
seamen's opinion taken by the reasearch members of the mercantile marine
college in 1956, the answers stating that they would continue their work fora long time amounted to only 33 per cent. of the total answers. The opinion
research of workers and professionals engaged in various occupations was
enforced in l955 by the Society of Sociology, and according to the survey thepercentage of those who were satisfied with their occupations was about 55 percent. ofthe total. Ifwe compare these two figures, it is quite clear that seamen
were less satisfied with their occupation than other workers. And by a former
survey the cause of their dissatisfaction was mainly based on the lack of home
life, insecurity ofold age, in addition to poor wages.`iO' This also shows thatseamen are not satisfied with their wages as the price of their labor though

their wage level has been always higher than manufacuring workers and thewage differentials of seamen in comparison with manufacturing workers has
shown a moderate increasing tendency. (refer to the table).
Seamen's wage in comparison with manufacturing workers

unlicensedseamen

manufacturingworkers

(A)

(B)

1952

14,755

13,393

1.10

1953

17,053

15,138

1.13

1954

17,42316,O03

1.09

195S

20,263

16,377

1.24

1956

20,336

17,660L15

1957

20,824

18,198

1..14

1958

24,612

17,836

1.39

1959

25,28019,533

1.29

AB(remark) Seamen wages are monthly wages in addition to voyage allowances excluding fringe
benefits and meals.

Source: Seamen's wage: Dept. of Transportation, wage of manufacturing workers:

Dept. ofLabor.

When seamen are disappointed with their wages and working conditions
as we have shown, we can hardly expect an improvement in their morale how-ever good human relations may be established among them. With regard
to the relation of wages with the morale of workers attention is often paid to
the wage system and the wage differentials among the differentjobs in the same
enterprise, Ofcourse that is very important, and also in the case ofJapanese

seamen the lower morale of the low grade oMcers suggest that there is someroom for remedy of wage differentials among different jobs of seamen. But(10) T. Nishibe, "Japanese Seamen-their labor and lives-", 1961, p. 126.

HIROMASA YAMAMOTO

60

regarding the relation between morale and seamen wages as a whole we should
pay more attention to their wage level in comparison with other industrial
workers. For the purpose of raising the morale of seamen a mere improvementof human relations will not attain this aim. Only the improvement of bothhuman relations and wage level can raise the morale of seamen.

III
Labor Relations in the l7aPanese ShipPing Industr" and Personnel Administration

In the Japanese shipping industry the employment system of seamen isquite different from those of other countries. Japanese seamen are employedcontinuously by a specific shipping company and do not change employers usually. Even in case the seaman finishes his vogage he continues his employment

relation with his employer. This permanent employment system ofJapanese
seamen is similar to that in other industries in Japan. On the other hand
Japanese seamen are organized into a single industrial union, Japan Seamen's
Union,(ii' in contrast with the fact that all other workers engaged in different

services in Japan are members of their respective enterprise unions which
are organized exclusively by the employees of specific enterprises.(i2' When
we consider the labor relation of the Japanese shipping industry, we must pay
attention to these two factors.

Generally Japanese workers seldom change thier employers. For under
the permanent employment system it is diMcult to find a new employer, anda change in employment is disadvantageous to workers under the prevailingwage system ofJapan, under which the wage of a worker increases as his
service period in the enterprise increases. In these circumstances the worker
is apt to be conscious that he is an employee of the specific enterprise. When
the worker becomes employer-conscious, finding it disadvantageous to change
his employer, it is natural for him to consider that his wage and working condi-

tions are dependent largely upon the prosperity of the enterprise. As aconsequence, he tends to work for his employer and to restrain, though uncon-

sciously, his demand as an union member for an excessive wage increase.
Combined with this employee-consciousness of the worker, the personnel(11) With regard to the reason that only seamen can succeed in organizing an industrial union in

Japan, refer to; H. Yamamoto, "The Singularity of the Seamen's Union ofJapan," Kobe
Economic & Business Review, No. 7., 1960.
(!2) Though the union structure of the enterprise union is similar to the company union, thefunctions of these two are quite different, because in the former the management can neither
control union decision directly nor have effective influence upon the union activities as it

wishes.

61
ON INDUSTRIAL RELATIONS IN JAPAN'S SHIPPING INDUSTRY

administration of Japanese enterprises strengthen the worker's employeeconsciousness further by means of measures ef improving human relations.
Therefore the personnel administrations of Japanese enterprises may beconsidered as being usefu1 in many cases in orienting the workers' activities

as union members in cooperating with the management, resulting in modest
demands from the union for improvement in wage and other working conditions,
if we are reminded of the fact that most of the labor unions ofJapan havethe structure of enterprise unions which are organized exclusively by theemployees of the specific enterprise.
Japanese shipping companies also have attached importance to the effectthe personnel administration has upon the consciousness of the workers. It
is reflected in the change of the collective bargaining system. The collective

bargaining system ofJapanese shipping industry which had been held between
the seamen's union and shipowners' association during the postwar years,
regarding wage increase turned into individual collective bargaining which
was held between the union and the specific shipowners' groups in 1956.(]3'This change in the collective bargaining system was of course due to thedivergence ef interests among shipowners because of the severe slump incoastwise shipping, and was also due to the diMculties for seamen in finding

new employers because of the permanent employment system. But, from theother point of view this change in the collective bargaining system had close
relation with the personnel administration of large shipping companies which

aimed to raise the morale of the employees and to make them employee con-scious through the larger improvement of wage and working conditions.
In addition, the fact that shipping companies opposed the co-employment
plan proposed by the seamen's union, insisting on the necesity of employing
seamen exclusively by respective companies, may be considered as the reason
that shipping companies paid much attention to the relation of the employeeconsciousness of seamen and their consciousness as union members.(i4)But in theJapanese shipping industry the personnel administration does notnecessarily have such an influence on labor relations as is the case of the com-pany in the bargaining with enterprise union. Seamen who are employed bydifferent companies are without exception members of a single industrial union.
Executives of the union participate in collective bargaining, holding leadership(13) Regarding minute details in relation to the change in the collective bargaining system, referto; Japan Labor Association, "Research on the Colliective Bargaining of Seamen", 1961. pp.

19-34.
(14) D. Yamamoto, "Note on the Reserve System of Seamen," Kokumin Keizai Zasshi, Vol. CIII,

No. 3., pp. 77-80.

HIROMASA YAMAMOTO

62

in union activities, and propose improvements of wage, etc. which may beconsidered as the demand of greatest common measure of all the members.
Accordingly the propositions of the union do not refiect the demand of specialgroups who are employed by the specific shipping company, but reflect thetactics of the, union executives who intend to strengthen the union throughthe increase of common advantages for all the members. Therefore, though
the ideology of the semen's union is moderate, the antagonism between laborand management may become clearer than those of enterprise unions.
Indeed the employment ofJapanese seamen is the same as in those of
all other Japanese industries but if from this fact we lay stress on the similarityof the union function between the federations of the enterprise unions andthe seamen's union, it may lead to an erroneous conclusion. When considering the labor-management relation of the Japanese shipping industry, wemust not overlook the fact that seamen have organized an industrial union.
The reason that maritime labor could form a single industrial union in the
postwar years might be based mainly on their prewar experiences in union
activities and aiso on their employment conditions in the days when their union
organization was formed.(i5' But, why has maritime labor been able to maintaintheir industrial union structure, notwithstanding the fact that their employ-ment system was changed in 1950 from the wartime governmental control ofseamen into a permanent employment systme? It is due to the necesity andfacility of maintaining collective bargining uniformly by union executives onland concentrating the necessary control on them, because the seamen as union

members are on board and it is impossible for them to participate in union
activities on land, and is also due to the reliance ofthe union members on theirunion executives. So far as these conditions exist, the personnel administration within the enterprise cannot affect the labor relation, and there is little
room for the union organization to disintegrate even though thorough measures
are being carried out for seamen to increase their employee-consciousness by
respective enterprises.

IV
PersPectives of Collective Bargaining

As we have pointed out, the Iabor relations of the Japanese shipping
industry has been characterized by the existence of a single industrial union

and the permanent employment system. From these characteristics in thecollective bargaining system of the Japanese shipping industry there may(15) H. Yamamoto, op. cit., p. 53 ff.

63
ON INDUSTRIAL RELATIONS IN JAPAN'S SHIPPING INDUSTRY

emerge two different possibilities which stand out in sharp contrast to eachother. One is the enlargement of the subjects dealt with by individual bargaining between respective shipping companies and the union, corresponding
to the application of personnel administration which intends to raise theemployee-consciousness of seamen. The other is the enlargement of thesubjects dealt with in the uniform collective bargaining between the union andthe shipowners' association. The latter corresponds to the efforts of theunion which has endeavored to decrease wage differentials among seamen
employed by different companies through the program of an employment
pool for seamen and the minimum wage system.(i6)We have no concern whether any of the possible collective bargaining
systems is more advantageous to labor or management. We are concerned
only with the conformity of the labor management ofJapanese shipping
companies in their industrial relations. So long as shipping companies findadvantage in the permanent employment system, they may prefer the individualcollective hargaining system, or they may endeavor, if possible, to conclude
labor agreement with the union newly established by their employees. However, the postwar experience of unionism in the Japanese shipping industry
shows little possiblity of the emergence of an enterprise union among seamen.
The personnel administration intending to raise the employee-conciousness
ofseamen has a limited effect upon the smoothing oflabor-relations. Therefore
the human relations administration which has been applied only within theenterprise should enlarge its objectives to the whole shipping industry inaddition to its usual application, because seamen are members of the single

industrial union on the one hand while being employees of some company
on the other hand.
Though the individual collective bargaining system comes to deal withmore subjects than ever, the rest have to be dealt with through uniform
collective bargaining. (The individual collective bargaining system will
not deal with all matters of collective bargaining so long as the existing organi-zation of seamen's union is kept.) Also in uniform collective bargaining theshipping companies will have to strengthen the integration of shipouners'
association and empower the association to conclude labor agreements, notwithstanding the considerable difference of interest among shipowners.
As far as shipping companies are willing to apply a systematic Iabor management adequate to the peculiarities of seamen labor relations, the above-

mentioned measures should be adopted even if they do not prefer them.
(16) H. Yamamoto, "On the Employment System of seamen in Japan," Kobe Economic &Business Review, No. 9., 1962. pp. 38-41.

64 HIROMASA YAMAMOTO
Without these measures of Iabor management, the object of labor management

being profit maximization through improvement of Iabor eMciency cannever be attained.

REGIONAL DISPARITIES IN THE BRAZILIAN ECONOMY:A CASE STUDY ON THE BRAZILIAN NORTHEAST
Yoshiaki NisHiMuKAi

I

Those who are engaged in studying Brazilian affairs must keep in mind
that Brazil itself censtitutes a world. Its vast territory extends from thetropical to the temperate zone, therefore, it is not necessary to say much about

the differences of climate and landscape. The populational distribution isregionally different and as the racial composition is also very complex, wecannot define any racial type as the Brazilian people. In the social life of
the people, there survive the customs of the emigration countries from which
the people or their ancestors emigrated to Brazil. In relation to the economy,
there exists the extractive economy in Amaz6nia and the capitalistic economy
in the South. Brazil, in this manner, consists of heterogeneous elements inall aspects including nature, society, economy, race and culture. In thissense, it can be said that Brazil is a miniature world.
But it is not suMcient to recognize Brazil as a mere unity of these highly

different elements. It is interesting to remember the fact that there are many

people who consider Amag6nia not as a part ofBrazil. Certainly, the remarkable backwardness of this region contrasts with the high level of economic
development of the South in which are included SaNo Paulo and Rio de J7aneiro.
According to this way ofthinking, it could be said that SaNo Paulo is not Brazil,

either. It is obvious, however, that Amaz6nia and Sa-o Paulo are in Brazil.

In these regions we can find a common language, religion, customs andnational integration which is regulated by a unified legislation that has beenpromoted by economic policies. Through these factors are combined theheterogeneous elements which constitute Brazil and through their interrelations they have been transformed into a more Brazilian type. So as tounderstand Brazil better, therefore, it is important not only to make clear theelements constituting this country, but to analyze how they are organicallyunified and in what relations they stand.

Founded on these ideas, this work will take up some regional problems
in the Brazilian economy as one of the most characteristic aspects in the
country, specially concentrating on the soÅíalled "Nordeste" (the northeast)

65

YOSHIAKI NISHIMUKAI

66

which has become more important for economic planning.
II

Some regional disparities always exist in an economy. It is well known
that there are some remarkable differences between the north and the south
even in the United States. A report of the United Nations showed that inEurope the regional inequality in income Ievel is greater in the relatively under-

developed countries than in the developed ones and this inequality tends toincrease in the former.(" Nevertheless, we are obliged to take up the Brazilian problem because of the particular situations as shown in the following.

First, the regional disparities are considerably great in Brazil. In
Amaz6nia, as referred, the principal economic activities are of extractive industries relating to exports, and in the northeastern part there can be seen thefirmly-rooted influences of slavery which was abolished in 1888. But theeconomy of the south is highly capitalistic and, on the other hand, the vastlands of the middle-west still remain unexploited or are being developed. It
is said, therefore, that Brazilian economy is not an integrated system, but afederation not compensated by regional economies.(2' Taking up the percapita income as one of the indices of regional disparities, the income of thenortheast is, as shown in table-1, Iess than one-third the level of the middle-

south.(3' This divergence is more than that between the level of income of
Table-1 Regional distribution of income -1956
total income
billion cr. $Per caPtta mcome

million cr. $cr. $u. s. $

north

25.0

440. 96, 316

northeast

102. 2

1 802.5

5,461

96

middle-south

636. 911, 232. 8

17, 151

303

Brazil764. 1

13, 476. 2

12, 718

224

'

111

(Source) Groupo de Trabalho para o Desenvolvimento do Nordeste, Uma Potitica de Desenvolvimento Econ6mico Para o jVordeste, Rio de Janeiro, 1959, p. 13.

(1)
(2)

United Nations, Ecenomic Survay ef EttrePe in 1954, Geneva, 1955, pp. 136 ff.

"Polos de Desenvolvimento Regional," in Desenvolvimento &9 Conjuntura, outubro de 1961,
p. 65.

(3)

The term `JVordeste' (northeast) used in this work covers the nine coastal states which extend
from the state of A(laranha"'o to Bahia, the `north' the states of Amaz6nia, and the `middle-south'

contains the rest. For particulars, see V. V. Poksh{shevskiy, "As principais regi6es econ6micas no Brasil", in Revista da Faculdade de Cie"ncias Econ6micas da Universidade do Pard, ano 1, No.

1, 1960. The division shown in table 2 is that used in the oMcial statistics of the Government.

REGIONAL DISPARITIES IN THE BRAZILIAN ECONOMY: 67
A CASE STUDY ON THE BRAZILIAN NORTHEAST

the Brazilian middle-south and ofadvanced countries. It may be said, therefore,that the problems with relation to JVordeste in Brazilian economy are more
important than that of the latter in world economy, because, generally speak-ing, necessary efforts to develop an economy are relatively greater in theinitial stage. Table-2 shows us that in the regions situated north of Bahia the

Table-2 Per caPita income by federal units (cr. S)
1939`north'

1949

1958

2, 44010,S83

2,963

12, 240

2,134

9,573

],689

6, S9 5,

Maranhao

669
628
687
548
473

1,l60

5,712

Piaui

4r,1

1, 0783, 991

Ceara

4S5
587

1,567

4, S96

1, 9036, 098.',18

1, 6525, 99S

2,181

9, 422

Rio de Janeiro

693
538
845
S47
512
681
668
914

Distrito Federal

2, 338`south'Sao Paulo

Amaz6nasPara`northeast'

Rio Grande do Norte
Paraiba

Pernambuco
Alagoas`east'

Sergipe

Bahia
Minas Gerais
Espfrito Santo

l

]

1,670

8,081

3,777

17,0281,927

8, 724

1,795

7, 9072, 743

12,787

2,969

12,1593,787

17,67412, 058

52, 059

1, 244

5, 39824, 500

1, 381

6,729

30, 571

Parana886

3,781

18, 021

Santa Catarina

791

3,167

14, 274

Rio Grande do Sul

1, 242

4,102

19,318`middle-west'

2, 21311, 974

Mato Grosso
Goids

706
973
570

3, 44319, 267

1, 675

9, 245

Brazil886

3, 702

16,756(Source) Desenvolvimento (if Conjuntara, ano IV, no. 11, 1960, p. 180.

Per caPita income in 1958 did not exceed the 10 thousand craceiros level, withthe exception ofAmaz6nas while in the rest, only in Goia's was it less than thatlevel. Comparing the two extremes, we can see that the per caPita income
in Piaui was less than one-eighth the level of SaNo Pattlo. This remarkable

YOSHIAKINISHIMUKAI

68

discrepancy in income gives rise to the more striking difference in the standardof living, because of the concentration of income, diseases and calamities
which cannot be found in the developed areas. In Nordeste which has nearly
periodically suffered from drought, it is often diMcult for the inhabitants evento maintain a subsistence level. In such a case, regional disparities appear
not only as a relative but as an absolute matter.

Secondly, regional disparities have tended to increase in Brazil. In
the period between 1949-1958, as shown in table-3, the share of income
Table-3 Regional distributionof incomeindices ofPer caPita income

total income (O/.)

19S8

1949

1949

1958

north

2.4

2. 2

6S. 9

northeast

16.2

14. 3

46.6

middle-south

8L4

83. S

Brazil100, O

63.2
/

41.9
a

i

i

100. 0100. 0r(Source) Revista Brasileira de Economia, ano l4, no. I,

l960, pp.

100, O

18-9.

declined from 2.40/. to 2.2 in the `north' and from l6.2 to 14.3 in J7Vordeste.
The index ofthe per capita income also decreased from 65.9 to 63.2 in the for-mer and from 46.6 to 41.9 in the Iatter. On the contrary, the same index
of the `south' which covers the states of Sa-o Paulo, Parana', Santa Catare'na and

Rio Grande do Sul, increased from 145.7 in 1949, triple the average level of the`north' and the ,7Vordeste, to 146.2 in 1958, that is, the 3.3 times of these latters.
Table-4(1948-1OO)

Indices of the real production

1956

1952

1953

107

101

106

111

122

130

137

112

122

129

132

142

147

151

112

181

126

129

139

145

149

1950

northeast

102

middle-south

105

Brazil104(Source) Grupo de Trabalho para o Desenvolvimento

do Nordeste,

1954

1955

19Sl

1949

oP. cit., p. 18.

