ECONOMICBUSINESS&
5

bssSVTE'-oeg`l .IIIIIii :tht('

ese "seTHE RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

1958

Copyright, 1958, by The ResearchInstitute for Economics

and Business Administration The

Kobe University

'

KOBE

ECONOMIC & BUSINESSREVIEW5,<`if/3THE

RESEARCH INSTITUTE FOR
AND BUSINESS ADMINISTRATIONECONOMICS
KOBE UNIVERSITY

1958

CONTENTS
Page
History of Yen lts Developmentsin the Japanese Economy (1)•••••••ny••••••••••••••••••••-•••••••••••••Hiroshi SHiNJo•- 1

Fundamental Features of the Accumulation of Capitalin the Late Meiji Era••-•••••••••-•••••••••••••••••••••••••----•••••- Masahiro FuJiTA••• 23

Some Aspects of Japan's Trade with Southand South-East Asia, 1950-1957•••••-•••••••••••••••••••••••••t•••• Fukuo KAwATA••• 43

Curves of Diminishing Values of Japanese Merchant Ships
in Proportion to Their Age••••••••••••••••••••••••ny••••ny-•••••••••••Ginjiro SHiBATA••• 53The Modernization of Japanese Shipping Basedon the Transportation of Hokkaido Marine Products•••••••••••• Seiji SAsAKi••• 67

Deve!opment of the Marine Insurance Industry in Japanin the Meiji Period••••••••••••••••••••••••••••••••••••••••••••- Hiromasa YAMAMoTo

A Assimilagao do Imigrante Japones no Brasil •••••••••••••••••••••••• Hiroshi SAiTo••• 77••• 89Rate of Profit and International Specializationof Production•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••Hikoji KATANo•••103Replacement ()ost and Lifo Cost••••••••.•••••••..•••}•,••.•••••.••• Susumu WATANABE•••121

Spatial Problems of Business Activities••••••ny•••••••••••••••••••••••••••••Minoru BEiKA•••129The Nature of the Morgan Control••••..••••-••..,••••••...•••••••...•Tadakatsu INovE

•-•

138

On the Effect of Accelerated Amortization
for Tax Purposes ••••••••••••••••,•••••••••••••••••••••••••t•••••••••••••• Nobuko NosE•••147IN
HISTORY OF YEN ITS DEVELOPMENTS

THE JAPANESE ECONOMY (1)Hiroshi

SHINJO

1

The modern age of Japan began with the Meiji Era (1868-1912)
succeeded by the two following eras of Taisho (1912---26) and Showa (1926-). The name of an Era has been customarily renewed when an emperorchanges. When the 16 years old young Emperor Meiji was enthroned on thedeath of his predecessor, the old Japanese feudalism maintained for hundredsof years had just broken down by the downfall of the Tokugawa Shogunate
and the political powers of the nation were again restored to the Emperor who
had been quite nominal for a long time. So the socalled " Meiji Restoration "made the young Emperor the real Head of this newly centralized State.
This first year of Meiji falls in 1868 A. D,

The first coins of copper and silver were made as early as the Wado (1llla) Era in 708 and gold coins in the Keicho (msft) Era in 1601, though
Korean and Chinese coins had flowed into the country even before then.
Ever since many kinds of coins different in value and quantity came into
existence but they were not means of circulation in the present sense except

in great cities and the country as a whole was not yet money-economized.
However, in the last days of the Tokugawa regime, the central government
as well as feudal lords began to issue inconvertible currency notes due to theirfinancial diMculties, and at the time of the Restoration there were 1694 kindsof paper currency in circulation without any foundation of a definite monetary

standard as there were not less than 100 kinds of gold (oval shaped Koban
12 HIROSHI SHINJO
and Oban) and silver (grains and oblong shaped) coins of various quality.

It was, therefore, for the new government most important and urgent toreconstruct the confused money economy on a sound basis. The most importantinternational money in the orient at that time was the socalled "Mexican
Dollar," a coin of 416 grains -fltT silver (374.4 grains or 24.2606 gm. in fine),and since the opening of some ports for trade by treaties with foreign countries

the Mexican Dollars came to circulate in Japan and was deemed to be themost reliable and acceptable money. The government proclaimed in February
1868 the circulation of the Mexican Dollars throughout the country to be
lawfu1 and fixed its rate of exchange as equivalent to 3 Japanese silver coinsof Bu (Bu-gin) which was originally minted to be as equivalent to IBu ofgold. In April of the same year, in order to mint new coins, an English
coining mill at Hong kong for Mexican Dollar was purchased by an intermediaryof the Oriental Bank Corporation (Yokohama branch), an active English bank,existed until 1885 and removed to Osaka but as it was burnt down by fire the newcoinage minting was not started until October 1870 under the managementof an English engineer, William Kindle who was appointed its director.
The first coins thus issued, were denominated as Yen, a new monetaryunit, but one yen was precisely of the same weight and fineness as a Mexican

Dollar mentioned above. Apparently the value of the yen was fixed tocorrespond to the Mexican Dollar independent of the existing monetary unit.

The monetary units prevailing until then' were very complicated. Regarding
gold, there was a unit of Ryo (iili)" originating from the Chinese Tael, and

one Ryo was equal to 4 Bu (c"v) and 1 Bu (Bu-Kin) to 4 Shu (2Ik). Regarding

silver, a unit of Momme (AsL) or Me (g) was used, which was decimalized
into Fun (tfi) and Rin (za) and for Copper coins, the unit was Mon (J5()* Ryo was originally the unit of weight in China, as pound was in England. Kan, Momme, Fun,Rin were alike units of weight actually used in Japan. When the Japanese gold coins, Koban,
were first struck in 1601 (6th year of Keicho) the large one, which was called Oban (bigcoins) was worth 10 Ryo and the small one, Koban (small coins) weighing one tenth of theformer, was worth ! Ryo. Koban of the Keicho Era weighed 4.773-4.775 Momme, consisting of?tt9 of gold, 114tiZ65 of silver and the rest of miseellaneous metals, which was equivalent
to about 4.053 Momme of fine gold. Oban contained ten times the amount of this fine gold•
As the content of the Japanese new Yen defined by the new Act of 187i was 1.5 gramm, thatis to say O.4 Momme of fine gold as aferesaid, a gold 1 yen compared to 1 Ryo of Keicho Koban
is approximately one-tenth. 1 Ryo was so much devaluated at the time of its replacement by
the yen in 1871. There lay about 170 years between the two periods.

HISTORY OF YEN ITS DEVELOPMENTS IN THE JAPANESE EcoNOMY 3with IOOO mon making a Kan (er) In the past, it was once oMciallydecided that a gold Ryo is equal to 60 silver Me, and to 4,OOO copper Mon.
But as there appeared various kinds of coins different in quality according totheir date of issue, no fixed rates of exchange really existed between gold andsilver units, and excepting copper coins, which were widely in circulation andaccounted by tale, most of them were evaluated by weight. The new unit
Yen (en or re) means literally circle or roundness and has no connection withweight, The new one yen was really the first round shaped coin in Japanese
history, as prior to it, only copper coins were round, yet they had without
exception square holes in the center.

This is the birth of the Yen in 1870, but the above step was taken rather

for temporal convenience and more fundamental reforms remained untouched.
The New Coinage Act (;efH{liE:ptJ) enacted in May of the following year was
intended to change the standard of money from silver to gold, declaring thatthe 1 yen gold coin should be hereafter the standard money lawfu11y payable

without limit, and all silver coins were to be auxiliaries. This policy wasdecided by the cabinet according to the advice sent from Hirobumi Ito, a later

prime minister and a then high othcial of the finance ministry, who had been
sent to the United States to study public financing and observe the directionsof monetary reforms going on in America and Europe. The new one yen
gold coin fixed by this Act was to contain 1.5 gramm (23,14 grains or O,4
Japanese Momme) of fine Gold. Beside the one yen, 20, 10, 5, and 2 yen goldcoins were to be minted. As subsidiaries were four kinds of silver coins withdenominations below 50 sen (S yen) and three kinds of copper coins below
1 sen. (i8o yen) According to the Act a silver coin of 50 sen was to contain10 gramm (154.4 grains) of fine silver. Though the new monetary unit Yen
was introduced, it was provided in the Act that 1 yen should equal 1 Ryo,and 1 yen be equivalent to 1,OOO Mon of the nominal standard copper coins(Eiraku-sen).

Thus upon the surface of things the new coinage act introduced the gold
standard system to Japan in l871 but in reality it was not so, because of themaintenance of the Mexican Dollar as legal money on the other side. As
already mentioned, Ito advocated the adoption of the gold standard after themanner of the advanced countries in the west. But opinions of English
envoys and representatives of the Oriental Bank were against it and they

HIROSHISHINJO

4

persuaded Japan to adopt the Mexican Dollar as a standard and warned themof the disadvantage caused by taking the double standard system. As there
was no gold reserve, that is enough to adopt the monometallic system without
financial suppert from outside and the existence of the Mexican dollar as a defacto international currency in the orient was not to be ignored, the only
pessible method was eclecticism. The Mexican silver dollar was thus permitted
to circulate, at first " for the time being in compliance with the request of people

in and out of the country to facilitate trade in licensed ports." " A silver coinof the same weight and fineness as the Mexican dollar, named the Trade dollar(Boeki-gin) shall be coined and be current side by side with the Mexican
dollar" and " in all licensed ports 100 yen of them shall be fixed as equivalent

to 101 yen of gold coins." As the currency of silver coins was not confined
to port districts in reality the Mexican dollar and not the gold yen functioned

as a real standard from the beginning. It was no wonder, as the value ratioof gold and silver fixed in the Act was l: 13.333, while the exchange ratioof the new gold coin and Mexican dollar (Trade silver) was 1:16.174.
Thus the new gold coins as well as the new silver coins other than Mexican

dollars had to disappear very soon from the market and the result was thede facto silver standard system.

2
As aforesaid, Japan decided to start her money economy by adopting thegold standard, but as the one yen Trade Dollar (Mexican Dollar) which was
originally allowed to circulate only in export and import ports districts was

authorized to be passed without limit in the country after May 1878 themonetary system of Japan changed into bi-metallism completely. Prior tothis, since March 1876 when the New Coinage Act of 1871 was revised by

Order No. 27, "For the payment for custom duties and other taxes byforeigners, the Trade Silver Dollar (both new and old) and the Standard
gold coin are received as equivalent, that is to say 100 silver coins equals IOO

gold coins," both metals have come to be on the same footing, the rate of gold

to silver being fixed and kept constant. And the above proclamation of May

1878 was published on the proposal made by Shigenobu Okuma, Finance
Minister at that time, asserting that for Japan only to keep the gold standard
was extremely didicult in the midst of circumjacent countries taking the silver

HCSTORT OF YEN ITS DEVELOPMENTS IN THE JAPANESE EcoNOMY 5
standard, and in the presence of the outflow of standard coins, especially gold,
caused by the over-issue of inconvertible paper currency and the gold production

within the country being scarce, the double standard of gold and silver would

be much more suitable and advantageous.
If the gold•-silver parity was constant or able to be maintained constantly,

as in the age of the double standard in Europe under the leadership of France
and others up to the first half of the 19th century it would make no difference
whether gold or silver was taken as the standard. And in truth, the gold-silver

parity had been maintained around 1 : 15.5 almost unchanged for centuries.
But situations were changing from about the middle of that century ; new gold
mines were discovered in Australia and America, but the production of silver

increased more rapidly. In addition, after Germany changed to the gold
standard the sharp fall of silver forced countries using the double standard to

rapidly abandon it. Thus the world tendency of the monetary system moved
sharply changing from the silver standard to gold.

The year 1871, when the Japanese new monetary Act was proclamated
was just this turning point. Therefore the fixing of any gold-silver parity

was impossible without putting Gresham's law in motion. It is noteworthy
that in l875 Seigi Matsukata,* a Iater finance minister, warned the cabinetof the exorbitant outflow of species in the following words. "Since the
Restoration, the government has made efforts to build up a new currency.
•••••• But since trade with foreigners was impossible without using Mexican
Dollars, the latter has become the standard both in and out of the country,
The value of this standard being very changeable the effect was unfortunate.

The government by coining the new Trade Yen of heavier weight and better
fineness than the silver yen prescribed in the Act tried to substitute for themin circulation. But compared with the Mexican dollar the new silver coin
had still less value. The custom house treasurer received only Mexican Dollars,

as lawfu1 and IOI yen of the new was equivalent to 100 yen of the Mexican.
Gold coins were driven out. Thus Mexican dollars only remained as standard)emoney.
Speaking of the value ratio of gold and silver, the characteristic of Japan* M. Masui, Development of our financial organization in the Meij era. Reminishences ofPrince Matsukata's achievements. The Journal of the Kobe University of Commerce. Vol.
II. No. 1. 1940.

6 HIROSHI SHINJO
was the low price fixing of gold as compared to silver from the beginning.
Thus the old "Jipang," written by Marco Polo as a country fu11 of gold had
been losing almost all of it. The following are the ratios calculated from goldand silver coins struck in the years noted, This table shows the remarkabledifference of the ratios between Japan and the west, and the reason why hugequantities of gold flowed out. The outflow of gold in the Ansei Era was
specially remarkable.
Table I. Gold-Silver Parity before Meiji

Mint Parity
1oo1 (6 of Keicho)

11.89

1695 <8 of Genroku)

14.21

1706 (3 of Hoei)

10.93
12.l2
9.47
5.74

1710 (7 of tt >{1711 (1 of Shotoku)

Market Parity

Parityin London

15,02{ 10.84
14.57

15.44
15.22

11.30

15.29

1714 (4 of n )11.92

1786 (l of Gembun)

ll.58

IO.13

15.18

1819 (2 of Bunsei)

13.32

13.02

15.33

1820 <3 of " )

10.24

9.91

15.62

1837 (8 of Tempo)

8.57

8.66

15.83

1859 (6 of Ansei)

524

6.36

15.19

1860 (1 of Man'en)

I5.58

18,93

1529

26.11

15.44

15.13

1865 (1 of Keio)
1871 (4 of Meiji)

16.01

15.55

15,57

1875 (8 of ,/ >

16A7

15.85

16.59

1878 (11 of " )

16.17

17.03

17.94

The ratios of the same from 1868 togold standard system was adopted were as
Table II. Gold-Silver Parity

1897 the 30th of

Meiji,

when thefollows :in and after

Meiji

Japan

London*marketparity

legalparity" I. Shrigly,

1868

15.58

16.38

15.59

1869

l5.58

l5,10

15.60

1870

15.58

15.10

15.57

The price of gold. London

1935. pp,90-91.

IN JAPANESE
HISTRY OF YEN ITS DEVELOPMENTS THE
EcoNOMY 7
Japan

Londonlegal parity

market parity

1871

16.01

15.55

15.57

1872

16.01

15.55

15.63

1873

16.01

15.55

15.93

1874

16.01

15.48

16.16

1875

16.17

15.85

16.64

1876

16.33

16.82

17.75

1877

l6.33

16.43

l7.20

1878

16.17

17.03

17.92

1879

16.17

l7.87

IB.39

1880

16.17

17.22

18.05

188l

16.17

17.58

18.25

l882

16.17

17.40

l8.20

1883

16J7

i7.82

18.64

l884

16.17

17.79

18.61

1885

16,17

18.66

19.41

1886

16J7

20.15

20.78

l887

16.17

20.96

21.IO

1888

16.17

21.49

22.00

1889

16.i7

21.22

22.10

1890

16.17

19.47

19.75

1894

16.17

30.82

31.60

1897

32.34

34.20

1898

35.03

1899

34.36

1900

33.33

1905

33.87

1910

38.22

1915

40.48

3
Coming back to the beginning, we now turn to the yen embodied by paper
currency. The task of !he new government to put the flood of inconvertible

paper currency in order was not easily completed in face of the financial
necessity at the time of the foundation of the new centralized state. To raisemoney by government bonds was impossible and the issue of governmental
currency notes was the only way to meet the financial need. The result was
only to add new kinds of inconvertible paper currency to those already existing.

8 HIROSHI SHINJO
Issued from May in 1868 (the lst year of Meiji) to December of the next
year the first governmental notes called "Daijokan-satsu " (another name was
Kin-satsu i. e. " gold notes " only in name) amounted to 48 million Ryo. The
second in smaller denominations called " Minbusho-satsu," issued for one year

from October 1869 amounted to 7.5 million Ryo and the third "Okurashodakan-shoken" put out for five months ending February 1872 came to 6.8 million

yen and the fourth called " Kaitakushi dakan-shoken " issued for 4 months inthe beginning of 1872 amounted to 2.5 million yen. The more the notes were
issued, the less became their purchasing power and 100 Ryo of the first notes

circulated was equivalent only to 40 Ryo of gold. After July 1872 thegovernment notes were all printed in Germany to prevent forgery and thetotal amount of these elaborate notes issued for five years to 1877 reached 121

million yen, 22 milion of which replaced the notes issued by the feudal
government and lords before Meiji and 62 millions replaced the above notesof the Meiji government, Meanwhile, the government found it necessary tosupply enough capital to rising firms and industries. In February 1869 an
oMce called "Tsushoshi" was established to promote the production and tradeof the country and under its guidance eight Kawase-Kaisha (exchange company
in English translation, though this signified bank. The word "Ginko" meaningbank did not yet exist) were established in the commercial cities, of Tokyo,

Yokohama, Osaka, Kyoto, Kobe Niigata, Tsuruga and Otsu. The Kawase
Kaishas were to supply capital by issuing their notes convertible to governmental

notes. But with the one exception of Yokohama, whose notes were convertible
into silver coins, their notes were not possible for acceptance by the people in

the fiood of the depreciating paper currency and 7 Kaishas out of 8 failed
very soon. However, it is worthy to note that the idea of "company" of thewest was thereby first introduced. Just at this time Hirobumi Ito sent a letterfrom the United States proposing beside the adoption of the gold standard
already stated the establishment of national banks of issue to consolidate theinfiationary notes following the example of the national banking system in1863 which aimed at putting the inflationary green backs to put in order.

So did the "Kokuritsu Ginko" (national banks) come into existence by
the enactment of the act (as[tLeefi`76e<ptJ) in Novermber 1872. While thissystem was introduced by the advice of Hirobumi Ito, there was anotherproposal by Kiyonari Yoshida to establish a centralized banking system like

HISTORY OF YEN ITS DEVELOPMENTS IN THE JAPANESE EooNOMY 9'that of England which Premier K. Inoue decided not to adopt, Besides there
had been petitions to establish private banks from the public, in which therich like Mitsui, Ono, and Yasuda were at the head. The government wasconcerned about the consolidation of the national debt and it was urgent anddesirable for the government to replace the huge volume of paper currency

with new sound bank notes. So according to the above Act of November
1872 to establish a national bank, six-tenths of its capital should be paid to thegovernment in inconvertible currency notes for which the government handedoyer new consolidated bonds to national banks and these bonds alone qualified
as a fiduciary reserve for the new issue of the national bank notes. Principallythe bank notes were to be issued against specie reserves, and the specie reserve

was to be not less than two-thirds of the amount of issue to ensure convertibility. Under these conditions, five national banks were successively established,

the lst national bank in Tokyo sponsored by Mitsui and Ono, in June l873
with an actually subscribed capital of \2.448 mil. for 3 mil., the second

reorganized from the former "Kawase Kaisha" of Yokohama with a capitalof \O.25 mil., the third in Osaka sponsored by Konoike, the fourth in Niigata
by 1ocal landlords and the last in Osaka by the former feudal Samurai class.

But as shown above, issue of the bank notes meant no credit creation at all
to the banks, and the bank could not raise loanable funds without increasing

deposits which was almost hopeless in those days. Most of the notes issued
were soon converted into silver and an enlargement of the circulation of thebank notes was hopeless in face of the increasing currency note issue on thepart of the government. Intended replacement of the old currency with the

new was out of question and one bank in Tokyo with plenty of government
deposits and the another in Yokohama with convertible notes in Mexican
dollars were the only ones that could stands. In March 1875 the existing four
national banks petitioned to change the convertibility from silver to currency

notes so that their banking business might better operate. Granting thispetition the government revised the National Bank Act in April 1876, wherebybank notes became convertible into currency notes and the limit of notes issue

was enlarged from six-tenths to eight-tenths of the capital of each nationalbank, while the legal reserve requirement was reduced from two-thirds toone-fourth of the amount of issue. It was after this revision that the numberof national banks increased so rapidly that the government had to stop further

10 HIROSHI SHINJO
establishment when the 153rd national bank was inaugurated in Kyoto in
1879. Thus the banking business was finally put on the rail and the amountof bank notes in circulation increased sharply as follows :Table III. National Banks
Number of

End ofnational banks

Amount of

Bank notes

capitalin circulation(mil. yen)(mil. yen)(mil. yen)

2
4
4
4
5

1873
1874
1875
i876{J."Åíf

Deposits

3.00

O.85

2.87

3.45

O.80

3.49

3.45

O.23

1.47

2.45

O.06

2.55

1.05

1877

26

22.99

13.02

4.51

1878

95

33.35

24.46

8.07

1879

153

40.62

33.96

11.79

1880

151

43.04

34.40

11.25

I881

148

43.87

34,38

13.71

2.50

But by this unification of bank notes and currency notes the government's
purpose to attain the replacement of the latter by the former came to nothing,especially as the so-called Sei-nan (south-west) civil war, the rebellion ofGenera} Takamori Saigo, broke out in Kyushu in 1877 and the government
found it necessary to issue currency notes anew amouting to 27 million and toborrow 15 million yen from one of the national banks (the 15th nationalbank in Tokyo, founded by feudal lords) to meet the military exendituresneeded. The total amount of issue of two kinds of paper currency increased
then from 107.41 million yen at the end of 1876 to 163.87 million yen at theend of I878 ; consequently the prices of commodities rose remarkably, some one

called it the "Seinan-senso inflation", and the agio of silver coin for paper
increased as follows:
Table IV. Depreciation Qf Paper Currency
Notesagainst

Notesagainst

Year

1868
1869
1870

Priceof

1MexicanDoller

1goldyen

Rice(Un-(1silveryen)

polished)

highestlowestaveragehighest

-"-

---

ff

O.871

O.639

O.748

--

1.093

O.860

O.962

1.073

1.005

1.033

lowestaverageper1koku---

HISTORY OF YEN ITSDEVELOPMENTS IN THE JAPANESE EcoNOMY 11
Notes against
1 Mexican Dollar

Notes against

1 gold yen

YearhighestlowestPrice of

Rice (Un-(1 silver yen)
averagehighestlowestpolished)

average

1871

1.012

O.881

O.978

l872

1.066

O.966

1.018

per 1 koku

1877

1.073

1,O(X)

1.040

1.053

1.013

1.033

l878

1.316

1.081

1.158

1.217

1.049

1099

1879

1.446

1.239

1.339

l.336

1,102

1.212

\4.80
7.30
7.13
5.13
5.34
6.39
7.96

1880

1.828

1.428

1.573

1.686

1.365

1.477

10.57

1881

1.930

1.734

1.843

1.795

!.620

1.696

10.59

1873

l.oo5

O.992

O.999

1.060

1.0I8

1.036

1874

1.012

O.994

1 .00tl

1.047

1.030

1.038

1875

1.016

1.oo2

1.008

1.0tl7

1.006

l.029

1876

1.049

1.000

1.019

1.023

O.948

O.989

Meanwhile, the first governmental notes called "Daijokansatsu" issued
in 1868, with the promised term of redemption by silver expired in 1880.
Redemption being impossible the government could do nothing but substitutethe new for the old. Owing to inflation" as well as to business activity
stimulated by the war the rate of interest rose from the level of 10% to 159oduring the four years ending December 1881. Prices of two kinds of nationalbonds sank heavily even below 70 against a par of 100: one was the"Kinroku-Kosai" (hereditary pension bond) handed over in 1876 in lieu of
payment in cash as annuities to former feudal lords and Samurais losing theirincomes, for the amount of 173.9 million yen payable in 30 years with interest

from 5o/o to 7% according to the status of receivers, and the other was the"Kinsatsu-hikikae-Kosai (Gold-convertible-currency-notes consolidating bond)issued since 1873 to the amount of 6.67 million yen with 69o interest payable
in 15 years.

Bond holders as well as salary and wage earners suffered severely,
especially many samurais who lived on these pensions sank down to lower
levels during these years. However, there were also others like Zenjiro Yasuda

who made fortunes with speculative profits gained by dealing with silver andbonds. The capital of the Mitsubishis represented by Yataro Iwasaki who
carried troops and munitions to the front as a monopolistic shipowner during* K. Ono, Inflation in the early Era of Meiji. Kobe University Economic Review. 2. 1956

12 HIROSHI SHINJO
the war was accumulated also during this period. Again the situation wasvery favorable for land owners who received rent in kind from peasants andpaid tax with depreciated money to the government. Thus the accumulationof capital had been rapidly proceeding by way of forced saving on the partof the general public through infiation before the introduction of deflation in
188l.

4With the appointment of Masayoshi Matsukata as Finance Ministerin October 1881 began the defiationary policy.

Matukata was born in I835 in Kagoshima and after spending nearly 30
years as a"samurai of Satsuma" got a position in the finance ministly in
1870, being introduced to the center by Toshimitsu Okubo who was a seniorof his native place and one of the moving spirits of the Restoration in whichsamurais of Satsuma, Choshu (Yamaguchi) and Tosa (Kochi) played themain part. In 1875 he was pormoted to Vice-Minister of Finance and in1878 he was sent to France and became acquainted with Leon Say, a grandsonof J. B. Say, by whom he was taught the importance of stabilizing money andthe necessity of establishing a central bank modeled after the newest banks,

perhaps of Belguim. After returning home, he was soon appointed Home
Minister in February 1880. His predecessors were Shigenobu Okuma (l87380) and Tsunetake Sano (I880-81), Okuma, a veteran statesman occupied thisimportant position for a long time and the foregone policies were mainly
promoted by him. Even Okuma recognized the importance of adjusting the
confused currency. But in his mind, the rising prices and depreciation ofcurrency were rather the effect and not the cause of the unfavorable balance oftrade instead of the depreciation of currency, the rising price of silver causedby its shortage brought about by imports exceeding over exports was the evil.

Of foremost importance to him was therefore, to correct the balance of
payment by promoting exports and to lower the silver price by increasing the

supply of silver. To curtail the volume of currency corresponding to thedecrease of silver would be a deterrent to the growing economy. From thispoint of view he founded a silver market in Yokohama in February 1779,
released some of the government's silver holdings to the market and establishedthe Yokohama Specie Bank in February 1780 with the aim of lowering theHISTORY OF YEN .ITS DEVELOPMENTS IN THE JAPANESE EooNOMY 13
price of silver. But the result was not successful,

Matsukata's proposal was then approved by Premier Sanjo's new cabinet
and he took radical measures energetically. According to Matsukata's plan
the national budget shouid have an ample surplus yearly so that the govern-

ment could decrease the existing notes and partly purchase specie for the
reserve of future currency, and secondly, a single central bank should beestablished to supply a sound and uniform currency for the nation. Thus bykeeping the government expenditure constant for threG years the nationaltreasury bore a surplus of 40.1 million yen of which 13.64 millions of existingnotes were set on fire and the rest held as reserve. By encouraging export,with new consulates established abroad and with finance facilitated by documentary drafts etc., the government's silver holding increased to 42 million
yen. The circulation of notes decreased to 88 million yen less than the endof l881, and the percentage of specie reserve rose from 89o to 35% in four
years.

Then on the establishment of the Bank of Japan (Nippon Ginko) in
October 1882, half of the capital of 10 million yen was contributed by thegovernment. Though the Bank opened the door, the Bank of Japan notes
were not issued up to May 9, 1885 in order to make sure of its convertibility

and its business was limited mostly to that of government's fiscal agent.

The Act of Convertible Bank Notes was promulgated in May 1884. The notes

were promised to be made payable in silver on demand and the Bank ofJapan had to hold an "adequate quantity of silver" for the notes issued.
From January 1885 the replacement of the circulating currency notes by thisnote began. In July 1888 the article relating to the above reserve was revised

to the effect that the Bank should hold the equivalent amount of gold andsilver in coins and bullion for the amount exceeding 70 million yen, for which
the Bank could issue notes with governments bonds, treasury bills, commercial
bills, etc. as reserves. However, the Bank was permitted to issue notes up to

5 millions for a start in July, which was enlarged step by step up to theabove amount. This legal limit of fiduciary issue was extended to 85 million

yen two years later and continued to March 1889. The further extension will
be elucidated in the later chapters,

On the other hand, existing national banks by losing the priviledge ofissue after the expiration of 20 years from the date of their charter had to14 HIROSHI SHINJO
be gradually reorganized into ordinary deposit bank. Also the circulation ofexisting currency notes issued by the government was prohibited from thebiginning of 1900 and had to be exchanged for new bank notes by the endof 1905. The Bank Act (enZiatpmJ) was enacted in 1890 and had been put
in force in order to regulate the business of increasing private banks and of

deposit banks reorganized from national banks. Among the former the Mitsuibank founded in 1876 with a capital of 2 million yen and the Yasuda bankin l880 with O.2 million yen capital were the most influential. I22 out of }53

national banks were converted into deposit banks with their names unchanged, as the lst national bank to the lst bank which has been existing up to

this time. Among Big Fives the Mitsubishi bank and Sumitomo bank cameinto existence a little later in 1895. The clearing system was established in

Osaka in 1879 and in Tokyo in 1886, ' •As Finance Minister, Matsukata directed the Japanese financial policy forl3 years during the period from 1881 to 1900. He became the Prime
Minister in the end. When the Bank of Japan was established he appointed

as directors R. Minomura representing the Mitsuis and Z, Yasuda who was
the Head of the Yasuda bank. K, Kawada, Y. Iwasaki and T. Yamamoto allof whom belonged to the Mitsubishi group became presidents of the Bank
successively from )896-1907. Thus Zaibatsus had a rather intimate relation'

Table V. Rates of Exchanges 1886-97.
Sight bill on London

Sight bill on N. Y.