The following table-4 gives indices of the real production which manifest
more clearly the regional difference in the rates ofgrowth. The annual rateof growth of the real production corresponded to 40/. in Nordeste and to 5.30/oin the `middle-south'. The annual rate ofpopulational growth being almost
the same in these regions, the per capita rate ofgrowth reached 1.50/. and 2.7O/o

respectively. The disparity in the rates ofthe real income growth, however,REGIONAL DISPARITIES IN THE BRAZILIAN ECONOMY: 69
A CASE STUDY ON THE BRAZILIAN NORTHEAST

was much more, because of the great improvement which occurred in relation to the prices of exports due mainly to the rise in coffee prices, which was

in favor of the `middle-soath' of the country. According to the estimate of
the Government, it is said that the per capita income of the `middle-south' has
increased at the rate of 3.50/, while on the other hand, the increase of the
Per caPita income of jVordeste has never surpassed 1.50/,, and that, if such atendency is maintained until the end of this decade, the per capita income of.7Vordeste will be, in 1970, II8 dollars (at the level of prices of 1956), whilethat of the `middle-south' will reach 440 dollars(`'. These data show us that
one of the principal economic problems of Brazil, in the present stage of its

development, is that of the regional disparity in the rates of growth. In
relation to the economy of the `middle-south' which has already had diversification of industries including the production of capital goods, it can beadmitted as certain that its development will continue and that at the end of
this decade, the economy of' the region will have reached a degree of autonomy in its supply of capital goods, which will overcome the serious problemsof the balance of payments with which the economy is now confronted. The
prospects of the economy of .ACordeste are totally diverse; at the end of thisdecade, if'actual tendencies are maintained, its population will top 26 million,
the pressure over the land will increase, the vulnerability to drought will be

more than today and no important modification will have occurred in theeconomic structure. Then, more than today, jVordeste will remain as thepoorest area in Brazil.

It may be argued that the disparity in income levels will not be aggravated, in the form indicated above, because the relative cheapness of trans-

portation will promote spontaneous migration, in the direction of regions
where higher wages are paid. In this respect, we must remember the factthat the economies of .Arordeste and of the middle-south, even if they are com-bined, do not constitute properly an economic system. In addition to theinferiority of laborers in .7Vordeste, in fact, the Brazilian experience has beenin the direction of an alliance of labor organizations in advanced zones, withthe object of acquiring and defending their higher wages, making it diMcult

to absorb new components of labor. Consequently, not a few laborers who
move to advanced zones in the case ofa drought return to jVordeste.
Thirdly, it concerns the vastness and density of populations in the under-

developed areas. The `north' ofBrazil is much more extensive than the areaof West-European countries, and .ACordeste is also vaster than the countries of

the European Economic Community. The population of.Nordeste, is estimated( 4 ) Grupo de Trabalho para o Desenvolvimento do Nordeste, op. cit., p. !9.

YOSHIAKI NISHIMUKAI

70

at 2.5 million and is greater than that of Argentine.
In Latin America, there are several countries with similar levels of Per
caPita income as u]Vordeste, such as Bolivia, Paraguay, Honduras, and Haiti.
But the total population of these countries is less than one half of that of.]Vordeste. It is necessary, therefore, to understand .7N4ordeste not only as one of

the regional economies in Brazil, but as the most extensive, densely populated

and underdeveloped area on the Continent.
Finally, the regional disparities are actually taken up as one of the mostimportant economic problems in Brazil. It comes from the necessity ofintegrating the regional economies through developing underdeveloped areas

and decreasing these disparities, For this purpose, some governmentalorganizations were started early; the Superintende"ncia do Plano de Valorizaga"oEcon6mica da Amaz6nia in the `north', the ComissaNo do Vale do Sdo "Francisco in.7Vordeste and the SuPerintende"ncia do Plano de ValorizagaNo Econ6mica da ]FronteiraSudoeste in the `extreme-south', which have been preparing and promoting
plans for the economic development of each region. But the results were
not satisfactory in that they failed to meet the expectations of the Brazilian
people. Recently, the Superintende"ncia do Desenvolvimento Econ6mico do Nordeste
was created to develop in earnest the economy of this poorest region of Brazil
and its first developing-plan was passed in 1961 by Congress under strained

circumstances. Taking this opportunity, the interest of public opinion in
Brazil has seriously tended towards regional problems. This has been stimulated by the fact that the increase of regional economic disparities areraising serious social tension and uneasiness which are indicated in the activi-

ties of the League of Agricultural Laborers-Ligas CamPone"sas-presided by
Francisco Juliao, and that, on the other hand, the regional disparities are
weakening the political integration of Brazil and, moreover, are creating
favorable conditions for the antifederalists to raise their heads. Thus, policies

for the regional development of Brazil are indispensable not only to reducethe disparities and to eliminate the economic, social and political unrest, but

to accomplish economic integration and, consequently national integration.

IllThen, what are the basic causes for regional disparities and how havethese remarkable differences been formed in Brazil? It is the next task to
reply to these questions and to make clear the process of the economic formation of Brazil. Our interest will tend mainly towards the relation between.7Vordeste and the `middle-south'.

The natural conditions are fundamentally responsible for the back-REGIONAL DISPARITIES IN THE BRAZILIAN ECONOMY: 71
A CASE STUDY ON THE BRAZILIAN NORTHEAST

wardness of.7Vordeste. As this region covers vast areas suffering from drought,
agricultural land is relatively short. The proportion ofthe agricultural population in 1950 was about 720/, of the active total which exceeded that ofthe`middle-south', which was 510/,. And the quantity of land per worker ismuch less than that of the latter; 1,3 to 2.4 hectares (see table-5). The
regional difference is more notable in the capital invested in agriculture.
Table-5

Agricultural

indices by regions

Proportion of

Proportion ofactiveagricultural

population(o/o)

POP(u,Y,a)tion(195e)

Capitalmvestment

Per capita

per worker

per hectare

lncome(ha.)(Cr. $)(Cr. $)

Farm Jand

Nordeste

31.1

7L 7

1.3

6, 3003, 700

middle-south

33.9

51. !

2. 4

27, OOO

10, 600(Source) Data used in tableul.

Observed in its totality, these structural differences iead us to conclude that
two basic causes are responsible for the lower level of income of JVordeste; therelative shortage of land and a lesser accumulation of capital, However, as
the accumulation of capital itself is a symptom of the stage of development,
it is inferred that the real cause for the stagnation of the economy of ,7Vordeste,

in face of the economy of the `middte-south,' is in the relative poverty of theland. The rapid growth of the population in this region is aggravating the
problem of the land.
But the difference in the per caPita incomes of the different regions ofBrazil, resulted, primarily, from historical conditions. We remember thatin the latter half of the 16th century and in the 17th century, in which the
production of sugar was the greatest activity of the country, .]Verdeste appeared

as a zone of great prosperity, surpassing the per capita income, not only of allother regions ofBrazil, but of all the other regions on the Continent.C5' What
are the historical factors which placed jVordeste in an adverse stagnant situation ?

The evolution of Brazilian economy is not through the gradual expansion
ofthe initial nucleons ofeconomic activities as seen in the economic evolutionof the United States. The production of sugar as mentioned above, of goldin the 18th century and of coffee in the 19th and this century were, as wellknown, concentrated in jVordeste, in the state oÅí Minas Gerais and in the south(5) "Politica de Desenvolvimento Regional,"
1960. p. 41.

in Desenvolvimento&f Conjuntura,ano IV, No. 11,

72

YOSHIAKI NISHIMUKAI

respectively, but vast undeveloped areas remained within them. It camefrom the fact that, in the colonial epoch, the centers of economic activities
had been localized in different points on the coast separated by themselvesat great distances. From these coastal points began the penetration to theinterior and great populated zones were formed. In the same manner as
among different nucleons vast empty spaces were observed, the same occurredamong diverse zones based at different points on the coast. As a consequence,the circulation offactors for production was scarce among these zones. Therefore, no mechanism existed or it was weak which in an integrated country,

avoided the appearance of remarkable economic disparities. And eacheconomic zone was directly combined with the international economy bymeans of foreign trade. It can be said, therefore, that even today there does
not exist a Brazil economically speaking, but a "Portuguese America".(6)After 1930' there appeared a new factor which can not properly be called

historical. The international markets, which up to that time had absorbed
Brazilian products satisfactorily both in quantity and in price, began to reveal

itself incapable of giving this country a suMcient rate of economic growth.

Hence, the economic development of Brazil has assumed the form of a more
intimate articulation of these `economic islands'. Such an articulation is madein connection with the market, in constant expansion, of the `middle-south'
which found in the export of coffee its impulse for growth. Thus, for example,
when the economy of sugar co]lapsed, with the disorganization of the world
market of this product, its survival became possible due to the reserve of themarket in the `middle-south'. A similar case occurred in the economy ofrubber, which entered a total collapse with the systematic planting of thisproduct outside Brazil. After a period ofgreat difliculties, this economy could
subsist based on the market of the `middle-south'.

This articulation, however, which the research workers on Brazilian
economy, in the first half of this century, appreciated as a form of' evolution

tending to iptegrate the country into only one economy, brought the germof problems with which the Brazilian people are confronted, because thearticulation reproduced the same scheme of geographical division of laborwhich has transformed the development of world economy, with its industrialized metropolises and colonies, the producers of raw materials.(7' In the
period in which the `middle-south' possessed a simple economy of export, ofsemi-colonial characteristics, equally combined with the great international
centers-economy of relatively low productivity and of the same structure as(6) Ibid., p. 40.
(7) Celso Furtado, A OPeragaNo jVordeste, Rio deJaneiro, 1959, p• 12.

REGIONAL DISPARITIES IN THE BRAZILIAN ECONOMY: 73
A CASE STUDY ON THE BRAZII.IAN NORTHEAST

the rest of Brazil-even if it had formed a greater market, the action of thefactors tending toward the concentration of income would have been lessvisible. However, in proportion with the middle-seuth's growth in industrialization, the relation of dependence of other regions became clearer andwere transformed progressively into the relation of economies producing raw
materials with an industrial center.

We must note the recent program of economic development. Whenindustrialization was stimulated in 1930 it was the `middle-south' which had
more favorable conditions in relation to the external economies. This initialadvantage has tended to enlarge in the process of time and the `middle-south'
has not only been in increasing competition with manufacturing industries
which other parts of the country sought for themselves, but has attracted

capital and entrepreneur-ship generated in other regions. In accordancewith this tendency the plan of economic development after the War was
also characterized by the creation of a single dynamic center installed ina determined area of the country. The economic operators who give doctrinal and ideological basis to the program, aMrmed, then, that if this center
was installed, it would transmit waves of progress to all the country, promot-

ing a stable and balanced growth of Brazilian economy.

But, if we examine the commercial and exchange policies which haveplayed leading parts in the economic policy for development, we shall be able
to clarify the unexpected results that they brought about. From 1948 to 1956,
the positive balance of trade of .Nordeste ascended to 638 million dollars which
was suMcient to cover the deficit of the balance of trade of the rest of thecountry. It happened, however, that Nordeste did not utilize in its totality

the foreign currency generated by the export. About 400/. of this currency
was transferred to other regions of the country.(8' The cause of the transfer
is clear; the rate of development in the `middle-south' being more intensive,the processes of industrialization have been also more rapid. So the demandof equipment and semi-elaborated products, which the industries require-in
great part articles not produced in the country-increased with much more
intensity in the `middle-south'. The effects of this intensive demand of
foreign currency were aggravated by the policy of control of imports, whichby reason of its selective character favored imports without national equivalent, that is, capital goods which .IVordeste imported much less frequently.
Moreover, it contributed to the state of affairs that the rate of wages of the`middle-south' was higher than that of JVordeste and so the gains generated fromthe import ofcapital goods were larger in the former. Thus, the means used
(8) Grupo de Trabalho para o Desenvolvimento do Nordeste, op. cit., p. 23.

YOSHIAKINISHIMUKAI

74

to promote the industrialization of Brazil, resulted in the direct prejudice ofless-advanced regions.

Not having access to the totalily of foreign currency which the exports
produced, JVordeste was induced to spend the income corresponding with it inpurchases from the `middle-south'. But the negative balance of this tradeofNordeste with the rest ofthe country has been substantial. In other words,
the `middle-south' sells to ,Nordeste a substantially greater quantity of merchandise than it buys. As exports of the former to the latter are composed
mainly of manufactured goods and in the exports of the latter the weight is
on raw materials, we can conclude that the discrepancy in favor of the `middlesouth' is still greater, if the trade is measured in terms of the volume of em-

ployment created in the two regions. There do not exist, however, any
necessary reason for which a triangular commerce among .7Vordeste, the `middle-

south', and the exterior causes economic disadvantages to that region. In
case that there is no intervention of other factors, it can be argued that, if.7Vordeste spends in the `middle-south' foreign currency aquired from the exterior, it is because the former derives an economic advantage from the latter.
But that is not the situation of JVordeste, for the alternative possibility of im-

porting from foreign countries is not existent, because the merchandises which
v7Vordeste needs are, practically, excluded fi om the imports of Brazil becauseof the high tariffs, or because of other impediments of exchange. ProÅí A.O.
Hirschman took up this effect as one ofthe polarization effects.(9' In the Bra-zilian economy, we can say that this effect has played the most importantpart in expanding regional disparities.

IV
Resting on the basis of the analyses described above, we conclude as
follows ;1) It is equivocal to present the Brazilian economy as only one system
to be comparable with other underdeveloped economies of similar levels of
Per capita income. There exist some heterogeneous structures and we can see
the disparity among the regional levels ofdevelopment. In the theory of theeconomic development of underdeveloped countries, it has been fairly common to neglect or to treat superficially the problems of regional disparities

and development. But one of the economic characteristics of almost allunderdeveloped countries is that some regions are economically and geographically isolated from others and the degree of regional autarky is fairly high.

(9) A. O. Hirschman,

The StrategJ of Economic DeveloPment, Yale Univ.

Press,

1958, p. 188.

REGIONAL DISPARITIES IN THE BRAZILIAN ECONOMY: 75
A CASE STUDY ON THE BRAZILIAN NORTHEAST

Consequently, it is often adequate to consider the problems of economic
development as regional ones. The economic development of Brazil is one
ofthe good examples.
2) We must refer to the problem of the distribution of capital for
economic development. As above mentioned, the Brazilian economy canbe considered as a complex of more or less autonomous systems, presenting
diverse combinations of factors and resources and distinct potentialities. It

has been thought, therefore, that to develop simultaneously these systems
signifies the division of excesses in resources and the reduction of the averageintensity of growth as a whole. Thus it is necessary to concentrate scarce
resources in regions with more potentialities, in order to create a suMciently
powerfu1 nucleon which serves as a basis for the development of other regions.
Recognizing some truth in this view, it seems to us that the general formula-tion of the problem is not correct. To abandon regions of scarce resources
with their rapid growth ofpopulation is to permit grave problems to be created
for the future of this country. And, in fi ct, the policy ofthe economic develop-

ment founded on that way of thinking brought about the expanding regional
disparities. This experience indicates that in economic planning it is necessary to combine several programs for regional development and to create
several growing poles. The economic plan for the development of .7Vordestereflects adequately this necessity.

THE BASIC CONCEPTS OF GOING-CONCERNVALUATION
Jiro ONoI

In my previous paper,`i) referring to several sources - especially the"Beteiligungsfinanzierung" of E. Schmalenbach and "Der Wert der Unternehmung als Ganzes" of K. Mellerowicz, I brought forward the tentative
opinion that the valuation of a going-concern has two purposes, and thatthe basic concepts - the object of valuation, the profit and the rate forcapitalization - must be determined in accordance with each purpose.
In this paper, going a step farther, I try more fundamentally to examine
the significance of these two purposes of a going-concern valuation, and more
concretely to consider how the process of valuation must be built from cachpoint of view.
II

A going-concern valuation means to appraise the value of an entire
business enterprise, of which parts are harmoniously functioning in accord
with the whole organization, on its side of "capital."
The concept of "capital" is variously defined, but here I want to define"capital" as the potential capacity with which all individual goods or an
organization - like a business enterprise - will be able to bring out the worth

measured in money.
A business enterprise employs labourers, purchases materials, produces
goods and offers services, that is, it carries out various economic activities,
each of which has its respective social utility and therefore a value, though

it is not always shown in the form measurable in money. I am sure thata going-concern valuation means to grasp a value which a business enterprise
has on the side of the abovementioned "capital", that is, on the side of its

potential capacity to bring out the worth measured in money.

( 1 ) Jiro Ono; On the Purposes ofa Going-Concern Valuation and its Natures, Kobe Economic& Business Review, No. 9, I962, p. 105-106.

77

JIRO ONO

78

Hereupon, first, must it be considered that the valuation of a going-concern
has two purposes and so two objects.`2'

In the cases of a merger, sales of a controlling interest, alteration of thelegal organization, admission or withdrawal of partners in a partnership,
reorganization, quasi-reorganization, valuation of goodwill, borrowing moneyon the security of an entire business, compulsory purchase of business enterpriseby the government etc,, it is necessary to appraise the value of the capitalof the business enterprise. In the valuation of a business enterprise there
are various motives.

However, I am sure that these motives can be arranged into two fundamental purposes, that is, appraisal of

1. the value of proprietorship capital for each person concerned in
the transaction of an entire business or its shares, without regard to BIS, thatis, having no consideration of the accounting of business.
2. the new accountability ofbusiness - the value ofthe total capital (ortotal assets) employed in the business which should be the new basis of thecapital- (or assets-) value for a fresh start of business accounting, disregarding

the share's value in the transaction.
To begin with the first purpose, as a matter of course, the valuation of
proprietorship capital has its significance in the fact that it appraises the share's

value of a business enterprise for each interested party (for example, present
shareholders, future partners, creditors etc.), that it gives them a reliablebasis for their investment decision (though the investment, here, doesn'tmean to invest in real or physical capital, but to purchase shares of an enterprise, that is, to invest in a so-called fictitious capital) and that, eliminating thefriction of capital transaction as much as possible, also from the higher view-

point of social economy it makes the investment most effective. By many
writers of corporate finance theory in Germany and the U.S.A., for example,

E. Schmalenbach, A.S. Dewing etc., this aim has been considered to be themost important purpose of a going-concern valuation from many years ago,
though in their books the second purpose is thought to be fulfi11ed at the sametime that the first is complete.

Also at present the importance of the valuarion from this first viewpoint
must not be disregarded, especially in Japan, in regard to some of the problems as follows:(1) The valuation is important for the development of a stable security
market which is based on the public capital of the people.
In Japan the financial convention in which corporations offer their stock(2) Jiro

Ono; ibid., p. 116.

79
THE BASIC CONCEPTS OF GOING-CONCERN VALUATION

holders the right to prior purchase of additional stock-issue at a par value

have made the stock market more speculative than in its normal phase,(3'and now the kinds of securities are going to become more complex (that is,preferred stock, convertible bond etc.).
The value ofa business enterprise, appraised on the basis of this acceptable
theory, will clarify the nature of stock rights in each case of stock-issues andwill give the public and the authorities in charge of the securities market

a reliable foundation for sound investment and rational regulation, which
are necessary to eliminate over-speculation or over-fluctuation of market
prices, to increase public shareholders who intend to invest - not to speculate- their money in stocks, and to promote the stable expansion of the securites

market.
It is said that in Japan the public capital of the people does not circulate

in the securities market so much, and that the capital structures ofJapanese

corporations are much worse than those of the U.S.A. because of diMcultyin long term securities financing.(`'Therefore, from such a point of view it has a very important significanceto promote a sound securities market on the basis of a reasonable internal value(the hypothetical value whieh should be acquired in a perfect ficee market)
of stocks.

(2) The valuation plays an important part also in promoting thefinancing capacity of shares, which have not been dealt with, for example, bymeans of establishing an investment company for small businesses andexpanding a second stock exchange.
If an investment company is going to purchase or the stock exchange isabout to accept the shares which have not yet be dealt with in the stock
market, the shares must be given a justihable price in accordance with theirinternal value.
In order to promote the growth of small businesses, which have a so-called
strategic position in Japan as the backbone of national economy, their shares'
financing capacity must be increased.C5)

Also in this respect the valuation has a significance.

(3) The worth of shares must be appraised when, in order to improvethe capacity for the international scramble for markets, a business enterprise is( 3 ) Jiro Ono; On the Value of Stock Rights and Its Significance in Corporate Finance, Kobe

Economic & Business Review No. 7, p. 104-106.
(4) Michihiro Kono; Zaimu Kanri (Financial Management of Corporation) II, 1960, p. 258-

263.
( 5 ) Saichiro Suminoe; Kabushiki Kokai ni okeru Kakaku no Mondai (On the Problem of theStock Price in Its Opening Sale), Sangyo Keiri, Nov. 1962, p. 17-19.

80

JIRO ONO

going to combine with another business by means of purchasing its shares.
Especially when the businesses are great corporations whose stocks aredealt with in the stock exchange, the valuation must be done on a theoretically

acceptable basis so that the sharesholders and others concerned might not be
injured by the financial transaction with which the combination is accom-

panied. 'Because of these reasons, the valuation of a going-concern from the firstpoint of view, that is, the valuation ofproprietorship capital has even now animportant significance and must be theoretically more refined.
In this case, the worth of a going concern, needless to say, is decided byits so-called earning-power value, though this concept must be modified alittle, as I shall mention in the next chapter.

In the next place, the second purpose of the valuation has its significancein the point that it establishes a new basis fer capital (or assets-) value-new

accountability-in accordance with the whole value-structure of national
economy for the business accounting to make a fresh start, and that it makes
a future profit-and loss statement more reasonable.
That is, as stated above, in the cases of fusion, reorganization, quasireorganization etc., the total capital (or assets) employed in the businessmust be revalued or the capital (or assets) value as the accountability must
be reestablished, to prepare a justifiable profit-and Ioss statement thereupon.

Some writers, for example, F. Schmidt, insist that each individual tangible (or material) asset should be revalued with replacement cost for thispurpose.
According to this opinion, however, the greater part of intangible assets
cannot be included in the revalued capital (or asset), though the revaluationof each tangible asset can be settled.

Therefore, first the earning-power value of the enterprise as the whole
capital (or assets) employed must be appraised, and next in the framework of
the earning-power value each tangible asset has to be revalued with a replacement cost.
The difference between the earning-power value and the sum of the replacement cost of tangible assets is grasped as the positive or negative intangible
asset.

In other words, in this case also the whole capital (or assets) must bevalued on the basis of the earning-power value, and thus the value of' the total
capital or total assets employed in business is so established that the businessin each of future periods acquires a normal profit-ratio in the national econo-my.
This value must be regarded as the new accountability or the new basis

81
THE BASIC CONCEPTS OF GOING-CONCERN VALUATION

for future business accounting in that it gives the business management a
most justifiable responsibility for future activity or decision.

That is, the profit-ratio has no significance to management efliciency
when the pre-valuation-worth of the capital (or assets) is kept unrevalued, as
the basis of business accounting, in spite of variations in the capital (or assets)value. No one can understand whether the acquired profit is higher or less.
On the contrary, in the business revalued, ifthe profit ratio is less (higher)

than the normal, the eMciency of management will be evaluated to be inferior(superior), because the total capital (or assets) is valued to bring forth a normal
profit.

Also the business enterprise itself, through the valuation the businessaccountmg comes to have more the character of a collection-and maintenancecalculation. By means of revaluating each tangible asset with a replacement

cost, the accounting can approach closer the maintenance-calculation of
tangible assets. By means of, moreover, reflecting the positive or negative
intangible assets on future profit- and loss statements, though negative intan-

gible assets in a reasonable manner must be subtracted from the replacement
cost of'tangible assets which seem to be main cause of the Iower earning-power,

the business which has a higher (lower) earning-power than normal can keep
its scale enlarged (reduced) from the view-point of capital-maintenance-calculation or capital-collection-calculation.
Therefore, from the standpoint of the whole national economy, it can besaid that a valuation makes it possible for a business enterprise to calculate themaintenance of capital whether it was built in the fbrm of tangible assets
or of intangible assets, that the valuation earlier recognizes the decreased
capital, that is, the negative intangible assets, and that each business enterprise

can adjust its activity - its scale - in accordance with the demand of thewhole national economy which appears in its earning-power.
Thus, each of the interested parties with which a business enterprise issurrounded is given a reliable understanding of the financial position andoperating performance of a business.
The present business accounting founded on the cost basis has a very greatsignificance in that it can present the so-called "objective verifiable evidence",

and in that it can grasp purely the performance of a business activity during

a period if the value-variation of production goods can be disregarded.

However it has only a limited capacity for the capital-maintenancecalculation or capital-collection-calculation and for representation of the ac-countability in the whole value-structure in national economy. Especiallyduring changeful times where remarkable innovations and continuous decreases
in money value are taking place, accounting founded on the cost-basis is con-

82 JIRO ONO
sidered to bring forth great diMculties in business activity.
In such circumstances, if the cost-basis should still be carried through,we must take every opportunity - fusion, reorganization, quasi-reorganization
etc. - to appraise the value of the entire business enterprise or to adjust theaccountability, and we must renew the business accounting founded on the
cost-basis.

That is, future profit-and loss statement must be made so real that it will

be in accord with the whole value-structure in the national economy.
Though, the valuation of a going-concern, of course, cannot thoroughly
solve this diMcult problem because many business enterprises will only irregu1arly or very slightly experience fusion, reorganization, quasi-reorganization
etc., the valuation can at least direct business accounting in that direction.

And we must clearly recognize that a going-concern valuation has such aduty.

The importance of this side of going-concern valuation has already been
insisted on by F. Schmidt(6' as early as the 1920s'. But as stated above,generally this purpose has been apt to be confused with the first purpose.
Though our opinion is different from that of Schmidt's in that we grasp
the earning-power value as the ground of capital value, and therefore we consider the intangible assets of a business as the important factor in the total
capital (or assets) employed, the significance of a going-concern valuationon this side must be distinctly recognized.

III
Second we must consider how a going-concern value or earning-power
value must be understood and grasped.
Generally it is said that the earning-power value is decided by the sum of
the present value of profit anticipated in each of the future peroids, and I
also hold this ground of the so-called dynamic going-concern-valuation theory.
However I am sure that the capital value ofa business enterprise is more widelydecided by the future flow of worth which consists of capital, revenue andexpense, and that the value of a going-concern must be appraised by meansof adding the present value of inflow and subtracting the present value ofoutflow, because, as stated above, capital is the potential capacity with whicha business will be able to bring out the worth measured in money.
In this case "this fiow of worth" means not only the flow of money, but
includes the value of goods. That is, the revenue recognized by the realiza(6) F. Schmidt; Die Organische Tageswertbilanz.

THE BASIC CONCEPTS OF GOING-CONCERN VALUATION 83
tion-basis and the drawn capital are value-infiow, and the expense recognizedby the accrual-basis and the invested capital are value-outflow. ("capital"
is here the originally invested value or the drawn value from the business, thatis, it is understood as the potential capacity before transforming to the shapeof a business enterprise or the worth measured in money after the businessactivity)

It is often said that the most substantial factor of value is only the money-

flow anticipated in regard to the goods or the business. However I am surethat the value of a going-concern must be understood within the structure oftoday's business accounting so far as it is a social system of business calculation,and therefore that also the fiow of value must be grasped on the ground of
the principles adopted by the present business accounting.
For example, in Co. X, the expected profits in future n periods are supposed

to be Ei, E2, E3)..... E., the interest rate for capitalization is i (supposing that i, = i.. == i, . . . . . i. == i, to simplify the formula), then e=(1+i),

and the liquidation-value after n years is L.

So, the worth of X Co. is represented by the fo11owing formula.
mx"=: rEL + rE,2" + rE,!L + . , . . r:li.ln..- + rL.

ggg eeNow if the company anticipates issuing additional stocks K after 2 years

and to retain R from the 3rd years' profit E,, and after 10 years to pay
the retained income as dividends, the liquidation value will increase by K',

m,r .. Ei. + mE22- - -Kim + -E33" m rR3- +....

e e e K'e e

R EL n+ n+ lo ''..+L'nnJ+

g agg

In regard to this procedure, some writers give unacceptable reasons.
For example, according to the opinion of E.Schmalenbach,C7' the retained income (or invested capital) is considered to have to be subtracted because thepart ofprofit (or invested capital) will be doubly included also in the liquidation

But in this explanation there are some questions. The first question iswhether the same value as the invested capital (or retained income) can be

anticipated to be included in the liquidation value or not. The second
question is which the pfofit or dividend is the object for capitalization, andtherefore the third question is why dividends paid from the retained income(7) E. Schmalenbach; Beteiligungsfinanzierung, 1954, S. 55.

JIRO ONo84

can be considered as the profit for capitalization.

In spite of the importance of these questions, no clear answer is given
because he looks only at profit as the object for capitalization and disregards

the flow of capital (including retained income, dividend from it and drawn
capital).

I am sure that these questions can be settled by means ofintroducing theconcept of the "flow ofvalue which consists of revenue, expense and capital".
That is, as shown in the next figure,(8) the future outflow ofvalue (expressed by -> ) is supposed to be the value which will go from the business to theoutdise and the value that shareholders will have to offer to it, and theseoutflows are subtracted.

?- businessenterprise-<--- outside
I shareholder
management
r2 businessenterprise= outside
Therefore the future expense and the investment of proprietorship capitalin the business are the outflow of value, that is, must be subtracted,
On the other hand, the future inflow of value (expressed by <- ) is supposed

to be the value which will come into the business from outside and the valuethat shareholders will recieve from the business, and these inflows are added.
Therefore the future revenue, the dividend (whether it will be paid fromthe retained income or from the current profit) and the liquidation value
are the inflow of value, that is, must be added.
The retained inceme is first considered as a part of current profit andadded altogether, and next considered as the newly invested capital fromshareholders and only the part is subtracted.
Now, as shown in the above figure, there are two standpoints, in accord-

ance with the two purposes of a going concern valuation, and in regard tounderstanding these value-flows.
That is, the standpoint ofproprietorship capital which has been mentioned

above, and the standpoint of total capital employed in the business which
figure is shown by placing "management" instead of "shareholders". I want

to show the standpoint of total capital by "management". In connection
with the difference between these two standpoints we will examine thecharacters of value-flows in the next chapter.
At any rate in the valuation ofa going-concern, the future flow ofcapitalmust also be considered. In regard to the business which is to be appraised,
not only profit (that is, revenue and expense) but also investment of capital,
retaining of profit, drawing of capital, liquidation etc., must be considered to(8) E. Schneider;

Wirtschaftlichkeitsrechnung, 1957, S. 5.

85
THE BASIC CONCEPTS OF GOING-CONCERN VALUATION

need attention.

Especially in such an advanced time when longrange-plans or forecasts
can be made with fair reliability, these value-flows of capital must not be dis-regarded, because (as I will mention in the next chapter) from the standpoint
ofproprietorship capital the valuation will take every probable future activitiesof business into consideration and therefore the flow of capital for them mustalso be regarded.
As stated above, I am sure that the value-flows which consist of revenue,
expense and capital decide the worth of a business enterprise, and therefore
that it must be appraised by means of subtracting the present value of outflow
and adding the present value of infiow. By such a wider understanding, inappraisal of the so-called earning-power-value the factors of capital can betaken into consideration without any conflict with thc existing valuationtheory.

IV
Thirdly it must be pointed out that in accordance with each of the two
fundamental purposes of a going-concem valuation the contents of capital,
revenue, expense and rate for capitalization are respectively grasped separatelyfrom one another.
In the case of the valuation of proprietor's capital for the interested party
in the transaction of an entire business itself or its shares, without regard to•the business accounting, the profit for capitalization is one which purely
belongs to proprietors' capital, that is, the net profit from which interest

expenses and income tax are subtracted. The influence which the capital
structure of the business and the institution of tax have on the future net profit

must be taken into consideration.
The net profit which purely belongs to the proprietors' capital varies inaccordance with alteration of income tax rate and therefore of' the institutionof tax. Needless to say, for each of the parties interested in the transaction ofan entire business - for example, present or future shareholders - only thenet profit after subtracting this infiuence of tax is most significant.
Besides, the capital structure has influence on the net profit. When therate of interest expense is lower (higher) than the rate of earnings on total
capital, the more the borrowed capital is, the more (the Iess) the profit ofproprietors' capital is and so the larger (the smaller) the value ofproprietors' capital is, if the rate for capitalization is supposed to be same.

Of course, the value doesn't always become larger (smaller) in accordancewith the quantity of borrowed capital because, as stated above, the rate for86 JIRO ONO
capitalization generally includes an increasing additional rate in company
with the unsoundness of the capital structure. However it can not be assured
that increase of net profit is perfectly balanced by the additional rate forcapitalization. That is, it cannot be said that the value of'proprietors' capitalis the same whether the capital structure is sound or not.
Therefore, though it is often insisted that the proprientors' capital must
be calculated by subtracting the borrowed capital from the value of the total
capital employed in a business regardless of the influence which the capital
structure has on the net profit, and though this opinion is considered to be
acceptable to establish the book value of proprietors' capital, that is, toprepare the B/S, for the reasons stated above, I am sure that the net profit,

excluding the interest expense, and the rate for capitalization must be
respectively determined, to appraise the economic value ofproprietors' capitalfor each ofthe parties in the transaction of a business.

Thus the proprietors' capital is the very capital which has potential capa-

city to bring forth the profit which purely belongs to proprietors subtracting
interest expense and also income tax.
And also the rate for capitalization must be determined on the basis ofthe
average ratio of net profit to proprietors' capital, for example, the averagerate ofreturns on capital stock after tax, adding the proper supplementary ratetaking account of the legal organization of company, the shares' ability tocirculate in the stock market, the scale and capital structure of business, thefuture market-share of business, the future development of the same businessfield etc.

In capitalization the rate for capitalization has two functions. One is
the function of comparison or appraisal. The other is the function of taking
account ofuncertain factors or risks. Properly speaking, the rate for capitali-zation has only to compare the potential capacity for the business to bring
forth the worth with that of general capital in the same national economy,
if the future value--flow is perfectly anticipated or if the factors of risk or un-

certainty are taken into account in some way, for example, by means of
introducing the replacement-cost oftangible assets as a supplementary-valueC9'(as to introducing the replacement cost, there are many kinds of' methods).

But the future value-flow (revenue, expense and capital) cannot be always
exactly -- or with the same degree of correctness - anticipated, and the(9) Paton & Paton; Asset Accounting, 1952, p. 512-515.
E. Schmalenbach; Die Beteiligungsfinanzierung, 1954, p. 66, p. 77.

H. Jacob; Die Methoden zur Ermittlung des Gesamtwertes einer Unternehmung, Z.f.B.,
1960, p. 131 and p. 209.

87
THE BASIC CONCEPTS OF GOING-CONCERN VALUATION

method dependent on the replacement cost is, ofcourse, much more unacceptable than one dependent on the additional rate.
So, at least to a certain degree, this uncertainty factor, in relation to thelegal organization, the capital structure, the future development of businessetc., must be taken into consideration as additional rate.
Therefore, though the most fundamental rate, that is, the average rate
ofreturns on capital stock after tax can be certainly given, the additional rate

must be respectively determined in accordance with each condition of thebusiness as stated above, because it is quite different in each case to what extent

the future-flow can be exactly anticipated, or whether the replacement-costoftangible assets can be used as the supplementary value or not. No formula,in regard to the determination of the additional rate, can be shown.
And according to each proprietors' standpoint, a fairly great alterationof business condition, that is, increase of plants, modification of organization,

increase of dividend etc., can be intended, and therefore for those purposes
an increase (or decrease) of capital must be anticipated because for each

person concemed the economic value of a going-concern •is determined bytaking account of every further possibility in regard to itself and others .

So, in this case, as stated in the preceding chapter, the value-flow of
future proprietors' capital, that is, an additional stock-issue, retaining of
profit, drawing of capital etc., has a very great significance.