HighestLowestHighestLowest1886

314.063!O.13$81.43$73.3187

313.80311.32

79.68

74.86

88
89
oo

311.58310.05

75.15

73.09

312.52310.86

78.22

73,72

318.60311.10

91.12

75.25

91

3!5.193!1.32

83,39

75.40

92
93
94
95
os
97

3!O.51218.6tl

73.76

65.99

218.72213.87

66.46

55.83

213.091111.86

54.18

48.17

2/2,51

1/11.31

53.77

47.13

212.692!1.19

54.25

50.90

2fl.45

1/ll.89

51.20

48.47

HISTORY OF YEN ITS DEVELOPMENTS IN THE JAPANESE EcoNOMY 15
with the Bank of Japan changing positions among themselves according to

the pelitical change. 'As soon as the convertibility of notes into silver began, the agio between

silver and paper disappeared. Nevertheless, the rate of exchange against gold
standard countries was not stable even after, because the price of silver against

gold kept declining. The rates of exchange during this period are shown in

As foreign trade expanded, the instability of the exchange rates wasundoubtedly harmfuI to the nation. The adoption of a more solid monetarybasis was now quesion of timing and for Matsukata the next task was torealize the gold standard system as the Iast step.

In 1893 a committee was organized to investigate the monetary system ofJapan to inquire (l) the cause and effect of the recent fluctuations of pricesof gold and silver, (2) the influence of their fluctuations upon the economyof this country, and (3) the necessity of revising the monetary system of thiscountry due to these fluctuations and if revision was necessary which system
and what measures should be taken. In the explanation given by the Minister

are the following:"Today in this country only silver coins circulate. The
effect ot the changes of gold and silver prices upon the economy and financeis enormous. Moreover since the sharp decline of silver prices due to theIndian currency reform the prospects for the future of economy are in confusion

and those engaged in trade and industry are in extreme fear as how tomanage themselves••••••"The remarkable decline of silver prices after 1890 was attributed to thesuccessive abandonment of the silver standard in many countries. The powerfu1

support of the U. S. was Iost by its abolishment of the Sherman Silver
Purchase Act and the adoption of the gold standard in 1900. Clearly thetrend of the world moved towards a gold standard. However the majority ofopinions of the above committee still "believed that the endless fall of thesilver price in the future would be impossible and comparing the effects ofthe changes of the gold-silver ratio upon the country with those of a gold
standard country we judge our advantage to be greater, and our disadvantage

far smaller than gold standard countries." Hence some of them were of theopinion that it was better to participate in the international double standard

union upon its formation persuading western countries to form it, and othcrs

16 HIROSHI SHINJO
asserted it was best to prolong the decision until the western countries definitely

reached some solution. However, when some members were added to thespecial committee and their answers for the necessity of revising the present

silver standard were asked, 8 out of 15 answered in the aMrmative, out of
which, 6 votes (Yoshiro Sakatani, Juichi Soeda, Koki Watanabe, Jun Kawa-

shima, Ryoichi Kurihara, Takashi Masuda) were for the gold standard,
while the remaining two (Heigoro Shoda, and Ukichi Taguchi) were forthe double standard. So the direction of the monetary reform was decidedwith a bare majority for the gold standard.

5
The new Monetary Act (ftMiSki) was promulgated in Mach 1897. Article
2 states " The unit of price is 750 miligram (-iltr Momme) of fine gold which iscalled Yen." Three kinds of gold coins, \20, \10, and \5, were qualified as

un!imited legal money. A 5 yen gold coin weighed 4.1666 gram of 19

ootO

o

gold, that is 1 momme or 3750 miligram of fine gold. 3 kinds of silver coinsand 3 kinds of copper coins were struck out as subsidiary money. It isremarkable that the new one yen golcl coin represented exactly the half of theweight and fineness of the one yen defined by the old coinage act of 1871,
as it was O.8333 gram against the old of 1.6666 gram of the same fineness.
And in reality, during the period from 1871 to 1897 the market value of gold

had risen almost exactly to two times the value of silver, as Matsukata
explained in the parliament as follows:"As it is most important at the revision of a monetary system to takenote of causing no changes in the existing conditions of prices, of liabilities

and of tax burdens, we are going most carefu11y to fix the value of new goldcoins exactly equivalent to that of the one yen silver coin now in circulation.

As to the method of deciding the present real value, we have come to theconclusion that it is best to depend upon the latest rate. An>' method of
averaging would not only be diMcult under the sharp changing state, but also

would not express the real value at present. Moreover, the value of gold
should be calculated a little higher than actual, as it will rise more or lesswhen the adoption of the gold standard system materializes. In view of theaverage silver bullion price quoted in London being a little less than 32 silver

against 1 gold, it should be fixed at I to 32 plus a. Then the price of the

17
HISTORT OF YEN ITS DEVELOPMENTS IN THE JAPANESE EcoNOMY
old one yen gold coin would be calculated just twice as high as the new one
yen gold coin, (the old parity was 1 to 16,17.), then it would also be very
convenient for the mixed circulation of both old and new coins."

Thus the new monetary act was put in force on Oct. 1, 1897 (30th of
Meiji) and at the same time the Convertible Bank Notes Act was revised tomake the Bank of Japan notes convertible into gold instead of silver, Worthmentioning is that, to the gold reserve for convertibility in the Bank ofJapanwas contributed the Reparation fund (230 million Tael) paid by the Chinese

government after the Chino-Japanese war 1894-95, which was repayable in
London in gold without which the revision would have been nearly hopeless,Thus it took about 26 years or Japan from the first legislation of thenominal gold standard of 1871 down to 1897 when Japan really changed to
the gold standard system to assimilate herself with the international gold
standard. According to the Act, the limit of the fiduciary issue was fixed at

85 million yen as before consisting of national bonds, commercial bills andothers prescribed by the Act. Again, the specie reserve was allowed to containsilver in coins and bullion up to one fourth of the total. But the limit of thefiduciary issue was expanded very soon to 120 million yen by the revision of

the Act two years later. Besides there was a regulation for the so-called"excess issue" (excessive fiduciary issue) which had been in force alreadysince 1872, namely "When the Bank of Japan finds it necessary to increase
the circulating currency according to the change of market conditions, it canissue notes by permission of the Minister of Finance backed by government
bonds, public debts, ministry of finance notes or other gilt-edged securities orby commercial bills as security. In this case the tax not less than 5 percent

per annum, the percentage of which is to be decided by the Minister ofFinance on each occasion, should be paid for the amount in excess." This
form of the gold standard system was apparently taken after the model of the

Bank of England.
In this form the Japanese gold standard system was maintained hereafterfor 20 years to 1914, when the first world war broke out. We will show
below on Table VI the amount of bank notes in circulation, specie reserve,

index numbers of prices, the rates of exchange on London and New Yorkduring this period. For reference purpose three other Tables are added.
During this period Japan waged war three times at intervals of 10 years.

HIROSHI SHINJO

18

Table VI. Convertible Bank Notes and their Value during the Gold Standard System.
Rates of exchange on

Amount of bank Percentage Index
notes issued atof specie

number of

the end of theyear

reserveholding

wholesaleprices1897

226,229

43.4

95,O

1898

197,400

45.4

1899

25Q,562

44.0

1900

228,570

29.5

1901

214,097

1902

LondonRates of exchange

on N. Y.
par \1OO=$49.85

par \ i = 2!o-fltr
highestlowesthighestlowest89.0

210.42210.16

49.45

48,82

104.0

2!O.8

2!O•4

50.00

49.47

1oo.O

2fO.4

2!O.3

49.51

49.25

33.2

94,8

2!O.5

2fO.3

49.74

49.25

232,094

47.0

99.8

210.8

210.3

50.13

49.50

1903

232,921

50.2

103.0

210.7

210.4

50.01

49.35

1904

286,626

29.2

112.2

2!O.4

210.1

49.42

48.76

1905

312,791

37.0

119.1

210.6

2!O.3

49.80

49.25

1906

341,766

43.1

124.2

210.5

2!O.4

49.63

1907

369,984

43.7

131.3

2/O.5

210.4

49.75

1908

352,734

48.1

118.5

2!O.5

210.4

49.57

1909

352,763

54.2

117.3

210.6

210.5

49.75

49.57

l910

401,625

55,4

122.6

210.4

210.4

49.64

49.42

1911

433,399

52.9

127.2

2105

2!O.4

49.50

40.44

1912

448,922

55.0

134.8

2!O.6

2!O.4

49.73

49.48

l913

426,388

52.5

l3I.3

210.9

210.3

49.74

49.33

1914

385,589

56.6

210.1

49.63

49.13

48.62

119.8

2!O.4

49.38
L

T

49.38
49.42

430,138

57.6

141.8

211.3

2/O.2

49.66

1916

601,224

68.2

172.4

211.6

2/O.2

50.50

49.88

1917

831,371

78.0

217.0

211.8

2!1.6

51.oo

50.50

1915

The military expenditure of Chino-Japanese war 1894-95 amounted to about
200 million yen and that of Russo-Japanese war 1904---5 about 1,716 million

yen and of the latter nearly a half of that sum had to be borrowed from
London and New York, Between these two wars, banks furnishing long-term
credit by issuing bank debentures were established, Japan Industrial Bank

(Nippon Kogyo Ginko) in l900 and Japan Hypothetic Bank (Nippon Kangyo
Ginko) in 1897. The spinning industry with the production of only 12
thousand bales in 1883 increased to 105 thousand bales in l893, but after the

Chino-Japanese war the production jamped up to 511 thousand bales in 1897
and the export of cotton yarn increased from 31 bales in 1890 to l40 thousandbales in 1897. Russo-Japanese war acted as another incentive to the industry
in general and ship•-building and steel industry began to rise, though heavy

19
IN JAPANESEECONOMYHISTORY OF YEN ITS DEVELOPMENTSTHE
Table VII. Currency
Metallicin Circulation

Paper currency

currency

Govern- National

Converti-

colns

Auxiliary
silyer
colns

o
o
o

o
o
o

o
o
o

50,091

1870

o
o
o

1871

2,667

2,740

1,409

5,625

60,272

1872

26,161

3,663

3,859

5,625

68,400

o
o
o
o
o

1873

43,551

3,663

7,597

5,634

78,381

l,362

1874

39,712

4,572

8,765

6,060

91,902

1,995

1875

32,317

4,478

9,610

6,934

99,072

1,420

1876

29,8406,140

12,868

7,952

105,148

1,744

1877

25,741

5,869

15,547

9,034

105,797

13,353

1878

23,227

6,423

16,913

9,734

139,419

26,2791879

19,8237,384

14,15910,192

130,309

34,046

1880

14,929

9,443

9,589

10,665

124,940

34,426

1881

13,697

9,368

8,136

11,241!18,905

34,397

1882

13,04913,843

7,499

12,231

109,369

34,385

1883

12,655

17,196

7,301

13,19997,99934,276

1884

11,99820,138

7,263

14,18393,38031,O16ooooo12,55522,414

9,253

14,756

88,34530,155

3,956

3,311

1886

13,28824,087

9,253

15,07867,801

29,501

39,55023,622

1887

14,111

22,O15

11,245

14,91355,81528,60453,45530,997

11,983

14,79946,73527,68065,77130,316

12,195

12,04440,913

26,73979,10931,836

12,193

11,461

33,27325,811

102,932

27,297

Gold
coins

1868
1869

1885

1888
l889

14,68916,356

1 yensilyer26,18031,674

Coppercoins

mentcurrency

notes
24,03755,5oo

Bank
notes

ble

SpecieBankreserve

notes

o
o
o
o
o
o
o
o
o
o
o
o

o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o

16,27227,362

1891

17,20835,383

13,193

10,493

27,88824,870115,735

38,094

1892

12,31046,922

14,302

10,162

20,828

2S,891

125,843

42,144

1893

12,237

52,124

16,189

9,922

16,40722,756

148,663

44,8981894

11,957

46,292

18,171

9,674

13,40521,782

149,814

29,216

1895

12,25547,192

20,752

9,6os

11,1 29

20,797

180,337

25,951

1896

12,81150,97823,229

9,379

9,376

16,498198,314

26,353

1897

79,9oo31,Otl9

29,356

9,351

7,451

5,025

226,229

64,673

1898

83,689o45,814

9,339

5,412

1,867

197,400

65,5131890

and chemical industries developed at length highly after the first wor!d war

181-18.
For two decades of this "classical" gold standard system, the rates offoreign exchange were characteristically stable and the notes circulation as well

eo

HIROSHI SHINJO
Table VIII. Development of Banks*
Nationa! Banks
No. ofBanks

Deposit Banks

Bank Deposits Loans & No. of

Advances Banks

notes

l883

141

34,276

1884

140

1885

139

1886
l887

Paid in
Capital

Deposits

Loans

Invest-Advances

ments

23,491

42,48531,O1622,05645,95430,15526,48843,194136

29,50131,i3345,424136

28,60431,711

55,168135

27,68033,52759;405

134

26,73933,882

68,239134

25,81132,30871,697

134

24,87038,74676,173

1892

133

23,891

48,24664,906

1893

133

22,756

59,83480,O14545

30,58338,42649,083

12,905

1894

133

21,782

66,977

86,152700

37,38049,19659,173

16,577

1895

133

20,797

75,OOO

91,898792

49,807

84,252

89,165

1888
1889
1890

I

1891

1
!

1

I

20,597
j

32,565

1896

121

16,49861,825

105,720

1O05

87,899141,937

157,200

1897

58

5,025

27,76728,764

1223

147,812

207,741

241,900

59,245

1898

4

1,867

867

607

l444

189,439

287,045

438,100

93,466

1899

1561

209,973

392,256

581,036

97,11919oo

1802

239,364

436,779

661,974

102,365

l901

1867

251,7oo

450,186

635,107

109,057

1902

1841

258,111536,702697,552

116,494

1903

1754

253,oo3

566,227

725,355

114,999

1904

1708

248,776

605,316

733,145

149,646

1905

1697

252,697

692,520

796,432

161,104

1906

1670

256,523 1,033,762 1,111,765

175,560

1907

1658

286,314944,295

1,113,162

175,445

1908

1635

295,549

938,072

1,098,149

193,601

1910

1617

311,354 1,054,413

1,123,377

247,425

1914

1593

401,200 1,519,760 l,726,850

265,295

as price indices moved up and down, With the only exception of 1903, notes
were constantly "issued in excess" but the proportion of specie reserve washigher than 40e/o on the average, though the system was not a proportional

reserve system. The remarkable rise of exchange rate on London after 1915
was caused by the increased imports of England for military goods, thus thebalance of trade became unfavorable against England while the shipment ofgold was checked by the danger on the sea. However, prior to the rise, by

HISTORY OF YEN ITS DEVELOPMENTS IN THE JAPANESE
EooNOMY 21
Table IX. Foreign Trade during the Meiji Era.
Total of
ExportTotal of

Import(IOOO yen)
Total of
ExportSurplus

Total of

Import1868

15,553

10,69356,604

81,72912,90920,784+ 4,860- 7,875

1890

1869

l891

79,52762,927

Surplus- 25,125+ 16,6oo+ 19,777

1870

14,54333,742- 19,199

1892

91,10371,326

1871

17,96921,9171893

89,7l388,257

1872

17,026

26,175

1894

113,246

117,482

1873

21,63528,I07

1895

136,112129,261

1874

19,31723,462- 3,948- 9,148- 6,472- 4,145

1896

117,843

171,674- 53,832

1875

18,611

29,976- 11,365

1897

163,135

219,301- 56,165

1876

27,712

23,965

165,754

277,508

23,34927,421

1899

229,497

243,332

1878

25,98832,875326,929

1879

28,17632,953

1880

28,39536,627+ 3,747- 4,072- 6,gg7- 4,777- 8,231

1898

1877

1881

31,05931,191

1882

37,72229,447

1883

36,26828,445

1884

33,871

29,673

1885

37,147

1886-111,748- 13,835-i06,795- 20,238- 15,845- 17,165- 42,313-154,292- 11,O03- 51,923- 55,976+ 27,415- 13,348- 86,563

1900

220,134

1901

274,807

295,0441902

285,094

300,938

- 132

1903

315,238

332,404

1904

342,078

384,3911905

345,738

500,029

1906

454,103

465,107

29,357+ 8,275+ 7,823+ 4,199+ 7,790

1907

463,363515,286

48,87632,168+ 16,708

1908

408,302464,279

1887

52,40844,304+ 8,103l909

443,672

416,257

1888

65,70665,455

+ 250

1910

495,029508,379

1889

70,061

66,104+ 2,957

1911

485,458

572,021+ 1,456- 4,236+ 6,852

the withdrawal of short term capital back to London the exchange rate of theyen dropped for a while. During the lst World War Japan accumulated muchgold in London. Between London and New York, the dollar was stronger,
and the rate of the English pound declined. Nevertheless as the pound rate
was not cut down, the dollar rate against the yen had to rise without reason,and for some time in 1915, yen went down even below the gold export point

which had to be checked by the gold shipment from Japan to the U. S. A.
At last America's gold embargo raised the dollar rate against the yen overthe gold import point, as high as 52 dollars and more in l918.

England stopped the gold standard in April l919. But as the shipmentof gold was neither possible nor done, de facto abandonment had been done
* M. Fujita, The Banking System in the middle Meiji Era (.1870-1910) Kobe Economic andBusiness Review. 3. 1956.

22

HIROSHISHINJO

earlier. On the contrary, the United States which stopped it in September
1917 returned again to the gold standard in June 1919 shortly before theconclusion of the peace treaty, two months after the English abandonment.

Thus the peund and dollar,changed positions in world economy and New
York appeared clearly on the horizon as the world money market. (To becontinued)

FUNDAMENTAL FEATURES OF THE
ACCUMULATION OF CAPITALIN THE LATE MEIJI ERA

Masahiro FUJITA(I)
So far from our analysis of the history of Japan's monetary and banking
system in the Meiji Era, we have seen a parallel relation between the deve-

lopment of Japanese capitalism and the expansion of the monetary and bank-mg system.
.

Although the general trend of our banking circles during the latter four-fiveyears of the Meiji Era clearly had the fundamental feature as mentioned above,
the financial process of this period, namely the proper character of our national

economy and actual or real situations which the creation and formation of ourcapitalism derived from this character, lagged far behind the advanced Westerncountries. By means of stage divisions we can summarize the history of moneyand banking in the Meiji Era as follows:-(1) The first period. (1868-1873)
This period is styled " Exchange Firms (Kawase Kaisha) days." KawaseKaisha was the only financial institution under go,vernment protection, otherinstitutions were negligible, for example, excluding agent financing and self-

financing there were mutual financing associations (Tanomoshi-ko), mutual
1oan businesses (Mujin), pawnbroking (Shichiya) and usury.

(2) The second period (1873-1876)
This period is called " the establishment of national bank days." In other23

24 MASAHIRO FUJITA
words, this period formed the basis of Western style banking.

(3) The third period (1876-1882)
The national bank attained the highest stage of prosperity from anamendment of the national bank regulation to the establishment of the Bankof Japan,-- the height of prosperity of the national bank.

(4) The fourth period (l882-l885)
This period was characterized as " the establishment of the Bank ofJapan

days," for the Bank of Japan as the only central issue bank opened businessin l885, but, on the other hand many national banks gradually changed into

pure private banks. These days were, so to speak, an introduction to theformation of Japanese capitalism from the financial aspects viewpoint.

(5) The fifth period (1885-1894) from the beginning of the circulation of bank-notes (Bank of Japan) to the outbreak of the Sino-Japanese
War. The feature of this period consists of"the exclusive right days of the

Bank of Japan."(6) The sixth period (1894---1904) from the end of the Sino-Japanese War to the sudden outbreak of the Russo-Japanese War. In those days,
our government established successively special banks the Hypothec Bankof Japan, the Industrial Bank of Japan, the Hokkaido Colonial Bank, etc.

(7) The seventh period (1904-1912) from the Russo-Japanese War
to the end of the Meiji Era. We can call this " the prosperity period of ordinary
deposit banks."Thus, the rapid development in our financial circles after the Meiji
Restoration was supported by " Banks " which became the pivot of the Westernform or type of financial operation.

Since the establishment of the Daiichi bank in I873 as the first bank ofour country, the number of banks reached 2,100 after forty years (l873-1912).
Morever, the total deposits of these banks amounted to 1,900 million yen. In

this case, we must especially observe the relative relation between thedevelopment of our financial circles and the monetary and banking policy of
our government. The fundamental trend of the monetary and banking policy
after the Meiji Restoration was based on an inconsistent policy of protection

and interference in banking. These conditions show the unavoidable circumstances of the Meiji Government policy which aimed at the realization of the

production industry and tcok measures calculated to enrich and strengthen

THE ACCUMULATION OF CAPITAL 25
their own country.
However, we can simultaneously find a remarkable tendency of the government making a preferentially reverse use of its protection policy toward banks
intending to utilize or avail themselves of these financial organs. Such a conspicu-

ous inter-dependent relation between oMcial authorities and private fields has

dominated our financial circles as a motive power for a long time. And, suchcircumstances, invited serious disaster to our financial circle or economic andbanking system, but there was no gainsaying th'is destiny (that is the abovementioned fact).

(II)
When we start to theoretically analyse actual stutations of the accumulationof capital in the Meiji Era, we shall study the financial aspects of theaccumulation of capital. We consider that Japanese capitalism was establishedultimately during and after the Sino-Japanese War. This is shown clearly by
the following description, namely, in the spinning industry which is thoughtof as one of the prerequisities for the establishment of industrial capital andwhich represents the growth of cotton yarn (the export of cotton yarn exceeds

its import). The other indicator of the establishment of Japanese capitalism

Table 1. Development of cotton yarn

(1) Unit: Thousand spindle(2)-(4) Unit : Thousand baleYear

Number offactory

Number of
spindleAmount ofdomestic

Import(3)Export(4)prgduction( 2 )

8

2

50

23

l10

67

l42

104

106

144

57

39

76
215
277
353
385

204

81'

O.031
O.108
O.109
1.000

1893

40

381

214

64

11.00

1895

47

366

48

11.00

1897

74

580
970

511

53

140

1899

83

1,189

757

27

341

1902

80

1,246

770

1903

76

1,381

801

8
3

307

1877
1887

19

1889

28

1890

30

1891

36

1892

197

FUJITAMASAHIRO

26

is the foundation of the Yahata Steel Foundry in 1896. We regard it as thefirst establishment of a key-industry in the Japanese national economy.
Entering the late Meiji Era, the so-called concentration and centralizationof capital became a remarkable characteristic of Japanese capitalism. The basic

system was formed after the Russo-Japanese War. In such a case, the indicator
was the rapidly increasing power or tendency of the number of corporations,and another important indicator was the remakable development of the electricindustry.

Table 2. Change of cotton yarn

NumberofYear

Numbercorporatlonsoffactory

Working

aapital

NumberProducts

Exportof) (Thousand) worker) (Thousand)(Thousand(Thousand
bale
bale
yen
spindle(Thousand)spindle

1903

51

76

34,400

1,290

73

800

310

1904

49

74

34,700

1,310

62

260

l905

49

78

36,990

1,400

71

1906

47

83

40,610

1,440

76

1907

42

83

55,280

1,5oo

79

1908

36

86

52,420

1,4oo

74

700
910
950
980
880

1909

31

88

57,980

1,830

83

l,030

260

1910

36

92

59,320

1,390

93

1,130

250

1911

34

oo

61,690

1,9oo

92

1,130

290

1912

41

93

66,160

2,210

99

1,350

370

270
270
230
170

The change in composition of the manufacturing industry from the view
point of paid-up capital shows the concentration and centralization of the capital
process in our capitalism.
Table 3. The Number and Amount of paid-up Capital Corporations
Year

Less than

1oo

100-5oo500-1,Oool,OOO-5,OOO More than

5,OOO

Total

1905

132,832

190,058

99,473201,083

353,437

975,837(%)(13.61)(19.38)(10.19)(20.60)(36.22)(1oo.OO)

1910

170,781261,291

162,189

317,392

362,748

1481,401(%)(11.51)(l8.11)(10.95)(21.42)(37.99)(1oo.OO)

1910

206.779(10.43)332,024

195,904

493,450735,075

1983,232(9.88)(24.88)(38.07)(1oo.oo)(%)(16.74)(Unit :

Thousand yen)THE ACCUMULATION OF (]APITALThe Change by the Classification of Manufacturing

Table 4.

27
Industry(Paid-up (]apital Unit : Thousand yen)

Year Spinning

MachineCeramic

ChemicalPrinting

OthersElectric

Total

1904

53,872

14,706

6,217

16,856

1,893

20,521

25,689139,756(%)(38.5)(10.5)(4.4)(l2.1)(1.4)(14.7)(18.5)(1omO)

1914

135,623

43,84021,O1670,603

4,785

247,634

112,OOO

662,510(%)(20.4)

(6.6)

(3.2)

(10.7)(O.7)(41.5)(16.9)(100.0)And, the establishment of our industrial caPitalism strenghthened the close
relations between industrial caPital and banking caPital. During the late Meiji
period the following statistics can be shown of the financial and the production
operations.
Table 5. The Expansion of our Industry 1887-1907

Year

Productionof Cotton

Export of Cotton Yarn
Total For China

Export of

Production

Production

Cotton Stuffof Steelof Coal15l,746(thousand bal) (million yen)
1887
1897
1907

23
511
982

13
30

9

2

26

3,230

25

22

52

13,804(Unit of Stoe1 and (loal: Thousand France ton.)Thus the wonderfu1 or splendid development of national

economy wasreflected clearly on the productive national income.
Table 6. Productive National Income (Unit: Million yen.)
Agricultural

and
Year

Fisheries

Forestry
Industryamount amountof'lncomeofpro-

duction

pro-

duct

.m-

MiningIndustry
pro-

.In-

Manufacturing Industry
house

factory
industry
pro-come duct come duct

Other
Total
In-

industry

.m.

pro-

.In-

come duct

come

dustry

1875

308

236

20

8

40

24

272

540

1876

266

196

21

8

42

25

301

530

1877

253

206

21

8

42

25

290

509

averagel978-1882
average
1883-1887

276

206

21

8

42

25

288

527

342

276

80

32

160

96

322

726

tiverage

324

267

103

41

180

108

412

828

1888-1892average

500

415

169

68

254

153

529 1,165

FUJITAMASAHIRO

28
Agricultural

and
Year

amount amount pro-of production

1893-l897
average
1898'

1899
1900
1901
1902
1903
1904
1905
1906
1907

657
954
814
999

of
duct
Income571.

Manufacturing Industry

MiningFisheries

Forestry
Industry

Industry

pro- .mprocome duct come duct
.

m-

954

817
694
853
924
848

56

318
l
33 46535 56339 60246 567i45 11 554

1,223

1,027

73

40

57

46 i 568•

1,285

l,073

79

43

58 l 46 [ 594

1,057

842

96

51

78

1,332

1,062

106

57

118
119

1,066

41

49

1,603

1908
l909
1910

1,579

1,276

380

228

186

457

274

225

532

319

740 l,666
923 2,233
946 2,219

241

606

333

1,053

2,519

227

585

322 1,078

2,597

221

565

311

1,099

2,524

227

544

299

238

524

288

296 E 503

277

107

739
86 l 867

347

540

297

1,121

2,570

64

111

89 1 941

1,190

3,336

65

105

84

62

I

1

376

577

317

875
947

350

615

338 1,294

3,407

379

652

359 1,323

3,305

419

689

379 1,351

3,333

524

743

409 1,382 3,884

622

797 1 448

1,094

123

68

103

82

136

76

100

80 11,048

1911

1,741

1,403

144

81

106

1
85 1,309

1912

2,043

1,702

159

88

130

104

1,555

Table 7. Distributive National Income
Assessable income

1,544

dealt

with as follows:(Unit :

Million

Then. this productive national income was

1901

come

127

936 2,575
924 2,612
982 2,510

1,028

1900

pro-

[

1,303

l85
306
392

come duct

i

1,385

Year

dustry

.m-

m-

1

57

l

1,3oo

Other
Total
In-

industry

.

i

45

house

factory
industry

Non-assessable

Total

lncome

yen.)
1

d
t

r

Government.mcome
16

1,099

1,284

1,199

1,505

1,647

2,039

431

1,696

2,127

1902

474

1,702

1903

521

2,098

1904

558
616

2,055

2,613

35

l905

2,046

2,665

48

1906

681

2,1!7

2,798

63

1907

2,928

75

2,281

3,l69

2,263

3,178

:

2,518

3,425

l

1911

739
888
915
907
956

2,189

1912

1,056

1898
1899

1908

1909
1910

2,567

2,739

l
1
I

E

l
t

22
25

28

2,176

28

2,619

28

3,523
3,795

4,508

oo
l

l

96
73
61

oo

THE ACCIUMULATION OF CAPITAL
Still,

for29

the sake of this analysis the expenditure national incomemust beshown of the accumulation of capital in those days.
Table 8. Expenditnre National Income (Unit: Million yen)
SavingConYearsumptlon(ig•lge•es.)

Saving
1898

1,099

1899

1,154

1900

1,255

43
25
44

1901

1,668

111

1902

l,824

1903

1,850

1904

2,281

A29
40
A64

1905

2,258

177

1906

2,280

305

1907

2,358

1908

2,491

50
45

1909

2,670

l33

1910

2,660

141

1911

2,999

124

1912

3,096

145

Tax

Gross
Total

123

1,357

137

1,322

113

19
Al
18

156

1,542

178

A5

168

2,O09

17

2

155

2,oo8

67

A2

180

2,095

l29

144

182

2,736

543

55

230

3,093

306

152

l5

255

2,993

156

A46
A59
47
67
67
33

19

286

2,754

20

313

2,842

8

328

3,527

11

3,073

20

325
342

32

361

3,854

f

Individual

Individaul

Securities

Total

Investment

73
7
69
67
56
27
193
366
1
106
52
349
Al16
ll4
218

ll6

32

97
482

25
318
363

Holdingof CashInternal(eX,C.i.U,de)Reserve

3,726

On examination of the accumulation of capital in the late Meiji Era, weregard as indicator the following monetary factor, that is the form of saving

and investment. This is an impertant significance as the source of the concentration and centralization of capital and fund. The following table represents
fluently the remarkable characteristics of the accumulation of capital of the late

Meiji Era.
Table 9. The Characteristies of the accumulation of capital (Unit: Miilion yen)
1. Depesit

Year

bank

cooperapestal tive

depositdeposit societies

deposit

2

1893
189tl

1895

8
26

3

2. In-

3. Currency and deposit

surancelife in-Totalsurancereserve

1
1
1

3
9
26

cas.h
current(holdmg) depesit

22934

trasfer.savlng

Total

22
717

16
51

30

MASAHIRO FUJITA
2. In-

1. lkposit

Year

bank

postaldepositdeposit

1896

43

1897

69

1898

45

l899

3. Currency and deposit

surance
ccopera-life in-societies

surancetive+deposit

Total

cash
(holding)

reservecurrent

trasfer

deposit.
savlng

Total

1

44

18

17

35

A2
A4

1

68

30

33

63

2

43

42

19

22

1

2

25

A23
A53

52

Al

19oo

40

1

3

44

9

9

18

1901

106

3

2

111

A5

1902

A32

2

1

A29

35

2

1903

34

3

3

40

AIO
A33
A13

5
11

A2

1904

A74

7

3

A64

111

33

144

1905

160

14

3

177

13

42

55

1906

279

20

1

5

305

4

148

152

1907

22

19

2

7

23

14

1

7

50
45

41

1908

1

A46
A59

1909

105

18

2

8

133

A26
A19

A88
A34
63

3

47

1910

80

38

4

9

141

27

37

3

67

1911

84

23

5

12

124

24

44

Al

67

1912

125

13

6

1

145

A17

A17

1

A33

4.

Year

government
and1ocal debenture
bond

Security' lnvestmenttshares1

totalholdingoffinancial
institutionandsecurityinvestment

securityadvance.Increase

tttt

tttt

balancedprivate

A6
A2

1894

A6
Al

A6

1895

90

oo

19

71

1896

31

31

36

A5

1897

36

124

160

44

116

1898

15

79

94

21

73

1899

A2

56

54

47

7

1900

15

80

95

26

69

1893

Al

1

1901

19

49

68

1

67

1902

40

43

83

27

56

1903

25

2

27

1904

211

39

250

-57

193

1905

374

30

404

38

366

1906

40

81

121

120

1

1907

47

31

78

A28

106

'

27

CAPITAL
THEACICUMULATION OF
4. Security

Year

Investment.

sharesbond [
38 I
427
A212
59
A7 f

1909
1910
19I1

1912

total

105

,ijg '

19

75

53

G

l

533

.
Increase

239

lg:

i

86
'

45

e

194

36

254

f

52
349
Al16

I

184

:

A30

62
76

security investment

security advance

L

671l•

1

1908

balanced private

holding of financial
institution andg:x&re::n, t I

debenture31

218
6. 0verseas
lnvestment
balancc of international balance

5. Internal reserveYeardivi devd

profit.
corporatlon

loss

internai
reservetax

of payments

1904

153

M3

l905

1906

153

101

28

9

1907

141

88

26

8

l9

1908

146

so

27

9

20

1909

139

98

25

8

8

A156
44
37
17

1910

132

99

24

8

l

178

1911

164

104

30

10

20

106

1912

199

I19

36

12

32

33

15

Under such circumstances, the accumulation of capital was

directed mainly

for the concentration and centralization of funds to banks andother financial

institutions.

Table 10.
Year

1910
1919

1,629

190l

State financial.
Instltutlon

Big five

30
120
312

1893

The concentration of banks (Unit:

-t

15%
11%
12%
14%

Private banks
Total

57
202

30%

691

26% 1,oo3
26% 4,737

3,108

19%

Million yen)87
S22

(exclufiivvee Big)

45%
30%
38%
40%

109
727
1,638
7,084

55%
70%
62%
oo%

Gross total

196
1 ,049

2,64i
l,821

or. 189S just before the Sino-Japanese war.
1901 the peak period of the increasing number of banks.
1910 the year of the formation of syndicate groups (undertaking of government banks).

1919 World War I ended.

With the progress of the accumulation of capital the weight of the current

depesit decreased in comparison with other money-making deposits.

100%
leo%
100%
1oo%

MASAHIRO FUJITA

32

Table 11. The change of the depesit kindTime deposit andCurrent deposi special current deposit

YearTime deposit

PrOper(%)

bankof ordinary

Other deposit

Total

1901

38

48

29

14

1910

31

59

39

11

1OO

1914

26

65

49

9

1oo

1919

22

69

50

9

1OO

1OO

Turning to the pointof the special

relation between

industrial capital andbanking capital, we finda rapid trendof centralizationand concentration.

Tablel2. (]oncentration

Paid-up capital ot 1

Year iIndustrial

1897
1907
19I9

and accumulation of industrial capitalIand banking capital

Paid-up capital

Bank depasit

by the bankcorporatlon

356

270
533

206
444

1,824

3,438

1,257

9,917

Unit: Million yen.
During this period, the means of bank collecting funds were as follows :1) The liquidity fund was apt to be lacking in the process of the rapid
establishment and expansion of industrial capital, so the possiblity of a liquidity

fund flowing into a bank (the greater part of the fund consisted of current
deposit) was rare and small.

2) As the development of stock caPitalism was backward and the spreadout conditions of direct individual investments for valuable securities werevery low, the bank collecting funds as a money-making deposit, (which wasa part of the accumulation of money capitalist) was much larger than theamount of fund in a normal development.
3) In order to attain modernization in a short period, the absorbing of

small savings and funds was needed. As a result, a remarkable increase of
postal savings was realized.
Table 13. Sources of concentration fund in financial institutions

Bank self-capital
Year
1897

1907
1919

Paid-upBank deposit

capitalReserve Total

206

38

444

l40

1,257

371

244

Time SavingCurrent Other
deposit
77(43%) (22%)
584

418

(27%) (23%)
1,628

4,030

(13%) (41%)

depositdeposit

25125

deposit129

Exclusive

Total

depositof

Total

BankofJapan
356(7%)(35%) (36%) (100%)
1,825
912
118377 (49%)(1oo%)

78
471(7."/e)(21%)

5431,799 3,550 9,918(5%)(18%) (36%) (loo%)

278

(49%)
1,354

(63%)
1,185

8,733

(71%)

OF
THEACCUMULATION CAPITAL
Year

Bank

Postal(] ooperative

bonds

,
savlngdeposit

1897
1907

1917

26
74
715

92
698

33

Insurance
corpotatlon

Postal life

reservel6

reserve

3

47

l86

397

Gross total

msurance

564(100%)
2,154(100%)
12,3669(1oo%)
Unit :

Million yen

The early Meiji Era was charctetized by the low level of original accumu!ations, but the late Meiji Era attained a considerable level through various
financia! institutions. Above all, in this aspect, the contributions of state

financial institutions were remarkable. One of them was the Industrial Bankof Japan.
From the following reasons the ambition for the industrialization of Japanwas very strong. That is (a) Japan lacks land to produce enough to feed her
immense population, (b) the soil in Japan is very poor in quality and farming
does not pay unless drainage and fertilising are used, (c) the Japanese people
possess a great aptitude both physical and intellectual for industry, (d) labor

is cheap and also motive power, as water power can be harnessed to produce
electric current at a low cost, (e) Japan has a market within itself that is
capable of large expansion.
In order to accomplish their industrialization as an advanced manufacturing

country Japan needed a great deal of capital and funds, but in those days
Japan, first of all, had to overcome various obstacles which included theobstructive tactics of the government of the early Meiji Era who in their
mistaken idea of barring foreign influence had widely opposed any industriali-

zation with the aid of foreign capital, knowledge and skill, Nevertheless,the Meiji government regarded the import of foreign capital and knowledge
and skill as the most effective means for the modernization of this country.

The industrial bank was significant as an example of this feeling. The In-

dustrial Bank of Japan (the Nippon Kogyo Ginko) was established in 1900
modelled on the Cr6dit Moblier de France. This bank opened business in
April 1902 and its authorised capital was 50 million yen fully paid up.
The government strictly controlled its operation by means of many government
regulations ensuring an effective supervision. Their most important business34 MASAHIRO FUJITA''

was the financing of long-term loans (or funds) to various industrial concerns,

such loans contained as security the national and local government bonds ordebentures and shares of reliable companies, of industrial Iands, buildings,
factories, ships and railways and other assets. The kinds of industries which

this bank financed were mainly fundamental industries, in other words, theshipping, iron and steel, fbod, engineering and chemical industries, but notcotton. As the cotton industry was controlled by a big enterprise of strong

financial power independent of any outside aid, it was omitted from thisfinancial protection. Therefore, most of the industries which obtained financial

support from this bank were those initiated by government or particularinterests to the government, with the exception of infant industries whichwere particularly helped by the institution. In the same way as conductedby the Hypothec Bank the necessary funds had been acquired, but of course,
the amount of debentures authorized was not to exceed ten times the bank's

paid-up capital, provided however, that such debentures did not exceed
the amount of outstanding loans, discounted bills, national and 1ocal government

bonds, company debentures and shares, and gold and silver bullion in hand,
Only in the event of funds being required for enterprises of the nature of
public utilities undertaken in a foreign country, could the bank issue further
debentures, irrespective of the above mentioned restrictions, with the approval

df the Minister of Finance. The most important business of this bank wasprescribed by the Law of the Industrial Bank of Japan promulgated in 1900,
but some of these operations succeeded while some failed due to the needs ofthe times and the skill of the executives.

It has been said that Japanese industry would not have developed to suchan extent in those days unless it had been like the monopolistic service ofthe type of Credit Mobilier de France. Under such circumstances there wasno prospect of realising a vast profit, but there was all the more when thecommercial banks obtained and operated the privilege that the Industrial Bankof Japan had exclusively posseessed. Although its foreign operations brought
in a substantial profit, this bank sustained a Ioss in the beginning of its business.

The remarkable characteristic of this bank lay in the fact that a large proportionof the capital was held by foreigners, and this fact distinguished it from other
oMcial banks. Above all, the object for the establishment of this bank consisted

in importing foreign capital, so from the beginning it directed its efforts toTHE ACCUMULATION OF CAPITAL 35
this end, and during the first eleven years it succeeded in bringing in foreign

funds to the extent of 350 million yen for financing Japanese enterprises.
Yet, compared with the funds raised inside the country, the foreign capital
was negligible : for the bank was able to raise 50 million yen for the Govern-

ment in 1902, 140 million yen for the municipalities and 135 million yen for
the South Manchurian Railway, a state enterprise. But these sums were destinedfor public undertakings, the funds raised abroad were for private concerns.
Moreover, an important function of this bank was overseas investments, in which
we may count loans to private enterprises and public utilities in Korea in 1906,

another was investments in China. Such connections as were established by
the bank through foreign interests proved afterwards the most effective contribution to the development of its foreign business. The first external loan

floated by the bank was the 5 per cent in 1908, amounting to Åí 2 million.
Since then it has played a prominent role in the floating of various loans
abroad.
According to a report made public a considerable proportion of the Japaneseloans floated in foreign markets from 1902--13 was handled by this establish-

ment: the amount being 57.5 million yen, Åí26,476,440 and l50.88 million
French francs. In 1908 an amended law was passed, by which the sphere ofbusiness became enlarged and came to include the following: 1) to makeloans on pledges of national and local bonds and company debentures andshares, 2) to subscribe for or underwrite national and local bonds and company
debentures, 3) to receive deposits of money and accept for custody articles ofvalues, 4) to engage in trust business for mortgage debentures, 5) to discountbills, 6) to engage in the business of bills of exchange and documentary drafts,

7) to make loans on security of foundations created as prescribed by law,8) make loans on mortgage of ships under construction, loans which shall be
redeemable by annual instalments within a period not exceeding fifteen years,
or at a fixed time within a period not exceeding five years, 9) to make loans
on security of shipbuilding materials or equipment, 10) to subseribe for or takeup shares which have been approved by the Minister of Finance concerned,11) to subscribe for national or local bonds and company debentures, or to act
as agent for receiving instalments payable by general subscribers, or for paying

principal and interest and dividends, 12) to make call loans for a fixed termon security of sites and buildings belonging to factories, or of residential land

36 MASAHIRO FUJITA
and buildings lying in 1ocalities where a city organization law is in force, or ofcity Iand to be designated by Imperial Ordinance, provided however that the
total amount of such loans shall not exceed two-thirds of the amount of paid-up

capital, 13) to purchase national or local bonds or company debentures andshares or gold and silver bullion with available money which the bank may

employ for the purpese. As a result, the function of this bank became
enlarged, became in fact a sort of hybrid institution. This bank had intended
originally and theoretically, to be a Credit Mobilier, but in practice became

a commercial bank.

Now, both the Industrial Bank and the Hypothec Bank of Japan became
alike in real estate financing operations, though the former specialized inbusiness connected with industry rather than with agriculture. In generalbanking operations, particularly in making of Ioans on negotiable securities,
and discounting bills, the Industrial Bank differed little from ordinary com-

mercial banks, and came to trespass even upon the field of debenture trust.
operatlons.
Notwithstanding the fact that this bank became a special financial insti-

tution with proper and extraordinary kinds of functions it did not prove by
any means to be as easy as expected. Then, the more this bank was deprivedof its special characteristics, the more diMcult it became to conduct successfu1

business. Since opening its business, it had not been easy to make satisfactory
showings in the records of its operations. This bank often sustained big losses,

such as in connection with its loan to mining interests. And, the diMcultyof acquiring low interest bank funds provided a serious obstacle which verymuch hampered the profitable operation of the bank. Disregarding so-called"big commercial banks" possessing deposits totalling approximately ten times

their paid-up capital, this bank because it had a small number of branches
had not been able to obtain large deposits and had no alternative but to depend

upon the issue of debentures as a source of loanable funds. However, this isworthy of attention regarding the financial conditions of the late Meiji Era.

Also, for a long time, the Industrial Bank debentures were not regarded asa very attractive investment, and therefore the issue did not usually provea success. Under such circumstances, it was natural that the institution should

call for a thorough overhauling of its constitution and indeed until 1913 it
was continually being reorganized.

THE AC)CUMULATION OF CIAPITAL 37
Although we have special interest in the importing of foreign capital,
this had better be observed in connection with overseas investments. The bankalso took an active part in investments in China not only directly but also

through the Oriental Industrial Development Company, the, Sino-JapaneseIndustrial Development Company (Chunichi Industrial Development Company)
and the Chaka Exchange Bank. One of the most notable investments of thebank was its "political loans" to China in l918. Loans were also made to
Japan's industrial developments in the South Seas. It had also underwriterloans to the Russian and French Governments and also subscribed for shares of'Table 14. The Operation of the Industrial Bank of Japan Unit: Thousand yen
Year
1902

OMcialPaid-up

capitalcapital10,OQO

2,5ooBalanceofTrusting

Contents of loan
Doposit

Loan

bonds

money

3,048

1

1,108

3,237

3,237

4,595

4,595
2,628

advance

Diseount
bill

1903

1O,ooO

2,5oo

6,Osc

9

l,etO

1904

10,ooO

2,5oo

9,OOO

25
10

1,793-

2,628

1,436

4,488

2,475

2,o12

15,673

12,3733,300

l8,305

13,617

4,688
2,ooO

1905
1906

10,OOO
17,5oo

9,909

5,OOO
l3,7509,756

20,312l

1908

17,5oo16,25025,087

72
604

l909

17,5oo16,25033,990

1,527

8,665

30,961

26,620

4,340

1910

17,500

16,25037,491

1,580

8,875

29,8oo26,233

3,567

1911

17,50017,5oo45,161

3,834

4,780

39,75323,63016,122

1912

17,50017,5oo55,517

6,694

3,602

40,037

23,68016,3571907

17,5oo16,25014,37914,884
10,072

26,951

24,951The Gross Capital (power) of the Special Bank

The Hokkaido

The IndustrialYear

The Hypothec
Bank of Japan

1902

18,266

2,500

6,658

1903

23,4493,447

10,244l9M

25,3994,185

13,5581905

28,941

6,948

16,639Colonial Bank

Bank of Japanl906

33,334

8,065

44,227

1907

41,oo6

11,75046,1391908

49,273

13,39452,403

1909

58,451

16,21260,271

1910

88,567

18,96764,286

1911

135,308

21,892

69,412

Unit: Thousand yen

38 MASAHIRO FUJITA
the Franco-Japanese Bank and ChUka Exchange Bank when these institutions
were established. It featured the trust business and mortgage debentures.
Through financial accomodations of the Deposit Bureau of the Ministry of
Finance, the bank lent for industrial rehabilitation first aid loans to districts

devastated by the great earthquake of 1923.

(III) .
'The economic effect of the accumulationof capital is the expansion of theeconomic frontier and the development of productivity. The expansion of
productivity by the accumulation of capital must accompany the rise of theliving standard, whereas, our living standard is very poor. Since the early
Meiji Era, the growth of our national income for the eighty years is about
ten-times, but the growth of the living standard is only 2.5 times. In theunderdeveloped countries, the rate of accumulation is generally high for the
Iow living standard, and Japan is not an exception either, Therefore, the rateof accumulation of capital in the Meiji Era was favorably high, about 250/o.

The rate of development ofJapan's economy (in the long term) according to
the annual rate is about 40/o, so the actual living standard ought to be morethan twice from the viewpoint of the real national income and shouldnecessarily show ten times the rate of development for the eighty years after
the Meiji Restoration.

Table 15. The Annual Rate of Growth

`

Year

Real national

EmployedGrosslncomepopulation

population

3.5

O.4

4.1

G-Po

G-P

1.4

3.1

2.1

O.4

13

3.7

2.8

5.l

O.7

1.3

4.4

3.9

5.5

O.8

1.4

4.7

4.1

4.7

O.8

1.5

3.9

3.2

(G)

1903-12.I908--17
1908-17-1913-22
1913-22-1918-27
1918-27-1923-32
1923-32-192&37(P)(Po)

Cf. I owe the main part of this table to Mr. Ryaichiro Ishii's analysis (assitant prof. of Kobe Univ.)

According to another viewpoint, both our production level and consumption
level are as follows :-THE AoeUMULATION OF CAPITAL
Table 16. The Annual rate of growth and Production and
Annual rateof growth

Production
level

Year
1888-1892

153

IB93-1897

170

39
level
.
consumptlon

Annual rateof growth

Consumption
level

3.2
2.2

A4.7
A2.5

66
59

1898-1902

186

1.9

62

1.0

1903-1907

175

A1,2
8.3
2.4
5.5
4.3
2.3
3,6
2.9

78

5.2
2.0
AO.7
o.o
8.0
5.2

1908-1912

208

1913-1917

233

1918-1922297

1923-1927

360

l928--l932

402

1933-1937475

l938--1942

543

86
83

82
ll5
145

159

1.9

139

A2.5

The feature of the late Meiji Era (in the accumulation of capital)

can bemade clear by adding the data of the accumulation of capital in the
Era and the Post-war Showa Era. 'TaishoTable 17.

The Rate of Saving

Currency

Year

Deposit and.Insurance

anddepositStockmvestment.

Internal
reserve

Rate of

National

Total.
savlng.

Incomecurrency

33
A99

548

4,233

13.0

2,549

13,154

19.4
i3.3

181

l83
2,278

210

A147
65
A220

1935

l,530

128

Table 18.

.
(Converted by Average for the Past
The Rate of Money S avmg

1915
1920

151
517

1925

1.072

1930

Year
1903-1912

Nloo8-1917
1908-!9!7

ev1913'1922
1913-l922..191g1927
1918-1927

N1923-l932
l923-l932.."1928-1937

6oo
387
818

I02

1,899

l4,304A97

280

ll,245

2.5

433

2,909

14,952

19.5

Rate of saving

10.2%
l4.7

15.8
12.6
i3.5

1

Ten Years)

MASAHIRO FUJITA

40

Table 19. The Accumulation of Capital in the Post-war

DomesticYear

private capitalformation <1)

Government
investment (2)Gross domestiÅë

capitalformation (3)Gross national
products (4)Rate of iccumulat{6nof capital<1)ÅÄ(2)(3)ÅÄ(4)

22.2%

1946

757

298

1,054

4,740

16.0%

1947

l,991

1,461

3,452

i3,087

15.2

26.4

1948

4,942

2,580

7,522

2,66i

18.5

28.2

1949

5,320

2,986

8,306

33,752

15.8

24.6

1950

7,986

1,891

9,877

39,708

20.1

24.9

1951

l2,5794,242

16,821

55,407

22.7

30.4

1952

12,441

4,354

16,79561,717

20.2

27.2

1953

13,4336,225

19,65871,364

18.8

27.5

1954

1l,687

5,612

17,29973,962

l5.8

28.4

1955

12,863

6,786

19,64978,97416.3

24.9

Unit : One hundred million yen
The rate of accumulation of capital in the United States shows l2.20/o (l919-1924), 10.9e/o (1925-1930), 5.00/o (1931-1934), 15.3o/o (1947-1953) andUnited Kingdom: 8.19e (1919-1924), 7.6e/o (1925----1930), 5.00/e (l9311934), 14.10/o (1947---1953) and West-Germany 23.20/o (1947-1953) andFrance 20.2% (1947-1953). The recent tendency in the Showa Era of theaccumulation of capital is able to be summarized as follows :1) The weakness of self-accumulation of enterprise.

2) The huge weight of the financial fund.
3) The expansion of the overloan tendency of banking.
In the late Meiji Era, the following were the types of accumulation ofcapital.

I) The development type of the steel industry which was back-uped bystate capital.

2) The self-expansion process of the cotton yarn.

3) The industrial growth style of the cotton industry and the spinning silk
industry.

4) The growth of the heavy chemical industry supported by banking
capital.

Besides, the steel industry was based on external capital (its contents isstate capital) and rapidly developed.

On the contrary, the spinning industry had grown up on the foundation

THE ACCUMULATION OF CAPITAL 41
of internal accumulation. However, the industry development type throughthe medium of banking capital lay between the above-mentioned two types,
and the introduction of external capital.

Thus, the important part of banking capital is to promote the financial
aspect of the accumulation of capital.

SOME ASPECTS OF JAPAN'S TRADE WITH
SOUTH' AND SOUTH-EAST ASIA, 1950-1957
Fukuo KAWATA

By South and South-East Asia we mean in this article the region including
those countries such as India, Pakistan, Cleylon, Portuguese Asia, Afghanistan,

Burma, Federation of Malaya, Singapore, Thailand, Indonesia, States of Indo-china, the Republic of the Philippines and British Borneo.

In what follows we examine the change which took place in our tradewith this region during the 1950-1957 period.

1. Japan's export to South-East Asia amounted to $228 million in 1950.

Due to the boom brought about by the outbreak of the Korean War in June,
1950, our export to this area expanded more than twice that of the previous

year to $499 million in 1951. But the boom did not last long, and when it
was over, the depression set in, and our expert began to decline in 1952,
dropping down to $387 million in that year. In 1953, our export still continued
to decrease, partly because of the slump in this area and partly because of thesevere restriction imposed by the sterling area countries. From l954, ourexport took an upward turn owing to the gradual recovery of world economy,

and to our efforts for export promotion. The amount of our expert kept
increasing from $448 million in 1954 to $485 million in 1955, to $530 million

in 1956 and to $632 million in 1957.

During the I950-1957 period our export to this region increased by
177o/o, while our export to the world increased by 2480/o. Therefore, therelative importance of this area in our total export declined from 28e/o to
22 9o •ng

FUKUO KAWATA

44

The amount of our import from this area was $200 million in 1950.
Due to the Korean War boom our import also increased more than twice to$422 million in 1951. In 1952, the amount decreased slightly to $417 million,

but it again increased to $537 million in 1953, reflecting the economic
expansion in Japan. In 1954, the amount of import declined to $459 million
by the retrenchment policy of Japan. After I954, our import from this area
increased steadily year after year, reaching $677 million in l957.

During the 1950-57 period, our import from this area increased by 238e/o,

while our total import gained by 342%. This brought down the share ofthis area in our total import from 21o/o to 160/o.

During the same period, our total trade (export plus import) with thisarea increased by 206e/o, while our total trade with the world expanded by
296e/o. The share of this area in our total trade fell from 240/e to 18e/o.
The proportion of this region in our expert trade was highest in 1951 (379o),and lowest in 1956 (219e), while the ratio of our import from this area waslargest in l953 and in l955 (220/o) and smallest in 1957 (16%).
The total of export to and import from this area in 1950 constituted 240/oof our total trade with the world. The percentage rose to 270/a, the peakfigure during the period, in l951, but thereafter it remained stable until it

fell to 219o in l956 and to 189o in I957. (Cf. Table 1)
1. Development of Japan's Trade with South & South-East Asia (in million U.S. dollars)
Total

Year

ExportExportto S. E.

.e/e

Tothi

Import(R)

ImportS. E. Asia

from

Total

%
(2)

(A) + (C)

21

1,789

428

24

21

33,98

921

27

21

3,301

22

3,685

24

Total

Trade

Trade
with

%

(R+.D.)

(A>

Asia

820

28

969

37

2,044

30

2,028

1,275

228
499
389
329

26

2,410

1,629

448 -

28

2,399

2oo
422
417
537
459

19

4,028

eo4
866
907

2,O11

485
530
632

24

2,471

551

22

4,482

l,036

23

21

3,283

20

5,731

1,174

21

22

4,283

644
677

16

7,135

1,309

18

(B)

1950
1951
1952
1953
1954
1955
1956
1957

2,852

1950t--57+2e8% +i77%

1,354
1,273

2,501

(c>

(D)

S. E. Asia

(B) + (D)+342% +238%+296% + 206%

Source: Ministry of International Trade & Industry, The Present State of Japan's Foreign

Trade. (Tstisy6 Hakusyo)
Ministry of Finance, Monthly Return of the Foreign Trade of Japan.

24
23

SOME ASPEerS OF JAPAN'S TRADE WITH SOUTH-EAST ASIA 45
2. The largest markets of Japan's export in this region were Pakistan,

Indonesia, India, Thailand, the Philippines, Singapore and Burma. In the

1950-1954 period, Pakistan and Indonesia stood at the top, but in the
1955-l957 period India took their place.

The share of the five largest markets in the total export to this area
during the l950-1957 period had a tendency to decrease. It fell from 80.50/e
in 1950, to 68,60/o in 1957. This means the increasing diversification of ourexport market in this area. (Cf. Table 2)
Table 2. Japan's Export to Selected Countries in South & South-East Asia

(in million U. S. dollars)

i ii

l

l

l
1950
l951

1952

1953
l954

1. Paki-stanl. Indo-nesia
1. Paki-stan
1. Indo-nesia
1. Indo-nesia

1955 1. India
1956 1. India
1957 1. India

55.6
1 28.4l17.8

2. Indo-nesia
2. Paki-stan
2. Indo-nesia
2. Thai-

105A Iand
119.7
84.7

105.2

2. Thai-land
2. Indo-nesia
2. Indo-nesia
2.
PhM113.3
PPInes

46.3
117.0
59.8
52.6
65.1

64.7

76.0
89.0

3. Thai-land
3. Singa-pore
3. Singa-42.6 4. Indiai ]4. India
56.6
51•5 l4. India

3. Bur-33.i i4• pS.irnega-mai'4. Bur-

tan

56.0

ma

3. Thai-

63.o i4• Singa-land

1 Pore3. Indo-

land

1
203

36.7

Value

5. Thai-land
5. Thai-land
5. Philii.
ppmes

45.6 5. India
i5. P.hili.

pplnesi

5. Phili.

60.8 PPines
81'5 R' mBa""

5. Indo75.9

18.3

80.5

45.2

80.0

36.4

78.2

27.5

76.5

43.9

74.0

51.8

68.0

55.5

68.5

73.4

68.6

pplnes322

59.3

the Five

Cbuntries (%)

5. Phili-

51.7

6s.2 ,4' 1ff.hdai'china
3. Thai-

Value i CountryLpore
3. Pakis-Share ofi

Value Country
Year Gountry Value Country Value Countrychina

The largest sources of our import from this region were Thailand,
Pakistan, Malaya, the Philippines, Indonesia, India and Burma. In the 19501954 period, Thailand and Pakistan occupied the first place, but in the l955-

1957 period, Malaya and the Philippines were at the head of the Iist. The
share of the five largest sources in the total import from this region decreased

from 81.0% in l950 to 65.90/o in 1954, but it took a reverse movement in the

1955-1957 period. This tells us that the diversification of our sources ofimport had been going on in the 1950-1954 period, but in the 1955-1957
period this tendency was somewhat changed.. (Cf. Table 3) .

FUKVO KAWATA

46

Table 3. Japan's Import from Selected Counuies in South & South-East Asia

(in million U. S. dollars)
Share ofthe Five

Year Country Value Country Value Country Value Countr,y Value Country Value (loun-tries (%)

1950
1951

1952
1953

1954
l955
1956
1957

1. Thai-

43.5

land
1. Paki-

stan

102.5

1. Paki-

stan

108.0

1. Thai-

69.2

land
1. Mala-

92.8

ya
1. Phili-ppines
1. Mala-

ya

116.7
154.2

3. Paki-

39.i

ya
2. Mala-

stan

58.7

ya

82.4 2. India

stan
1. Paki-

2. Mala-73.0

2. Thai•

3. Indo-nesia
3. Thai-land

84.7 3. Indialand
2. Phili-

67.1.
pplnes
2. Phili-

89.0

ppines
2. Mala-ya
2, Phili-.
ppmes

3. Bur-ma
3. Inde-

nesia

39.0

4. Phili-•ppines22.5 5. India

54.8 4. India

52.4

4. Mala-

54.3

62.5
75.1

63.1

ya
4. Phili-ppines
4. Indo-nesia

81.2 4. India

108.2 3. India

103.4

113.8 3. India

105.0

4. Indo-nesia
4. Indo-nesia

5. Thai-land
5. Phili-.
pplnes5.
Mala62.7

ya

60.2
77.3

91.4
65.1

5. Mala-ya
5. Thia-land
5. Pakistan
5. Paki-

stan

l7.8

8l.O

51.0

75.6

51.2

77.5

50.4

71.0

56.5

65.9

63.4

73.2

50.6

73.0

47.2

71.7

3. Japan's trade balance with this region as a whole was favourable in1950 and 1951, but in later years it has turned and remained unfavourable.
The trade balance ratio was largest in 1953 and smallest in 1954. This ratio
indicates the degree of difference between 6ur export and import, by showing
our positive balance in plus and our negative balance in minus figures. In thecase of zero, it means that our export and import are exactly equal,
From Table. 4, we learn that our trade balance was most adverse in 1953,

while, in 1954, the trade gap was smallest. In 1952 and 1957, the degree ofimbalance was considerably low.
Table 4. Japan's Balance of Trade with South & South-East Asia (in mllion U. S. dellars)Year

Total Trade (A)

1950

427.3

1951

921.4

1952

803.7

1953

865.4

1954

907.6

1955

1,035.7

1956

1,174.3

l957

l,308.2

Balance of Trade

Balance of Trade (B)Ratio (%) (BIA)+ 28.1

+ 6.6
+ 8.4
- 3.8
-24.2

+ 77.2- 30.5-208.2- 10.8- 66.1-l14.5- 44.8
,

- 1.2
- 6.3
- 9.8
- 3.4

SOME ASPEerS OF JAPAN'S TRADE WITH SOUTH-EAST ASIA47
As for Japan's trade balances with individua] countries in the region
we classify the countries in this region into three groups, that is GroupA, B and C. To Group A belong, those countries with which Japan has
positive trade balances throughout the period ; and to Group B those countries

with which Japan has negative balances all through the period ; and to GroupC those countries with which Japan has sometimes positive and sometimes
negative balances of trade.