Here the value-flow of capital should be grasped as such in the goingconcern valuation.
On the other hand, in the case of the valuation of the total capital (orassets) employed in the business for the purpose of a fresh start of businessaccounting, that is, establishment of a new accountablity of business, thecapital includes also the borrowed capital, and therefore the profit for capitali-zation must be the sum of all surpluses which total capital or total assets ofthe business bring forth over the value which is necessary for the so-called
simple-reproduction-process ofbusiness activity, that is, it must include interest

expenses, income tax and bonuses to managbements.
The purpose of the valuation, in this case, is to revalue the total capital andtotal assets and to make the future profit-and loss statements more reasonablein accordance with the whole value-structure of economy.
So income tax or interest expenses must not be subtracted because theexisting institution or the present capital structure must not influence thefuture profit-and Ioss statements. The value of the capital of an entire business for new accountability is one ofpotential capacity with which the wholeof assets, including intangible assets, will bring forth prQfit (here the flow ofcapital, as stated under, need not be taken into consideration) which should

88 JIRO ONO
belong to the entire business itself.
Also in this case it is often said that the interest expenses must be subtracted

from the profit for capitalization, and that the value of whole assets can beappraised by means of' adding the borrowed capital to the proprietors' capital
revalued separately.
However, in regard to the former, we can point out that at least in thepresent economically the income tax is still considered to be a surplus, notan expense, and that no rate for capitalization, in the case in which the wholeof assets, whether it is financed by proprietors' capital or by the borrowed
capital, is appraised, can be one after tax, because the interest rate of borrowed

capital has no relation to income tax though generally the average rate of
return on proprietors' capital is grasped as the rate after tax. And therefore

the rate for capitalization cannot but be determined, without subtracting
income tax, on the basis of the interest rate ofnational or public debts andfirst class bonds, that is, on the basis of the rate which is considered to be
the average rate of return on the total capital of business in the national
economy. And also the profit for capitalization must include income tax inaccordance with the rate for capitalization.
On the latter question, as stated above, we must regard the influence ofthe present capital structure of business and the existing institution of tax on
the value of capital or assets, and therefore on the future profit-and loss state-ments. These influences, needless to say, must be eliminated.
Then, in this case, the future flows of capital - they are the borrowingof money and the return of borrowed capital in addition to the additional
investment of proprietors' capital, the drawing of proprietors' capital, theretaining of profit, etc. - must not be taken into account, because theobject ofvaluation is the present assets or capital of business and so the futurechange ofthis substance must not be anticipated. If the future capital-flow istaken into consideration, the present revalued capital or assets will include

the earning-power-value of assets which the management intends to purchasein the far future and so the profit-and loss statements of the next period will

be influenced by the assets which will not have yet been purchased. Sucha result must be avoided.

A STUDY ON THE CURRENT COST THEORYOF FRITZ SCHMIDT
Isao NAKANOI
How should business accounting cope with the problem of the fall inmonetary value today? On this theme we can find much literature, but nofinal conclusion has been reached as to what is the proper valuation basis of'costs. As a starting point for a study ofthis crucial problem, we are going tolook into the Iogic under]ying the current cost theory of Fritz Schmidt.

The accounting theory of Schmidt is bujlt on the foundation of his socalled "organic view of business" (organische Betriebsauffassung). This is
a way of considering an enterprise, asserted with a view to overcoming theerror of looking at it exclusively in its interior sphere.(i' And according tothis view, "in an organism of the whole economy an enterprise as well as ahousehold constitutes a cell. All individual economies are connected withthe whole organization of the national economy through the market."`2' Inholding such a view of an enterprise Schmidt seems to aim at studies of itsconditions for existence,(3' For this purpose it is necessary to adopt theorganic view-point, because an individual enterprise and the whole economy
interact on each other.(`) Thus, the organic view of business means considering an enterprise not as an individual existence but as a cell of the whole

economy, with intent to study its conditions for existence, assuming interac-tion between the individual enterprise and the whole economy.
It seems that the chief content of the interaction between both lies inthemutual relationship between the individual will of an enterprise in search
ofprofit and the necessity of continuous production of the whole economy tosatisfy wants of human beings. On this point Schmidt says, "the natural andharmonious laws of a free economy, regulated by competition and the pointof maximum profit, have a tendency to adjust individual enterprises so as to( 1 ) Fritz Schmidt, "Die organische Tageswertbilanz," the 3rd edition, Wiesbaden 1951, p. 1.

(2) Ibid., p. 47.
(3) Ibid., p. 48.
(4) Ibid., p. 395.

89

90

ISAO NAKANO

assure the group of consumers of the highest satisfaction of their wants.""5'
So an inquiry into the conditions for existence of an enterprise on the premiseof interaction between the whole economy and an individual enterprise leads
to the problem of how an enterprise should adapt itself to the economic laws

regulating it with market prices. Such a point of view also clarifies themeaning of Schmidt's remark that an enterprise held as a cell in the organic
theory is properly regarded not as a unit of a fixed immovable size but as
fioating in the stream of values in the whole economy, dependent on the skillof management.(6)What are the conditions for existence of an enterprise, considered as aproblem of adaptation to the economic laws of a business floating in thestream of values in the whole economy? "An enterprise engaged in production can exist continuously, only when the consumers' demand for a specified
product brings such a high valuation ofit that a market price lying above thevalues of costs expired for its production arises from that.""" To achieve
this condition, an entrepreneur (Untemehmer) must take the following two
steps: (1) he must invest the capital at his disposal into such values that havea tendency to remain the same (Werterhaltung) or-when it is possible-torise (Wertsteigerung), and (2) he must try to attain the highest profit (Erfolg)

by using them productively. The former offers the basis for the latter, andit also contributes to the benefit of the whole economy to achieve these steps
properly.

Now that the conditions for the existence of an enterprise have become
clear, how are they related to business accounting? "Schmidt derives theprinciples of appropriate valuation and income accounting from the essenceof a business and its organic relationship with the market".`8' Then, why
has he to derive his accounting theory from the organic view of business?
We presume that the reason lies in his view-point that business accounting
should help an entrepreneur take proper measures first of all. The proprietyof this interpretation shall be proved later, but here we hasten to cite thefollowing words of Prof. Karl Hax, "Schmidt reviews various methods ofbusiness accounting (betrieblichen Rechnungsmethoden) on the basis ofsuitability to give the entrepreneur guiding principles for business dispositions

which concur with the natural laws of the economy (natUrlichen Gesetzen(5) Ibid., p. 395.

(6) Ibid. p. 87.
( 7 ) F. Schmidt, "Der Wiederbeschaffungspreis der Umsatztages in Kalkulation und Volk'swirtschaft", Berlin 1923, p. 30.
( 8 ) Karl Hax, "Der Gewinn begriff in der Betriebswirtschaftslehre", p. 54.

91
A STUDY ON THE CURRENT COST THEORY OF FRITZ SCHMIDT

der Wirtschaft)".(9' Thus, while the organic view of business requires anenterprise to adapt itself to the economic laws, it is the entrepreneur that takes

the steps, and on the other hand the accounting must be useful to him, sobusiness accounting must be based on the organic view of business. Thus,business accounting based on the organic view of business, through its contribution to proper dispositions of an entrepreneur, takes account of the benefitof the whole economy as well as that of an individual business.
By accounting usefu1 for the entrepreneur is meant the accounting whichcorresponds to his activities in his business and which tells him the results of
his efforts clearly and separately. From his first activity ofinvesting his capital

into goods that are expected to remain the same or to rise in value comes"property accounting" (Verm6gensrechnung) for the purpose of showing the"property value change" (Verm6genserfolg) as increasesor decreases ofvalues
on investments and the total amounts of reproduction values of assets including these changes of values; while his second activity of the productive
use of his property gives rise to "income accounting", which computes incomeon sales. Property accounting is considered to perform the static function of

showing the asset values on the one hand and at the same time the dynamic
function of delivering cost values to income accounting on the other hand.
Next, we shall examine the relation between accounting based on the organic view ofbusiness and the stockholders as owners ofthe business. As is immediately seen from the standpoint ofSchmidt's theory aiming at an accounting which contributes to an entrepreneur's dispositions, his concept of capital(=property) means "what the enterprise possesses in a real sense",(!O) "theitems on the debit side of the balance sheet",(i]' while the credit side is regarded

as nothing but a reflexion (Spiegelbild) of the debit side. Therefore "theowners of a business can demand no more than the values on the debit side.
He has no claim (Anspruch) for the maintenance of the average purchasing

power of the capital paid in the business perhaps many years ago. Likeowners of any goods, he has made fast his fortune to what has been chosen
under a certain view-point and must submit to the change ofvalue as it is".('2'Thus, the owners of a business are treated as a passive existence submitting to
the change of values, in relation to the enterprise as a cell floating in the streamof values of the whole economy under the control and management of theentrepreneur.

(9) Ibid., p. 55.
(10) Schmidt, "Die organische.....,", p. 244.

(ll) Ibid., p. 244.
(12) Ibid., p. 113-114.

92

ISAO NAKANO

To sum. up, the organic view of business underlying Schmidt's theory
means a view of the business taken for the purpose of inquiring into the con-ditions for existence of an individual enterprise which is connected, andinteracts, with the whole economy through the economic laws of the market.
And according to this view, an enterprise is considered as an existence floating in the stream of' values in the whole economy, under the guidance of anentrepreneur trying to adapt the business to the economic Iaws of the market.

And from the standpoint that accounting should contribute to proper dispositions of an entrepreneur first of all, this organic view of business and thestructure of his accounting theory comes to have connections, and it is expectedby Schmidt that the accounting thus connected with the organic view ofbusiness will contribute to the benefit of the whole economy as well as thatof an individual enterprise. And the stockholders are regarded as a passive
existence submitting to economic laws and value changes.
II

One of the unsolved problems in the replacement cost theory in generalis, whether the asset values on the balance sheet should also be valued on theircurrent costs or not. It will be interesting to review Schmidt's accounting
theory fixing our eyes upon his viewpoint on this problem.

Schmidt regards capital in the same light with property (Verm6gen),which according to him means what an enterprise possesses in a real sense,
namely the items on the debit side of the balance sheet.`i3' And to take an
example of a plant acquired by a business, by the "property" is meant not
the amount of money paid for it in the past but the existing plant itself.(i`'Then why does he consider the property not as the invested money in the past

but the plant itself? "The whole way of thinking of the executives (dieganze Denkweise der Betriebsleiter) would be adjusted wrong, if they would
act as if there were still the money, not the plant."(i5' Thus the direct reason

for adopting the above concept of property seems to be that what the executives treat, what provides the basis of their actions, is not the invested moneyof the past but the existing values.

Next, on what valuation basis should a property be valued which isregarded as being on the debit side of the balance sheet in conformity to

the executives' view-point? "Property accounting (Verm6gensrechnung) is(13) Schmidt, "Die organische,,...,", p. 244.
(14) Ibid., p. 228.

(15) Ibid. p. 228.

OF FRITZSCHMIDT 93
COSTTHEORYA STUDYON THECURRENT
embodied in the balance sheet and makes a report of cost valucs. It goes
without saying that such a view of the balance sheet requires the reporting of
the replacement cost as of the current closing date. In the spirit ofthe entre-

preneur (Geiste des Unternehmers) it must develop from current cost to
current cost."(i6)When the current cost valuation is required in order to conform to thespirit of the entrepreneur, what does it mean in the concrete? Here we must
remember that Schmidt has derived both spheres of property accounting andincome accounting from the activities of the entrepreneur. In relation toproperty accounting he has pointed out the work of the relative maintenanceor increase of property values of an enterprise measured on the basis ofmarket prices of the assets (which means composing the property from such
goods as will show a higher rise and a lower fall in value than the average).(i7'It becomes the work of property accounting on current costs conforming to
the spirit of" the entrepreneur to make it clear to what degree the above
disposition of the entrepreneur has succeeded and as a result what steps hemust take now.
Value changes on assets are recorded on the property value change
account (Verm6genswertanderungskonto), which shows differences between
current costs and original costs of all the assets existing in the business as of

the closing date. So it discloses "to what extent the property staying in thebusiness moved in value, therefore to what degree the investment policy(Anlagepolitik) of the entrepreneur has been accompanied with success(Erfolg)."`iB' This account shows how far the property of the business has
adapted itself' to the fall in monetary value in its value changes, and so Iong as

as any or all of the parts of the property lack in adaptability, the accountallows the entrepreneur to make a conversion when it can still be made favorably for the individual business as well as for the whole economy.(i9'Thus Schmidt considers it as one meaning of the current cost valuation
to judge the result of the investment activities of the enterprise and to contribute to the dispositions of the entrepreneur, but he has given a more important significance to (the total amount of) the current acquisition values(Wiederbeschaffungswert) of all parts of the property of the enterprise
including the above-mentioned value changes, as of the closing date. On
this point Schmidt explains as fo11ows; the total amount of the reproduction(16)

Schmidt, "Der Wiederbeschaffungspreis", p. 32.

(l7)

(18)

Schmidt, "Die organische......", p. 131.
K. Hax, op. cit., p. 56.

(19)"Der Wiederbeschaffungspreis", p. 75.

94 ISAO NAKANO
values provides a most important foundation of income accounting, namely(1) it is the basis on which the values of expired costs are determined, and(2) the total reproduction values multiplied by the normal interest rate
(Normalzins) makes the normal profit (Normalertrag) of the enterprise,
which shows the size of the profit which the entrepreneur must attain in orderto keep his business continuously. Comparison of it with the actual profit
tells whether the normal profit has been earned or not and to what degree
an enterprise has been able to attain a profit in excess of it by means of a
special performance (Leistung) or monopoly. And further through capitalization of this difference, the additional earnings capitalized value (zusatzliche

Ertragswert) of the enterprise can be determined.(mo'As to the disposition of the entrepreneur relating to the total reproduc-tion values Schmidt says, "If the selling price is smaller than the current
acquisition prices plus the interest during the turn-over period (Umsatzdauer)
the conclusion must be drawn that a fUrther trade of the same kind is to bediscontinued,"(2i' And from the standpoint of Schmidt reviewed above, it
is inferred that the "interest" is determined on the basis of the total reproduction values.

To recapitulate, we understand that in Schmidt's theory the groundfor valuing the assets on the balance sheet on the basis of their current costs

lies in its possibility to conform to the spirit of the entrepreneur and tocontribute to his proper dispositions, and this assertion is consistent with his

standpoint aiming at accounting based on the organic view of business.

III
What is the proper profit in income accounting? On this important
problem Schmidt states as fo11ows; ". .The enterprise does not indicate anything wholly independent but it can be completely understood only as a constituent of the whole economy (Glied der Gesamtwirtschaft). It can live onlyin this framework, as the cells of our bodies in it and with it,

From the standpoint of the enterprise as a part of the national economy
we must seek the concept of profit, under the application of which the enterprise can take proper steps in all economic situations. . . And whether we havechosen the proper concept of profit we shail be able to recognize only bymeans of reviewing whether it is possible for all enterprises to take adequate(20) "Die organische......", p. 91.

(21) Ibid. p. 72.

A STUDY ON THE CURRENT COST THEORY OF FRITZ SaHMIDT
95
measures without being Ied in the wrong direction."(22' And the corporate
profit must be in fuli harmony with the fundamental economic laws of themarket so that it may be usefu1 for proper dispositions of the enterprise. Thus

it becomes clear that in the income accounting theory Schmidt emphasizes
it as requisite for proper income to make appropriate measures of the enter-prise possible.

As revenues are based on the current price level, we find no problem
concerning them. So the fundamental problem lies in the valuation basisof costs which will give rise to proper profit in the sense that it makes adequate

meusures of the enterprise (entrepreneur) possible.
To begin with, what are the appropriate measures of an enterprise which

proper profit should make possible? The replacement cost theory of Schmidt has been said to aim at the maintenance of physical capital (materielle
Kapitalerhaltung). Of course his theory is not unrelated to it, but the writerbelieves that the connection between his income accounting theory and themaintenance of physical capital is rather delicate and complicatcd.
Schmidt's income accounting theory takes the form ofcharging to revenue
current acquisition prices as ofthe date of sale, ofthe cost volumes required toreproduce the same quantity ofproducts on the productivity as of the same date
(which shall simply be called the current cost accounting hereafter). If thiscalculation aimed at the (perfect) maintenance of physical capital for its
object, it would immediately be confronted with the following extremely
diflicult problems; (1) The total of costs valued on the current acquisition
prices on each date of sale will not necessarily equal the final replacement cost.

(2) How should the conversion of capital investment be dealt with? (e.g.
when the costs recovered from the sale of article A has been reinvested into
article B, some fixed asset, bank deposits, cash on hand or accounts receivable).

(3) What is the relation of the progress of science with the maintenance ofreal capital? The capacity of capital consists not simply in its physical sub-stance but in its earning power. Maintenance of its original form may notassure its original capacity or its original earning power. (4) What should
be done if a part of' the capital is supplied with borrowed capital? Suppliersof the borrowed capita] require collection of monetary amounts fixed in thecontract but do not desire maintenance of capital substance as of the date of thecontract. In case of a rise in prices capitalists can retain more than is suthcient to keep the owners' equity substantially, while a fall in prices will not only

make it impossible to keep it but also in an extreme case it may lead to a(22) Schmidt, "Die organische......", p. 85.

96 ISAO NAKANO
situation that even the existing total assets cannot cover the retirement of themoney capital.`23)

In studying the income accounting theory of Schmidt it is to be questioned
at first whether he aims at the perfect maintenance ofphysical capital (which
provides for an actual replacement). As will be explained later, it seems proper to interpret that there does not exist such an intention in his theory.