Under Group A come Ceylon, Singapore and Afghanistan, and underGroup B are counted British Borneo, Portaguese Asia, Malaya and thePhilippines, and to Group C belong India, Pakistan, Burma, Thailand,
Indochina and Indonesia,
With India and Pakistan, our trade balances are positive for four years,

with Indonesia & Indochina for six years, with Thailand for 2 years (1956 and l957) and with Burma for only one year (1957). (Cf. Table 5)
Table 5. Japan's Trade Balance Ratio with Individual aountries in South & South-East Asia

(in percentages)
country
Group A
GeylonSingaporeAfghanistan

1950

l951

1952

1953

1954

1955 l lgs6

1957

,

+95
+96

-

+84
+87
+76

+77
+77
+88

+78

-95
-43
-67
-15

-92
-37
-43
-45

-25

-17
-26
-33
+18
+29
+37

+74
+67
.+33

+77
+57
+39

+77
+34

-96
-59
-75
-39

-95

-91

-58
-75
-25

-94
-88
-75
-36

-95

79

-21

-l6

-3
-8

-9

-8

+51

-23
-47
-76
-32
+37

+27

+45

+O.9.

+4

+74

-49
+66

-48
+54

-11

-9

+2

+43
+55

+91

+59
+27
+90

Group B
British Borneo

Portuguese Asia

MalayaPhilippines

-92
-50
-80

-4

--

-72
-- 37

-89.
-80
--

12

Group C

Burma
ThailandIndia
Pakistan

Indochina
Indonesia

-4
-1
+7
+l8
+14
+55

-6
-O.7

+7
+54
+40

+21

-8

+46

4. Japan's principal exports to this region are suchfabrics of cotton, rayon filament and spun rayon, yarns

-O,3

+5
-3

commodities asof cotton, rayon

48 FUKUO KAWATA
filament and spun rayon, iron and steel, cement, textile machinery and parts,
railway vehicles and parts.

It is a noticeable fact that the shares of fabrics and yarns have been
declining, while those of iron and steel, cement, machinery and vehicles havebeen increasing. In J950 and 1951, fabrics and yarns took up 60.09o and52.5% respectively, but in l955, 1956, 1957, they accounted for only 33.80/o,

37.9%, and 32.89e. In contrast to the downward trend of the shares oftextiles, the relative importance of iron and steel, machinery, vehicles, cement

are improving (Table 6).
This implies the change in the demand of this region from consumption
goods to goods necessary for the economic development in this region.
Although the shares of fabrics and yarns are declining and those of ironand steel, cement and machinery are increasing, we should not overlook thefact that fabrics and yarns still hold a larger part than iron and steel, cement

and machinery in our export to this region.
Table 6. Commodity Composition of Japan's Export to South & South-East Asia

(in percentages)
l igso1. Cotton Fabrics

2. Rayon Filament
Fabrics
3. Spun Rayon Fabrics
4. Cotton yarns

)
)
L

1951

1952

195S

1954

l955

i956

l957

48.0

35.2

23.6

30.1

28.0

17.6

21.0

18.2

'7.3

7.7

4.2

7.0

4.6

8,3

(

5.3

3.8

2.4

4.8

5.0

3.7

gl,6

3.5

3.0

3.1

1.0

O.9

1.1

7.2

5.7

6.8

3.8

O.8

2.4

1.5

1.3

6. Spun Rayon Yarns

O.2

1.9

2.4

3.1

2.1

1.6

1.0

2.1

' Total (1.v6)

60.0

52.5

42.6

45.0

40.9

33.8

37.9

32.8

7. Iron & Steel

7.2

10.7

21.2

18J

15.0

16.9

1.1

1.6

1.9

1.9

15.5
1.6

19.3

8. Clement

1.7

3.0

2.8

2.7

1.8

3.3

1,5

4.5

2.1

1.2

2.7

4.0

3.9

268 l 232

26.3

5. Rayon Filamentyarns

9. Textile Machineryand Parts
10. Railway Vehicles

f

2.4

O.3

O.8

l.1

13.4

14.4

ar2

za.6

and Parts
Total ,(7.vlO)

1.0
ax.6

l
/

3.7
i

The quantity of cotton fabrics experted to this region which was 585
million square yards in 1950, registered a smaller figure of 560 million square

SOME ASPEerS OF JAPAN'S TRADE WITH SOUTH-EAST ASIA 49
yards in 1957, although more than 600 million yards were recorded in 1951

and in l954. The export of cotton fabrics was rather stagnant during the
1950-1957 period.

In contrast to cotton fabrics, rayon filament fabrics and spun rayon

fabrics made a remarkable advance in the quantity of export during the
1950-1957 period. Especially striking was the increase of spun rayon fabrics.

As for yarns, cotton yarns and rayon filament yarns remained stationary,
while spun rayon yarns increased rapidly.

Iron and steel, cement and railway vehicles also made a marked advance,

reflecting the strong demand of this region for its economic development.
The export of textile machinery was unstable, in some years increasing whilein other years decreasing, but in general it showed a rising tendency. When

we compare the rate of change in the export quantity during the 1951-1957
period, the most striking is the increase of railway vehicles and parts andspun rayon fabrics, and next comes the growth of iron and steel, spun rayon

fabrics, and cement; while cotton yarns and rayon filament yarns are slow
in their increase, and cotton fabrics declines.
Table 7. Quantity of Japan's Main Exports to South & South-East Asia

Rateof

L aotton Fabrics
2.

Rayon Filament
Fabrics'3.

Spun Rayon

Fabrics
4.

unit

1950

1951

19521953 1954

1955

1956

1957 Change

millionsq. yds

585

624

419

496

649

"7

558

560

. 10

do

25

108

110

105

102

151

201

153

+ 42

do

8

14

33

33

65

155

175

133

+ 855

24

24

27

16

22

20

17

25

3

12

7

7

5

10

10

13

O.4

10

17

17

17

17

IO

26

+4
+8

78

196

491

318

476

687

512

592

+ 222

388

323

280

350

455

976

997

+ 157

millionCotton Yarns

lbs

Rayon Filament
doYarns
6. Spun Rayon Yarns
do
1ooO
7. Iron and Steel
5.

MT(19511957)(%)

+ 160

8.

Gement

do

198

9.

Textile Machineryand Parts

millionu. s.
dollars

6

10

12

5

21

10

7

17

+ 70

10.

Railway Vehicles
and Parts

do

5

2

3

3

5

18

21

25

+1150

5. Japan's

main Imports from this.

area are suchcommodities as. lron

FUKUOKAWATA50

ore, raw rubber, raw cotton, lumber, crude petroleum, rice, manila hemp andjute. Thc shares of iron ore, crude petroleum and Lumber are rising, andthose of rice and cotton are falling, while those of manila hemp and juteremain stationary. The share of raw rubber decreased in the 1950-1954
period, but it took an upward turn in the 1955-1957 period. (Cf. Table 8)
Table 8. Commodity Composition of Japan's Import from South & South-East Asia

(in percentages)
1950

1951

1952

1953

1954

1955

1956

1957
22.4

1. Iron ore

5.2

5,8

8.6

5.3

10.9

12.3

17.0

2. Crude Petroleum

2.1

l.8

1.8

2.1

5.4

6.2

6.5

6.5

3. Rice

30.0

l3.5

20,O

25.4

27.0

15.3

8.1

4.2

4. Raw Cotton

18.4

22.9

25.1

20,8

8.4

12.4

!2.I

8.9

5. Raw Rubber

21.0

16.4

11.7

9.3

8.3

12.0

13.3

11.7

6. Lumber

1.1

3.1

3.1

6.3

7.3

9.6

12.5

7. Manila Hemp

3.3

2.0

23

2.2

1.8

1.6

1.7

8. Jute

1.4

1.9

1,5

1,1

I.O

1.3

1.2

{
r

8.8

1.8
E

1.3

[

The quantity of our main imports from thisregion showed generally an

upward trend. (Cf. Table 9)
When we compare the quantity imported in

1951 with that in 1957, weSouth & South-East Asia

Table 9. Quantity of Japan's Main Imports from

Rate of
whit

1950

i951

i952

1953

1954

l955

l956

1957 Change(1951-

1957)(%)
1Ooo

MT

1,193

1,957

2,675

2,776

3.832

4,589

6,066

7,224

+ 269

2, Rice

do

474

414

450

688

766

577

397

22i

46

3. Raw Cotton

millien

104

140

282

356

126

219

242

209

+

4. Manila Hemp

do
do

63

1. Iron Ore

lbs

5. Jute

1OOO

6. Crude PetroleumKL

7. Lumber

1Ooo

8. Raw Rubber

1Ooo

find that the

33

52

20

oo

44

69
65

58
58

65
68

71

76
80

+ 130
+ 33

230

384

681

523

1,330

1,922

2,207

2,182

+ 468

483

549 1,281

1,313

1,858

2,322

2,456

+ 407

58

77

91

81

88

107

121

+ 108

CM

MT

49

58

most rapid increase

was registeredin petroleum,

lumber and iron

SOME ASPEcrS OF JAPAN'S TRADE WITH SOUTH-EAST ASIA 51
ore. The growth in the import of rnanila hemp and raw rubber was
moderate, while the increase of raw cotton and jute was rather slow.

The amount of rice imported increased in 1953 and in 1954 owing to
the crop failure in Japan. With the exception of these years, the quantityof rice imported from this area showed a downward trend, During the
1951-l957 period the quantity decreased by 460/o.

6. From the foregoing statements, we come to the following conclusions :l) Although the value of our export to and import from thisregion increased, the relative importance of this region in our total
trade decreased.

2) The largest markets for our 'exports were formerly Pakistan andIndonesia, but recently India has come to the top of the list; the biggest
sources for our imports were formerly Thailand and Pakistan, but in recent

years, Malaya and the Philippines have gained in importance.
3) Japan's trade balance with this region as a whole was in almost
all years unfavourable, except in 1950 and in 1951. Those countries withwhich Japan's trade registers a constant export surplus are Ceylon,
Singapore and Afghanistan, while those countries with which Japan's tradeshows an import surplus are British Borneo, Malaya, Portuguese Asia andthe Philippines. As the trade balance ratios with those countries are

generally high, the imbalance of our export to and import from thosecountries may be considered as permanent.

4) Japan's export of consumer goods is decreasing, while that ofproducer goods is increasing. Despite the declining tendency in the exportof textile goods, they still hold a larger portion than producer goods.
In regard to our import, the relative importance of rice and cotton isdecreasing, while that of iron ore and crude petro!eum is increasing.

Thus, we may conclude that South and South-East Asia which wereformerly our principal markets for textile goods and were our main sourcesof cotton and rice are now changing in character as markets for ourcapital goods and as sources for materials of our heavy and chemicalindustries.

CURVES OF DIMINISHING VALUESOF JAPANESE MERCHANT SHIPSIN PROPORTION TO THEIR AGE

GinjiroSHIBATAThe diminishing values of ships in proportion to their age are indispensable data which represent a standard for the value of the used ships, thedepreciation of their cost or the settlement of their insurable value. In theanalysis for this purpose the statistical figures containing numerous cases
extending over several years of the actual trading prices of used ships must

be used as basic data. During the last war Japan lost nearly all of her
ocean-going ships but afterwards made every effbrt to make up the lost tonnageof her merchant fleet by building crack ships. The trading of used ships,
therefore, has been seldom done after the war. But recently some trades aretaking place in the shipping market again and it is necessary to fix a standard
level for prices. What the present article intends to do is to comply with thisrequirement to a certain extent.

The basic data which have been available are limited to the cases ofpre-war times according to the above-mentioned reason. The price of a ship
is however greatly affected by the business conditions in the shipping market

and by the price of iron. Since 1935 Japan's business conditions have beenuniquely active and eventful ; that is, the business conditions have gone throughfive stages up to now: (1) prior to SinorJapanese hostilities, (2) from thattime until the fall of 1939, (3) from Sept, 18th 1939 when the Price-Stop
Law was proclaimed until the outbreak of the last war, (4) during WorldWar II and (5) the post-war period. But the basic data used here are those53

54 GINJIRO SHIBATA
of the seven years, from 1935 to 1941, because of the rarity of cases following

the outbreak of the last war.

Throughout these seven years the distinctive feature of the Japanese
economic situation was the one-sided boom caused by the economic control tomeet the expansion of the war industry and the restrain of inflation. By the
one-sided boom we refer to the sharply divided condition which existed between

those industries concerned and unconcerned with the war. The former were
extremely active, while the latter were severely depressed. This tendency was
further intensified with the progress of time.

The shipping condition during these years was not exempted from theabove case. The economic control by the Government early extended toshipping freight, charterage and the price of iron, and dark clouds hovered

over the shipping world, Nevertheless, the volume of foreign trade which
decreased extremely since the world-wicle economic crisis in 1930 slightly
increased from 1935.

Since 1937, some epoch-making facts were brought about. At that time
the Government entertained the oMcial idea that a ship was a public organ

and that the ship building and shipping businesses should be managed bya governmental or semi-governmental organization. The Japanese shippingworld confronted a turning point in its history. New ship building works
were hard-driven, standardization of the type of ships was forced, governmental

control of shipping business and other shipping policies was carried out, in

addition to the former procedures of pegged policies for the price of iron,shipping freight, charterage, etc.

But until the outbreak of the war in 1941, the Japanese shipping world

was in a prosperous condition and business was very active in general.
The differences from the prosperity at the time of World War I was thatthe extent of the rise in freight became narrower, the prices of ships themselves

were much lower, ship building was not being left to the discretion of privatecompanies, and the trade of ships became limited to some extent.

The price of ships, however, fluctuated widely since 1935 despite thePrice Stop law of Sept. I8. Averages of prices at which Japanese ships wereactually sold in the Japanese market and the average prices of ships newly
constructed from 1935 to 1941 indicated a continuous upward tendency on the
average as shown in TABLES I and II.

CURVES OF DIMINISHING VALUES OF JAPANESE MERCHANT SHIPS 55

TABLE IAVERAGE PRICES OF REalPRocATOR-SHIPSAerUALLY SOLD IN THE MARKET.
UNIT: Yen per 1 Dead-weight Ton.
1935

1936

1937

1938

1939

1940

1941

No. Price

No. Price

No. Price

No. Price

No. Price

No. Price

No. Price

Years

Types

Yen
iooO D. W. T.

2ooO ,,
3000 ,,

1

4ooO "
5000 "

2

200

6000 ,,

1

169

7000 "

4

182

8000 ,,
9000 tt

1

188

Total orAverage

9

l90

186

Yen

Yeh

Yen

Yen

Yen

Yen

2

229

3

315

5

365

4

424

1

720

1

880

18

222

6

279

13

356

53

392

10

448

37

485

1

211

1

300

4

329

14

396

5

470

3

556

15

197

7

316

4

355

66

387

10

490

9

590

5

192

5

289

6

343

23

386

2

425

3

185

1

350

21

383

4

353

2

390

5
7

371

1

356

5

484

8

485

350 195

389

37

463

65

506

2

174

2

305

1

2oo

2

322

1

47

206

26

288

S4

308

359

TABLE IIAVERAGE PRICES OF RECIPRocATOR-SHIPSNEWLY coNSTRUCTED IN JAPAN.
Dead-weight Ton.
UNIT: Yen per l
Years
1935

l936

1938

1937

1939

l941

l9tlO

Types
1000 D. W. T.

Yen

'Yin
197

229

Yen

315

365

'Yen
424

Yefi '

Yefi

Y'e-ri467

499

20oo ,,

190

220

246

356

392

435

465

3000 "

182

211

3oo

329

396

434

466

4000 ,,
5000 ,,

2oo

197

297

355

387

459

504

188

192

287

34S

386

456

504

6000 "
7000 "

169

185

274

345

383

455

500

182

202

273

371

428

451

8000 ,,
9000 ,t

188

174

305

334 I
323 l

359

41S

436

l80

2oo

322

356

482

483

l86

206

288

388

449

Total
Average

i

308 l
I'
350
i

1

The fluctuations in the newly-built prices shown in Table II act as abusiness indicator which represents the integrated variation of the price of iron,'472

56 GINJIRO SHIBATA
wages of ship-building workers and other prices or vaiues which are variablein accordance with the general business conditions of the respective years.
That is, the figures shown in Table II can be understood to signify the activity

in the shipping industry in Japan.
Thus, the results obtained by dividing the prices per ton of sold ships by
the price per ton of newly-built ships in the respective year mean the prices
of used ships corrected for fluctuations originating from the business cycles.
The benefit obtained from such a process is that, a standard price for a certain

used ship can be easily computed if the price of a newly-built ship can beapproximately calculated from the cost of ship•-building materials, wages andcapital interest at a given time even though an actual contract for the shipbuilding does not exist, and is multiplied by the percentage obtained as above.

To observe the diminishing tendency in the price of a ship in proportion
to its age, it is necessary to use statistically standardized data as a basis.

There may be two methods of standardization, that is, (1) to standardize thewhole original data by means of a certain statistical technique, or (2) to pickup only the data regarded as a standard and to consider other data gotten
out in a constant relationship with the standard data. For the present case,the latter method will be used.
Assuming the ages of all ships being equal and other conditions also being

equal, the prices of ships per ton should differ according to (1) the tonnageof ship, (2) the kind of engines attached; reciprocator, diesel, turbine or
sailing, and (3) the type of ship; ships for general cargo, passenger, passenger

and cargo, tanker or for special cargoes. 'In view of the price per ton, the larger the ship the lower is the price;
regarding the engine attached, there is a tendency to appraise a reciprocatorhigher than a sailing ship, a turbine steamer higher than a reciprocator anda diesel boathigher thanaturbine steamer. And, there is a trend in generalto estimate the price per ton of a passenger boat higher than a cargo-passenger

boat, and of a cargo-passenger boat higher than a cargo boat.
In the first place, we' classified all ships in three classes, 1000-3000
dead-weight ton class, 4000-6000 d, w. t. class and 7000-9000 d. w. t. class;secondly, we sampled out and used reciprocator-ships since they were thegreatest in number for sale at the period concerned; and thirdly, we selectedcargo ships for the reasons mentioned above. Therefore, for the second andCURVES OF DIMINISHING VALUES OF JAPANESE MERCHANT SHIPS 57
third conditions, the data treated here are concerned with the lowest unit
prices of used ships.

Thus, the following means were adopted for used reciprocator cargo ships
which were actually traded :1. Classified the types of ships in three classes; 1000-3000 d. w. t.,

4000-6000d. w. t. and 7000-9000 d. w. t,
2. The qverage costs per 1 d. w. t. of newly-built cargo ships were
investigated for each of the above mentioned classes, and by them the prices
per 1 d. w. t., of used cargo ships actually sold for the respective class weredivided so as to convert the latter into percentages with regard to the former.

3. Graphical representation was made so as to see the correlation between

the percentages mentioned above and the ages of ships actually sold whichcorrespond to each case. That is, a horizontal axis wag placed for the age ofships and a vertical axis for the percentages of prices, and every case wasnotated on this graph with a most probable average line drawn through every

dot adopting the method of least squares. 'To draw this average line, the following conditions must be considered
as a theoretical premise.

1. In case the age of a ship be O, the price-ratio in the average line
shall be IOO.

2. However old a ship may be, the price must go down neither to thezero point nor under the zero point. The minimum price shall be equal tothe price of scrap iron.

In order to satisfy the above conditions, the average line to be adopted
here must not be a simple straight line (Y =a+bx), but a logarithmic curve.

However, data in existence are limited in number and most of the cases
concentrate on those for ages from 15 years to 45 years. The cases for ages

from O year to 15 years and those for ages above 45 years are very few, sothat for the price of ships under 15 and above 45 years of age a curve which

satisfies the above conditions is extremely complicated to be drawn mathematically. Therefore, for the figures of these cases we drew curves indifferent ways from those of ships above 15 years of age for which data
were available in plenty.

First, the method adopted was to draw a logarithmic least squares line
for the available figures in existence, that is,

58 GINJIRO SHIBATA
log Y=log a+X log b
where Y equals the curvilinear coordinates in question, X equals the years ofage, a the ratio of price per ton in case of X=O, and b the gradient of thecurve.

Since various mathematical methods were proved failures in working out
a most suitable curve consistently throughout the case for all the years of ages,

or50, for the years of ages other than the obtainable real data, several shipsof corresponding years of ages which have never been for sale were selected
for each type and their prices were estimated arbitrarily by the experts engaged

in the shipping business, The latter prices were compared with the prices
per ton of the newly built ships in the same manner done for the available
figures. According to the estimation of the experts, we find that the pricesof ships after an elapse of one or two years from their construction sharply

decline up to about l5 years of age. Then, the means which we took finally

was to draw curves by eye-measurement so as to conform to the trend ofcurvature very naturally tracing from the first point of the curve which was

drawn mathematically for the actual figures according to the equations
mentioned above, to a point of ]OOe/o in price-ratio which means the price of

newly-built
ships. .
The equations which were calculated from actual data are as follows :For the ships of 100or3000 d. w. t.......IogY=1.87068-O.O0834X" 4000-6000 d. w. t....,..logY=1.89669-O.OI094 X
ii 700or9000 d. w. t.......Iog Y=1.87532-O.O1207 X
And the actual data were dotted on the correlation-scales and their curves

were drawn throughout the price ratios of ships for or50 years of ages,
as shown in Charts 1, 2 and 3.
The fluctuations in money value are to be eliminated in outline in theprice ratios and consequently in the curvilinear coordinates which are dottedin Charts 1, 2 and 3.

Nevertheless we meet another question as to a discrepancy which arises
between the variations in price per ton of used ships and of newly-built ships ;that is, in some cases, the price per ton of used ships which always meansa spot price might be going up more than those of newly-built ships whichmeans a contract price or sometimes a future price, This was caused by thefact that at that time the price control of iron and steel was strictly executedSHIPSOF DIMINISHING VALUES OF JAPANESE MERCHANT59
CURVES
since they were war materials, while the sales of used ships were left free tosome extent, and shortage of the tonnage of ships raised the prices of usedships according to the diMculties of receipt of ship-building materials and thelack of building berths at dockyards,
So, in spite of the statement at the outset of this article that the phasesof general business conditions in Japan would be divided into three periods
for pre-war times, the Price-Stop Law of Sept. 18th 1939 had little influenceon the trade of used ships, and the distinction in the variation of the prices ofPrice-ratio
per ton.

100

90

so
70
60

.
.

50

.

.

dO

.

30

.

.

.

.

.

20
IO

Oo 246 8 10 S2 i4 t6 16 20 ee 2n 26 2e

30 en M 36 38 aO a2 44 46 a8 50-Age of ship1: Average price-ratios per ton
CHART

of

correlated

1000-3ooO d. w. t. type duringwith the age of ships

1935-•1941 years' period.

Price-ratio

per ten
IOO

90
80
70

60
50
.

no

.
.

30

.

.

20
10

Oo 24

6

8

tO 12 14 l6I6 20 ?? 24

as 28 30 32 ca 36 ea dO d? dd A6 48 50-Age of ship CHART 2: Average price-ratios per tQn correlated with the age of shipsof 4000-6ooO d. w. t. type during 1935-19`ll years' period.

60 GINJIRO SHIBATA
Price-ratio

par ton

LOO

90
80
70
60
50
40
3e
20
lo

.
.
..

.
..

.

OO 2 4 6 8 IO l2 l4 16 IP 20 22 24 26 28 30 3? sa 36 38 40 an`44 d6 de 50-Age of ship CHART 3: Average price-ratios per ton correlated with the age of shipsof 7000-9000 d. w. t. type during 1935-1941 years' period.

used ships can be seen between the period before the Sino-Japanese hostilities(Jan. I935-June 1937) and the period since then. This fact can be seen in
Chart 4.
For the above reason, we described the curves of the average diminishingprice of used ships with their ages for each type, separately for the two
above-mentioned periods. These curves were described in the same method
as the curves in Charts 1--3. Charts 5, 6 and 7 are the results.

PTice-ratio

per ton

IOO
90
eo
70
60
50
40
30
20
IO

(3)ec
C?J

t.tSJS
'Oee.

ls

et

t?)Jvtrl)len.

Jscs

'June

t937-

Set. ts

tS37

eO 2 d 6 8 10 1? i4 t6 IB 20 2? ?4 26 28 30 32 sa 36 sa 40 42 44 46 48 SO-Age oÅí shjp CHART 4: Curves of average price-ratios per ton for the ships of 1ooO-9000 d. w. t. typeclassified into three periods, Jan. 1935-June 1937,July 1937-Sept. !939 and Oct. 1939-Dec. 1941.

CURVES OF DIMINISHING VALUES OF JAPANESE MERCHANT SHIPS 61
As shown in Charts 5-7, the relation between the ages of ships and their,
prices for the two periods are different according to the type of ships. Thatis, for the type of 1000-3000 d. w. t. ships the curve for the period after
the Sino-Japanese hostilities is higher by 7e/o averagely than that of the period

before then, and for the type of 7000---9000 d. w. t. ships, the former issimilarly higher by 9.5% on the average than the latter. In regard to themedium type of ships, however, the converse situation is seen between theprice ratios of ships under 24 years of age and those of above 24 years of age.

That is, for ships of under 24 years of age the price-ratios for the period
Price-ratio

per ton

loo
90
eo
70
60
se
dO
30
2G
IO

NOTE

x-•--•CasesforJttn.1935-Junei937.-----

Jut

tS37

-Oec.

t94t

Jan.isJs

Cases{orJvlyl937-Dec1941.
x'Junets37
1

t

.
.

.

.

.

'

OO 2 d 6 8 SO 12 la 16 l8 20 22 2d 26 28 30 32 sa 36 38 40 d2 dn 46 d8 50-Age,of shipCHART 5: Curves of average price-ratios per ton for the shipsof 1000-3ooO d, w. t. type classified into two periods.

Price-ratio

per ton

loo

90
80
70
60
50
AO
30
20
lo

NOTEx••--CasesforJen,l935-Jvnet937

o/:}'ls32.

.----

Cases{orJulyl937-Dec134t

Oec
fSVI

Jdn. tS35-

Y

June i9J7
.

.

,

tt

1

OO 2 a 6 8 le l2 [a l6 E8 20 22 ?a 26 28 30 su 34 36 38 40 42 att 46 n6 5e---Age of shipCHART 6: Curves of average price-ratios per ton for the shipsof 4000-6000 d. w. t. type classified into two periods.

62 GINJIRO SHIBATA
Price-ratio

per ton

IOO

90
80
70
60
50
no
30
20
jo

NOTE

x••---CesesforJanl93S-Junel937
CasesforJuty1937-Dec.i9al.---•-

JufJan,

IS37- Oee,

IS35-Ju

l947.

nets37

.
'

x
.
n

T-v-

:

OO 2 4 6 e IO t2 l4 i6 I8 20 2? ?4 26 28 30 3? 3d 36 38 AO A2 ad 46 d8 50-Age ef shipCHART 7: Curves of average price-ratios per ton for the shipsof 7000-9ooO d. w. t. type classified into two periods.

before the Sino-Japanese hostilities are rather higher than those for the period

after, while for ships of above 24 years of age the price-ratios are higher forthe period after. Chart 6 shows this intersecting relation. This intersection at

the point of 24 years of age was caused by the fact that at the time before
the Sino-Japanese hostilities the used ships of younger ages were heavily tradedat higher prices and on the contrary afterwards those of older ages were tradedin larger numbers at higher prices, In fact, no ship under 20 years of age
happened to be traded after the Sino-Japanese hostilities in this group, while
before then five cases occurred. This fact induced such an intersecting relationof curves both before and after the Sino-Japanese hostilities, and if there were

any trades of younger ships for the latter period the curve would be situatedhigher than it actually should.

Judging from these conditions and from the situation shown in Chart 4,
the price-ratios of used ships to the newly-built ships after the Sino-Japanesehostilities are thought to be higher by 80/o on the average as compared withthose of the prior period,

Therefore, it might be rather proper to calculate a curve using only thedata of the time after the Sino-Japanese hostilities. But such data were notsuMcient in number so that a reliable dlminishing-value curve could not becomputed adequately. That the more data obtainable the higher the reliability

is a statistical rule in general. Thus, we decided to depend not only on theCURVES OF DIMINISHING VALES OF JAPANESE MERCHANT SHIPS 63
data after the Sino-Japanese hostilities but the data before then. The results

were shown in Charts 1,2 and 3. The values of those curves were computedfrom the data from 1935 to 1941 in all. And since the difference between
the two time series shown in Charts -7 is estimated to be about 80/o on the
average, the final curves should be elevated by 4% in all for the data here

taken in. The rate 4e/o is of course an approximate number, because theformer period of time contains thirty months while the Iatter is for forty-two
months, and besides there is a difference in number of cases between the former
and the latter. But in the nature of things mathematical accuracy should not be

expected too much in such an estimation, since the data are not so abundantin number and the average lines calculated from such data should only bea base line about which the original data are distributed in a pretty broad
range. Three curves in Chart 8 were described so as to elevate by 4% eachcurve shown in Charts 1---3, and moreover as stated before, using for reference
the estimation by experts in shipping circles the price ratios for O year of age

were adjusted by eye-measurement to fit 1000/o exactly. The original figures
for Chart 8 are given in Table III.
Price-ratio

per ton

IOO

CHART890

Cvriesefdiminishlne
valvesofJapanesemer-

70

J

60
50
AO
'

30
20
10

'

chantshipswiththeirage.

80

2

3

NOTE

1•----loce-3000d.w.t.type2•----neOO-600od.w.t.type3•----7oeo-geOOd.w.t.type

Oo 2 a 6 8 IO l2 l4 t6 l6 2e 22 2U 26 ?8 oo 3? 3d 36 ss tO d2 dd n6 A8 50-Age ef ship-M

GINJIRO SHIBATATABLE M
PER TON OF THE
DIMINISHINGVALUESUSEDSHIPS IN JAPAN
Types
Ages

of Vessel

1

Types
1OOO30oo ! 4000-6000 7ooggooo
D.W,T. D.W.T. D. W. T. Ages

1000-3000 4000-6000 7000-ooOO
D. W. T.
D, W. T.
D. W. T.

of Vessel

o

1oo.O

100.0

100.0

26

46.9

42.6

37.9

1

94.6

94.0

93.6

27

46.0

41.5

36,9

2

89.9

89.7

88.5

28

45.1

40.5

35.8

3

86.0

85.5

83.5

29

44.2

39.5

34.9

4

82.3

81.6

79.1

30

43.4

38.5

33.9

5

78.8

78.1

75.2

31

42.6

37.5

33.0

6

75.5

,
1

74.9

71.9

32

41.8

36.6

32.1

7

72,8

l

72.0

68.9

33

41.0

35.7

31.2

8

70.3

I

69.6

65.9

34

40.2

34.8

30.3

9

68.2

67,3

63,O

35

39.4

33.9

29.5

10

66.3

652

60.7

36

38.7

33.1

28.7

II

64.5

63.3

58.7

37

37.9

32.3

27.9

12

62.8

6i.5

56.9

38

37.2

31.5

27.1

13

61.2

59.8

55,O

39

36.5

30.7

26.4

l4

59.7

58,2

53.2

40

35.8

29.9

25.7

15

58.3

56.6

51.6

41

35.1

29.2

25.0

16

57.0

55.1

50.0

42

34.5

28.5

24.3

17

55.8

53.7

48.7

43

33.8

27.8

23.6

18

54.7

52,3

47.3

44

33.2

27.1

23.0

19

53.6

50.9

46.e

45

32.5

26.4

22.4

20

52.6

49.6

44.8

46

31.9

25.7

21.7

21

51.6

48,3

43.5

47

31.3

25,1

2Ll

22

50.6

47.1

42.4

48

30.7

24.5

20.6

23

49.6

45.9

41.2

49

30,1

23.9

20.0

24

48.7

l

44.8

40.1

50

29.6

23.3

19.5

25

47.8

l

43.7

39.0

!

i
1
1

!

The curves shown in Chart 8 and figures in Table III should be applicable
to an actual case, understanding the conditions attached to those formations,that is:

1. As a general condition, the curves must be interpreted as a standard
type, as a statistical mean always is. Actual cases should deviate in fairly wide

ranges from these curvilinear coordinates as a matter of course.

2. The data used here are those of ordinary reciprocator cargo ships only.
Therefore, diesel motor ships, turbine steamers, passenger boats, mixed boats,CURVES OF DIMINISHING VALUES OF JAPANESE MERCHANT SHIPSostankers and other special vessels have been not considered. For the prices ofthese other kinds of ships the constant ratios to the values of these curves
should be computed from other d'ata and practically applied.

Table IV shows the average prices per ton of diesel and turbine ships
which were actually sold during the same period. But these cases were so few
in number that we did not dare to fix the average ratios of these figures tothe figures shown in Table I,

TABLE IVSHIPSAVERAGE PRICES OF DIESEL AND TURBINEACTUALLY SOLD IN JAPANper 1 Dead-weight ton.
UNIT: Yen
x.. Years
Types -X'-x....

1936

1935

1937

1938

l939

1940

1941

Diesel Ships

D.W.T.
Imo3ooO

370

251

4000-6000

7ooC9000

422

231

317

219

517

528

375

350

600

345
Turbine-Ships

D.W.T,

f

1000-3ooO

222

268

4000-6ooO
7000-9000

197

197

342

359

382

523

327

188

l97

305

343

385

359

487

34e

3. Types of ships were divided here in three classes, that is, IOOor3000

d. w. t., 4000--6000 d. w, t. and 7000-9000 d, w. t. This resulted from thefact that the number of cases were not sudicient to classify still finer. Numericalvalues classified by every 1000 d. w. t. will be roughly perceived by means ofcurves which are described in three equal parts between the standard curves

shown in Chart 8.
4. In these three curves the increased value as the result of repairs is notconsidered specially. In other words, the data used here contain those for ships

both repaired and unrepaired, So, for the same age and same type, the original

points which deviated extremely above the curve in Charts 5--7 mean mostly
those for ships heavily repaired, and the points which deviated extremely below

66 GINJIRO SHIBATA
the curve mean generally those for ships unrepaired. Small repairs are done
from time to time, but fairly large repairs which increase the value of ships
to a certain extent are usually made before a regular inspection by the proper

authorities, and heavy repairs or an overhaul must be made after about twenty

years or thereabouts. To adjust the curves to the values increased by these
repair expenses, other statistical data regarding the repair expenses must be

provided and the yearly average of the expenses must be added to thecorresponding values of the curves.

5. 'Besides the above conditions, even among ships of the same kind andequal type there are various grades in quality, that is, higher, ordinary andlower grades. The specification in the quality of ships can not be obtained
from these figures, because the latter shows merely the average value of theships of various quality.

6. Latest figures after the war are still not so suthciently available sothat the correlation curves are not described suMciently, Questions will beconcentrated on whether the ratios of the value of the used ships to the valueof newly-built ships after the last war would not be equal to those of before

the last war, A discrepancy surely exists to some extent between them. But
the greater part of the Japanese merchant marine has been newly built after
the war and few ships have been traded. So, adequate curves for the pest-war
time can be expected to be described in the future.

(The original data were all provided by the Nippon Shipping Exchange,
Corp., Kobe.),THE MODERNIZATION OF JAPANESE SHIPPINGBASED ON THE TRANSPORTATION OF
HOKKAIDO MARINE PRODUCTS

Seiji

SASAKI(1)
In the twelfth and thirteenth centuries the great herring fisheries of theNorth Sea and the Baltic, of which "King Herring" was the chief, became
a dominant factor in the development of European commerce, and employed
not only a very large tonnage in order to transport the products, but wasa remarkable impetus to the shipowners in building many big vessels suitable
for long-distant navigation. The great Scania Fishery at the entrance to theBaltic and the other herring fisheries in the north seas constituted the largest

part of the important cargoes in the Middle Age when all Europe was thenCatholic or Orthodox and observed rigidly and universa11y the many fast days.
Many historians have pointed out that the Hansatic League dominated for threecenturies, at least, the sea routes of northern Europe through their monopolyof this commerce. We can easily discern similar facts in other marine nations,such as the Dutch who took the place of the Hansa merchants after about
the fifteenth century, the Norwegian, Swedish and Danish who were engaged
originally in the same carrying trade and could respectively develop theirmodern shipping industries.
In our country we can also recognize a similar relation between the carrying

trade and fishery. The " Kitamaesen " in the Tokugawa Era and the " Kitamae
shipowners " group in the Meiji Era, which were the great leaders of the early67

68 SEIJI SASAKI"Shagaisen," were merchants and carriers of Hokkaido marine products, anddeveloped their shipping business chiefly by transporting that cargo from

Hokkaido to Hokuriku or Osaka. Although many people know that "Kitamaesen " were typical big ships among our sailing vessels and that the ownersof those vessels adopted the steamers earlier than others, contributing to thedevelopment of modern Japanese Shipping, few understand yet the fact thatthey started from a similar " carrying of marine products " as the above-said

European shipping industries. The transportation of fish played an importantpart in the growth of Japanese shipping, both in the sailing era and in thesteamship era. Almost all of the earlier " Shagaisen " employed in the carryingof Hokkaido marine products and even the "Shasen," at least, the steamersof the Nippon Yusen Kaisha or its antecedents, the Mitsubishi Kaisha, carrieda considerable volume of those cargoes. Thus, it may be said that thetransportation of Hokkaido marine products was very closely connected withthe modernization of the Japanese shipping industry as a whole.

This article aims at showing the intimate relation between the carryingof Hokkaido marine products and the development of modern Japanese shippingin the case of the modernization of the ship from sailing to steamer amongthe "Kitamae shipowners" group, for they took exclusive charge of thattransportation since the Tokugawa Era and their modernization represented
almost entirely the development in this field.

(2)
When the writer made an etymological study of "Kitamaesen," it was
shown that those ships named " Kitamaesen " navigated chiefly along a coastal

sea-route from Hokuriku ports to Hokkaido ports.--" Kita " meant the formerand " Mae " meant the latter . The ships belonging to Hokuriku ports wereremarked as being the most important sailing vessels engaged in the trade of

Hokkaido marine products. They contributed to the protection of Japanese(sailing) shipping against its decline during the period of national isolation

together with the "Higaki-Kaisen" and "Taru-Kaisen," both of which
navigated almost regularly from Osaka or Kobe to Tokyo (Edo). The Kitamaesen were the larger sailing vessels and were employed in the longer distanttransportation of bulk cargo than the others. Moreover, the leading shipowners

in this group played a most typical and leading part in the growth of theTHE MODERNIZATION OF JAPANESE SHIPPING 69
cargo-steamer, when the modern steamship firms began to develop as " Shagai-psen" apart from the Nippon Yusen Kaisha and the Osaka Shosen Kaisha.
The growth of the Japanese cargo-steamer was motivated indeed by thedevelopment from sailing vessels to steamships in the Kitamaesen. In thisrelation, it may be said that the transportation of the Hokkaido marine products

gave an important impetus to the development of modern shipping.

Even though the Kitamae ships contributed to the building of large
vessels and the maintenance of the carrying trade before the middle of thenineteenth century, they were quite infantile in quality and of Iow performanceas compared with that of the European ships in those days. Such Japanesetype sailing vessels which were called "Yamato-bune," were transformed at
first into European type sailing vessels after the tenth of Meiji (1877), forunder the conditions of those days it was diMcult to adopt the most modefn
ship (steamer) by the single effort of a shipowner.

The first European type sailing vessel in Hokuriku provinces was the"Joei-maru" which was built at Nanao in 1875. After a few years, however,many Kitamae shipowners began to buy or build new type vessels, because
they were given a direct impetus by the navigation of the "KashU-maru"(153 ton) which was built at Osaka in I879 and owned by famous Nisaburo

Hiroumi. The "Kaetsu-maru" (92 ton) which was bought by the Etchtt
Fuhansen Kaisha in 1881 was another of the earliest European type sailing
vessels.

But, the marine products, especially kippered herring or fish manure,which were carried from Hokkaido to Hokuriku ports or Osaka, were a massbulk cargo and were much more conventionally and profitably transported by
the Japanese type sailing vessels which could take them on board in mountainstyle--this method of loading was generally known as "Yamadori"than by the European type sailing vessels. Furthermore, those cargoes did not

require rapid navigation. On that account the transition from the Japanesetype sailing vessel to the European type sailing vessel was not neccessarily

quick and on a large scale. Nevertheless the Japanese type sailing vessels

needed 3540 days to navigate from Otaru to Osaka and usually were only
able to make one round trip a year, On the contrary European type sailing
vessels could easily undertake three or four round-trips and suffered less fromthe effects of the weather or wind. Thus it was natural that many rich and70 SEIJI SASAKI'

progressive Kitamae shipowners should increasingly make use of the latter.

A prohibition against building the Japanese type vessels over 500 "Koku"
which was put into practice in 1885 gave a final spurt to such progress.

The adherence to sailing vessels in the dawn of such early Japanese
steamship companies as that of the Mitsubishi Kaisha or of some other local
firms was clearly caused by the long tradition or character of the Kitamae
shipowner's shipping business ; they owned and operated originally their ships

in connection with their commercial pursuits, in other words, their shipping
business was evidently a "private carriage." It must also be noted, however,that such a small-scale development of the European type sailing vessel wasitself fairly affected by the remarkable advancement of the steamship businessoutside of them. Many shipowners, at least, the progressive owners were sure of
the inevitability of adopting the new steamers sooner or later. They therefore
made allowance for the adoptation of the European type sailing vessels. It wasreflected on their tonnage in about l887.--see the figures on page 71.
The conservatism of the owners of sailing vessels became especially more

visible at this stage of transition to the steamer. The Kitamae shipwoners
even formed a self-defensive organization. Prior to this, however, we musttake a brief glance at the earliest transportation of Hokkaido marine products
by steamship, because such a' selfriefensive organization itself just came into

being against the advance of the steamer.

An old document which is preserved in the Hiroumi-house includes somuch valuable maritime record of the latter half of the nineteenth century
that we can fairly imagine the earliest fish-transportation by steamer. It isespecially interesting to note that there are two marine transportation
contracts which were concluded between some Kitamae merchants including
Hiroumi and the Mitsubishi Kaisha in 1884 and 1885. In those days the
Mitsubishi was competing against a new steamship company, the Kyodo Unyu
Kaisha, along the coastal routes, The violent competition in passenger tradic

between Yokohama and Kobe forced both companies into a greatly unbalanced
condition. To deal with the dithculties the Mitsubishi aimed to exploit a newtransportation field and to maintain those cargoes under their own control.
The traMc of the abundant Hokkaido marine products was then the best field

for exploitation. So the Mitsubishi endeavoured to persuade some powerfu1
merchants who were also the owners of sailing vessels, and succeeded in an

71

THE MODERNIZATION OF JAPANESE SHIPPING
Membersand their sailing vessels of the Hokuriku Shingikai in January

1889.

the numbers in the brackets mean European type sailing vessels.
4 vessels.

M. Nishide
K. Tadatani

Nishide-maru, etc.

5 vessels.

Jinkichi Kadotani

Kitoku-maru, etc.

KyUetsu-maru, ,t

K6ch6-maru, i,

8 ,t (3]K6toku-maru, ,tEitoku-maru, ti

3 ,,
4 ,,
3 ,t
5 ,,
5 ,t
5 ,t

N, Hiroumi

H. Yokoyama

Y. Hamanaka
K, Hamanaka

Sakikake-maru, ,,10 " (5)K6fuku-maru, ,i

4 tt

S, Hayashi

4 e (3]

M. Hamanaka

Kata.maru, /tEiju-maru, ,iS. Tanbo

Zinpo-maru, ,,G. UkonYawata-maru, tf

3 tt
14 ,, [13]Eirai-maru, ,,Anzen-maru, ,tAnzen-maru, ti

4 tt
6 " (1)

G. Nakanishide

Hikobe Kubo
Kubo-maru, ,/Hikosuke Kubo Ch6ho-maru, ,tTsariki-maru, ,,M. Masuda
G. Konishide

Ichiju-maru, ,,3 "[2)

C. Sakatani

Koch6-maru, ,t

6 tt

E. Okazaki

S, Ooya

Yawata-maru, it

S, Nakamura

Jintaro Kadotani

Shotoku-maru, ,,7 n[2)
7 u(1)

S. Nishikawa

3 tt

5 tt

exclusive transportation contract for the marine products. It is very noteworthy

that the contract of l885 provided a clear and exclusive shipment clause anda deferred rebate system, but it did not mean the prohibition of private
carriage with sailing vessels owned by those merchants; for those merchantsowned and operated many sailing vessels which were intended to carry theirown cargoes. And they would never have agreed to remove their sailing
vessels from the fish-traMc and to rely completely on the steamer service ofthe Mitsubishi.

(3)
As mentioned above, the transition from the Japanese type sailing vesselto the European type sailing vessel began after the war of 1877. A violent

south wind, named "Saigo Maze," which blew uninterruptedly for about
seventy days during this war, exposed so completely the Iow ability of theformer that even most conservative shipowners could not but awaken to the needof technical development in ships. On this occasion, many general shipowners
including the Kitamae shipowners group started at first by adopting the better
sailing vesse! on account of their own historical, economic or psychical conditions.

It was clear that the enormous fund necessary to buy a steamship, the technicalinexperience and the mental insecurity in its navigation hindered a quicktransformation to the better type ship (steamer).

Their long tradition as merchant-shipowners, however, was the greatest
reason for their adherence to their sailing vessels. As one document mentioned,

72 SEIJI SASAKI
the owners of sailing vessels had generally such following strong opinions in

those days :- though the sailing vessel was apparently more awkward than
the steamer, it had undoubtedly a convenience in itself; it needed less capital,

cost and crew; there was a special advantage, as nine--tenth of the carrying
cargoes could be adequately handled by sailing vessels in those days•••••-.

When the Nippon Yusen Kaisha, which was established after the compe-

tition between the Mitsubishi and the Kyodo Unyu, tried to carry the
Hokkaido marine products, the Kitamae shipowners received a great shockand had to do more serious thinking in order to maintain their sailing vessels

and trading business. Following the example of sailing vessel owners in otherprovinces, the Kitamae shipowners organized a defensive body, "Hokuriku
Shingikai" in 1889 too. Sixty-three owners with 177 sailing vessels took partin this organization, all of whom belonged to the three prefectures, of Ishikawa,

Fukui and Shiga. In spite of the non-attendance of some owners like Baba
who engaged in shipping at Toyama prefecture and of the participation of thesailingmaster or the pure merchants,-"Riku Sho" (land-merchant)--•,
who owned no ships, this organization was almost representative of the Kitamae

shipowners as a whole. Many famous shipowners, like Hiroumi, Ooya, Ukon
or Hamanaka were naturally its chief members.
Every union of sailing vessel owners in those days originated completelyfrom a self-defensive requirement against the urgent pressure of the modern

steamship companies especially, of the N. Y. K. The Dainippon Domei
Fuhansen Kumiai in 1888, the Nada Seik6 Kaisha and the above-mentioned
Hokuriku Shingikai in 1889 had a common purpose to maintain their own
sailing vessels as long as possible. Above all, the establishment-prospectus of the

Hokuriku Shingikai stated very plainly the facts that the Kitamae merchantny-

shipowners and their ships were suffering from a terrible invader, and thatthey had to co-operate in order to keep up their own traditional business.
After all it had only an insignificant effect, but we can easily acknowledge
some important signs in the development from sailing vessels to steamers in

the Kitamae shipowners group, or, in the new change in the transportationof the Hokkaido marine products, through the formation of this organization.

(4)
Besides the rapid development of both chartered companies, the Nippon

THE MODERNIZATION OF JAPANESE SHIPPING 73
Yusen Kaisha and the Osaka Shosen Kaisha, there were a good many smallsteamer enterprises in the Hokuriku provinces. And those steamers tried
sometimes to navigate to Hokkaido ports. In January l881, a steamshipcompany, named the Hokuriku Tsusen Kaisha, was established by N6so Fujii,
Seisaku Kuchiki and others, and another company, the Etchtt FUhansen Kaisha
was founded in the same year by N. Fujii, Sh6zo Shiota, Magosaburo Washiyama, etc. The latter even boughta large steamer, "Sukune-maru" (640 ton)in spite of its name being "Fuhansen " (sailing vessel). Such steamers of theabove-said companie.g and of the Kan6 Kisen Kaisha which was establishedin 1886 had navigated already to the Hokkaido ports along the coast of theJapan Sea before the twentieth of Meiji (1887), and there is no doubt thatthose steamers carried some marine products during their service.

. However, the N. Y. K. was the most powerful and direct invader or thegreatest competitor for the Kitamae sailing vessels. This company was a much

Iarger, monopolistic enterprise than the Mitsubishi Kaisha and "controlled
almost all internal routes." Therefore all merchants had unwillingly to accept
the expensive freight charges, and all other shipowners were obliged to limit theirown activities to only a few narrow, unimportant trade routes. The N. Y. K.

made special efforts to hinder any new-comer (steamship firms) on the one
hand, and encroached as much as it desired upon the territory of the weaksailing vessels on the other hand. As a general rule, the sailing vessel was

not even considered an opponent of the N. Y. K., as it was not powerfulenough to compete against the steamers of the latter.

The Kitamae shipowners suffered then from the most terrible pressure
put upon their own sailing vessels in addition to disadvantages as merchants.

This was the rnain reason why they organized the above-said Hokuriku
Shingikai as a self-defensive body and why they did not give up their sailing

vesse!s to the last, In 1886 the EtchU Kisen Kaisha was founded at Takaoka,

and also S6ichiro Asano bought the "Hinode-maru" (1,136 ton) to operatea new steamship business. These two firms had the distinctive motive of
opposing the N. Y. K., but even other steamship owners had, more or less, similar

feelings of hostility. By the way, the "Kosuga-maru" (wood, 1,496 ton) of
the Etcha Kisen Kaisha was the first steamer of more than l,OOO ton which
was built in this country. Besides, M, Baba also began to own and operatesome small steamers in those days.

74 SEIJI SASAKIThe adoptation of the steamer had a gradual but inevitable effect on the

Kitamae shipowner's business in furthering progress, for a shipowner could

it may be more correct to say "had to" carry public "freight" inaddition to his own private " cargo " since the operation of steamers which had
far more capacity, speed and reliability of navigation than sailing vessels. It
took a long time, however, for the Kitamae shipowners to abandon their sailing

vessels and try to develop a purely modern shipping business after theirseparation from commerce. In fact, the transition to the steamer itself was
motivated by the wishes of the Kitamae shipowners to maintain their traditional

trade of Hokkaido marine products. Even in a later period, many shipowners
kept up their commercial business with their own sailing vessels on the one
hand, and tried to develop their shipping business by means of new steamships

operating on some new routes on the other hand. Their steamers at firstnavigated the same route as the sailing vessels had navigated, and transported
marine products together with the sailing vessels. In the next stage the shipowners

operated their steamers on more remote new routes seeking more profitable

new cargoes. And at last the shipowners gave up the carrying trade with
their sailing vessels, and engaged in pure shipping business exclusively withthe steamers.

At any rate we can conclude that the transportation of the Hokkaido
marine products by steamers was the starting point in the modern developmentof shipping. The main steamship enterprises in Hokuriku ports which were
established before the 30th of Meiji (1897) and engaged in the transportationof the Hokkaido marine products were as follows.
1) Hokuriku Tsusen Kaisha ; established in 1881, at Fushiki, the Shitoku-maru(53 ton), and the Akitsu-maru (130 ton), afterward T. Takebe and K.
Ishizaki took over the steamers and business of this company.
2) EtchU Fuhansen Kaisha ; established in 1881, at Fushiki, the Sukune-maru(640 ton), joined the Kyodo Unyu Kaisha in 1882.

3) Kan6 Kisen Kaisha; established in l886, at Kanazawa, the Kan6-maru(266 ton), Aomori-maru (200 ton), the Fus6-maru (190 ton), theMinamoto-maru (100 ton), the No.2 Kan6-maru (90 ton) and someother smaller-steamers, brQke up in 1900.

4) Etchtt Kisen Kaisha; established in 1886, at Shimonoseki village (nearTHE MODERNIZATION OF JAPANESE SHIPPING 75'

Takaoka), the Kosuga-maru (l,496 ton), was successful till the Taisho era.

5) Fushiki K6un Kaisha; established in 1888 as a combination of theabove-said Takebe and Ishizaki and the Fushiki Kisen Kaisha (establishedin 1886, a coastal small steamship enterprise), at Fushiki, the Shitokuny-maru,

the Naoetsu-maru (81 ton) and the Imizugawa-maru (Tonnage unknown).
6) Nisaburo Hiroumi; bought the Hokuriku-maru (638 ton) in 1888, the
HokushU-maru (994 ton) in 1890, the Takashima-maru (310 ton) in I891

and the Chihaya-maru (509 ton) in 1892, afterward rcorganized intoa modern steamship company and is developing as the Hiroumi Kisen

Company Ltd.
7) Hikotaro Ishizaki; bought the Ishizaki-maru (1300 ton?) in I888, but thissteamer sank in 1891.
8) Michihisa Baba; engaged earlier in the smal! steamship business, butbought a larger steamer, the Sharyo-maru (800 ton) from the N. Y. K.
in 1889. 0n the one hand, he was the promotor (president) of the EtchU
Shosen Kaisha (established in l897), and on the other hand reorganizedhis own enterprise into the Baba Gomei Kaisha and placed the Baba
Kisen Company Ltd. of today on a solid basis.

9) Masaku Minamishima; bought the Nakoura--maru (1,084 ton) in 1890,
reorganized afterward into the Minamishima Shoko & Co.
IO) Shichihei Ooya; bought the Kaga-maru (991 ton) in 1891, the Chidorimaru (200 ton) and the Aikoku-maru (1,722 ton) in 1892, and the
Takenoura-maru (2,052 ton), the Taiwan-maru (2,391 ton) and theGaisen-maru (1,790 ton) a few year later, reorganized afterward into
the Ooya Shosen Goshi Kaisha and developed till the Showa era.
11) Yasaburo Hamanaka; bought the Nikk6-maru (1,865 ton) about the sametime as Ooya's Kaga-maru and the T6y6-maru (2,548 ton) in l893.
12) Gonzaemon Ukon; bought the Nanetsu-maru (1,326 ton) before 1893,
afterward reorganized into the Ukon Shoji Company Ltd., and continued
business till the Showa era.

13) Denuemon Sugano; bought the K6ryo-maru (1,OOO ton?) in 1892, but
this ship sank the next year.

14) Shinminato Kisen Company Ltd.; established in I893, at Shinminato, theNo.1 Shinminato-maru (lll ton) and the No.2 Shinminato-maru (183ton), broke up in 1903.

76 SEIJI SASAKI15) K6suke Shiota; bought the Izanagi-maru (436 ton) in 1895, and opened
the coastal-route around this country and the Korean route, but this ship

sank in 1900.
I6) Hokuetsu Kisen Kaisha; established in 1896, at Uozu, the Hokushin-maru(1,186 ton), the Hokuetsu-maru (116 ton) the Kannon-maru (100 ton?)and the Shinkawa-maru (tonnage unknown), broke up in l900.

DEVELOPMENT OF THE MARINE
INSURANCE INDUSTRY IN JAPANIN THE MEIJI PERIODIN RELATION TO THE CAPITALISTICDEVELOPMENT OF JAPAN

Hiromasa YAMAMOTO

In this article the writer wishes to study the establishment of the modern

marine insurance business in Japan in connection with its capitalistic deve-

lopment, with special concern for foreign commerce and merchant marine.
Before we enter into our subject, it is better for us to point out the diflferent

conditions of economic development in Japan briefly in relation to marine
lnsurance.

European countries have a long tradition of marine insurance. Though
the establishment of modern marine insurance was after the industrial revo-

lution, its origin and development had been combined with the developmentof foreign trade which was the element to destroy the feudal economic systems,

and merchants had by then accumulated many experiences and customs withregard to marine insurance. Therefore at this time when we study the historyof marine insurance, we should keep in mind that modern marine insurance
has a long tradition from the Mediteranean trade period, however important
it may be to distinguish modern marine insurance from the primitive one.

And it is natural that European countries which had intimate commercial
relations with each other had marine insurance of almost the same contents.

77

78 HIROMASA YAMAMOTO
On the contrary Japan had an unique status with regard to the development of foreign commerce because it stood at the far eastern end of Asia

and was a closed country to foreigners in 1639. After the exclusion offoreigners Japan had no contact with foreigners with respect to foreign tradeand culture, and Japanese were prohibited from building ocean-going sailing

vessels and from traveling to foreign countries, Therefore Japan had nochance to develop marine insurance.
However it was quite natural that the function to cover the loss causedby the perils of the sea almost the same as marine insurance should appear in
the course of the development of domestic commerce and coastal transport which

had the effect of destorying the feudal economic systems. The method of
underwriting in Japan during the feudal period was not affected by the marine

insurance in Europe. It had an uncompleted style and its function was notseparate from those of trade and transport, corresponding to the feudal economic

conditions of Japan in the Tokugawa Period.
Accordingly in the course of the modernization of Japan after the Meiji
Revolution the underwriting method of Japan met as great changes as in allother economic fields. The Meiji Revolution of l868 was the outcome not of

the complete destruction of feudal economic systems, but of the demand ofEuropean capitalistic countries to open trade with Japan with the danger toJapan of making itself a colony of capitalistic countries. After the Meiji
Revolution the Japanese government introduced and fostered domestic industries
and other capitalistic economic systems so as to be able to keep pace with theeconomic development of European capitalistic countries and to escape fromthe danger of becoming itself a foreign colony. Marine insurance was not an
exceptlon.

Thus our study includes three parts: the underwriting system in Japan
during the period of the feudal economy, the introduction of western underwriting methods and the establishment of underwriting firms in Japan; andthe establishment of the marine insurance industry of Japan.

I
From the earlier part of the seventeenth century downward Japanesetraders engaged in foreign trade with South East Asia. In those days theso-called "Nage-gin," which meant investment, was used for the purpose of

DEVELOPMENT OF THE MARINE INSURANCE INDUSTRY IN JAPAN 79
accomodating the foreign trade fund. When a shipowner was to start on avoyage, foreign trade merchants invested in a foreign trade fund which waslent by investors under the following terms. If the vessel came back to themother port safely, the lender, the foreign trade merchant was repaid thefund lent with interest, but the borrower had no duty to repay the fund if
the vessel and cargo bought with the fund were lost by shipwreck. Foreign
trade vessels sailed to South China, South East Indies, or the Philippines, andthe voyage required half a year. Then the term of the Ioan was six months,
and the rate of interest was ordinarily from thirty to fifty per centum of theloan, sometimes amounting to ninety per centum at the highest. Those highinterest rates were due to the character of the loan which covered the loss
caused by the perils of the seas.

This system of bottomry was supposed to have been introduced by thePortuguese who had commercial relations with Japan in those days. Thissystem was abandoned after the prohibition of foreign trade in 1639, because

it could be made use of only in foreign trade from which much profit could
be gained. In 1639 foreign trade and building of ocean-going sailing vessels

were prohibited by the seclusion order. Thenceforth sea transportation andcommerce were limited in their activities to domestic or coastwise areas,
resulting in the underdevelopment of the underwriting method.

During the earlier period of the Tokugawa Reigns (1600-1867) main
coastwise trade routes, including the route between Tokyo and Osaka, wereopened and much cargo was carried on those sea routes by Japanese typesailing vessels, From those days downward the monetary economy by andby passed into a feudal economic system accompanying commodity productions
in many districts. At that time the business of sea transportation was notdivided from commerce and was carried out by the so-called merchant-carriers

who formed a "Tonya," a sort of guild. The merchant-carriers devised anunderwriting method peculiar to them. They put aside silver (money) inaccordance with the volume of the cargoes to be carried, for the purpose ofcovering the loss of their cargoes. We may say that it was a sort of selfunderwriting.

Afterwards there appeared the tendency of the shipping business to
become separate from those of merchants and with this tendency the method
to cover the loss of cargoes was also changed. Shipewners formed their guilds

80 HIROMASA YAMAMOTO
the same as in the case of merchants, and they were dependent on merchants'
guilds or most powerfuI merchants in the guilds, for they did not have enoughpower to engage in their business with their own capital. The marine
insurance policy which was used in those days remains today, and from thispolicy we can estimate the method of underwriting at that time.

The merchant, who controlled shipowners, concluded a marine insurance
contract as an underwriter with merchants whose cargoes were loaded on thevessel. The underwriter called " Uke-oi " got money which should be regarded

as freight and insurance premium from the insured. The underwriter paid
freight to shipowners out of the money that was received from the insured.
When the cargoes were lost, the underwriter paid insurance rnoney equal tothe value of cargoes evaluated at the time of contracting. By means of thatpolicy merchants could secure their interests. We cannot know how far thisunderwriting method prevailed in those days. However it must be admitted
that the underwriting business was not separated from that of merchants, andthat the insurance premium was combined with the freight. Therefore weshould regard the underwriting system in those days as primitive and not
rational.