The Iate Professor Iwata, interpreting that Schmidt's income accounting
is exclusively based on the standpoint of the whole economy, explained its

meaning as follows; "When the entrepreneur consumed production goods
and produced and sold the products, the transaction brought a bad effectfrom the view-point of the whole economy, so long as demand for the production goods grew so that-no matter how small their actual buying prices
may have been-their current acquisition prices as ofthe date ofsale exceeded
the market prices of the products. This means a loss from the standpoint of
the whole economy and this transaction had better not have been carried out,
because the production goods would have received a higher valuation fromthe consumers if they had been left as they were or consumed in anotherproduction, or in the case of commerce it would have been better for the
consumers, if the goods were left on the buying market instead ofbeing moved
to the selling market. Only in case the selling prices remain considerably
higher than the current acquisition prices on the date of sale, can it be said

that the transaction has been worth-while from the view-point of the whole

economy.
....To be brief, the organic theory of income accounting has the duty ofcomputing the results oftransactions from the view-point ofthe whole economy

and ofjudging whether the enterprise should and can be continued or not,through comparison ofthe reacquisition prices as ofthe date of the transaction
with selling prices. Where the result of this calculation has shown that itis necessary for the sake of the whole economy to continue the business, its

physical capital must be maintained absolutely and the same transactions
carried on."(za)According to this explanation, the meaning of income accounting on
replacement costs lies in its functions ofjudging whether an enterprise canand should be continued or not from the standpoint of the whole economy
and, where its continuance has been justified, of maintaining the physicalcapital absolutely. This interpretation appears right, but the whole theory(23) Tetsuzo Ota, "A Criticism on the Capital Maintenance Theories," "Accounting" (Kaikei)

Vol. 27 No. 2, August l930, pp. 166-167.
(24) Iwao Iwata, "Principles of Income Accounting" (Rljunkeisangenri) 1956, pp. 342-344.

97
A STUDY ON THE CURRENT COST THEORY OF FRITZ SCHMIDTof Schmidt is established on the basic idea that the rational activities of theentrepreneur Ied by his own will of searching after profit harmonize with theeconomic laws of the market, and there is no intention of forcing the entrepreneur to take any action for the benefit of the whole economy against his

will. So the meaning of his current cost theory must be analyzed from thestandpoint of the entrepreneur in the first place.

According to Schmidt, the disposition courses of the entrepreneur concerning the maintenance of the business is as fo11ows (1) the entrepreneur must
consider whether the recovered costs should be reinvested in the same thing orin another, and (2) to carry out investment in another field (which means atransformation of the production or trade process) after carefu1 consideration,or (3) continue the same production or trade as before.C25'

Since Schmidt regards the disposition courses of the entrepreneur as
flexible to some degree, it will be a matter of course that he does not require

an income calculation which would accomplish the perfect maintenance ofphysical capital (in the same quantity as before) blindly and automatically,of the accounting which according to him should contribute to proper dispositions of' the entrepreneur. With regard to "the current acquisition prices
as of the date of sale" (Der Tagesbeschaffungswert des Umsatztages) which
provides for the basis of his income accounting, he states as follows:"This current acquisition price of the date of sale shows the entrepreneurat what price he can purchase the part of costs (Kostenteile) included in the
goods sold (Verkaufsgut) as of the date of sale. Ifthe selling price is lower, hewill not have to bring the goods which can also be resold on the buying market
to the selling market where they are valued lower. So long as this resale isnot possible, from a selling price which is lower than the current acquisition
prices plus the interest during the turn-oveT period (Umsatzdauer), at least

the conclusion must be drawn that a fUrther sale of the same kind must be
discontinued. In case of continuing production the business must put aside(absondern) an amount equal to the reacquisition prices on the date of' sale
(Wiederbeschaffungspreis am Umsatztage) so that it can continue production. Therefore only what exceeds the current price of costs is the profit on

the completed sale (das Gewinn am vollzogenen Umsatz). The original costvalues mean nothing for determining the profit from sales, for considering theturn-over period of some length it is very unlikely that the costs included in
the product can be purchased again at their original prices. Thus it follows
that the current acquisition price of the date of sale must be the fundamental

value for income accounting (Erfolgsrechnung). Only this can tell the(2S) Schmidt, "Der Wiederbeschaffungspreis", pp. 92-93.

98

ISAO NAKANO

manager of the business (Leiter des Betriebes) if his production or his tradeis still profitable at a given moment; whether on account of a large profit an
expansion of the business is possible (eine Betriebserweiterung) or because of
its reduction a restriction (eine Einschrankung) is necessary."(26'Thus the significance of income accounting on current prices as of the dateof sale lies in giving to the entrepreneur a guide to judge whether his businessshould be maintained in its original content, contracted, expanded or converted, by considering whether the selling price can cover the current acquisition prices of the parts of costs which have expired under the existing conditions as of the date of sale, namely whether the maintenance of the originalcontent of the business is possible as of the date of sale.

Now, the courses of disposition of the entrepreneur is, as stated before,
either (1) to judge and then maintain the same contents as before, or (2) tojudge and then take some other step than maintenance of the same state(e.g. expansion, contraction, conversion etc.). In both cases it is nothing
but the possibility of the maintenance of the same sorts and amounts of property as before as of the date of sale that the current cost accounting of Sch-midt furnishes. It is left to the activities of financial management to bring

the possibility of the maintenance thus offerred to the actual maintenance ofthe business, or to get the additional amounts necessary for expansion, contractlon or converslon.
In this case it is asserted by Schmidt that the possibility of proper judg-

ment and maintenance offerred by current cost accounting has the importantmeaning of "parallel production and consumption" (der Gleichlauf vonProduktion und Konsumtion) from the view-point of the whole economy.
The parallel exists, "only when a consumer receives at every moment thesame amount of goods that can be produced on the basis of the productivity
existing at that moment in the whole economy, in exchange for his income
from production delivered at that moment."(or' It is clear that only current
cost accounting agrees with this principle. And concurrence with this principle brings the effect of stabilizing economy, by excluding (1) the intensifi-

cation of a boom that the accounting on the original cost basis gives risethrough the process of excessive (paper) profit due to a price rise --> excessive

investment of the entrepreneur on account of his wrong judgment and distribUtion of the paper profit caused by his failure to maintain the property ->a further rise in prices, and (2) the aggravation of a depression through theprocess of a paper loss in case of falling prices -> too small investment and too(26) "Die organische......", pp. 72-73.
(27) Ibid., p. 147.

99
A STUDY ON THE CURRENT COST THEORY OF FRITZ SCHMIDT
small distribution of profit->underconsumption.(2B'

When there exists a change of productivity (eine Verschiebung der Produktivitat), namely when a different quantity of products is manufactured
with the same amount of real cost values or a different quantity of transactions

is carried out, owing to a technical, legal, psychological or organizationalchange in the production or trade process, the current cost accounting-since
it accomplishes the paralell of production and consumption-results in costs

which decrease in case of a rise in productivity and increase in case of
its fall. On the other hand, an adequate quantity of assets to be held by
the enterprise is required to increase in the former case and decrease in thelatter case, with the result that a rise in productivity gives rise to an increasein demands for an addition to the stocks and therefore to a rise in their market
prices and a fall leads to an increase in supplies due to the reduction ofstockand consequently to a fall in their market prices. Thus, in times of a rise inproductivity the joint effect of the increase in the market prices=revenues
and the decrease in costs is an enlargement of profit, inducing an expansion
in the business. On the other hand, in case of a fall in productivity thedecrease in the market prices=revenues and the increase in costs Iead toa reduction in the profit and moreover a deficit. This deficit "will be a spe-cially valuable indication (ein Fingerzeig von besonderem Werte) to theentrepreneur and immediately when the transition of productivity has occurred
his calculation will tell him that he is manufacturing products which lie under

reproduction values and that consequently as a careful manager (aufmerksamer Wirtschafter) he must readily come to the conclusion not to produce
such products any more."(29) So, when the general transition ofproductivity
has occurred, the current cost accounting makes it possible for the enterpriseoccupying an average position in the whole economy to take some other stepthan to maintain the same content of the property as before.
When a transition of desire for the products of the ente'rprise has takenplace on the part of consumers, the entrepreneur must judge and take someother measures than the maintenance of the same property as before. But
Schmidt does not consider this problem for the reason that this transition ofdesire will exert influence on the field of demands and not on the field ofcosts.Cso' I his remark of Schmidt is consistent with his fundamental standpoint that income accounting should show the entrepreneur the disposition
to be taken on the basis of the possibility of the maintenance of the existing(28) "Der Wiederbeschaffungspreis", pp. 53-57.
(29) "Die organische......", p. 157.
(30) Ibid., p. 152-153.

1OO

ISAO NAKANO

production capacity, for a profit computed on any other basis than the current
replacement cost of the existing production capacity itself could not tell theentrepreneur to what degree the existing physical capital is profitable.
In order to prevent the property of the enterprise-which constitutes thefoundation of the entrepreneur's activities and as a principle should be maintained as before by means of adding adequate financial policies to the recovered
costs from the current cost accounting-from being worn out by the nominally
fixed borrowed capital, Schmidt proposes the principle of equilibrium of thevalues oh the balance sheet (die Wertgleichheit in der Bilanz). This principle requires that all the real assets (Realguter) of the debit side of the balance

sheet-which moves in value with the change of monetary values-should be
financed with the owners' capital and all monetary assets with borrowed
Capital.(3i)

According to Schmidt, it agrees also with the benefit of the whole economy
for the individual business to accomplish a balance of the property accounting
in accordance with this principle. The monetary assets of the enterprise aremainly composed of (1) the cost funds (Kostenfonds) providing for the purchase of labor etc. in the following period and (2) the accounts receivable due

to sales on credit, of which the cost funds are most properly financed by the

income funds (Einkommenfonds) which the consumers do not require for
consumption in the near future, because this way of financing brings thefavorable effect of offering a demand for that temporary surplus money ofconsumers and interest on it and also ofcutting down the total requisite amountof money in the whole economy-and so minimizing the loss of monetary
values in case of a fall in the monetary value-in comparison with the caseof financing the total cost funds with the new capital of the owners of thebusiness. On the other hand, •the disposition of balancing the accounts
receivable and the borrowed capital results in properly absorbing the ex-cessive buying power caused by the sales on credit and minimizing the total

amount of money in the whole economy by converting the excessive credit
existing in a business to the owners' equity of anQther business which has
had too money debts.(32)Now, we shall summarize the above analysis of the income accounting
theory of Schmidt. His accounting theory based on the organic view ofthe business requires that the accounting should contribute to the proper
dispositions of the entrepreneur who manages the business, from the standpoint of the enterprise as a cell floating in the stream of values in the whole(31) Ibid., pp. 132-133.
(32) "Der Wiederbeschaffungspreis", pp. 58-70.

A STUDY ON THE CURRENT COST THEORY OF FRITZ SCHMIDT 101
economy. And the entrepreneur does not try to maintain the same property
as befbre in all economic situations, but in the first place he judges whether

the business should maintain the same kinds and amounts of property as
before and then he tries to perform the actual maintenance if his judgment
justifies it. The current cost accounting acts as a guide for this judgment on

the basis of the possibility of maintaining the same kinds and amounts ofproductive capacity as before. It belongs to the activities of financial manage-

ment to bring the possibility of the maintenance as of the date of sale to theactual maintenance of the business when the judgment has justified it. On
the other hand, in order to prevent the property of the business constituting

the foundation to be maintained, expanded, contracted or converted inaccordance with the judgment of the entrepreneur from being worn out
against his will especially in case of a rise in monetary value by the nominally
fixed borrowed capital, the principle of equilibrium of values in the balance

sheet is proposed.

IV
In closing this survey of Schmidt's current cost theory, we shall bringforward a problem which seems to this writer to have been left unsolved byhim. To be sure, so long as we approve his fundamental idea asserting that
accounting should contribute to the proper dispositions of the entrepreneur
from the standpoint of the business floating in the stream of values of thewhole economy, the structure of his accounting theory forms a complete system. But in this system the greatest problem lies in his treatment of thestockholders. According to Schmidt, the stockholders as owners of thebusiness are regarded as a passive existence submitting to changes in values

on the property of the business. Of course, the proper dispositions madepossible by accounting based on the viewpoint of the entrepreneur may indirectly contribute to the protection of the stockholders, but when-for example-the business has fallen in substance or value below the average as aresult of the wrong disposition of the entrepreneur in spite of the proper in-dications given by the current cost accounting, the theory of Schmidt does
not hold the idea that the loss must first be recovered before the profit appears,

but there immediately comes out a profit so long as the revenues exceed thecosts on current acquisition values as of' the date of sale.

Once the late Prof. Sugimoto criticized this point as follows; "The ideaof Schmidt is based on goods, which is so inappropriate in the present economy
grounded upon money capital.. . In the first place, to take an extreme ex-ample, suppose that an article was purchased at 1,OOO yen and though nol02

ISAO NAKANO

change has occurred in the monetary value, its current acquisition price asof the date of its sale has come down to 10 yen. In this case, if the revenue
from its sale is 15 yen, he considers 5 yen as the profit, which he says can be

distributed without impairing the financial condition of the business. Do
you think such an idea is proper? An enterprise is characterized as a meansof maintaining and increasing the monetary capital of capitalists rather thanas a means ofsatisfying the desires ofconsumers. How is it possible to speakof a profit when the money capital of capitalists is being dissipated?"(ss'With regard to the above example, if the entrepreneur had succeededin perceiving this fall in value on the property value change account quickly
and in converting the direction (content) of his production or trade to evadethe fall in value, such a situation could not have taken place. But once thefall occurred, the income accounting of Schmidt's theory can do nothing but

continue the current cost accounting on the new lower basis of values, andwe cannot find any mechanism that can protect stockhoiders submitting to
the fall in value of the property of the business from the Ioss due to a failureof the entrepreneur in investing the capital in goods which tend to remain thesame or to rise in value. How can this problem be solved-this seems to be
the greatest problem in the current cost theory of Fritz Schmidt.

(33) Akio Sugimoto, "A Review on the Dualistic View-Point of the Balance-Scheet", "Accounting"(Kaikei), Vol. 31 No. 5, November 1932.

DIE KOSTENBEGRIFFE FUR DIE BETRIEBLICHE
PLANTUNG
Tetsuo KoBAyAsHi

I
Voruaiort

Die Hauptzwecke der Kostenrechnung sind im Verlauf des Zeitalters
verschoben. In und vor dem zweiten Weltkrieg, herrschten in Japan die
Verfeinerung der Gewinn-und Verlustrechnung (AbschluBrechnung) und
die Preisbestimmung des Produktes, als die Hauptzwecke der Kostenrechnung.
Aber nach dem Krieg ist die Hilfsfunktion der Kostenrechnung fUr die betriebliche Kontrolle und die betriebliche Planung, fUr die letztere vor allem inden letzten Jahren, betont worden. Und man beachtet auch die Brauchbarkeit der Kostenrechnung fUr die L6sung der dispositiven Probleme derUnternehmungsleitung.
Die Aufgabenentwicklung der Kostenrechnung in Japan ist zum Teilvon den auslandischen Literaturen, die in Japan vorgestellt sind, beeinfluBt

worden. Insofern mag der japanische, entwicklungsmaBige Zustand derKostenrechnung, von denen der Lander etwa verschieden sein, wo die
Kostenrechnung direkt von den praktischen Anforderungen entwickelt worden

ist. Aber, die groBe Dienlichkeit der Kostenrechnung zur betrieblichen
Planung wind neulich auch in Japan in der Praxis weit erkannt. Allerdings
k6nnen auch in diesem Falle die EinflUsse der auslandischen Literaturen
gefunden werden. Aber die auslandischen Meinungen sollen hier nicht ohne
weiteres Ubergenommen werden. Vielmehr muB man unter BerUcksichtung
der japanischen Verhaltnissen sie korrigieren.
In Japan sind schon viele auslandische Literaturen, welche die Probleme

der Kostenrechnung in dem System der betrieblichen Planung behandeln,vorgestellet worden. Aber wir nehmen hier aus solchen Literaturen einen

Bericht von Committee on Cost Concepts and Standards of American
Accounting Association: ,,Tentative Statement of Cost Concepts Underlying

Reports for Management" (April, 1956 Accounting Review) auf, um den
Zusammenhang der Kostenrechnung mit der betrieblichen Planung systematisch zu betrachten. Und wir betrachten, wie dieser Bericht in Japan, vor
allem fUr die Systematisierung der betrieblichen Planung im Zusammenhang

103

l04

TETSUO KOBAYASHI

mit der Kostenrechnung Ubergenommen ist, od. werden soll.
Dieses Komitee ver6ffentlichte frUher zwei Berichte Uber die Kosten-

rechnung (Accounting Review April 1948 und April 1952). Im zweiten
Bericht von 1952 ist dieses Komitee auf drei Hauptzwecke der Kosterechnung
hingewiesen :1. die Zusammenrechnung der Kosten fUr die Finanzbuchhaltung,2. das Angebot der Kostendaten zu den verschiedenen betrieblichen Leiterod. Instanzen fur ihre Kostenkontrolle, und
3. die Sammlung der Kosteninformationen, die fUr die betrieblichen Entscheidungen und damit fUr die betrieblichen Politiken notwendig sind.
Die Kostenrechnungen, die fUr den dritten Zweck ausgefUhrt sind, wurden
als die speziellen Kostenuntersuchungen charakterisiert, denn sie werden am
meisten auBer dem Iaufenden Kostenrcchnungssystem gelegentlich ausgefuhrt.
Doch, unserer Meinung nach, kann auch das laufe' nde Kostenrechnungssystem,das mit der Finanzbuchhaltungssystem verbunden ist, die Kosteninformationen fUr die betriebliche Planung bieten. In diesem Sinne wurde derZusammenhang der Kostenrechnung mit der betrieblichen Planung nur
unvollkommen systematisch behandelt.

Im dritten Bericht von 1956 ist dagegen der Geltungsbereich der
Kostenrechnung zur betrieblichen PIanung als ein selbststandiger Teil systematisiert und die eigentlichen Kostenbegriffe fUr die betriebliche Planungnoch umfassender dargestellt. Dieser Bericht soll als eine der wenigen Ver-suche, die den Zusammenhang der Kostenrechnung mit der betrieblichen
Planung systematisch in Ordnung gebracht haben, bemerkenswert sein.

n,,Pro7'ect Planning" und ,,Pen'od planning"

In diesem Bericht werden zwei Typen der betrieblichen Planung
dargestellt, ehe die Kostenbegriffe fUr die betriebliche Planung behandelt
werden. Sie sind ,,project planning" und ,,period planning". ,,Projectplanning" sei der Vorgang, in welchem die Leitung, um sich Uber den
Kurs der zukUnftigen Tatigkeiten im Zusammenhang mit einem spezifischen
Problem zu entscheiden, die vesrchiedenen Alternativen abschatzt. Dagegensei ,,period planning" der Vorgang, in welchem die Leitung, fUr eine wirtschaftliche Periode (am meisten ein Jahr), eine annehmbare Folge von
PIanungen der gesamten Zukunftstatigkeiten in der Unternehmung od. ineinigen ihrer funktionalen Unterabteilungen bekommt.
Der Vorgang der ,,project planning" wird ferner, wie folgt, aufgeteilt(a.a.O.S. 184 FuBnote).

105
DIE KOSTENBEGRIFFE F()R DIE BETRIEBLICHE PLANUNG

1) Anerkennung mehrerer m6glichen Kurse der Zukunftstatigkeit,2) Abschatzungjeder Alternative in den wertmaBigen und unwertmaBigen
Beziehungen, und
3) AuBerung einer Entscheidung, die eine der Alternativen Uber den Kurs
der Zukunftstatigkeit einschlagt.

Haufig kommen diese zwei Typen von der betrieblichen PIanung gleichzeitig vor. Wahrend mehrere Teile von Problemen von ,,project planning"
6fters sporadisch vorkommen und die Alternativen von den langen, verschiedenen Zeitdauern nach sich zieht, folgt ein Teil von solchen Problemen dem
festen Zeitmodell der ,,period planning", denn der Disponent kann die Zeit-

dauer der zu entscheidenden Alternativen beliebig kontrollieren, um den
Zyklus der ,,period planning" als auch die Zeitdauer der ,,project planning"zu wahlen. Somit beschreibt dieses Komitee, daB einige Tatigkeiten, diedem Vorgang der ,,period planning" aufgebUrdet werden, tatsachlich zur,,project planning" geh6ren (a.a.O., S. 84).

Es ist auch an anderer Stelle hingewiesen, daB ,,project planning"haufig als ein Teil der ,,period planning" ausgefUhrt wird. Sonst wUrden alle

Bereiche des Betriebes, in kurzen Zwischenraumen, nicht leicht der Nach-prUfung und Wiederplanung der vorher angenommenen Planne untergezogen, oder wUrde es schwerlich sein, daB der Disponent allen Punkten,,project planning" unterzieht. Die Sachen, welche die noch sofortigere
Entscheidung erforden, gehen dann direkt in den Planungsvorgang von,,period planning" ein (a.a.O. S. 188).

Aber dieser Punkt ist uns noch fragwUrdig. Vielmehr sollen wir
zunachst den Sinn der Einleitung der betrieblichen Planung in ,,projectplanning" und ,,period planning" noch eingehender prUfen, ehe ihre
Gleichzeitkeit in Frage gestellt wird.

In dem zweiten Bericht yon 1952 wurden die folgenden Probleme, fUr
den die speziellen Kostenuntersuchungen ausgefUhrt werden, aufgezahlt:(1) die Bestimmung der Beschaftigungsvolumen, (2) die Auswahl der Warensortimente, (3) die Veranderung der Produktionsverfahren, (4) die Erweiterung bzw. Erneuerung der Anlagen usw. Sie wurden meistens als die
Probleme von ,,project planning" betrachtet. Aber diese Probleme erfordern
auch die PrUfung vom anderen Standpunkt, d.h. von ,,period planning", undauBerdem erstrecken sich diese Probleme nicht nur auf die speziellen Kosten-

untersuchungen, sondern auch auf die laufend durchfUhrende Kostenrech-

nung. Von diesem Standpunkt soll man auch denken, daB der Begriff,,period planning", einen Mittelpunkt des dritten Berichtes von 1956 bilden.
In diesem Bericht von 1956 werden der Charakter der ,,period planning"
ferner, wie folgt, erklart. ,,Der Hauptzweck der ,,period planning" besteht

106

TETSUO KOBAYASHI

darin, daB man die verschiedenen Serien der Planungen entwickelt, und daB
man sie in eine Gesamtplanung so umstellt, auf daB jede einzelne Aktivitat
geleitet und koordiniert, und zwar die GUItigkeit ihrer Sammlung als Ganzes
versichert werden kann. Gew6hnlich wird ein Jahr als die Periode gewahlt.
Der angenommene Plan ist die Basis fUr die Mitteilung, und er enthalt die

Kostendaten, die fUr die Kontrolle der zukUnftigen Tatigkeiten dienlichsind". ,,Period planning fUhrt meistens zur gesamten Budgetierung." (a.a.
O. S. 187)

Bei der ,,project planning" kann man ein Problem, gewiBermaBen
isoliert von den anderen Problemen behandeln. Dagegen, bei der ,,period
planning" handelt es sich gerade um die Koordination aller Teilplane fUr
die gesamt Planung bzw. Budgetierung der betreffenden Periode. ,,Period
planning" erfordert also anderes PrUfungsprinzip als ,,project planning".

Es ist notwendig fUr die Systematisierung der betrieblichen Planung
und die Charakterisierung der Kostenbegriffe ftir die betriebliche Planung,mehrere Planungsrechnungen nach jeder eigenen Problemstellung zu unterscheiden. In diesem Sinne sind dicse Pianungskategorien von den japanischen Autoren stark beachtet worden, und von solchem Standpunkt sind die

Auffassungen von American Accounting Association in einigen Punktenauch kritisch betrachtet. Z.B. gegen die Auffassung, daB es sich um projectplanning handelt, Uberall wo irgend eine Auswahl notwendig ist," ist es betont
worden, daB nicht nur ,,project planning", sondern auch ,,period planning"

den Auswahlvorgang enthalt. Auch unserer Meinung nach enthalt ,,period
planning" ihren eingentlichen Auswahlvorgang, d.h kann auch sie nicht
ohne Auswahlvorgang sein. Vielmehr soll dieses Problem hier so aufgefasst
werden, daB es sich um den Inhalt der Auswahl handelt. Z.B geh6rt die
Bestimmung der Arten der Erzeugnisse und ihrer herzustellenden StUckzahlen
in einer wirtschaftlichen Period, nach unserer Auffassung, zum Probleme derperiod planning. Sie erfordert zwar eine Auswahl. Aber die Auswahl
wird im Unternehmungsziel der betreffender, wirtshcaftlichen Periode undim Abstimmungsvorgang mit den anderen betrieblichen bzw. finanziellen
Pl2ne der Periode orientiert. Sonst wUrde der eigentlichen Sinn des Begriffes,,period planning" als ein Planungsbegriff verlieren, nahmlich wUrde sie nur
die bloBe Anhaufung der ,,project planning" sein.

Wir m6chten diese zwei Typen von der Betriebsplanung als die verschieden Planungskategorien in gleichem Rang stellen, um die eigentlichen
spezifischen PrUfungsprinzipien beider betrieblichen Planungskategorien zu
entwickeln. Infolgedessen hat die Gleichzeitigkeit beider Planung fUr uns

nur den sekundaren Sinn. FUr uns ist die Erkenntnis der eingentlichen
Denkweise in beider Planungskategorien am wichtigsten.

107
DIE KOSTENBEGRIFFE FUR DIE BETRIEBLICHE PLANUNG

Hier, diesen Planungsbegriffen so11en die Begriffe ,,Grundplanung"
und ,,AusfUhrungsplanung noch gegenUberstellt werden.
,,Grundplanung" ist die Planung Uber den Grundaufbau des Betriebes,
bzw. Uber seine Grundbedingungen. Dazu gehdren, z.B. die Planung Uber
die Entwicklung der neuen Erzeugnisse, die Entscheidung der Investitionspolitiken, die Auswahl des Betribsstandortes usw.

Dagegen ist ,,Ausfuhrungsplanung" die Planung Uber die laufenden
Tatigkeiten des Betriebes. Wahrend die Grundplanung sich auf eine lange
Zeit erstreckt, ist die AusfUhrungsplanung, von Natur, die kurzfristige Planung, d.h die Planung der Tatigkeiten in einer wirtschaftlichen Periode(meistens ein Jahr).

Weil die Grundplanung die langfristige Planung ist, geh6rt sie zur,,project planning". Aber nach der Auffassung des Komitees von AAA, zur,,project planning" geh6rt auch ein Teil von AusfUhrungsplanung, wahrend
alle ,,period planning" zur AusfuhrUngsplanung geh6ren. Namlich besteht
die AusfUhrungsplanung aus ,,period planning" und einem Teil von ,,projectplanning", wahrend die Grundplanung nur aus ,,project planning" besteht.
In dem Bericht dieses Komitees ist die Bestimmung des Erzeugnispreisesals ein Beispiel der AusfUhrungsplanung, die zur ,,project planning" geh6rt,
aufgezahlt. Die Preispolitiken sollen zwar manchmal, unter der Berifcksichtigung des gesamten Periodenerfolges in einer betreffenden, wirtschaftlichen Periode von ,,period planning, entschieden werden. Aber freilichkann ein Teil dieser Entscheidungen vorlaufig ohne BerUcksichtigung deranderen Periodenplane gemacht werden. Z.B. bei der Preisdifferenzierungkann nur der Sachengegenstand vorlaufig in Frage gestellt werden. Er
wird namlich, fUrs erste, aus den anderen laufenden Tatigkeiten in der Periode

einigermaBen isoliert. Allerdings muB man den ermittelten Preis danach indie ,,period planning" einfUhren.

Im Vergleich zu den Begriffen, Grundplanung und AusfUhrungsplanung,sind die Begriffe, ,,project planning" und ,,period planning" geeignet, um diedie sachmaBige Isolierung und ihre Synthese in der betrieblichen Planungzu charakterisieren, obgleich mit letzteren Begriflren der Unterschied derPlanungsdenkweise, im Zusammenhang mit dem langfristigen und kurzfristigen Gesichtspunkt, nicht ohne weiteres klar gemacht werden. Aber man
kann je nach der betreffenden Problemstellung eine von beiden Einteilungs-

weise der betrieblichen Planung wahlen. Hier handelt es sich um die
Brauchbarkeit der Einteilungsweise von AAA Komitee fur die Charakterisierung der Zusammenhang der Kostenrechnung mit der betrieblichen Planung.
Und in diesem Falle sind die Begriffe fUr die Charakterisierug der Denkweise
Uber die sachmaBige Isolierung und ihre Synthese im betrieblichen Planungs-

TETSUO KOBAYASHI

108

vorgang noch wichtiger.

III
Die Kostenbegri e far ,,proJ'ect planning"
In dem Bericht von 1952, wurden mehrere Kostenbegriffe fUr die speziellen

Kostenuntersuchungen zur betrieblichen Planung aufgezahlt d.h,: replacement costs, opportunity costs, imputed cost, sunk costs, discretionary costs,
postponable costs, out of pocket costs, differential costs, usw. Dagegen ist
in dem Bericht von 1956 nur auf einen Begriff fUr ,,project planning" hingewiesen, d.h. ,,differential costs".

Jedoch ist dieser Begriff ,,differential costs" in sehr weitem Sinne zu ver-stehen. Er enthalt zwar auch den Begriff: DiflFerenzkosten von zwei ver-schiedenen Beschaftigungsgraden (Wenn man, in dem Bericht 1952, von,,differential costs" spricht, handelt es sich gerade um diesen, engen Sinn).
Aber ,,differential costs" in dem letzteren Bericht bedeutet vielmehr im weiten
die Differenzkosten von irgendenen Alternativen in allen Seiten der betrieblichen Tatigkeiten. Hierbei sind die Differenzkosten von zwei verschiedenen

Beschaftigungsgraden nur eine Form. ,,Differential costs" in dem Bericht
von 1956 ist ein Umfassungsbegriff der Kostenformen in ,,project planning".
Das ist in dem Bericht von 1956, wie folgt beschrieben:,,Die Kosten fUr ,,project planning" sind die veranschlagten, in Zukunft

herabzuwerfenden Werte, die von jedem alternativen Kurs der Zukunftstatigkeit der Gesellschaft verursacht werden. Solche Kosten.... man als,,differentialen costs" bezeichnen kann, denn der WtirdigungsprozeB (von,project planning Verf.) ist ein Vergleichsablauf, welcher die Berechnung,wie die Gesamtkosten (und Erldse) sich unter den verschiedenen Zukunftsbedingungen wahrscheinlich verandern werden, in Anspruch nimmt." (a.a,O.S.184-5).
Unter diesem Begriffe ,,differential costs" soll man die Kostenbegriffe, diein dem Bericht von 1952 fUr die speziellen Kostenuntersuchungen aufgezahlt
wurden, verstehen.
Die Bezeichnung ,,diffentialen costs" mag zwar insofern kritisiert werden,
als sie leicht mit dem engeren Begriff d.h. Differenzkosten von zwei Beschaf-tigungsgraden vermengt wird. Aber mit diesem weiteren Begriff lassen sichdie Kosten in ,,project planning" gegen die Kosten in ,,period planning"klar gegenUberstellen. Bei der ,,period planning" werden alle Kosten angesammelt. In diesem Punkt gilt die Einteilung der betrieblichen Planung in,,project planning" und ,,period planning" zur Charakterisierung verschiedener

Kostenbegriffe im Zusammenhang mit der verschiedenen Denkweise im

109
DIE KOSTENBEGRIFFE FUR DIE BETRIEBLICHE PLANUNG

betrieblichen Planungsvorgang.

Danach ist in dem Bericht von 1956 das Rechnungsvefahren derdiffential costs" beschrieben.

))

Wenn man die zukUnftigen Differenzkosten von den gegebenen Alternativen ermitteln m6chte, sei es notwendig, eine Altenative als die Bezugsalternative zu bestimmen. Als diese Bezugsalternative wird haufig solche Alter-

native gewahlt, welche die unveranderte Fortsetzung des schon angefangenen
Planes in Erwagung zieht. Das bedeuted an, daB, ,,project planning" tatsachlich haufig die nochmalige PrUfung des vorherigen Planes ist.
Solches Verfahren in ,,project planning" enthalt noch weitere Probleme.

Aber in dem Berichte vom Komitee AAA wird die eingehende Untersuchung
dafUr nicht gefUhrt. Der gr6Bere Teil des Berichtes ist fUr die Probleme derKostenbewertung verwendet.
Bei der Kostenbewertung sollte ein folgender Unterschied von den differentialen Leistungen, die jede Alternative mehr od. weniger als die Bezugsalternative erfordert, gemacht werden, um ihre differentialen Kosten in der Zukunftzu ermitteln; zwischen den differentialen Leistungen, die am Anfang der(project) Planungsperiode schon auf Lager sind, bzw., an denen die Unterneh-mung dann unwiderruflich gebunden ist, und denen, die in dieser Periode
neu zu beschaffen sind; zwischen den differentialen Leistungen, die in dieser

Periode voll verbraucht werden, und denen, die am Ende der Periode zum
Teil Ubrig bleiben werden, und; zwischen den differentialen Leistungen,deren Ersatz zu vornehmmen ist, und denen, deren Ersatz nicht vorgenommen wird.
FUr die differentialen Leistungen, die in der (project) periode beschafi't

und voll verbraucht werden, sollen die in Zukunft zu erwartenden Ausgaben,
od. ihre Geldaquivalente als die Bewertungsbasis benutzt werden.

Aber weil die Barbezahlung an den verschiedcnen Zeitpunkten gemacht
werden kann, handelt es sich noch um eine Diskontorechnung.

Wenn man prognosiert, daB die Barbezahlung und die Erwerbung derLeistung zusammenfallen, und zwar daB sie, auf einige Dauer verteilt, eintreten,

sei der anpassende MaBstab fUr die Kostenermittelung die Summe der diskon-

tierten Betrage von (a) Anfangsbezahlung, (b) Erganzungsbezahlung fUr
die Verwirklichung der Anfangsbezahlung und (c) weiteren Bezahlung, die,um den Erwerb zur VerfUgung zu stellen, gemacht wird.
Wenn die Bezahlungen in der Form der Versprechung fur Barbezahlungnach dem Erwerb der Leistung gemacht werden, soll der herabzuwerfende
Wert am erwarteten Erwerbstage gemessen werden, indem man den veranschlagten Betrag zum Tage der Leistungserwerbung diskontiert. Bei der
Diskontorechnung kann man mit dem ZinsfiuB der Schuld arbeiten.

110

TETSUO KOBAYASHI

Bisweilen werden die Bezahlungen in der Form der Leistungen auBer den
Geldern gemacht. In diesem Falle, wenn ihrer Ersatz zu vornehmen ist, soll

der Geldaquivalentswert gemessen, indem man den veranschlagten Preis in
der erwarteten Ersatzzeit, zum Erwerbstage diskontiert. Wenn nicht so, soll
der Geldaquivalentswert zu dem veranschlagten Nettobetrag gemessen werden,

den man mit dem Verkaufbekommen k6nnen wird.
Fttr den differentialen Leistungen, die in der (project) Planungsperiode
neu beschafft, aber nicht voll verbraucht werden, sei die Bewertungsbasis ihrer

zukUnftigen Kosten die Differenz von (a) dem zu bezahlenden Betrag od. dem

Geldaquivalentswert und (b) dem veranschlagten Geldaquivalentswert derLeistungen, die am Ende der Periode Ubrig bleiben werden. Der zu bezahlende Barbetrag od. der Geldaquivalentswert wird auf derselber Weise, wie
bei den differentialen Leistungen, die in der Planungsperiode von ,,projectplanning" beschafft und voll verbraucht werden, gemessen.