II
In l868 as the result of the political revolution, a national government

was established. This revolution was caused by the pressure of foreign
capitalistic countries who desired to trade with Japan rather than from thefall of feudal political powers through the development of domestic industries.

In succession to the conclusion of the treaty of commerce and navigation with

the United States in l858, Japan concluded treaties of commerce withother European countries and began foreign trade. Foreigners gained extraterritoriality and established concession settlements at foreign trade perts.
After the beginning of foreign trade imports of industrial products and exportsof raw silk and tea increased every year while Japan had no customs
autonomy. In face of the danger of becoming a foreign colony, the Japanese

government had to protect and foster domestic industries strongly whileabolishing the feudal economic systems so as to develop a capitalistic economy

rapidly. The guild systems were banished and Uke-oi, underwriters of the
feudal period were destined to fall. But the necessity for marine insuranceDEVELOPMENT OF THE MARINE INSURANCE INDUSTRY IN JAPAN 81
increased as before, for commodity distribution was enlarged to a nation-wide

scale and almost all goods were carried by Japanese type sailing vessels

because of the underdevelopment of Iand transports. However, the modern
marine insurance business was not established immediately after the revolution,

when it was necessary for someone to do underwriting business during thetransit period.

We know that Honinsha and the First National Bank had the functionof underwriting as part of their business. Honinsha was the semi-oMcial
corporation established in 1873 for the purpose of developing the economy of

Hokkaido and Karafuto districts, and the government lent the corporation
steamers and funds. Its business was sea transportation between Hokkaido andthe capital, drawing documentary drafts and underwriting cargoes which werecarried by the corperation. This corporation was winded up only one year
after its establisment. The reason for its dissolution was not clear though.

The First National Bank was established in 1873 and began the underwriting

business in 1877. In the beginning its business was confined to generalbanking business. However with the development of drawing up documentarybills in the northern districts of Japan, it was necessary to underwrite cargoes,

But there were no underwriters. Then in 1877 by permission of the Depart-

ment of Finance the bank began to underwrite the cargoes on which theyissued documentary bills. The bank kept up this underwriting business until

the Tokio Marine Insurance Company was established in 1879, and thentransfered its business to the latter.

Those two, Honinsha and the First National Bank can not be regarded
as modern underwriters. Because they were so-called merchant insurers whosebusiness was fundamentally sea transportation or banking, engaging in marine

insurance as a side line. And though their underwriting method and techniques were not clear, it does not seem to be always rational.

It is generally admitted that the establishment of the Tokio Marine
Insurance Company in 1879 should be regarded as the first modern marine
insurance firm in Japan. Since the Meiji Revolution (1868) the government
fostered and protected domestic industries and introduced capitalistic production

methods and capitalistic institutions so as to develop the economy of Japan

rapidly, and to escape from the danger of Japan becoming a foreign colony.
With regard to foreign trade and ocean transportation the circumstances did

82 HIROMASA YAMAMOTO
not permit any exception. The foreign trade ofJapan during the early Meiji
period may be expressed as colonial trade. In those days foreign trade wascarried out by foreign firms at foreign settlement concessions in Japan andalmost all goods were exported and imported by those firrhs. The Japanese
government had to develop foreign trade and also a merchant marine against
the pressure of cheaper goods produced in capitalistic countries lest it be madea foreign colony. It was under those circumstances that the establishment ofmodern underwriting was demanded.
The Tokio Marine Insurance Company was established with a capitalfund of 1,200,OOO yen which was furnished by aristocrats. The government
permitted it to begin underwriting business and guaranteed to compensate theloss of the company up to the value of 400,OOO yen. The company studied
the conditions of European underwriters and began its business following thesystem of European underwriters, Therefore we may say that this company
for the first time introduced marine insurance used in European countries,
differing from their predecessors, the Honinsha and First National Bank.
The introduction of the European system of underwriting business by thecompany is clearly shown by the following facts. Mr. Shibusawa, the founderof the company, sent Mr. Masuda to Europe for the purpose of studying theconditions of the marine insurance industry. And in the records of theestablishment of the company there were the " Principle of insurance " which

was translated into Japanese from the dictionary of commerce, and thetranslation of policies used by the Shanghai Yanze Insurance Company, etc.

The pelicies of the earliest period of the company do not remain today,
however it is supposod that they were made after the model of British under-

writers. As a result of the company following the systems of European
underwriters, it had less diMculties and needed a shorter preparation period
for starting its business. It was enough for the company to learn the experi-

ences and customs accumulated by Lloyd's and other underwriters in theprocess of the development of marine insurance.
At the start of its business, the Tokio Marine Insurance Company insured

only cargoes which were owned and traded by Japanese. However from theend of the same year the company began to insure cargoes owned by foreigners
also. In those days the trading areas of the company were confined to domestic

markets which constituted the coastal routes along the Pacific coast. And theDEVELOPMENT OF THE MARINE INSURANCE INDUSTRY IN JAPAN 83
amount insured was Iimited to 100,OOO yen for a bottom. But later theamount insured was enlarged, and the exceeding amounts to be insured were
disposed of by either being reinsured by foreign underwriters at Yokohama
or refused altogether.

In l884 the company began hull insurance with an enlarged capital of amillion yen in which 40,OOO yen was newly invested by the government.
Thus the company showed a favorable development under the protection of
the government from its establishment. Its development was supported by thecapitalistic development of Japan which produced an increase of demand formarine insurance. From the end of the nineteenth century the company
began to insure cargoes imported and exported and ocean going vessels in
addition to coastal vessels and cargoes, And in almost the same period thecompany set up agencies in London and other places.

III
The establishment of the Tokio Marine Insurance Company indicates the

beginning of modern marine insurance business in Japan. After its establishment other marine insurance companies were not established until 1893
when several underwriting companies started business. And then we should
answer the question of when the marine insurance industry of Japan wasable to stand upen a stable base and keep up their business.

Of course the development of marine insurance was conditionod fundamentally by the development of foreign trade and ocean transportation which

created much demand for marine insurance regarding cargoes and vessels.
And the establishment of the marine insurance indurtry as a whole should
be indicated by the fact that marine insurance firms were able to meet thedemands of marine insurance rationally and continuously, or cover losses
emerging from the perils of the seas. On the contrary marine insurance
before its modern establishment had the tendency of swindling and gamblingor lacked institutional or technical preparedness to meet the demand of marine

insurance. However, when we wish to study the establishment of the marine

insurance industry in Japan, other conditions also should be taken into
consideration. For marine insurance companies ofJapan were introduced andfostered after European underwriters had already engaged in business in Japan,

while imports and exports of Japan were performed by foreign trading84 HIROMASA YAMAMOTO
companies, and transportation of cargoes also was carried on by foreign
shipping companies. Foreign trading companies and shipping companies whichmonopolized foreign trade and shipping service of Japan had of course nowish to insure their cargoes and bottoms with Japanese underwriters who had

little experience, with small capital, and usually gave their patronage to
foreign underwriters.

Thus Japanese underwriters had to wait the development of Japanese
foreign trading companies and shipping companies until they had enoughpower to get back into their hands the foreign trade and ocean transportationof Japan. At that time Japanese underwriters had the opportunity at last to

get enough insurance contracts to keep their business and to get rid of
the monopolistic powers of foreign underwriters. Therefore the establishmentof the marine insurance industry in Japan should be studied in the processof the capitalistic development of Japan, especially that of foreign tradeand shipping, in addition to the institutional development of marine insurance.

a) development of shipping industry'We may say that Japanese shipping industry had settled down at theend of the nineteenth century. The Nippon Yusen Kaisha (N. Y. K.), whose
predecessor the Mitsubishi Kaisha had been established in 1875 and had been
fostered by the government, began its shipping service from Japan to Bombay
in l893. It was the first ocean shipping service for Japan, and the N. Y. K.

succeeded in keeping its service after a hard struggle with British lines.
Moreover, the N. Y. K. opened routes to Europe, the United States and Australia
in 1896, and thus the N. Y. K. succeeded in placing vessels on the main traderoutes ofJapan. In the same year the Japanese government strengthened its

fostering of shipping by means of the Shipbuilding Promotion Act andNavigation Promotion Act. Before that time foreign shipping had been cleared

from coastal trade routes already, and besides the Osaka Shosen Kaisha (O.
S. K.) had placed vessels on the routes to China ports and other nearby
sea trade routes. Thus the Japanese shipping industry, having been establishedat the end of the nineteenth century, began to show a more splendid development after the Russo-Japanese War of 1905.

b) development of foreign trade. For the purpose of making clear the problem with which we are here
concerned, the increase of the foreign trade of Japan has of course some

DEVELOPMENT OF THE MARINE INSURANCE INDUSTRY IN JAPAN 85
meaning, however more important for us is to recognize when the import andexport of Japan began to be performed independently by Japanese trading
companies. During the early period of the Meiji era the foreign trade ofJapan was carried on by foreign trading firms which had the privilege ofextra-territoriality as a consequence of the treaties of commerce and navigation

concluded between Japan and capitalistic European countries. The march offoreign underwriters into Japan coincided with those conditions. Accordingly
the mere increase of the volume of foreign trade of Japan did not produce anincrease in demands for Japanese underwriters, rather it resulted in more profit

and showed the superiority of foreign underwriters. Therefore it is necessary

for us to pay attention to the increase of goods exported and imported
by Japanese firms, and the establishment of a customs autonomy and theabolition of the extra-territoriality which enabled the result mentioned
above.

As a result of the remedy and the enforcement of treaties of commerceand navigation of July 17, 1899, consular jurisdictions in Japan were abolishedand customs autonomy was partly attained. Though the attainment of customs
autonomy in 1899 was perfunctory, it was usefu1 in preventing the fraudulent
practices of foreign trading firms, which had often been seen in the foreign
trade of Japan during the early period of the Meiji Era, and it made possible

for Japanese to trade under ordinary commercial practices. In this relation

we can not overlook the effect of the enforcement of the commercial code of1899.

At first foreign trading firms monopolized the foreign trade of Japan.

Thenceforth the influence of foreigners decreased by degrees and in 1908
Japanese trading firms handled over half the foreign trade of Japan for the
first time. It is said that after the First World War Japanese trading firms
were able to handle all exports and imports of Japan.

c) Institutional development of marine insurance
Forms of insurance policies

The cargo policy in Japanese used by the Tokio Marine Insurance
Company at the beginning of its business, followed a modified Japanese versionof Lloyd's policy. This policy was used by the Tokio Marine Insurane
Company and other Japanese underwriters until the forms of marine insurance

policies in Japan were unified in October 1898. The Hull policy was also

86 HIROMASA YAMAMOTO
based on the form of Lloyd's policy and its contents consisted of three parts ;parts of items to be designated, parts to be regarded as ordinary clause andparts to be regarded as particular clause,

As a result of the enforcement of the commercial code on July 1, l898,

the Tokio Marine Insurance Company and three other underwriters decided
to improve and to unify their policies from the necessity of harmonizingthem with the commercial code which was founded on the continental
law, and underwriters made special contracts with each other regarding
matters not prescribed in the code. Consequently the first unified marine
insurance policies were formed in October 1898, and carried into effect inNovember of the same year. Those policies, sotalled "forms of 1898's"
followed fundamentally Lloyd's policies, though it prescribed more minutely
the part of the ordinary clause after the model of continental policies.
Institutions of vessel inspection

Vessel inspection which was the premise of modern and rational marine
insurance was carried out as early as the beginning of underwriting by the

Tokio Marine Insurance Company. The Company made a request for vessel
inspection to the Department of Transportation at the beginning of its businessand concluded marine insurance contracts with only cargoes loaded on bottoms

which were certificated by the Department of Transportation as seaworthy.

Therefore, though the government did not adopt the system of compulsory
vessel inspection in those day, the company was relieved of the occurence ofloss caused by the defects of vessels. At first the company rendered services
of vessel inspection with every contract, but in May 1882, it advertised thatit had adopted the rules of shipbuilding used by the Board of Vessel Controlof the government, and insured only cargoes which were loaded on vessels
adapting such rules.

In November 11, 1883 the government decided to establish an institution

for vessel inspection in compliance with the request of the Tokio Marine
Insurance Company that had the intention of beginning hull insurance. And

then vessel inspection oMces were opened at Kobe and Hakodate with theenforcement of the rule of inspection for western type vessels on December 22,

1884. The rule prescribed compulsory vessel inspection regarding western
type vessels and vessels which passed inspection were given certificaion.

The Department of Agriculture and Commerce ordered the Tokio Marine

DEVELOPMENI[' OF THE MARINE INSURANCE INDUSTRY IN JAPAN 87
Insurance Company not to insure both cargoes and vessels unless the vessels to
be insured had certificates given by the inspector or cargoes to be insured were

to be loaded on the vessels certified. That order had the proviso that marine

insurance contracts could be concluded without inspection with vessels whichwere certified by Lloyds and other foreign vessel inspecting institutions.
As the next step the government enforced the vessel Inspection Law in April
1896. Thus the system and institution of vessel inspection was established inJapan.
Enforcement of Ihsurance Business Law

In the early period of the insurance business in Japan the government
regarded and regulated insurance corporations the sapa. e as usual commercial
companies and had no special regulating rules for underwriters. But after the

Sino-Japanese War of l894-1895 inflation and the inflow of the indemnityfrom China stimulated the fever of starting enterprises, but many bubble
insurance companies were doomed to fail. As a consequence the government
gave up its Iaissez-faire policy toward underwriters.

Thus from July, 1898 the commercial code was enforced and the Insurance

Business Law was enacted on July l, 1901. The enactment of those actsshould be regarded as the intention to rationalize and regulate commercial
transactions, and the latter act including the licensed system created thesituation of placing insurance companies under governmental control so as toprotect the interests of the insured. The Insurance Business Law prescribedthat those who wished to establish an insurance company were requested toask permission of competent authorities and that insurance companies had toaccumulate a liability reserve fund to be fixed by the prescribed rule.
By those policies the fundation of insurance firms became solid and the interests of the insured were also secured.

At the same time regulation against foreign underwriters began, too.
Based on Imperial ordinance No. 380 the Minister of the Department ofAgriculture and Commerce ordered foreign insurance companies to deposit
100:OOO yen by the end of that year. And the abolition of extra-territorial

jurisdiction was also carried out about the same time as mentioned before.
Up to that time there were no regulations for foreign underwriters. At thetime of the enactment of the Imperial ordinance there were twenty-six marine

insurance companies operated by foreigners, in which six companies engaged

88 HIROMASA YAMAMOTO
in fire insurance also, but by October 1906 foreign underwriters were reduced.
to ten companles.
The basis for the steady development of the marine insurance industryof Japan was established, we may say, after the Russo-Japanese War of 1904

to 1905 at the latest. In 1904 there were 26 home marine insurance companies compared w'ith ten foreign underwriters in Japan, In 1904 and afterwards
new contracts concluded with Japanese underwriters increased in value ten times

in comparison with those of foreign underwriters. The premiums received by
Japanese underwriters also showed almost the same reSults. Because of the
Iack of statistics, we cannot compare the activities of Japanese underwriters

with foreign underwriters in Japan before 1904, However, the facts mentioned

above suggest to us that Japanese underwriters got almost all contracts inJapan in the earlier period of the twentieth century. Of course it does notmean that they could insure the large part of cargoes exported and imported
in Japan, but it means that they could meet the demands for marine insurance

in domestic markets which grew rapidly. Therefore, the marine insurance
industry of Japan was established, we may say, with the basis for its steadydevelopment after the Russo-Japanese War of 1904 to l905 at the latest.
And our conclusion is also supported by the institutional development of marine

insurance including the enactment of the Insurance Business Law on the one

hand and the splendid development of foreign trade and shipping of Japanon the other hand.

N
A ASSIMILA9AO
DO IMIGRANTEAJAPONESNO BRASIL(')

Hiroshi SAITO

No ano de 1958, a imigragao japonesa para o Brasil comemora, o seu
cinquentenario. Iniciada em 1908, essa corrente imigrat6ria trouxe, at6 o ano

de 1955, cerca de 200 mil migrantes para o Brasil, entremeiada com uma
interrupgao de dez anos -de 1942 a 1952 -, quando se deu a altima guerra
mundial. Dentre os 185 mil japoneses, aproximadamente, entrados no Pais no
periodo anterior a guerra, mais de 700/o chegaram nos onze anos que precedem
a 1936, fato que atesta inegavelmente sua recenticidade hist6rica em contraste
com outras correntes, em especial, as europ6ias.

Popectaga"o- Pela ausencia de dados censitarios fidedignos e devido a sua

localizagao esparsa em varios Estados, nao dispomos de nUmeros exatos s6bre

a populagao de japoneses e seus descendentes. Uma pesquisa por n6s levada
a efeito em 1952-53, mostrou que a proporgao entre os issei (imigrantes) e nisei(descendentes) era de IOO : 170, respetivamente (Izumi e Saito !953). ()alcu-

Iando-se a populagao sobrevivente dos issei, naquela data, em 127,238 (Yama-

moto 1949), teremos uma populagao de nisei em 216.305, sendo a populagao
total de 343.543. Seguindo o mesmo criterio, a pepulacao nipo-brasileira no(*) O presente artigo baseia-se na comunicagao, ern ingles, apresentada pelo Autor a Terceiro()onferencia Internacional Cat61ica Migragao que teve lugar ern setembro de 1957, na Assisi,

Italia. O Autor agradece a Eseola de Sociologia e Politica de Sao Paulo e a Comiwio
Cata61ica Japenesa em Sio Paulo, sob cufos ausptcios o Presente relat6rio foi elaborado.

89

HIROSHI SAITO

90

fim de 1955, seria aproximadamente de 364.791. Somados a Gsse ntimero, os
que vieram no ap6s-guerra, cerca de 7.717, a mesma populagao estaria orgada,entao, em 372.508. Tendo em vista, ainda, certo ntimero de japoneses que
entraram no Brasil, vindgs de outros paises sulamericanos, podemos afirmar
que a populagao nipo-brasileira no pais, em fins de 1955, nao ultrapassava a
380 ,mil pessoas.

Tipos do imigrante E conhecido que essa corrente imigrat6ria foi encaminhada para os diversos setores de atividades agricolas, originando-se, clesse

fato, a concepgao, nao digamos err6nea, mas pelo menos confusa, de que todoo imigrante japones proveiu do meio rural, Na verdade, tratava-se de grupos
mistos, com a predminancia de componeses, mas com consideraveis parcelas deassalariados, pequenos comerciantes, operarios e outros elementos urbanizados.
A contribuigao desses bltimos foi particularmente nothvel a partir de 1925, pelo

recrudescimento da migragao rural-rubana no Japao, ocasionada por uma serie
de problemas s6cio-econ6micos tao caracteristicos das fases de intensa industrializagao.

No Estado de Sao Paulo, para onde se dirigiu o grosso da corrente, amaior parte dos japoneses foi encaminhada, como trabalhadores contratados,
nas grandes fazendas de caf6. 0utros, em ntimero consideravel, estabeleceramny-se
desde o inicio, como proprietarios, nos diversos nticleos, criados e assistidos por

empresas de imigragao e colonizagao. Essa diferenga nas modalidades deestabelecimento deu margem, como e obvio, a uma diferenciagao no posterior
processo de acsensao social do imigrante. Os trabalhadores contratados tiveram

que buscar, ap6s uma regular permanencia nas fazendas de caf6, os meios dese tornarem lavradores independentes, formando, nesse itinerario ascendente,nUcleos espentaneos em diversas regi6es de Sao Paulo e Parana, em contraste
com os nacleos previamente planejados e assistidos por empresas de colonizagao.

A mesma diferenga acarretou, igualmente, uma maior ou menor verossimilhanga,de um lado, e na maior ou menor rigidex e flexibilidade, de outro, na
reconstituigao da organizagao social da sociedade de origem (Willems e Saito
1947).

2. Mobilidade social e espacial

Quem teve a experiencia de travar contatos diretos com imigrantes
japoneses ou acompanhar de perto a evolugao dos grupos dessa etnia nos

A ASSIMILACAO DO IMIGRANTE JAPONES NO BRASIL 91
thltimos decenios, sabe que eles sao extremamente m6veis, ou pelo menos, tem

sido assim at6 agora. Cada familia de imigrante e portador de experiencia,
em m6dia, de quatro a seis mudangas de residencia durante os primeiros quinze

anos ap6s a chegada no Pais. Sao frequentes as familias de imigrante que sedeslocam de oito ou mais vezes num prazo de vinte e poucos anos. Geralmente, cada um desses deslocamentos corresponde in mudanga de status: decolono a arrendatario, de arrendatario a proprietario, ou vice versa,

Para os imigrantes colonos de caf6, os estagios de sua ascensao tem sido
os seguintes: a) permanencia de doisa tres anos de trabalho como colono nas
fazendas de cafe ; b) ap6s o que procuram formas de trahalho mais favoraveis
como contratistas, meciros ou arrendatarios durante um perfodo que varia detres a cinco anos; c) finalmente, com os recursos acumulados, tornarri-se
pequenos proprietarios. O tempo consumido nessa linha ascensional e variado :doengas, calamidades e outras pequenas desgragas sao suficientes para que afamilia do imigrante retroceda ao ponto de partida, para novamente comegar-- t-o ltlnerarlo.

Nesse processo de diferenciagao social, ha, naturalmente, elementos que, pordesajustamento ou por apego as outras profiss6es, desistem de atividades
campesinas para abragarem outras ocupag6es. Sao, por exemplo, os pequenos
comerciantes, empregados de escrit6rio, operarios e outros artffices que, embora

em namero reduzido, surgiam, antes da guerra, nos pequenos centros unbanos
do Interior, onde era numerosa a presenga de grupo japones.
E de se notar, tamb6m, que esses deslocamentos de antes da guerra eramrealizados em grupos, ja pelo sentimento de inseguranga e riscos que apresen-tava a migragao individual, sem ainda o adestramento suficiente na cultura
dotiva e o ajustamento tecno16gico completo ao novo meio.
No ap6s-guerra, a mobilidade do imigrante japones continua a ser intensa,

por6m com uma diferenga contrastante com o mesmo fen6meno de antes daguerra:o abandono, quase por completo, da id6ia outrora comum de "sucesso

rapido e retorno ao Pais de origem," Numa pesquisa por n6s realizada em
1952-53, cerca de 900/e de pessoas entrevistadas afiangara-nos sua disposigao de" se fixar e morrer nesta terra." A tendencia de fixagao e, ainda, demonstrada
nos seguintes algarismos : em 1938, as percentagens ocupadas pelos proprietarios

rurais e os nao proprietarios (trabalhadores e arrendatarios) eram de 56,4 e

43,6, respetivamente; em 1952, a mesma proporgao foi de 71,O e 29,O (Izumi

92 HIROSH,I SAITO
l954).

Hoje, a mobilidade do grupo japenes no espago, inclusive a dos seus
deseendentes, apresenta dois carateristicos principais : a) a remigragao de grupos
em sentidos contrarios, isto e, movimentos centri ugo e centriPeta; b) uma intensa
diversificagao ocupacional.

De fato, quasisquer que sejam os degraus escalados por imigrantes, parasair de sua posigao de simples trahalhador rural e chegar a situagao deproprietario ou posigao equivalente em outras ocupag6es, observa-se, nos anos

recentes, a intensificagao de dois movimentos em sentidos contrarios: uma
corrente centri uga flui sempre em busca de zonas pioneiras ora em desbrava-

mento nos Estados de Mato Grosso, Parana, Goias e outros. Ali os japoneses
trahalham, lado a lado, com os migrantes procedentes de outras regi6es do Pais.
A outra corrente no sentido centripeta esta atraindo os japoneses, a semelhanga

de migragao rural-urbana, nas areas subrubanas de grandes cidades como Sao
Paulo e Rio de Janeiro, dedicando-se a agricultura intensiva que abastece as
populag6es metropolitanas.
Segundo nossas observag6es, tanto o movimento centri ecgo como centripeta sao

oriundos das alternativas com que depara o imigrante em dada epoca e em
determinado estagio de sua mobilidade. A prova disso e que, fazendo pesquisas

tanto nas zonas pioneiras como nas areas suburbanas, encontramos membros do

mesmo grupo de parentesco ou da familia, cujo desmembramento tem severificado em alguma parte do Estado de Sao Paulo onde residiam juntos.
A mudanga de lavradores japoneses e seus filhos para outras ocupagaoes,
tais como pequenos comerciantes, industriais, profissionais de diferentes oficios e

assalariados em geral, e notavel nos anos recentes, nio s6 nas grandes cidades,

mas tambem nas pequenas cidades do Interior. E interessante notar que essa
mobilidade ocupacional nao e mais limitada, como aconteceu antes da guerra,i comunidade 6tnica, mas sim, entrosando-se cada vez mais com as instituig6es

da sociedade dominante. Os comerciantes tem sua maior clientela nas pessoas
de outras origems 6tnicas; os profissionais atendem mais brasileiros que seuscompatriotas e, assim por diante. Sem d"vida, el medida que se amplia oambito socia1 do grupo, os elementos a ele partencentes sao enquadrados na
estrutura maior e os canais de ascensao social sao mais encontradig6s no meio
urbano.

Tudo isso nos leva a crer que os imigrantes que entraram no Brasil na

A ASSIMILAC.Z;O DO IMIGRANTE JAPONES NO BRASIL 93'

6poca anterior a Ultima guerra, estao atingindo fases mais adiantadas no processo

de assimilagao. Os primeiros anos que se seguem a chegada ao Pais sao
consumidos na aquisigao de novos conhecimentos, na acomodagao aos nov,os
padr6es de comportamento, a fim de fazer face aos problemas que surgem docontato com a cultura diferente. Nessa fase de ajustamento, os imigrantes raramente se arriscam a deslocamentos individuais por ser grande o risco apresentado
por tais aventuras. Preferem, entao e, sempre que possivel, deslocar-se em grupo,

por sentirem assim maior seguranga. Mais tarde, quando o processo deaquisigao da cultura adotiva ja vai avangado, os imigrantes sentem-se encorajados a buscar as areas at6 entao de desconhecidas e tentar outras ocupag5es.

3. Tendencias atuais
A organicagdio social e as instituige"es Os japoneses e seus descendentes no
Brasil nao constituem, in strict. sense, um grupo de minoria (minority group), ja

pela ausencia de mecanismos especificos para sua persistencia, ja' pela ausencia

de discriminagao rigorosa da parte da sociedade dominante. Talvez, por essa
razao, nao reparamos senao em diminuta escala, a presenga de instituigo"es gtnicas

paralelas (parallel ethnic institutions) de que se observa na comunidade japenesa

nos Estados Unidos (Broom and Kitsuse, 1955). No entanto, isto nao quer
dizer que os japoneses nao possuam sua organizagao social a parte e diferente
das instituig6es da sociedade maior.

Os japoneses desenvolveram certos tipos de associagao, cuja decomposigao
e possivel em varios niveis ou amplitudes. De maneira geral, ha duas esferas

em que se distinguem as areas de seu controle: 1. Instituig6es de maior
amplitude que visam abranger todos os elementos da comunidade 6tnica japonesa,

independentc do controle que realmente possam exercer essas instituig6es;
2. Instituig6es de amplitude menor, das quais depende, de maneira direta, aorganizagao de comunidades locais japonesas a semelhanga de organizagao
comunal de mura (village) e, porisso, com maior grau de integragao social.
Entre as instituig6es de maior amplitude, ou globais, contam-se numerosas
associag6es que atuam nos setores de esportc, religiao, recreag5o, educagao e finssimilares, cada qual com sua "agenda," isto e, realizag6es ciclicas previstas.
Essas associag6es caracterizam-se pelo maior ou manor grau de exclusivismo em

relagao at sociedade dominante: algumas estao plenamente entrosadas com as
instituig6es similares brasileiras; outras sao limitadas dentro da comunidade94 HIROSHI SAITO
6tnica, , No setor esportivo, por exemplo, as associag6es de J'injitsu (judo) contam

no seu seio numerosos membros brasileiros; as de atletismo promovem competig6es regulares com as correspondentes brasileiras depois de preliminares
intercomunitarias; as de base-ball congregam apenas os elementos de origem
japonesa, apesar de se filiar a uma federagao oficial, pela simples razao daausencia de instituigao similar na tradigao brasileira, O mesmo se pose dizer
das instisuig6es religiosas: as associag6es cat61icas ou protestantes estao bastanteentrosadas com as similares brasileiras ao passo que as de seitas budistas sao decarater exclusivista,

As instituig6es globais estao longe de exercer, como o pretenderiam, ocontr61e s6bre a comunidade etnica total, sendo apenas permeaveis a seu contr61e

aqueles que s6 mediante essa alternativa podem satisfazer suas necessidades.
Regra geral, o alcance do contr61e exercido por essas instituig6es s6bre os ele-

mentos de origem japonesa 6 proporcional a distancia que separa os indivfduos
ou grupos de duas culturas, a brasileira e a japonesa.

Em contraste, as associag6es de amplitude menor sob as ,quais persiste aorganizagao de comunidades japonesas locais, na maioria das veaes, rurais, sao
resultantes do processo de reconstituigao e modificagao da organizagao social

do Pais de origem e, porisso, caracterizam-se pela maior integragao social emaior eficiencia de sang6es organizadas (Saito, 1954-55). Q;uase todos os nQcleos

rurais, formados per imigrantes japoneses nos Estados sulinos do Brasil, sao
possuidores desse tipe de organizagao, embora se verifique pequena variagao na

forma e em conteudo. Sao, por exemplo, representadas por agrupamentos taiscomo JVi onjinny-kai (Associagao japonesa), Seinen-kai (Associagao de juventude),Fnjin-kai (Associagao de mulheres) e outras semelhantes, juntamente com adivisao formal de grupos de vizinlhanga e respectivo sistema de cooperagao.

Esses agrupamentos, de idade ou de sexo, tem raizes na cultura de origem

bem como no seu sistema dinamico por meio do qual sao postos em funcionamento e continuagao tendo consistencia e integragao enquanto durarem ascondig6es favoraveis ligadas a comunidades rurais.
E interessante notar que, fora desses nacleos rurais, as associag6es de tipo

exclusivista tendem a enfraquecer, ou mesmo, a desaparecer entre os japeneses

residentes nos centros urbanos, sobrepondo-se a'i os interesses econ6micos,

ocupacionais e de classe aos de ordem Etnica. Visivelmente, os impactos demodernizagao passam a subjugar a resistencia cultural ou social dos grupos

A ASSIMILACAO DO IMIGRANTE JAPONES NO BRASIL 95
de imigrantes, a medida que estes se afastem da esfera de contr61e das insti-

tuig6es 6tnicas. Muitas vezes, o fen6meno 6 mal percebido pelo pr6prio grupo

etnico e a comunidade japonesa local nao esta consciente da evasao de seus

membros para a comunidade dominante,
Mudangas de cultura material --- As tecnicas de subsistencia e os instrumentos

de trabalho sao, via de regra, mais susceptiveis a mudanga. Neste particular, a" bagagem cultural " que e trazida pelo imigrante se revela pouco Qtil ao cabode primeiros anos, sendo, entao, substituida por equipamentos tecno16gicos dacultura adotiva. E quase surpreendente a rapidez com que se processa essa
substituigao : um estudo s6bre o processo de acomodagao entre os imigrantes de
ap6s-guerra, mostrou que ao cabo de dois anos, a maior parte dos instrumentos
de trabalho agricola, assim como b6a parte dos utensilios caseiros havia sido

substituida. Entre os imigrados antigos que chegaram ao Brasil nas epocas
anteriores b guerra, a habitagao e o vestuario nao conservam mais tragos dacultura originaria, senao em detalhes quase insignificantes (Saito, 1955).
Tragos culturais japoneses, porventura conservados nos estilos arquitet6nicos e
nos aspectos funcionais da moradia, sao muitas veaes substituidos ou eliminados,mais tarde, por ocasiao da construcao de moradias novas e mais confortaveis.

A alimentagao e os habitos alimentares parecem constituir, entre oselementos da cultura material, aqueles que se mostram mais persistentes.
A mudanga, neste caso, nao implica, necessariamente, a substituigao ou
eliminagao de tragos; toma mais a forma de dualismo, mediante a adogao denovos tragos e a persistencia dos antigos, o que torna verdadeiramentecomplexos os padr6es alimentares do imigrante japones. Mas, a forma dedualismo nao e uniforme, nem consistente, comforme as circunstancias oexigirem, os imigrantes adotam quase que integralmente os padr6:s alimentares

da cultura adotiva, com desprezo dos seus, para mais tarde, Iogo que circunstancias o permitam, recuperar seus habitos antigos. Ja na segunda geragao,

por6m, a mudanga e mais patente: os niseis preferem a carne ao peixe, ofeijao ao arroz simples, o tempero de gordura e alho aos condimentos japoneses.

Familia e parentesco O drama profundamente humano no decurso doprocesso de assimilagao toma sua forma mais tangivel na vida familia1 do
imigrante, e em especial, na relagao de pais-filhos, a qual experimenta, maiscedo ou mais tarde, tranzes agudos. Em seu processo de socialigao, os filhosde japoneses passam por experiencias, muitas vezes contradit6rias dentro e fora

96 HIROSHI SAITO
do lar, entrando em choque os padr6es ideias de duas culturas distintas a que
estao ligados. Os pais valorizam, geralmente, a educagao formal de seus filhos,

fazendoDs estudar em escolas secundarias e superiores brasileiras, gesto a que

se atribui um duplo sentido: a) desejo de os filhos adquirir o conhecimento
linguistico e da cultura adotiva, compensando, assim, a desvantagem com quetiveram que lutar na competigao com os brasileiros, b) o atribuir-se grandevalor a educagao formal em termos da tradigao japonesa.

Aparentemente paradoxal a esse procedimento, os pais temem ao mesmo
tempo que, com os conhecimentos adquiridos, os filhos passem a comportar-sede maneira diferente de sieus pais, afastando, assim, cada vez mais, as
expectativas reciprocas de comportamento. Pretendem controlar, entao, a conduta

de seus filhos de ac6rdo com as normas do familialismo japones, exaltando ovalor do amor filial, encarecendo a obrigagao moral de os filhos, inclusive

noras e genros, sustentarem e ampararem os pais na velhice. Os meios desolugao de que lancam mao os pais nessa emergencia sao varios: um delesconsiste em que, por meio de ensino da lingua japonesa, incutir na mente dos

filhos o que se chama de "espirito japones," a pretensa espinha dorsal damoralidade japonesa, Outro meio 6 procurar uma nora ideal, pelo menos parao primogenito, que tenha uma educagao tipicamente japonesa e que corresponda
exatamente is expectativas dos pais. Dai a grande importancia que os japoneses

ligam a manutengao de escolas de lingua japonesa e a prosperidade de escolas

domesticas destinadas bs mogas, onde se ensinam as etiquetas japonesas.
Esquematicamente falando, desse procedimento dos isei, o conhecimento da
lingua japonesa equivaleria ti aquisigao do chamado "espirito japones" que,por seu turno, significaria a manutengao do sistema familial japones.
Mau grado a tentativa de racionalizagao por parte dos pais, a realidada 6que os filhos reagem a esse procedimento dos pais, is vezes masmo com frontal
contrariedade. Os nisei, educados nas cidades, sentem-se atraidos cada vez maispelos padr6es ideais da sociedade dominante. Ante tal reagao, a atitude dos

isei se modifica, traduzindo-se em recuos com boa dosagem de conformagao.

Q;uando a acomoclagao de avangos e recuos e o reajustamento sucessivo derelagao pais-filhos nao se processarem de maneira desejavel, surgem, entao,
conflitos, com a inevitavel provocagao de desorganizagao familial. A fuga dejovens de ambos os sexos, as criangas abandonadas, muitas vezes frutos de uni6es
socialmente nao sancionadas, o suicidio de velhos solitarios, cujas notfcias sao

A ASSIMILACAO DO IMIGRANTE JAPONES .NO BRASIL 97
frequentes nos jornais, saNo sinais desse drama familial do imigrante japones;

O problema do intercasamento, ponto cruciante na relagao pais-filhos,
representa at6 certo ponto, a tendEncia observada na assimilagao. Apesar daopiniao estereotipada de que o japones e pouco propenso a matrimonios interetnicos, e surpreendente o aumento das uni6es desse carater, especialmente nos
filtimos tres ou quatro anos. E sinal de que os mores realcionados com o sistema

familial, na nossa opiniao, a maior barreira no caminho da miscegenagao,
estao se desmoronando. A atitude dos pais em relagao ao matrim6nio de seus
filhos com c6njuges de origem 6tnica diversa, esta se modificando rhpidamente :de atitude de " renegagao terminante " de ha uns dez anos passados, passou ha,

digamos, uns cinco anos, i de "contrariado" e de "constrangido," e agora,os pais mostram-se em geral, "conformados." Neste particular, os mores
japoneses estao perdendo seu carater sagrado, cedendo lugar a aparatos de como
salvar as "apare'ncias." E claro que, em se tratando de miscegenagao em que

entram em j6go a atitude de ambas as partes, seu aumento sensfvel implica a

modificagao, no sentido favoravel, do comportamento equivalente do grupe
dominante, A respeito, temos certeza de que a fraca aceitagio demonstrada

num inqu6rito realizado em 1941 (Willems, 1948) apenas 5,120/e para
casamento deve ter sofrido uma profunda alteragao nestes quinze anos.

O que acima ficou dito, nao se aplica de maneira uniforme a todo ogrupo japones, que apresenta uma maior ou menor variagao segundo as
camadas, areas de residencia e graus de aculturagao. Nesse ponto, a variante" rural-urbana " sera, talvez, a de maior significagao. Nos nticleos rurais, onde

se mostra consistente a organizagao social do mura, a miscegenagao encontra

ainda uma maior resistencia, ao passo que, nos meios urbanos, a tendencia 6
francamente favoravel a aculturagao, em geral, e a miscegenagao, em particular.

A mesma diferenga entre os meios rural e urbano se observa em relagao haculturagao lingUistica: na cidade, a lingua japonesa e conservada apenas
entre o nthmero restrito de nisei.

4. RelaeJ6es inter•etnicas
Apesar de diferenciadas, aparentemente, por um profundo hiato, a cultura

luso-brasileira e a japonesa nao experimentaram ate agora, como muita genteo suporia, em quase meio seculo de contato, conflitos s6rios e generalizados, queacarretassem ou resultassem numa discriminagao recial ou social em relagao ao

98 HIROSHI SAITO
grupo migrante. Talvez atuassem certos fatores hist6gicos e eco16gicos; ou,
apesar de sua aparente diferenga nos aspectos manifestos da cultura, talvez
existissem fatores favoraveis nos aspectos menos tangiveis, como valorag6es e

motivag6es. A diferenga de cultura afetou, 6 verdade, a tensao nas relag6es
entre a geragao dos emigrados ea de seus filhos, aquela pertencente a cultura
japonesa e esta i cultura luso-brasileira, provocando cheques e conflitos dentro

da propria comunidade 6tnica que, no momento atual, atravessa a fase detransigao. Mas, essa diferenga cultural nao tem provocado, pelo menos ate
agora, reag6es constantes que chegassem a criar situag6es institucionalizadas

entre os dois grupos 6tnicos em contacto. A ausencia de tensao permanente, esobretudo, generalizada, entre os dois grupos, deve-se em boa parte, h susencia,
por sua ver, de padr6es discriminat6rios da propria cultura luso-brasileira.

No passado, conhecemos alguns casos de choque ou confiito entre a
populagao de origem japonesa e as de outras origems, cujos efeitos, na maioria
das vezes, sao restritos ao ambito regional ou 1ocal. Nesse sentido, podem-se
destacar certos tipos de choques; 1. As cooperativas agricolas, cuja criagao se

deve a iniciativa de japoneses, suscitaram no decurso de seu desenvolvimentoum estado de competigao com os comerciantes brasileiros que se tornaram seus
rivais. 2. Em alguns centros de colonizagao japonesa, particularmente naqueles

de maior antiguidade, desenvolveram-se, igualmente, uma acirrada competigao
entre os negociantes japoneses, de um lado, e os de outras origems, de outro;competigao essa que se degenerou, em alguns casos, em conflitos quandoa ]uta era transferida para o cenario politico local. E de se notar que,num e noutro, o car6ter fundamental da competigao nao e senao fen6menosocial "normal" que se observa em todos os grupos sociais. Quando, por6m,
a competigao entre grupos 6tnicos se desenvolve e atinge tal intensidade quechega a ameagar, pela concorrencia movida pelo grupo migrante, o status de
um determinado grupo da sociedade receptora, surgem conflitos, sendo invocados,

entao, fatores 6tnicos ea "marca racial." Sao, portanto, conflitos que surgem
em fungao da " marca racial " e de classe, condicionados h certas circunstancias
peculiares.

A fungao de classe e de " marca racial " no desencadeamento da competig.ao

e confiito no caso especifico de que estamos trantando, sera melhor compreendida a luz das seguintes circunstancias :a.) Na zona rural, quando os colonos japeneses formaram seus nQcleos oA ASSIMILACAO DO IMIGRANTE JAPONES NO BRASIL 99'

contato a'i estabelecido foi com os campeneses brasileiros da redondeaa, os

chamados caboclos. O contato, em sua fase inicial, se desenvolve no planoeco16gico, com a subsequente acomodagao simbi6tica. As modalidades decoexistencia sao varias, dependendo do nfvel em que se efetua o contato:em
geral, a populagao da camada "baixa," constituida de pequenos proprietarios
e trabalhadores, se torna uma fonte de bragos para lavradores japoneses, ao
passo que a camada "alta," constituida de grandes propritarios e negociantes,

fornece meios de produgao aos japoneses, tais como transporte, financiamento
de mercadorias e locagao de terras cultivaveis, quando se tratam de japoneses

t tnao proprletarlos.
b.) Ao cabo de alguns anos, o quadro apresenta, na comunidade 1ocal,

uma nova disposigao de ordem econ6mica e social: a camada "baixa,"
constituida de trabalhadores caboctos; a formagao de uma camada "media"
com a absoluta maioria de pequenos produtores de origem 'japonesa ; a camada"alta" de negociantes e grandes proprietarios, esta ja incluindo alguns deorigem japonesa que lograram progredir na escala social.

c.) Justamente nessa fase 6 que se desencadeia a competigao e conflito
entre as instituig6es e comerciantes japoneses, de um laclo, e elementos congeneres

brasileiros de outro. O grupo " nativo " ameagado em seu status, apela entao
a recursos politicos, atribuindo ao conflito um carater pretensamente etnico ou

politico conforme o caso.

d.) A quarta fase 6 squela que estamos presenciando atualmente na
maioria de nficleos japoneses nos Estados de Sao Paulo, Parana e regi6es
pr6ximas: i medida que se torna firme a presenga, na comunidade Iocal, doelemento japones, cuja forga econ6mica e refletida, em parte, como uma
expressao politica atrav6s de seus descendentes em gozo de direitos politicos, acompetigao e, porventura, o conflito tendem a perder seu carater etnico, passando
a situar-se no plano geral.

Do exposto, deprende-se que as relag6es 6tnicas, limitado o seu sentido na

relagao inter-grupal, obedece, a um determinado ciclo, i semelhanga de race

relations c"cle (Bogardus, 1930; Park, 1937). Comegando com a fase em quese realiza a acomodagao simbi6tica no plano eco16gico e curiosidades mQtuas
no plano cultural, o contanto segue uma sucessao de estagios em que pesam as
atitudes estereotipadas de ambas as partes, a " marca racial," cenario politico
1ocal, chegando, enfim, a uma configuragao com maior equilfbrio e estabilidade

1oo HIROSHI SAITO
nas realg6es etnicas, e portanto, menos sujeita ao surto de conflito. Os nGcleos

rurais, formados com grandes parcelas de elementos japoneses, estao, a nossover, atravessando ou chegando as fases finais desse ciclo.
Nessa altura, conviria acentuar certas condig6es culturais que se manifestam

nas relag6es etnicas. Estudos recentes demonstram que em certas comunidades,as quais ja' adquiriram a configuragao acima relatada, ha, no caso do japones,

um desfasamento no status social com o econ6mico. Em outras palavras, ostatus do japones expresso em forga econ6mica, nao tem manifestagao correspondente no seu status social, devido a fatores culturais tais como conhecimento

deficiente da lingua e da etiqueta, que tornam obstaculos ao estabelecimento"normal" de interagao social e, consequentemente, de contato intimo e denatureza primaria entre a populagao japonesa e a brasileira. E de se suporque tais obstaculos sejam gradativamente removidos, uma vez que a expressao
social dos nisei supere a dos issei (imigrantes).

As relag6es de compadrio assume, nesse sentido, importante papel parapromover as relag6es fntimas e familiares. Observamos frequentemente que as

Iigag6es afetivas, trazidas pelo compadrio, diminuem os obstaculos que seoriginam da diferenga cultural.

Referencias citadas
BOGARDUS, Emory S.,
1930 A Race-Relations Cycle. American Journal of Sociology 35, n. 4: 612-17

BROOM, Leonard, and KITSUSE, John I,,
1955 The Validation of Acculturation: A Condition to Ethnic Assimilation. American
Anthropologist 57: 44-48
IZUMI, Seiichi

1954 Brazil ni okeru Nikkei Colonia no Keizai Seikatu. Ministry of Foreign OMce. TokyoIZUMI, Seiichi, and SAITO, Hiroshi. 1953 A Pesquisa s6bre a Aculturagao dos Japoneses no Brasil. Sociologia 15:l95-209

PARK, Robert E.,
l937 The Race Relations Cycle in Hawaii. in Romanzo Adams, Intermarriage in Hawaii.

New york
SAITO, Hiroshi'

i954'5iQgla R6??,P2e4rgltl[li"ilrrl;:n:6Rny7efiilo63d-egsC.o, /isa4i-gsslu3dsos-d7eoTranspiantagso cuiturai• socio-

1955 Imigrantes Japoneses de Ap6s--guerra: Problemas de Fixagao e Assirnilagao. (inedito)

WILLEMS, Emilio, and SAITO, Hiroshi

A ASSIMILACAO DO IMIGRANTE JAPONESNOBRASIL
1947 Shindo-Renmei: Um Problema de Aculturagao. Sociologia 9:133-52

WILLEMS, Emilio
1948 Aspectos da aculturagao dos japoneses no Estado de Sfio Paulo. Faculdade de Filosofia,

Ciencias e Letras, da Universidade de Sao Paulo

YAMAMOTO, Kiyoshi
1949 Zaihaku Nipponjin Jinko Suikei. Jidai n.8 Sao Paulo.

101

RATE OF PROFIT AND INTERNATIONALSPECIALIZATION OF PRODUCTION

Hikoji KATANO

1. The traditional theory of international specialization of production deals
with the problem of determining the specialized state for each country in a balanceof payment equilibrium under given prices (or its components) and resources.
However, in this paper, I intend to clarify to what extent we can recognize aninternational specialization of production with given prices (or its components)and free resources. The conclusion is that, whenever we are given prices (or its

components), we can point out specialized commodities or unspecialized commodities for all international equilibrium prices.

The traditional theory of international specialization of production shows us

that, when we are given prices (or its components), we can only pick up themost profitable commodity and the most unprofitable commodity in international
trade. Therefore, ip the case of three or more commodities, a specialized stateshould be recognized in a balance of payment equilibrium with given resources.
However, in the traditional theory, it may be assumed that all commodities are
specialized for all countries according to the relative quantities of resources foreach country. In this paper, I will develop a critique on the above-mentioned
point in the traditional theory. A summary of the critique is as follows: The
traditional theory has been developed from the point of view of the theory of
demand. However, from the nature of the theory of international specializationof production, this must be developed in the light of the theory of production
cost.(i) Thus the idea of the traditional theory is forced to explode. Why? The
reasons are elucidated in the following sectors.
2. In this paper, I will clarify to what extent we can tell about international103

104 HIKOJI KATANO
specializations of production under fixed conditions of production and real wages

for each country. The conclusion deduced from this reasoning may be used in
the case of determining a specialized state under fixed resources for each country
in the other stage.

In this paper, I will deal with this problem in a two-countries and three-commodities case; I and II country for two countries and 1-st, 2-nd and 3-rd

commodity for three commodities, where any one of three commodities may beeither production goods or consumption goods but all of these are neither production goods nor consumpt.ion goods.

Why I do not deal with a generalized case (multi-countries and multicommodities case) but two-countries and three-commodities case is that themethematical diMculties for the generalized case would be too much for me.
However, the conclusion in this paper may be much used in the generalized case.
For simplification, in this paper, I have made the following assumptions :(a) no tendency for monopolistic competition,(b) constant return for scale of production,( c ) constant preference of consumption for prices,(d) no international transfer of labor and capital,(e) to eliminate international transportation cost and other similar costs.

These assumptions make our theory more inferior than the traditional theory insome respects. For example, assumption (c) eliminates the traditional analysis( 1 ) The theory of international specialization of production must be explained

for the problem, what commodities a country produces under given
techniques and tastes. In such a problem, equilibrium should be defined

as a state in which there is a constant demand-supply under constanttechniques and tastes. This is the state where demand and supply arecompletely equalized under such prices as to give capitalists a profit
accounted by the average rate of profit : This is a long-time equilibriumin the sense of A. Marshall. Such an equilibrium can not be defined byonly the simple equilibrium of demand to supply. The simple equilibriumof demand to supply is meant by the state in which all prices are
determined in order to equalize demand with a given supply. But asthese prices give capitalists a profit under or above the average rate ofprofit, the supply may change in the long run. An equilibrium defined

as a simple equalization of demand to supply may be broken down soonafter its coming into existence, and then be realized in other levels of
demand and supply. This process continues to the state, with the equalization of demand to supply, as to give capitalists a profit accounted by
the average rate of profit. For the above-mentioned reason, an equilibrium
defined as a simple equalization of demand to supply is not true in thetheory of international specialization of production from the point ofview of the theory of production cost.

RATE OF PROFIT AND INTERNATIONAL SPECIALIZATION OF PRODUCTION 105
of the consumer's behavior. But I believe the most important point in studying
a capitalistic economy is to analyze the capitalist's response according to given

conditions. It may not be too late to deal with the problem of the consumer's
behavior after the problem of the capitalist's response has been completed.

3. Before analyzing an economy with foreign trade, in preparation for !aterstages, I will clarify the relation of relative prices to the rate of profit in an

economy without foreign trade.
3.1 Notations, which are needed for the moment, are defined as fo11ows:
aiCJ: quantity of J'-th commodity needed for production of one unit of i-th com-modity in country lg,(2)Pig : price of i-th commodity in country k,
rf : rate of profit of i-th commodity production section in country k,

In this section, I will, for simplicity, eliminate superscript k on each notation

because of the argument of a common state for each country.
In the economy of a country, there are the following relations between relative
prices and rate of profit.

(3.1) Åía,Jpj(1+r,)=pt i, ]'=1, 2, 3.
p,= et ,P3
where 3-rd commodity is taken as a numeraire. These reiations are equilibrated
under an average rate of profit among each commodity production section. Thesecan be uniquely determined by the equilibrium relative prices p," and the averagerate of profit r under constant initial conditions.(3)'(3.2)
2atJpJ*(1+r)==pt", i, 1'=1, 2, 3.
It may follow from (3.1) that the rate of profit for each section is determinedby relative prices as parameters.

(3.3) B,= :Eiliit,jPi i, j•=1, 2, 3.

(3'4) Bt=:llr, i, J'--1, 2, 3'(2) aZj stands for what it is, if J--th commodity is production goods; if it isconsumption goods, this means bJip Tif, in which 7Z stands for the direct

labor hours needed for the production of one unit of i-th commodity incountry I; and bJic quantity of j'-th commodity needed for reproduction of
one unit hour of direct labor in the same country.
( 3 ) For the existence condition of solution in this case, see N. Okishio, " Valueand Price," Keizaigaku-Kenkyit I, Kobe University.

106 HIKOJI KATANO
Let us agsume a set of relative prices (pi, p2, 1) corresponding to Bt as one point
P, and define the group of all points for p,}};O as a relative price plane• This plane

can be shown as the 1-st quadrant of rectangular coordinates with horizontal piaxis, vertical p2 axis and original peint PO. Point P" corresponding to the set of
equilibrium relative prices (pi", p2', 1) is defined as center of the country on thereiative price plane.

3.2 The above-defined group is shown by X• And let us define the following

sub-group of X.
(1) Sub-group of the set of relative prices by which, for each two commodity
production sections, a rate of profit of the one commodity production
section is made higher than the other; XtJ, (rt>rJ)•(2) Sub-group of the set of relative prices for which, for each two commodity
production sections, a rate of profit of the one commodity production
section is equal to the other; X9t(rt==rJ).

Among these sub-groups, there may be the following relations :X,, U X9, u X,, == Xi, i=1, 2, 3.
X,,n X9, n X,,= O
Let us take the following curves of second degree:f12(Pl,P2)= a21Pi+(a22-an)PIP2-a12P3+ a23Pl- a13P2(3•5) f23(Pi, P2)= ai3PiP2 +a32Pg- a2iPl+(ass-a22)P2-a23
f31(Pl,P2)=-a31Pl' - a32PIP2- (ass-au)Pl+ a12P2+a13
These are effective only within ptl}}iO. And the above-mentioned sub-group corresponds to fej as follows:(3.6) f.-lg f., xXoll, i, i=1, 2, 3.

KO X,,
ftJ=O can all be crossed at the center P' on the relative price plane and only

at one point. For this reason, the relative price plane can be divided into 12

domains. These domains must be located so as to make Vi2 on PO and be anticlockwise from Vi to Pi2. See Figure 1. These have the following charactersrespectively :(3.7) V, == X,2fi X32n X3,= (312) , V2 == X,2A X32nXg,== (?2)

V4 == X,2nXg2n X,3=(1:)
V3 = X,2n X32n X,,=(132)
Vs = X,2A X23n X,3 =(123) V6 =X9,n X23n X,3== (53)SPECIALIZATION OF PRODUCTION
107
RATEOF PROFIT AND INTERNATIONAL
V7 = X2,n X23 n X,3== (213)

Vs = X2i fi X23nX93=(25)Vg =X2,nX23fi X3i==(231)

V,o=: X2,n X83 a X3t = (g1)

V. == X2,n X32n X3,=(321)V,2 = Xg, n X32 n X3,= (3?).

Pz

/

VgVs

V7
V6

Vs

P*

V4 -

V12V:V2

Vs

Vlo
V'

1i

Po

Pi

Figure 1.
The right side of each formula shows an abridged form of the left side, in which
figures within a parenthesis stand for numbers of production sections respectively.

And the order is subject to the rate of profit; in this order, the left end shows

the section with the highest rate of profit, and two sections in a column meansthat there is an average rate of profit among them.
Next, let us assume that, in any country, a capitalist concentrates his capital in
the sections with the highest rate of profit under eoiustant conditions of prices. And let us

arrange the above-mentioned 12 sub-domains from the peint of view of the section
into which capital should be concentrated.under given prices. Then we have the next

aggregations. See Figure 2.

(3.8) Ti -- VnU Vi2U Vi =: (3) T2= V2=(?)

T3 = V3u V,u Vs=(1) T,= V,= (S)Ts == V7UVsuVg :(2) T6= V,,=(g).
Here, T shows each domain into which capital should be concentrated under given
prices. The right side of the respective formulas means the production section bywhich the respective domain is represented.

HIKOJI KATANO

108
P2

7'

Ts

T6

T,

,

P*

T2

T3
pi

Po

Figure 2.
3.3 In the above-mentioned T-domain, T2, T4 and T6 are compesed of partsof f3i=O, fi2 =O and f23=O respectively. Let us investigate some characters of T2,

T4 and T6 according to the character of f,j=O.

(a) T2.
According to some simple operations on f3i=O by analytical geometry,a variation of relative prices in T2-domain is shown as follows :dpl ..
,,,,o for (Al3,go,
dP2
where

IA131= -a31 -2a32 -(a332- all)-2"32 o "62-(a.a,a-all) a12

2 2 a13And, from this formula, we have the following relation;(3'9) a3iai2a+32a33a32 i anai2ai2ai3a32 ' fOr A3i;O'
Denominators of both sides of this formula mean the sum, calculated in terms of

2-nd comodity, of 1-st and 3-rd commodities needed for the production of one
unit of them respectively. Therefore, fractions of both side mean the degree ofrespective production section's technique on 2-nd commodity, namely the intensityof respective production section's technique on 2-nd commodity. Therefore, wehave the following Theorem :(Theorem) 1.
A variattons of relative prices in T2-donzain is shown as follows according toRATE OF PROFIT AND INTERNATIONAL SPECIALIZATION OF PRODUCTION 109
the relative inagnitude of the 2-nd commoditor intensitr in l--st commoditT production

section e} to the one in 3-rd commoditr production section ei'(3.10)

dPi ;)
dp, <LO fOr ekeg.

(b) T4.
For a variation of relative prices in T4-domain, we get the following Theorem

immediately by some simple operations on fi2= O by analytical geometry.
(Theorem) 2.
A variation of relatire prices in T4-domain is alwars.

(3.11)

dp2
>o,
dPl
'

(c) T6•

A Variation of relative prices in T6-domain is shown as follows according tosome simple operations of f23=O by analytical geometry :dp2 ..
-dpT EiO for IA]23;o,where

IAI,3= O a8i -2a2i
a31

a.a.3 - a22

2 a32 2'a21 a.X2'a22

2 2 -aasAnd, from this formula, we get the next relation;(3'12) a32a2ial#3iassa3i i a22a2iai'a23a3i ' fOr IA[23iO'

The meaning of this formula is similar to that in T-2domain. Therefore, wehave the following Theorem.
(Theorem) 3.
A variation of reeatire prices in T6-domain is shewn as fotlows accordinocr tothe relative ma.crnitude of the 1-st commodity intensity in 2-nd commoditr production

section e? to the one in 3-rd commodit7 production section e? :(3.13)

dp2
2
O for diiiei•
dPl :=The division of the relative price plane into T-domain expressed typicallyin Figure 2 have 9 kinds themselves. The significance of this division may becleared in the next sections.

The above is the gist of our argument about the relation of rate of profit

to relative prices within an economy of a country. And, in the next section,
we shall investigate situations in which these countries should begin to trade110 • HIKOJI KATANO
internationally with each other.

4. In this paper, we treat two countries and three commodities cases. We
assume that the initial conditions of these two countries are different from eachother. Therefore the set of equilibrium relative prices within a country is different

from each other also. In such a case, international trade should be done. Whatsituation does international trade generate?

4,1 In an international equilibrium situation, at least, the following two
conditions must be fi11ed :(a) Reproduction condttion. This means reproduction must be possible in theworld as a whole. This also means all comodities must be produced in either

or both country through the world as a whole.
(b) Rtzte ofprofit conditian• This means that capitalists in each country would
concentrate their capital in the production sections with the highest rate ofprofit under given international prices and consequently allocate their capitalso as to make a rate of profit equal among the specialized production sections
for respective countries.
The domain in which these two conditions are fi11ed is a joint-domain as follows :(4.1) (1) (P"r;Ti) i--1,••••••, 6.
(2) (T7; Ti) i= 1, 3, 5; j---i+ 3.
(3) (Tl; Ti) i=2, 4, 6; i--- i+ 2, i+ 3, i+ 4.
where P'" stands for the center of countryr and T" and TS for T-domain ofcountries r and s respectively. These are followed immediately by (3.8).

(;r3::) (;";.,) (;i,::) (;,i,.,) (;IT3) (;/1.,)(;3,;;) ' (;"iti,) <;i':5,) (;g,`:l)(Iit5,) (i: odd) (TT"t,,;:) (;i':;) (i: even) (;i;:)<;"s::) (;3•::) (S;'t:) (;i;z)(llli;?) (TTrs.,) (TT"3:3,) (TT"s+4) G;,.,) (;tf+2)

RATE OF PROFIT AND INTERNATIONAL SPECIALIZATION OF PRODUerION 111
Situation (1) shows a special case where the country r has the same situationof relative prices to rate of profit as it had before trade. We would omit thissituation in the following arguments.

Joint-domain in which situation (2) and (3) are fi11ed can be located on one
circle. Let us call this location the cijcle.

The circle on the left side represents the case of (i: odd), and on the right side

for the case of (i: even). Although these may be different types of circles, bothare the same in character; to add a unit to each subscript of the domain in thecircle on right side and to turn it 2z/3 clockwise, you may get the same circle
as on the left side. Therefore, to classify the circle into these two kinds is only
for the sake of simplicity.

Now, in the case of two countries and three commodities, two kinds ofcommodities must be produced at least in one country for the fu1filment of the
reproduction condition. And, for the rate of profit condition, there must be anaverage rate of profit among the two production sections. In this case, point
P on the relative price plane corresponding to the set of equilibrium relative

prices may be on XO of the two commodities for the country in which the two
commodities are produced. And when both countries produce any two-commodities
respectively, point P corresponds to the intersecting point of each XO belonging
to each country.