Wenn der Ersatz der Ubrig bleibenden Leistungen zu vornehmen ist,kann man sie mit ihrem veranschlagten Ersatzpreis in der erwarteten Ersatzzeit bewerten, der zum Ende der Periode diskontiert wird. Wenn nicht so,soll sie mit dem Netto-Verkaufswert am Ende der Periode bewertet werden.
Die differentialen Leistungen, die am Anfang der Planungsperiode schon

auf Lager sind, bzw. an denen die Unternehmung dann unwiderruflich gebunden ist, sollen mit ihrem Geldaquivalentswert in ihrem Benutzungszeitpunkt

bewertet werden. Wenn solche Leistungen zu ersetzen sind, sollen sie mit
dem jeweils veranschlagten Ersatzpreis am Benutzungszeitpunkt (bei der
Bewertung der Leistungen, die in der Planungsperiode voll verbraucht werden),od. mit dem zur Benutzungszeit diskontierten Ersatzpreis am erwarteten Ersatz-

zeitpunkt (bei der Bewertung der Leistungen, die in der Periode nicht vollverbraucht werden) bewertet werden.
Diese Kostenwertungsprinzipien bilden ein wichtigen Punkt des Beri-chtes vom Komitee AAA 1956. Sie wurden in den bisherigen Berichten
dieses Komitees nur wenig berUhrt. Und auch die amerikanischen Autoren
haben meistens dieses Problem nicht so eingehend behandelt. Vielmehr
ist das laufende Kostenrechnungssystem, das mit der auf dem Anschaffungskostenprinzip aufgebauten Geschaftsbuchhaltung eng verbunden ist, in den
Vordergrund gestellt, Doch soll die betriebliche Planung in der Zukunftorientiert werden. Die Planung, die sich nur auf den Vergangenheitszahlen
aufbaut, fUhrt selbstverstandlich zu den fehrhaften Ergebnissen, Als die
amerikanische, 6ffentliche Schrift, die sich ernsthaft mit den Problemen der

Kostenbewertung in der betrieblichen Planung befasst hat, ist in diesem
Sinne dieser Bericht vom Komitee AAA bemerkenswert. Die oben wiedergegebenen Kostenbewertungsprinzipien in der betrieblichen Planung sind in

111
DIE KOSTENBEGRIFFE FOR DIE BETRIEBLICHE PLANUNG

der Forderung des Betriebes orientiert, der seinen Gewinn, unter den gege-benen, od. prognosierten Bedingungen, zu einem Maximum zu machen unddamit seine Substanz zu erhalten strebt. Allerdings auf anderer Seite fragt
es sich dann, inwieweit man die Kosten, die an solchen Bewertungsprinzipien

bewertet werden, aus dem laufenden Kostensystem herausnehmen kann.
Aber das laufende Kostensystem kann sich U.u. selbst andern.
Ubrigens, nachdem dieses Komitee die Kostenbewertungsprinzipien ins
klar gemacht hat, berUhrt er kurz die Behandlungsweise der Faktoren vonZeit, Risiko und Unsicherheit in ,,project planning".

Um die Risikos, die jede in Aussicht stehende Alternative nach sichzieht, in der betrieblichen Planung zu berUcksichtigen, empfiehlt dieses
Komitee, die zukUnftigen differentialen Kosten von den betreffenden Alternativen mit den unterschiedlichen Satzen einzustellen. Diese Satze sollen
die Prognose vom Disponent Uber die Risikos der betreffenden Alternativen
wiedergeben.
Wenn die Zeitdauer von zwei od. mehreren Alternativen stark unterschiedlich ist, soll man in Vergleichungsvorgang solchem Unterschied entspre-

chend berUcksichtigen. Als die Methode dafUr empfiehlt dieses Komitee,
entweder die Rentabilitat (profit/invested capital) von betreffenden Alternativen zu vergleichen, oder eine gemeine Periode, am besten die kUrzeste

Periode von betreffenden Alternativen als Bezugsperiode zu wahlen. Im
letzteren Falle mUssen alle langeren Alternativen in die kUrzeste eingefUgt

werden, indem man den Geldaquivalentswert der am Ende der gemeinen
Zeitdauer Ubrigbleibenden Leistungen entsprechend berUcksicht.
Um die Unsicherheit, die mit der Schatzung der differentialen Kosten
von den betreffenden Alternativen verbunden ist, in der Planung zu berUcksichtigen, empfiehlt dieses Komitee, die zukUnftigen, differentialen Kosten
von den betreffenden Alternativen wieder mit den entsprechend unterschied-lichen Satzen einzustellen, oder die Sicherheitsspannen jeder Schatzung
auseinander zu setzen.

Diese Ausftihrungen im Bericht von Komitee AAA sind aber sehr ungenUgend. Um bei der betrieblichen Planung diese Faktoren in Erwagung
zu ziehen, mUssen diese Probleme noch umfassender (einschlieBlich der
Unsicherheit der Prognose Uber meherere Zukunftsdatenkonstellationen),und zwar noch gegenstandlich behandelt werden.

IV
Die KostenbegrzVe far ,,period planning"

Wie schon erwahnt, besteht der Hauptzweck der ,,period planning"

112

TETSUO KOBAYASHI

darin, daB man eine Serie von den Planen entwickelt, und sie in einen Gesamtplan so umstellt, auf daB jede einzelne Aktivitat geleitet und koordiniert, undzwar die GUItigkeit ihrer periodischen Sammlung als Ganzes versichert wer--den kann. ,,Period planning" fUhrt meistens zur gesamten Budgetierung.
Bei der ,,period plonning" handelt es sich nicht um den Vergleich vonden zwei od. drei Altenativen, die denselben Zweck verfolgen, sondern um
die periodischen Zusammensetzung der Teilplane Uber verschiedene Tatigkeiten in einer wirtschaftlichen Periode. Hierbei sollen die periodischen,gesamten Kosten daran geprUft werden, ob sie als ein Bestandteil vom periodischen, gesamten Erfolgsziel gelten oder nicht. Die obersten Geschaftsleitermachen bei der ,,period planning" die zusammenfassende Abschatzung desHauptplanes, der unter BerUcksichtigung von den Grundplanen und vorher
auferlegten Beschrankungen gesetzt wird.
Bei der ,,period planning" muB man also die gesamten Kosten in enier
wirtschaftlichen Periode ansammeln. Wahrend bei der ,,project planning"
die differentialen Kosten meistens von zwei od. drei Alternativen behandelt
werden, charakterisieren sich die Kosten in ,,period planning" dadurch, daB

sie im Bruttobetrag dargestellt werden. Das ergibt sich auch daraus, daB
der angenomene Plan in ,,period planning" die Basis fUr die Kontrolle der inder betreffenden Periode auszufUhrenden Tatigkeiten bildet. Die als Norm
der Tatigkeiten zu den verschiedenen Gebieten des Betriebes vorzugegebenden
Kosten umfassen alle Kosten, die, unter dem angenommenen Plan verursacht
werden sollen. Der Vorgang der ,,period planning" enthalt auch den Aufbau
der veranschlagten Kosten je nach dem Gewiet, wo jeder Teil der Hauptpolitiken und voher angenommenen Plane erfUllt werden soll. (a.a.O. 188).
Aber wir haben grbBeres Interesse darin, daB die Teilplane, bei der,,period planning" unter dem periodischen Gesamterfolgsziel geprUft undkoordiniert werden. Hierbei finden wir, wie schon erwahnt, den eigentlichen
Auswahlvorgang in ,,period planning", gleichwohl er etwa anderen Inhait
als bei ,,project planning" hat. Bei der ,,period planning" werden die verschiedenen Kombinationen der in ,,project planning" angenommenen Teilaktivitaten entwickelt, um die dem periodischen Gesamtbetriebsziel am besten
passende zu finden. Wenn die sachmaBig isolierten Teilplane zu einem
Gesamtplan in einer wirtschaftlichen Periode zusammengesetzt werden, sollen
sie vom umfassenden Standpunkt und zwar unter BerUcksichtigung von den
erwarteten Datenkonstellationen in der betreffenden, wirtschaftlichen Periode
weiter geprUft werden. DafUr gilt das eingentliche Auswahlprinzip von ,,period

planning". Wir denken daB die Bestimmung der Arten der Erzeugnisse unddamit ihrer herzustellenden StUckzahlen in einer wirtschaftlichen Periode,wegen des dafUr geltenden Auswahlprinzips, zur ,,period planning" gehdrt.

l13
DIE KOSTENBEGRIFFE FUR DIE BETRIEBLICHE PLANUNG

Sie sollen vom umfassenden Standpunkt in die anderen betrieblichen od.
finanziellen PIanungen eingestellt und im Zusammenhang mit dem wirklichen
Gesamtziel in der betreffenden, wirtschaftlichen Periode entschieden werden.
In diesem Sinne ist es wichtig, daB die solchem Auswalvorgang geltenden Kostenbegriffe fUr ,,period planning" noch weiter entwickelt werden. Hierbei
handelt es sich nicht nur darum, daB die Kosten, bei der ,,period planning"
im Bruttobetrag dargestellt werden. Ferner ist es auch notwendig, daB die
Kosten, in die verschiedenen Typen je nach der Problematik von ,,period
planning" wieder eingeteilt werden (z.B. in die gesamten variablen Kosten
und die gesamten fixen Kosten, od. in die Kosten, die kurzfristig zu Aus-

gaben werden, und die aufschiebbaren Kosten). Aber wir k6nnen leider
nicht solche weitere Entwickelung der Kostenbegriffe von ,,period planning"in dem Bericht vom Komitee AAA finden.
Ubrigens, beschreibt dieses Komitee, daB ,,period planning" ein potentiales ZusammenstoBgebiet von Planung und Erfolgsrechnung darstellt. (a.a.O.
S. 187) Das kann zwar daraus erklart werden, daB die veranschlagten Kosten

in ,,period planning" am peridischen Erfolgsziel gebunden werden sollen.
Denn bei der ,,period planning" handelt es sich nicht nur um die Kosten, son-dern vielmehr um den periodischen Erfolg, der von den Tatigkeiten in einer
wirtschaftlichen Periode erzielt wird. Aber es ist dann fragwttrdig, wennes, wie folgt, beschrieben wird: ,,Bei solchen Aktivitaten, fUr den die Leistungen am Anfang od. Ende von der Planungsperiode schon extrisieren od

Ubrig bleiben, ....verwendet ,,period planning" ihren Buchwert (d.hAnschaffungskosten-VerÅí), anders als ,,project planning" (a.a.O. S. 187I88). Denn bei der Planung ist es nicht notwendig, das Kostenbewertungsprinziep in der AbschluBrechnung zu befolgen, wenngleich die Ergebnisse der,,period planning" gew6hnlich in derselber Rechnungsform zusammengefasst

werden.

v
SchluPbemerkung
In Japan hat dieser Bericht vom Komitee, American Accounting Association zwar groBe Aufmerksamkeit erregnet. Aber das grdBere Interesse
der japanischen Autoren ist auf die GegenUberstellung von ,,project planning"

und ,,period planning" gelenkt worden. Das kann daraus erklart werden,daB die japanischen Autoren, im Zusammenhang mit dem verschiedenen
Charakter der Kostenbegriffe fUr die betriebliche Planung, einen Grundprinzip fUr solche Systematisierung gesucht haben. Die verschiedenen
Kostenbegriffe an sich sind auch in Japan schon gewissermaBen bekannt,

114

TETSUOKOBAYASHI

und in dem Bericht von 1956, gibt es nicht besondere, aufmerksame Entwicklung der Kostenbegriffe.

Aber auch die Charakterisierung dieser Planungskategorien von diesem
Komitee enthalt noch einige Undeutlichkeiten. Vor allem, ist der Sinn desPlanungsbegriffes ,,period planning" nicht genug klar gemacht worden. Die

Ausftthrungen von diesem Komitee sind dafUr zu formal. Dagegen denken
wir, unter ,,period planning", einen positiven Sinn als Planungsbegriff.
Wie oben erwahnt, hat ,,period planning" ihren eigentlichen Planungs-od.
Auswahlvorgang, welchem dem zusammenfassende Standpunkt des Betriebes
unterliegt. Und tatsachlich kann die Kostenrechnung, die solchem eigentlichen Planungsvorgang von ,,period planning geeignet ist, gefunden werden(z.B. Grenzkostenrechnung bzw. direct costing. Sie ist besonders geeignet zu
der Bestimmung der Arten der Erzeugnisse und damit ihrer herzustellenden

StUckzahlen, die vom periodischen, zusammenfassenden Standpunkt desBetriebes, d.h von der eigentlichen Planungsdenkweise der ,,period planning"

gemacht werden).

INTRODUCING PROF. SHINJO'S`CHISTORY OF THE YEN"
Zentaro MATsuMuRA

History of the Yen 100 Years of Japanese Money-Economy
By Hiroshi Shinjo. The Research Jnstt'tute for Economics & Business Administration,

Kobe University, March 1962. 205Pages in English.

It is a matter of great congratulation that a new light has been shed on
the history of the yen by Dr. Hiroshi Shinjo, professor of Kobe University who

has been widely known in Japan to stand for the metalistic conception ofmonetary theory in its most elaborate and modernized form. The book
begins with the exposition that judging from the price index in Japan, thevalue of the yen has declined to less than 111,400 since its initial attempt atstandardization in 1873 and accordingly, the price of gold has been marked
up 600 times in terms of the yen in less than a century. Hence no wondersome of our contemporaries deal with the yen as if it were simply a unit ofaccount instead of recognizing it as the general measure of value or the generalmeasure of exchange, to say nothing of the intrinsic monetary value or gold
itself. The misconception can be witnessed by the jacket of the book whichsimply shows one big letter \. This is all the more interesting when wecompare it with 100 7ahre Schweizerisches Mab'ncwesen published recently by Swiss

Mifnzen, which jealously reproduces a facsimile of two big gold coins in bold
relief on the cover of the book.
Be that as it may, the book gives us a number of new methods of approachto Japanese monetary history. It has been one of the wonders of the worldthat Japan succeeded in breaking through her `take-off' period without much
importation of foreign capital. Although the Meiji Government had to float
foreign loans in London in 1871 amounting to one million pounds (4.8 million
yen) to raise the funds required to construct railways between Tokyo and

Yokohama and again 3,4 million pounds (about 11 million yen) in 1873 to
pay for the capitalized pension fund, the Government thenceforth for sometime abstained from introduction of foreign capital, public or private. Not

only had Japan abstained from foreign borrowing, but even foreign bonds.

-England, France and Russia-were sold to Japan from November 1871 toJanuary 1874 (Meiji 4-7) at the time when Japan must have needed more

115

116

ZENTARO
MATSUMURA

money capital and an increase in gold and silver holdings. The contradiction underlying these situations is borne out by Prof. Shinjo in the light ofthe different ratios existing between gold and silver, that the foreign bondissue was utilized as the means ofspeculative capital movement mainly to takegold out• ofJapan. (p. 37)

As Japan entered her take-off period from around 1880's, we should
imagine that she needed more foreign capital than her export earnings provided

her with, as is the case with contemporary underdeveloped countries. It isremarkable, however, that although foreign markets for Japanese goods werelimited and Japan had to arm herself economically in preparation for theimpending Chinese War, she could keep her balance of international payments in surplus throughout the period from 1882 to 1893 (Meiji 15-26), asa result ofwhich she could carry out her anti-foreign capital principle. Someof our scholars attribute this anti-foreign capital principle simply to the wisdomof our earlier statesmen who were very cautious about foreign capital invasion
into our infant industries. But this way of approach, one should say, is some-what out of the realm of economic science. To this problem, ProÅí Shinjo
is not devoid of tools of scientific analysis and tells us that "prior to the intro-

duction of the gold standard, due to the falling tendency of the silver price inthe world market, prices of commodities measured by silver, were relatively
cheap in the gold standard countries. Besides, due to the continued deflationary policies making possible the adoption of the gold standard, the situationfor exports was favorable to Japan, and it seemed, as though this had been
prompted, so to speak, by the unconsciously enforced continuous devaluationof standard money." (p. 94) As is wellknown, M. Matsukata, one of themost highly reputed financiers in the Meiji Era made life and death combat
with monetary disorder after the Satsuma Rebellion, which brought Japan
severe inflation comparable to the American greenback inflation after the
Civil War.
We should not only appreciate the drastic policy of deflation carriedon by Matsukata, whose merit the author pays due regard at some lengthin Chapter 3, but also the perseverance ofJapanese trade and industry stillin their infant stage, while, on the other hand, we must not forget that theburden of deflation to bring international balance into equilibrium waslessened by the constant depreciation of the yen which had actually been on
the silver standard, in terms of the currencies of gold standard countries.
In this context we wonder ifJapanese deflation in the early Meiji Era would
be a recommendable measure to be folloWed by other underdeveloped countries
which are fighting against inflation inevitable to their take-off stage, without

incidental exchange depreciation which favored Japan and gave her a breath-INTRODUCING PROF. SHTNJO'S `CHISTORY OF THE YENT,'117
ing spell amidst deflationary hardship.

As to the restoration of the gold standard in 1930, Prof. Shinjo shares
the rather hackneyed opinion that it ended up in complete failure. We know
it was an inevitable consequence of the Genoa Conference in 1922 and theanti-inflationary mood prevailing among domestic pressure groups afterWorld War I. And we can imagine the ruling monetary ,orthodoxy had it,that should we return to gold, it must be on the standard with prewar mint
parity, in spite of Keynes' denunciation in A Tract on Monetary Refbrm 1924

which had been translated into Japanese and prompted some of our columnists to an anti-gold position.

Taking these circumstances into account, yet we wonder why Japan had
to follow the British pattern, instead of appealing to the standard devalued andnewly defined after the pattern of France, the Netherlands, Belgium, Italy,

Germany and Russia. It would be too much to say that Japan wanted toembody her subconsciousness of being one of the Three Big Powers into hermonetary policy and fo11owed the example of the U.S.A. and Great Britain
without regard to that of other countries. Notwithstanding the bitter ex-periences of repeated financial crisis, especially in 1927, the ruling Minseito

Government seemed to conclude that the gold standard with prewar parity
would be the only way to resuscitate the depressed Japanese economy. Is
it right that reportedly they were simply motivated by their partisan interest?

Assuming that Japan had returned to gold a little earlier after the War when
she had enough gold and foreign exchanges to go around, or otherwise as late
as in 1930 with new parity, would it not have done away with the ban on gold
export so soon in l931? And ifJapan had not resuspended the gold standard,

to which path would she have been destined to follow-to peace or to war?
The author, we hope, should have expatiated a little further upon these points.

In two chapters contributed to the conditions after World War II (Chapt.
9, 10) Professor Shinjo rightly estimates SCAP policy and says that the occupation policy to reconstruct Japan, such as dissolution of the monopolistic

Zaibatsu, reformation of agricultural land property, bringing up of tradeunions, modernization of women's position and so on, were doubtlessly remar-kable social reforms in themselves and should have brought about economic
development in the long run, but they might have possibly conflicted with
the quick re-establishment and reconstruction of the Japanese economy andabove all, stimulated postwar inflation. As a matter of fact, it was in 1947
when the occupation policy changed in the face of the sharpened opposition
between the U.S.A. and Soviet Russia, that Japanese inflation began to taper
off. Around this time G.H.Q. decided to make Japan economically independent and turn Japan as well as Germany into factories for Asia and Europe

118

ZENTARO MATSUMURA

respectively. So they began to place not so much emphasis on reformation
as on stabilization, which culminated in the Dodge Plan in 1949.

The Dodge Plan, aiming at stabilization in one stroke, consisted inessence of having a surplus budget and setting up of single rate exchangesystem, $ 1==\ 360. Up to that timeJapan had been on a sort of multiple
exchange rate practice that made foreign exchange dear fbr exports andcheap for imports, and so the new exchange system meant drastic rationalization for Japanese trade and industry to fbrce the prices of export goods

to fall and the prices of import competitive goods to lower. The blow tobusiness, however, was intensified as international economic conditions weregrowing worse and the Pound Sterling and other major European currencies
were depreciated in September of the same year. In connection with thesecircumstances we cannot but desire that the author should have given us his
own comment and estimation on the controversial problems as to whether
the newly defined yen was overvalued or undervalued against the U.S. dollar
and after the Pound devaluation, against the Pound and other European
currencies, although to do so might be too rash in the light of restrictions on

trade and exchange still brooding over the whole world. In retrospect,however, the value of the yen established by Dodge does not seem to be far
from equilibrium, because overvalued or undervalued at the outset, it hasbrought prosperity and growth to the Japanese economy throughout ups anddowns in business cycles. Japan came out ofthe Korean War newly clad withthe stabilized yen, just as she came out of the lst World War armed with a
lot of foreign exchange holdings. When we look back upon the history of
the yen and come across such coincidences, we cannot but sometimes fancy
ourselves to a midsummer night's dream that, should Japan have restored thegold standard a little earlier after World War I when she had enough specie
reserves to stand on her feet and dispensed with the later embargo on gold
payment, we might have walked on the way to peace and prosperity without

being involved in World War II.
At any rate the book gives us an interesting method of approach to thehistory of money and stirs up our imagination to the course the yen shouldtake in the future. The author always stands on the assumption that underan open economy the depreciation of a currency is expressed primarily by
the higher price of gold and the Iower exchange rates with foreign currencies(p. i). In a nutshell, he grasps the history of money in most countries as thehistory of depreciation, of which the yen is no exception. He rejects theoutmoded quantity theory of money and recommends the analysis of theflow of funds as an indispensable tool of monetary analysis. The quantity
theory of money, he insists, connot be true, because "the same increase in theINTRODUCING PROF. SHINJO'S "HISTORY OF THE YEN" 119quantity of money (bank notes and deposit money) would have different
effect on the economy. They may be expended for consumption, i.e. to buy
consumers' goods or services without producing anything, or to buy goods
in order to resell them, or again to employ laborers to produce goods andpay a sum of money as wages or salaries, the latter get income or the incomeof the country increases. That is to say, in one case consumptive income
increases, in other cases only money capital increases without influencing
national income, or again in another case both income and capital increases"(p. 142) In his opinion, unsophisticated quantity theorists assume neither
change in production, nor change in circulation of commodities, except thepurchasing power available for direct consumption, so that they cannot discriminate a rise in prices caused by prosperity from that caused by inflation.

Nor can they discriminate rising prices caused by increase of value on theside of commodities while the value of money remains unchanged from thosecaused by the decrease of value on the side of money while the value of commodities remains unchanged. (p. I57-8)

With these peculiar tools of monetary analysis at his command, Professor Shinjo places impartially the whole question of' 100 years' Japanesemonetary economy in its broad historical and international perspective. The
book is easily accessible to the layman and well docurnented for the monetary
expert.

July ]O, l962

KOBE ECONOMIC & BUSINESS REVIEWCONTENTS

NO. 1 (1953)
Present Day Significance of Free Ports ................................................Ginjiro Shibata

Development of Devaluation-Problem in Post-War Japan ........................Ki ozo Mi ata
Japan's Trade with South and SQuth-East Asian Countries .....................Fuktto Kawata
The Exchange Control Policy in Post-War Japan ..................................1lfasahiro FuJ'f:ta

On the Official Statistics of Foreign Trade in the Post-War Japan ............IIikoji Katano
On Business Historv ,........................,.....................,........................[Zradakatsu Ineue.
Problems of Regional
Industrialization in Japan .,........................,.........Minoru Beika
A Research of Wage Income in Post-War Japan ....................................jVobuko .IVosti
Revaluation in Japan.......................................................,.............Susttmu Watanabe

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

NO. 2 (1954)
Movements for the Establishment of Free Perts in Japan ....,...................Ginjiro Shibata
Japan's Trade with Latin America in the Post-War Years........................Fukuo Kawata
The Maritime Competitions in the Early Melji Era......................,.............Seiji Sasaki
Two Deflations in the Showa Era...............,......................................Masahire Fuj'af'a

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

The Recovery Method of the Japanese Shipping Industry
in Post-War Period.......................,......................,..........Hiromasa Yamamoto
Business Accounting and Tax Accounting..........................................Susumu M,ratanabe
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 ......Munehiro Masuzaki
On the Structure of the L'ational Income Distribution in Japan ...............Nabitko JNCosti

NO. 3 (1956)
Industrialization and International Trade ....,........................................Fukuo Kawata

Econometric Determination of Foreign Exchange Rate ofJapanfor 1926-1953............................,................................,.......HikoJ'i Katano
Present Status ofJapan's Shipping .............................,.................,......Ginjiro Shibata

The Distinction between "Shasen" and "Shagaisen" as Historical
Concepts in Japanese Shipping ...................................................Sei'i Sasaki

The Banking System in the Middle Meiji Era (1870-l910) ........,.........Masahire Fer7'ita
Disposition of Cost Variances in Japanese T,ax Law ...........................Susumu W7atanabe
Structure of Industrial Districts in Japan.,.....................,........................Minoru Beika

Note on the ZAIBATSU Combines ...................................................Tadakatsa lneue
On the Model-Building for Social Accounting Design ..............................JVobuko .7Vosg

NO. 4 (1957)
The Irnpact Qf Exchange Policy on the International Ecenomy
ofJapan During the Period 1930-1940.................................Laurence A Dowd
A Note on the Recent Trends ofJapan's Foreign Trade .......................,Fukuo Ilrawata

The Development of Overseas Banking System in Japanin the Melji Era................................,.................................Masahiro Fuj'ita

More on the Structure of National Income Distribution in Japan...............JV;obuko JVose'
Reconstruction of the Theory of Purchasing Power Parity ........................HikoJ`i Katano
Tramp Shipping Freights and International Trade ,................................Ginjiro Shibata

A Little Study on the Transition from the Sailing Vessel to
Steamer in Japan .......................,.............................................Setii Sasaki

On the Regulating Poiicy 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 Uiatanabe

Locational Problem in the New Major Branches ofJapaneseIndustries from l954 to 1956 .......,,........,.......................,........,iVinorer Beika
Business Problems in an International Situation,..................,.,.......,......7radakatsu Inoue

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

Some Aspects ofJapan's Trade with South andSouth-East Asia, 1950-1957 .........,.......................,.................Fukuo K'awata

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

The Modernization ofJapanese Shipping Based on theTransportation of Hokkaido Marine Products.................................Sei'i Sasaki

Development of the Marine Insurance Industry in Japanin the tsIelji Period...............................................,.........Hiremasa Yamamoto

A Assimilacao do Imigrante Japones no Brasil .......................................Hiroshi Saito

Rate of Profit and International Specialization of Production ..................Hikoji Katano
Replacement Cost and I.ifo Cost................,.....................................S"sumu VVatanabe
Spatial Problems of Business Activities ...................................................Minoru Beika

The Nature of the Morgan Control .............................................,.....Tadakatszt Jnoue

On the Effect of Accelerated Amortization for Tax Purposes .....................jVobuko jVosg

NO. 6 (1959)
History of Yen Its Developments in the Japanese Economy (2) .........Hiroshi Shinjo
The Central Banking Policy in the Meiji Era.......................................Masaltiro Fuj'ita

Economic Growth, Balance of Payment and aapital Movement ...............Hike]'i Katano

XN;orld Trade andJapan's Export 1953-1957 ...........................Fukuo Kawata
Alguns Asp' ectos da Mobilidade de Japoneses no Brasil..............................Hiroshi Saito
Problems of Emigrant-Transportation in Japan .......,......................Hiromasa Yamamoto
Port Labor Conditions in Japan .........................................................Ginjiro Shibata

The Development of the Concept "Operator" in Japan ..............................Sei'i Sasaki
Single Industry Towns in Japan .........................................................Minortt BeihaOn the Application of the Social Accounting
Principle to Business Accounting.......,....,....:..............................A'obuko jVIose'

Valuation of Work in Process ........................,......................,.........Susumu Watanabe

Developmental Stages Relating to Theories
of Stock-Equity Accounting ..............,.......,...........,...................R"uj'i T'akeda

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 .................................77adakatstt lnoue and Yoshiro Ikitshima

NO. 7 (1960)
Japanese Emigration and Its Effect on International Paymernts ...............Ginjiro Shibata
One-to-One Correspondence Between Goods and Factor Prices ..................IIikoj'i Katano
The Gold Standard and Banking Capital in Japan ..............................Masahiro FuJ'ita
World Trade and Economic Growth ...................................................Fukuo Kawata

Singularity in the Structure of the Seamen's Union ofJapan ............Hiromasa Yamamoto
Some Reflections on Inter-Comparability of Social Accounting ..................JV;obuko Artose'
The Meaning of Inventories ............................................................,9usum.u JltTatanabe

Structure of Income Determination on the Balance Sheet ........................R2uJ'i 71akeda

On the Value of Stock Rights and Its Significancein Corporate Finance ..................................................................Jiro Ono

Business Features and Management Policies of Industrial
Enterprises in Local Districts ofJapan.......................................?VIinoru Beika

NO. 8 (1961)
The Industrial System and Industrial Education in Southeast Asia
now on the Threshold of Reform; and Japan's Position therein ...Ki olo Mi ata
Industrial Structure and Educational System in India ........................Tadao Mi ashita
Industrial Education in India .........................................................Tadao AIi ashita
Technical Education in India .....................,...................................77adao ?Vfi ashita

Industrial Structure and Vocational Education in Thailand .....................Fukuo Kawata
The Industrial Structure and Industrial Educationin the PhMppines .........................,..................................Tei-ichi Yamasaki

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

NO. 9 (1962)
Problems in Port Administration and Finance in Japan.............,.............Ginjiro Shibata
Types of Early Modern Japanese Shipowners ..........................................Sei'i Sasaki

On the Employment System of Seamen in Japan ...........................Hiromasa Yamamoto
A Study on Japan's Invisible Trade ...................................................Fukuo Kawata

Problems of Industrial Location relating to Regional Development inJapan .................................................................................Mineru Beika

The System of Inside Contracting............................................,.........77adakatsu Inoue

A Critique on Professor Mahalanobis Model of Economic
Planning in India ..................................................................Hikofi Katano

National Income Concepts: Reconsidered ...,......,.....................................jVobuko jVTosi

Some Problems of the Installment Basis ..........................................Susumu JVatanabe

On the Purposes of a Going-Concern Valuation and its Natures ....................,Jire Ono
Die Betrachtungsweise der neueren betriebswirtschaftlichen
Kostentheorie .....,........................,....,..............................Tetsuo Kobayashi

KOBE UNIVERSITY ECONOMIC REVIEW 1962
Edited by Faculty of Economics,
Kobe University, Kobe, JapanCONTENTS"Money Economy" in the Tokugawa Era ..................,....................Kokichi .Mi2ashita

Currency versus Funds --- The Objective and Method of Monetary
Economics ................................,....................................Hiroshi Shinjo

The Logic of Excessive Competition -- With Reference of the JapaneseInter-firm Competition ..............,.......................................KoJ'iro JVIiino

Labor Supply and Farm Output........,......,............,............................Osamu 77anaka

Freedom and Ideas of Socio-Economic Order -- With Special
Reference to Transitions of Liberalism and Socialism .........Tlaketoshi AroJ-iri

Labor-Shortage in,Japan ---Its New Phase and Effect on the
Small Business • .....,..,,........•.....,..,....................,..,.........Takeshi Mizuno.ibllll/',-,-t .ttel/ett''•.-t..,/bdP:ltt,.,t'•.,t//lti//'..ei,.,tilblli/'../lt.,-i/dl//t'.•,IL,.t/d)P//''-.//',.//dedi/h, .;/-.,t/dlldtt',./P'•-,t/blii//'•-,/t.,.t/g/11/'',•1/' .t/i/11t/t'.,,tL.t//lilbbt',

THE ANNALS OF THE SCHOOL OF
BUSINESS ADMINISTRATIONKOBE UNIVERSITY 1962
Edited by The School of Business Administration,

Kobe University, Kobe, JapanCONTENTSThe Nature ofa Publicly-owned Public Utility .................................7'atsuo 17akenaka

The Character and Law of Wages under Socialism .................................Susumu Kaido

Planning Prices and Labor Productivity under Labor Input
Minimizing Plans ..............................................,.............Kaiuhisa Adachi

Die Bedeutung der Wichtigkeit der Selbstfinanzierung ..............................Akio ildrori

Zur Entwicklung der deutschen dynamischen Bilanztheorien .....................RJuj"i 77akeda
Increasing Productivity, Terms of Trade, and Protection ..,.............,.......Akihiro Amano
Organized Stock Markets in Japan ......................................................Hideo Hirata..l-'..1-"ll"''.dP'h,11dlilh',,IL."ldlHll''.A''.-ldPdld"."/.,H"Pdld''.J'-1111ell'''.J'''.,/-111V","''.dld/11"'.,V'•,/-ilL/H'-.-1',,ddllllllk,/t'.,-"IPIbh'•.Jl',,,drllllh.J'.,1/1

KOBE UNIVERSITY LAW REVIEWInternational Edition 1962
Edited by Faculty of Law,
Kobe University, Kobe, JapanCONTENTS
Legal Science and Judicial Behavior -- With Particu•lar Reference
to Civil Liberties in the Japanese Supreme Court-- .....,......Takeo Hayakawa
Influence sur la vie politique du systbme 61ectoral au Japon............ 7-lomokaza .IVishikawa

Lc Origini Convenzionali del Diritto Privato Aeronautico

In memQria del Prof. Amedeo Giannini .....................Hiroshi Kubota

THE RESEARCH !NSTITUTE FOR ECONOMICS AND
BUSINESS ADMINISTRATION, KOBE UNIVERSITY

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HISTORICAL SKETCH
In 1919, a research organization named the Institute for Commerce wasfounded in Kobe Higher Cornmercial School, one of the chief predecessors ofKobe University, with a gift made by F. Kanematsu & Company, 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 results 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 became the center of research in this field in Japan. A room
for statistics equipped with various computing machines was established andbegan publication of "Juyo Keizai Tokei" monthly and "Sekai Boeki Tokei"
annually. A filing room was prepared to deposit press clipping files systematically arranged by topics and dates. Another room was designed to become
the center of all possible original records and data having to do with the beginn-

ing and progress 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 for bu-

siness 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 consolidatedwith three other colleges in Hyogo Prefecture to become Kobe University. With
this development, the two Institutes were also amalgamated into the ResearchInstitute for Economics and Business administration, Kobe University. At
present, the Institute, with its eighteen full-time professional staff members,

carries on studies and investigations in international economy, business administration, and business mechanization 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-story
building named the Kanematsu Kinenkan and has a floor space of about 2,900
square meters, which includes a president's room, forty-one ofuces, 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
Under the directorship of a president, the Institute operates with two research groups one of which consists of five sections while the other has four
sections. Each research group and its sections are as follows:

A Group of International Economy(1) International Trade(2) Economy of Latin-America(3) Marine Economy(4) International Finance( 5 ) International Law of Econorny

B Group of Business Administration( 1 ) Business Administration and Business Mechanization(2) Accounting(3) International Management(4) Labor Problems
Besides the regular work of the Institute organized in this manner, researchcommittees may be created to carry on any special work requiring the joint
study of academic and business circles. At present, there are three committees, that is, the Asian Economy Committee, Latin-America Committee, andAccounting Committee.
For convenience and greater eMciency in carrying out its research activities, the Institute has a general oMce which is responsible for, ( 1 ) the collec-

tion and preservation of a comprehensive collection of books, periodicals, pam-phlets, and original records and data of finance, trade, commerce, industry
and business generally; (2) the classification, cataloguing, indexing, arranging,annotation and compilation of these research materials; and ( 3 ) the formulation and publication of the results of the investigations and studies accompli-

shed by the professional staff members of the Institute.

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I THE RESEARCH INSTITUTE FOR
il ECONOMICS&BUSINESS ADMINISTRATIONli Director:
KOBESueumu
UNIVERSITYWATANABEll Secretary:Toehio HARA

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I GROUPOFINTERNATIONAL i GROUPOFBUSINESS
il Fukuo
ECONOMICRESEARCH
i ADMtNISTRATIONRESEARCH
KAwATA Professorof lnternationa] l' Susumu wATANABE Prefessor of Accountingliill, Trade Dr. of Economics l Dr. of Businessi i Administration
l' Hiroshi sHINJo Professoroflnternational ii Finance Dr. of Economics i MinOrU BelKA Professor of Business

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i Torasaburo NoMuRA Professor of Transpor- i Dr. of Businessi tation Dr. of Commerce i Administrationi Taro KAwAKAMIililProfessor of Priyate : Yoshimoto KoBAyAsHI Professor of Business

International Law l Managernent

Dr. of Lawl Dr. of Businessl: Administration
Professor of rnternational!

i Jiro YAolFinance Dr. ef Economics i TadakatSu INouE Assistant professor ofil BusinessHistory
professor of Marinell Seiji sAsAKt

I Nobuko NosE Assietant Professor of

Economics: l Social Accounting
Dr. of Economicsilii Masahiro FuJ[TAii

America l' Tetsuo KosAyAsHt Assistant in Accountingii Hikoji KATANOliil Hiromasaiil Yoehiaki
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l Jiro oNo Assistant in Business

Assistant Professor of :: Latin
Administration
SectionRegional Study onii iSection
Aesistant Professor ofInternational Trade i IBaO NAKANO Assistant in Accounting
i' Sectioni

Assistant ProfeSSOr Of i Masaya oKADA Assistant in BusineSS
YAMAMOTO

Marine Economics l Adrriinistration Sectionion Latin America Section l Machinery Section

NISHIMUKAI Assistant inRegionalStudy i Kihachiro TsuDo Engineer in Business

OMce: The Kenematsu Memorial Hal],THE KOBE UN}VERSITYROKKO, KOBE, JAPAN

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