P'i (center of country I) may be connected with P"ii (center of country II)

by a chain X9i-X8ii-Xgi-•••-X9ii. There can be two or more chains underconstant initial conditions. However it may be, among these chains, what is
fi11ed by the reproduction condition must be only one. Under the condition
P'iETIi, what is fi11ed by the reproduction condition must be only one among

3XO's that is radiated from P"i. This selected X9i may be effective only in
X9icTIi. And TIi in itself or adjacent domain with TIi (T:i.i) may certainly
include XC2ii which can exist together with X9i. Therefore the joint domain of
XYi to X8ii can be effective. Next this XSii can be effective only in either sideof the joint domain. Moreover this X8ii can find the next X30i without fail.••••••All of this process can be represented on a part of the ctrcle• And when we are

given (P"i ETIi; P"iiEi Tl), the above-mentioned chain may be represented byan arc from the part containing TIi to Tl.

Now, the above-mentioned chain on the circle are of two kinds; a major arc
and a minor arc which conjugate each other. Then which is the effective chain?

For this problem, let us investigate the circle in more detai!. For any semicircumference of a circle, both ends are always homeomorphic; the difference112 HIKOJI KATANO
between them is that the centers of both countries are substituted in place ofeach other. And if we take a larger part of the arc than the semicircumference(a part of major arc), we must take again, on the part of an over semicircumference, the same topological path as of a semicircumference. However, this may
be possible only in a case in which the direction of P*" to P*S is the same as of

P*S to P'", where direction means a quadrants to which any objective center
belongs in a orthogonal coordinate that the original point is the subjective center.

This case is inconsistent. To escape from this inconsistency, we must take thepart of the semicircumference or minor arc effective as a chain. Therefore theabove-mentioned chain can be represented by a minor arc; a semicircumference

is represented by the maxim"m minor arc. Moreover, in this paper, we do nottouch the case of (4.1)-(1). So this chain can be represented by a minimum minorarc from a part containing T}i to T,i. Let us call this an eLffective ehain. Then we

have the following Theorem.
(Theorem) 4.
Mhen P"S belonocrs to Tl and P"" to Ti,(P*sETb P*rETi),
the donzain in which internntional eguilibriunz relcttire priees ctwz be realiged is ona circle and the part of a minirnurn rninor arc from the pcvrt containing Tl to Ti.

4.2 To determine the domain according to Theorem 4 in which international
equilibrium relative prices may exist, we must clarify some domains belonging
to country s to which any domain belonging to country r can correspond.
Immediately from (3.8), we can say that the following three combinations
are not possible:(P*sET2r; P*rclliT•i) , (P*sETE; P*rETi)

and (P*sETg; P*r Ei T6g).
However it may be said, we can not say all other combinations are always
possible. We must investigate whether it is so or not.
According to Theorems 1, 2 and 3, it is clear that the division of the relative

price plane to 6 T-domains has 9 kinds of situations due to the characters of T2

and T6 domains. And let us investigate the next point for these 9situations.
When the center P"S of countrysbelongs to any T-domain in country r, to which

domains does te center P"" of countryrbelong? This question may be solved
as follows. For example, let us assume the case (ddPpi )23>O and (ddPpi )3i>O in

country r. In this case, the situation of T-domain in country r is shown in
Figure 3.

RATE OF PROFIT
113
SPECIALIZATIONOF PRODUCTION
ANDINTERNATIONAL
1
Tg

l
1
l
1

t P*r

l/

1 T,r
o-- -- -------- -71-------/Tg

TE l T5

TIt

Figure 3.
And, on the same plane, let

us assume 8 demains Ui",••••••, Us" where therelative

price plane is divided into

8 domains by a vertical line (parallel with

P2 axis)and horizontal line (parallelwith pi axis) intersecting at the point P"rof eachother. This is shown in Figure

4.

I
UF

UE Ug

-ug

o

P*r

VE-

Ur,
UE ug
I
Figure 4.
Now let us assume P"SETI. In Figure 4, TrcUi. Therefore

P*sE Tic Uf.
On the contrary, because of P'SE Uir,

P*rE Ug,
for US-domain with the center P'S. According to the characters of

we have

Figure 3,

HIKOJI KATANO

114

p*rE Ugc(Tg u Ti u Tg).
From this reasoning, we can say in the above-mentioned case that, if P"SE!Tr,there is P""c(T3guTiuTg) ; namely that, when P"S belongs to Tr, P'" may belong
to any one in Tg, T4g or Tg, We show this meaning by(P*SET,r ; P*rE(Tg U T2 U Tg)).
In the same way, we have all information for all cases as follows:(A) (S;i ),,>O, (:;i ),,>O•(P*,ETr; P*n E"(T3S UTfiUTg)) , (P*S EI! T,r; P*r Ei (T39 uTiUTg))(P*S Ei T3r ; P*rEI (T3S U Ti U Tg U Tg U Ti U T2g))(P*S Eii T,r ; P*rEIi (Tg U Tisg U Ti U T2g DT39))(P*sET,r ; P*rE(Ti u T•i u Tg u Ti u Tg u Tg))

(P*sE T,r ; P*rE (T3c u Ti u Tg))
(B) (-ddpP-i ),,>o, (:;i ),,=o:(ddPpi ),,>O, (SSI ),,<O(P*, EI Tf ; P*nE(Tg uTi u Tg)) (P*s E! Ts ; P*r G! Tg)(P*sETs ; P*rEI (TguTguTi)) (P*s Ei T,r ; P*rEi (TguTtsg uTi))(p*sETg ; P*rE(Tg u Tg u Tls u T2S :) T3g u TS))(P*S EI T,r ; P*rE(T3g U Ti U TsS))(c) (-ddtr?,-),,=o, (SpP,i ),,>o:(:;i ),,<O, (-dde;),,>O(P*SET,r; P*rE (T3g uTiUTg)) (P*S Ei T,r; P*rE (T3S UTiUTg))(P*SETs ; P*rE (T3g U Ti U Tg U T6g U Ti U T2g))(P*SET,r; P*rE (TiUT2gUT3S)) (P*SETg; P*rE(TiUT2SUT3g))(P*sET6r ; P*rE] Tg)(D) (-dd;-,, ),,= o, ($i ),, ==o; (-ddtb,t),, :o, (S;; ),,<o; (-dd;-,, ),,<o, (ddpPi ),,=o(P*sETI; P*rE(TguTiuTg)) (P*sETE; P*rETg)(P*S Ei Tg; P*rE (Tg UT6g UTi)) (P*S EI T,r; P*r EI TiS)(P*S EI T,r ; P*rE(Ti uTizs uTg)) (P*SET,n ; P*,"eTg)(E) (SSi ),,<o, (-ddS-,i ),,<o,(P*sETr ; P*rE(Ti u T2g u Tg u Ti u Tss u Tg))

(P*sETs; P*rE(TguTguTi)) (P*sE!Ts; P*rE(TguTguTi))(P*sET,r; P*rdTi) (P*sETg; P*rEi (TiuT2SuT3S))(P*sETE ; P*rE (Tsi uT2g u Tg))

According to (A)-(E), it is clear that all combinations(P*sETf; P*rETi)
are pessible except the casesi=j=2, 4 and 6. From this we have the following

Theorem.

115
OF
RATE OFPROFITANDINTERNATIONAL SPECIALIZATIONPRODUerION(Theorem)Cbm

5.

bination

which is given by initicti(P*S EI TI ;P*rETj),conditions,is possible for allcases of i and i

except when

i=j=2, 4 and 6.
4.3 Next, let us investigate the characters of minimum minor arcs on a circle

for all the combinations except the cases shown in Theorem 5.
Now let us classify all effective combinations of i and i in (P'SETS' ; P""EiTi)

into the following four kinds;(4.2) (a) i--i, i=1, 3, 5.
(b) J'--iÅ}1, i=1, 2, 3, 4, 5, 6.
(c) J'=iÅ}2, i=1, 2, 3, 4, 5, 6.
(d) J'=iÅ}3, i--1, 2, 3, 4, 5, 6.
and investigate these four combinations respectively.

(a) 1'--icase.
In this case, the eflective chain is as follows;(;g,`.,)(;5'lt)<;i':2)(;l,:g)<;gil,2)L;g,tl:)<;i•t•3)•or (;i'.,)G"slg)<;i':;)<S"s:)(;i:f)(;i•:)<;S"3)•This may be interpreted into the following form ;(b".)(g 2)(".b)(g 9)(.b.)(2 g)(b.c),or (,a.)(S g)(C,")(.C g)(.C,)(: g)(b.C),
where a, b and c stand for any production sections respectively. Then is wetake any international relative prices realized on the above effective chain, thespecializable production sections for each country are the following.

(4.3) (2 1. :g g)
Therefore, in this case, each country can specialize on all production sections.

(b) ]'=iÅ}1 case.
In this case, we have to classify the effective chain inio two cases, i=odd andl= even cases.
In i=odd case, the effective chain is as follows:(;/i+3)(;5'T:)(;i;;)(;/i"5,)• for i-i+i,or (;5'.,)(;i':g)(;it:)(;g,`:g), for j-i-i.

116 HIKOJI KATANOThis may be interpreted into the following form ;(ba,)(s :)(cba)(: g), for J•---i+1,or (ba,)(g 2)(a,b)(z 2), f., J•----i-1.
Then the specializable production sections for each country are as follows:(4.4) (g i. :b .C) for i-i+ 1,(Z 'l :2 .) for i--i-i.
Therefore, in this case, country r may be specialized for 'two sections and countrys for three sections. And the unproducible commodity in country r is thecommodity which is contained in country s and not in country r in(4.5) Tl=(a), T,S=(a b), for i=i+ 1,
TT =(a), Ti =(a c), for j=i- 1.
In i=even case, the effective chain is as follows;(;i'.,)(;il;)(Zi•l;)(;i•:), for f--i.,,or (;5'.,)(;[t.:)(;ilz)(;i;g), for j-i-i.
This may be interpreted into the following form ;(Z 2)(ba,)(g z)(cba), f.r i=i+I,or . (Z 2)(.b.)(2 g)(b.C), for J'=i-1•
Then the specializable production sections for each country are as follows :(4.6) (gla2 :) f., J•-i+1,(2 'i. :b g) for j-i-i.
Therefore, in this case, country r may be specialized for three sections andcountry s for two sections. And the nonproducible commodity in country s isthe commodity which is contained in country r and not in country s in(4.7) TZ=(a b), Ti=(b) for i=i+1,
TT==(a b), Ti=(a) for J'=i-1.
(c) 1'=iÅ}2 case.
In this case, we have to classify the effective chain into two cases, i=odd andl==even cases. 'In i=odd case, the effective chain is as follows:(;g,t.,)(;/il:)(Ig,t;), for i-i+i,

RATE OF PROFIT AND INTERNATIONAL SPECIALIZATION OF PRODUCTION 117

or <;/i.,)<;I,'.g)Gi,'.i), for j-i-i.
This may be interpreted into the following form :(ba.)(g o(cba), fo, i=i+1,or (ba c) <Z 2) <acb), for i=i- i.
Then the specialized production sections for each country are as follows :(r, '1. ab g), fo, J'=i+2,or (gi " 2 ,), for j--i-2.
.
Therefore,
in this case, both countries may be specialized for two sections re-spectively. And the producible commodity for each country is determined asfollows. First, the completely specialized commodity for each country is shown in(4.9) TZ =(a), Ti== (b), for !'=i+ 2,
Tf== (a), TS•= (c), for i=i-2.
respectively. Second, both countries produce commonly the rest of the commodities
which are not contained in (4.9).
In i= even case, the effective chain is as follows;<;S/.,>, for ]'=i+2,or (;/1•.,), for i'=i-2•
This may be interpreted into the following form :(E Z), for i-i+2,or (S g), for i=i-2.
Then the specialized production sections for each country are as follows :(4.10) (gl ". b C), for J' =i+ 2,(r, •1. ab :), fo, J'=i-2.

Therefore, in this case, both countries may be specialized for two sections re-spectively. And the producible commodities for each country are given by(4.11) Tf=(a c), Ti=(a b) for l'=i+2,
T2=(a c), Ti :(b c) for i=i--2.

(d) i=iÅ}3 case.
In this case, we have to classify the effective chain into two cases, i--odd

and i=even cases.

118 HIKOJI KATANO
In i=odd case, the effective chain is as follows;(fi•.,)•
This may be interpreted as follows;(bac).
Then the specialized production sections for each country are as follows:(4.12) . (:l"b .).
Therefore, in this case, country r may be specialized only for one section andcountry s for the two remaining sections. And the producib!e commodities foreach country are shown by(4.13) T!=(a), Ti=(b c).
In i=even case, the effective chain is as follows;(E•.,)•
This may be interpretcd as follows;(abc).
Then, the specialized production sections for each country are as follows :(4.14), (glab C).
Therefore, in this' case, country r may be specialized for two sections and countrys for only one section. And the producible commodities for each country are

shown by(4.15) T:== (a c), Ti=(b).
From these reasonings, we have the following Theorem for the international
specialization of production for 2 countries and 3 commodities case.

(Theorem) 6. .

For the interuational specialization of production for 2 countries and 3 com-modities, if tve have initiat conditions for ecvch countrT, we can point out the
specializable production sections for each countror under any international relative.
prtces.

Mhen we have(p*sETz ; P*rGTi)
according to the initial conditions for each country, we can saor that(a) iny--i case. In this case, each countrr can specialige in anr one or tweof three comntaclities pvroductlvn sections.

(b) j---i+1 case. In this case, according to i=odd (or even), countryr

SPECIALIZATIONRATE OFPROFIT AND
INTERNATIONALOF PRODUCTION 119
can spe:ialiie in any one or two of two (or three) continodity production sections,and country s for any one or two of three (or two) contmodity production sections.
The specialixa6le cornmodities for ecac'h countror is shown (45), in the case ofi--odd, or (4.7), in the case of i=en'en,(c) i=iÅ}2 case. In this case, both countrtes can specialize for any one or
two of two commodity production sections. The specialigable commodities for eachcountry is shown (4.9), in the case ofi--odd, or (4.IJ), in the case ofi=even.

(d) i=iÅ}3 case. In this case, arcording to i=odd (or even), countror r
can specialize for one (or two) cornmoditor production sections, and country s fortwo (or one) sectlons. The specializa51e convmodities for each countr7 is shown(4.13), in the case of i=odd, or (4.15), in the case of i= even.

5. So far, for the case of 2 countries and 3 commodities, we show to what
extent we can tell about the international specialization of production under
given initial conditions. To complete the theory of international specializationof production, we must investigate the specialized situation for each country in

the international equilibrium state. This problem, we will treat in the next
paper.

REPLACEMENT COST AND LIFO COST
Susumu WATANABEI• The Lifo method of inventory is a method of charging current costs
against current sales. What do we then mean by `charging current costs
against current sales'? This method is often considered as equivalent to thereplacement cost method, or a method of charging replacement costs against
revenues from sales. Of course, the two methods show different costs of goods

sold where ending inventories are smaller than beginning. inventories. Thisis because the Lifo method includes historical costs of liquidated inventories

in the costs of goods sold during the period. May we then say that, withthis exception, Lifo uses replacement costs as costs of goods sold? No, that is
not the case. Even where ending inventories are equal in quantity to beginninginventories, there is a difference between costs of goods sold measured by Lifoand those measured by' the replacement cost method. These figures arrived atby the two methods have a different significance, too, in the profit and loss

measurement. The difference between the two methods lies in the fact that
Lifo costs are costs derived from actual costs, while replacement costs are costs

measured by what is required for replacement at time of sales. The replacement

cost method comes under the category of current price methods for pricing
requisitions. But the costs Lifo purports to charge are not replacement costsin this sense. The costs Lifo purports to allocate are the total of costs of
beginning inventories and those of goods purchased during the period (in thissense Lifo is based on the cost basis.) The said total of costs may be larger,

or may be smaller, than the total of their replacement costs. The costs of121

122 SUSUMU WATANABE
goods sold measured by Lifo are not replacement costs at time of sales, but arewhat is actually needed for replacement. In this sense the costs of goods soldby Lifo may be spoken of as ` actual ' replacement costs, which can be evidenced
by historical records. But for the fact that Lifo is thus based on actual costs,

it would not have won general acceptance. It is because modern profit andloss determination founded on the cbst allocation concept does not recognize
such calculation as places costs of goods sold above or below actual acquisition

costs. Must we then admit that Lifo is an imperfect replacement cost method,
so to speak, which is prevented by the actual cost basis from achieving its real

purpose of attaining costs of goods sold by the replacement cost method?
It is not so. The Lifo method is grounded on the`real capital maintenanecc'
concept, not on the`replacement cost'concept. In other words, Lifo considers
business profit as surplus left after the maintenance of real capital (here only
inventories are under consideration), and does not think that capital maintenanceis attained by recovering replacement costs. This point will be made stillclearer by reference to the points discussed below. .
Lifo is a method of matching current revenues with current costs in termsof the accounting period, for costs of goods sold to be charged are not costs
based on the price levels of preceding periods, but the very price level of thecurrent period. This is true ofa period as a whole, but what costs of goods
sold does Lifo aim at charging in individual transactions against revenues?
This question is important because the gross profit of an accounting period
is not realized all at once at its end, but is the aggregation of profits derived

from individual transactions. Now suppose that the individual sales prices (S)and the individual purchase costs (P) of the period are as follows:

Sales Sb S2, S3, S4 ""'''''"'Sn-b Sn
Purchases Po, Pi, P2, P3•'.•-••''•••Pn-i, P.

In this case there are some people who believe Lifo pairs Si and P., S2 andP.-,, and so forth. This is not a proper interpretation, but one misled by thename last-in, first-out, for matching of costs and revenues on the same pricelevel would show the result only for one period as a whole, but not for individual transactions.

II
The costs of goods sold determined by replacement costs for one accounting

REPLACEMENT coST AND LIFO coST 123
period are the sum total (2P',g',) of replacement prices at time of sales(P') multiplied by quantities sold (g'). The costs of goods sold determinedby Lifo for one accounting period are the sum total (EPig'i) of unit prices
based on Lifo (p) multiplied by quantities sold (g'). In the case of periodic

Lifo the costs of goods sold during one period are generally determined forthe period in question as a whole, for the quantitative determination of ending
inventories is required for the determination of the costs of goods sold during
the period.

The Lifo method that purports to charge current costs against current
revenues must do the same for segments of a period (like months, individual
issues etc.). For matching of revenues and costs on the same price level interms of periods will be meaningless unless it is based on matching of revenues
and costs on the same price level in terms of segments of periods.

What costs then is Lifo to be deemed to charge against each individual

issue? As previously noted, the costs of goods sold for one period is notdetermined by Lifo until the quantitative determination of ending inventories.

Individual issue prices during a period are not common to all cases (1) whereending inventories are equal in quantity to beginning inventories, (2) where

the former are larger than the latter and (3) where the former are smaller
than the latter, For simplicity's sake, let us assume that the ending quantity(g.) is equal to the beginning quantity (go) and consider the difference betwoen
Lifo issue costs and replacement costs.

If g,=:go, the value of ending inventories is Pogo by the periodic Lifo
method (po is the unit price at the beginning of the period). In this case,the issue price of each lot at a certain point is determined by the relations of
the q(u ian)titY sui ptSpU
e tt hOa[hge,,i2.sVeisnstuOillYi irnorilitOtChk6 beginning inventory go (its unit
oesd

price is Po), that g2 is received afterwards by purchase or by production (itsunit price is P2), and that 4i=qo=g2. The unit price to be assigned to e'i isP2 instead of Po. In other words, its issue price is P2e'i. The replacement
cost by the replacement cost method is P'ig'i obtained by applying the unit
price P', at time of issue to the quantity issued g'i, and the Lifo cost is therefore
1(apr

og
<tr p,t ,h<tnp2g?e replacement cost at the point of issue in case of rising prices(2) Suppose that the inventory in stock consists of qo (its unit price is124 SUSUMU WATANABE
Po) and g, (its unit price is P,), that g'2 is issued therefrom, that q3 is received

for replenishment, and that g'2==g,=g3. Then the unit price to be assigned as
Lifo cost to q'2 is Pi instead of P3. As compared with the issue price by the
replacement cost method (P'2g'2), the Lifo cost is smaller than the replacement
cost in case of rising prices (Po<Pi<P't,<P3).

(3) In case (l) above, a unit price at a point subsequent to the timeof issue is applied as Lifo cost, and in case (2) a unit price at a point prior
to the time of issue is applied. But, practically speaking, it will frequently

happen that a unit price at a point prior to the time of issue is applied tosome parts of one and the same lot, while a unit price at a subsequent point
is applied to other parts of it. For instance, suppose that the inventory instock consists of Poqo and Pigi, that g'2 is issued therefrom, that g3 is later

received for replenishment, that q'2>q,, and that qk(q'2-gi). The Lifo costis then Piqi+P3(g'2-ei). Compared with the issue price by the replacement
cost method P'2q'2, the Lifo cost will be smaller than the replacement cost withregard to qi out of the quantity issued g'2 and larger with regard to the rest

(g'2-gi) in case of rising prices (PQ<P,<P'2<P3). It follows that we cannot
talk in general terms of the relative size of the Lifo cost and the replacement

cost with regard to the issued quantity in question. Which is the larger of
the two depends on which is the larger of (P'2-Pi) ei and (P3-P'2)(q'2-qi),
or in more generalized terms, on which is the larger of (P'i-Pi-i) ]qi and(Pi+i-P'i)(qi'-dgi). Here dqi stands for the excess of the inventory at timeof issue over the beginning inventory, and (gi'-dei) for the excess of thequantity issued over dgi. (i standing for the time of issue.) For a period asa whole, therefore, the difference between 2P'ig'i (the total of issue prices
measured by replacement costs for the period) and EPig'i (the total of issue

prices determined by Lifo for the same period) may be represented by thefollowing formula (i--1, 2, 3••••••, n) :E(P'i - Pi -i) dei - S(Pi+i - P'i) (g'i - dqi) = EP'i4i - XPig'i

The relative size of issue prices as measured by replacement costs and thosedetermined by Lifo depends upon such factors as price fluctuations, inventories
in stock and quantities issued. Generally speaking, however, in case of rising
prices, replacement costs will be larger if dgi constantly exists in large quantities

at each time of issue, while Lif6 costs will be larger if it is of frequent
occurence that g'i exceeds dgi and that, therefore, the quantity (q'i-dgi) is

REPLACEMENT coST AND LIFO coST 125
received for replacement after issue. The reverse is the case when prices are
falling,Thus issue prices obtained by applying Lifo as a method of allocating
actual costs are different from those obtained by the replacement cost method
as a general rule, exceptions of which are confined to the following cases:(1) Where there has been no price fluctuation all through the period.
But this case is out of the question, since there is no benefit to be derived

from applying the replacement cost method or Lifo.
( 2 ) Where the quantity issued is replaced simultaneously with the issue
at the replacement cost prevailing at that time.

(3) Where the following relation prevails when the time of issue andthat of replacement are different:(P'i - Pi-i) Aqi = (Pi +i - P'i) (gi' - Agi)

Since conditions (2) and (3) are seldom satisfied in practice, the two methods
will generally present different issue prices.

Lifo costs are different from replacement costs because the former are
replacement costs actually incurred, while the latter are replacement costs attime of issue. Lifo costs may be larger or may be smaller than replacement
costs p'iq'i that will be required if replacement is made at the same time asissue is made. In case of rising prices, Lifo costs are smaller than replacement

costs if they consist of costs prior to P'i, We may speak of this difference
P'ie'i-Pi-iq'i as speculative profit, for this profit has been made by the caretaken by the enterprise of the inventory in question in anticipation of production

requirements. On the contrary, if replacement is made at a price higher thanP'i after issuance is made, a loss Pi+iq'i-P'ig'i will result, which may be called

speculative loss, for it is an additional expense incurred due to deferred
replacement, and could have been avoided, had replacement been made at thesame time as issue is made. I4 the case of declining prices, speculative profit

will arise from deferred replacement, and speculative loss will arise frompurchase in advance.(i)( 1 ) The base stock method will also give rise to speculative profit or loss in the same sense, andincludes such profit or loss on the base stock in the gross profit or loss from sales. In otherwords, the actual replacement costs for the quantity issued are here cost of goods so!d.

The term speculative profit or loss may have another meaning with regard to the basestock method. It may mean profit or loss on ` speculative holdings ', the excess of inventory

126 SUSUMU WATANABE
This concept of speculative profit or loss will throw additional light upon
the nature of cost allocation of inventories by Lifo. In other words, it implies
the inclusion of speculative profit or loss as described above in the gross profit orloss from sales that Lifo charges replacement costs actually incurred (hereinafterreferred to as `actual replacement costs') against revenues, instead of replace-ment costs that have in fact never been actually incurred. By the replacement
cost method in the strict sense of the term, replacement costs at time of issue
will be charged against revenues and speculative profit or loss will be excluded

from the gross profit or loss from sales. That is, it is not`speculative profit

or loss' but `inventory profit or loss' that Lifo aims at excluding from theprofit and loss of the period. The concept of costs of goods sold are related

to the concept of capital to be maintained. Lifo is based on the concept ofreal capital maintenance so far as inventories are concerned, and is to be
distinguished from the concept of capital maintenance on the replacement costbasis.

'

III'

Lifo so far as ending inventories (e.) are equal in quantity to beginninginventories (go), intends to treat actual replacement costs of goods sold during

the period by valuing ending inventories at the same prices as were assigned
to beginning inventories. This means matching of current revenues and current

costs. Costs of goods sold for the period by Lifo may be measured by thefollowing formula (i=1, 2, 3,••••••, n) :poqo+.2rpi gi -pog.

Here EPiei stands for the sum total of acquisition costs (by purchase or
production) during the period, This formula shew that q. is valued at Po andcosts of goods sold for the period are 2Pi gi where g, =go.

Some people maintain that such matching of revenues and costs on thesame price level is attained by Lifo for a period as a whole, but, as a necessary
corollary of matching of revenues and costs on the same price level for a period

as a whole, such matching for segments of a period should also be consideredholdings over the base stock. Here the speculative profit or loss is not the difference
between actual replacemept costs and current replacement costs not actually incurred, but
the difference between actual acquisition casts and revenues from sales with regard to
speculative holdings.

REPLACEMENT ooST AND LIFO ooST 127
as what Lifo aims to attain.

Thus Lifo, founded on the concept of real capital maintenance, has its
own reason for being, and is far more practicable than the replacement cost
method, for the latter requires artifical replacement costs to be measured ateach time of issue.

On the other hand, Lifo has its weakness by reason of the actual costprinciple on which it is based. Where ending inventories are smaller inquantity than beginning inventories, the quantity liquidated is valued at Po,

and to this extent matching of revenues and costs on the same price level isdisturbed. This is an unavoidable defect consequent on the actual cost principlethat holds Lifo in its grip. The extent to which such matching is disturbed
varies with the quantity liquidated and with price variances so far as the said

quantity is concerned. This will not, however, be an adequate reason for
criticizing Lifo, because Lifo presuppeses a free market where materials may
be freely acquired in quantities needed for business operations.

It may safely be asserted that Lifo has its theoretical foundations in thedetermination of proper periodic profit or lnss not including inventory profit
or loss by charging actual replacement costs against revenues.

SPATIAL PROBLEMS OF BUSINESS ACTIVITIES'tt
Minoru BEIKA'

I

Space and time problems in certain 1ocations of a firm,
An industrial firm is a physical existence, and necessarily has a certain

location and spatiality. Consequently, a firm faces space and time problems,
more or less, in its business activities.

1) The problems in business activities due to spatiality, may be found in theexternal and internal relations of a firm.

(1) The external 1ocational problems of a firrn are found in the various
business activities, that is, the financing, purchasing, manufacturing, selling,

managing, providing of equipment and labour, and so on. These havebeen generally approached as the so-called theory of industrial location, byinvestigating the locational factors relating to those activities,(2) But the internal spatial problems in a firm must also be taken into
consideration, because most of the present-day industrial firms have shown

some tendency toward physical branching out. At present many industrial firms have not only a considerable number of establishments, butalso the principal oMce may often be situated, separated from otherestablishments of their own, and also these establishments that include
selling oMces, store houses, service stations, and so on, may be placed inspatially different positions. Occasionally, the principal oMce itself may
be divided into different 1ocalities because of its functions.

In the early stages of the capitalistic economy, an industrial firm had

been operated from one point, in one sense, and each function of its

129

130

MINORU BEIKA
business activities had not been spatially differentiated at all. The so-called

theory of industrial location seems to be considered on the fundamental
basis of such a one-point-situated firm. But now the size of a firm has
grown larger and larger, .the structure of such a business enterprise has

become more and more complicated, and the formation of the organization
for such complicated functions is perhaps, more or less, to be accompaniedby the internal spatial differentiation of a firm. Rather, it is a generaltendency that the business activities of a firm are spatially differentiatedfrom each other to some extent,
Such internal differentiation (that is, physical decentralization) of a

firm is realized by the adjustment between the factors affecting the sizeof the business (including both the firm and its constituent establishments)
and the locational factors affecting the various business activities of thefirm, The factors which affect the size of the business unit are theseveral activities of the firm such as, technical, purchasing and marketing,managerial, financing, and adaption. to the changing conditions, external

and internal. Moreover, the suitable size of the unit demanded by eachfactor often may not coincide, or sometimes conflict with each other.
For instance, the technical factor may determine the minimum limit of
the size of the plant, and tend relatively to enlarge its size for technicaleMciency, while the managerial factor may restrict the maximum Iimitof the size, in spite of the means by several types of management organ-

izations to be able to delegate authority and responsibility (that isdivisional or functional decentralization). Furthermore, whil the optimum

size of a manufacturing unit may be medium or not too large, themarketing factor may demand the enlargement of the size of the firm,
and as a result, the firm may come to have several manufacturing units
which are 1ocated respectively at different suitable sites. In short, therelations among the factors which are to affect the suitable size of a firm

and its constituent establishments, are the fundamentla1 condition thatmake up the internal spatial differentiation of the firm. Each internal
establishment constituting the firm is respectively to be 1ocated actually at

a certain point by the mutual relations of the locational factors affecting
its business function. If, in a certain industrial firm, its plants are material-

oriented, the selling establishments may be 1ocated in the center of theSPATIAL PROBLEMS OF BUSINESS AerIVITIES 131
markets, to offset the weakness for the sales competition of its plants.

A certain vertically integrated firm may arrange its plants at eachprocessing stage in their respective suitable locations. Therefore, the spatialproblems of the business activities of the individual firm are not to beapproached from the basis of a one-point-situation in the general locational

theory, but these must be actually investigated from the mutual relations

between the internal spatial differentiation and the external locational

factors of the firm. •2) A firm, moreover, is confronted by time problems, as it is a physicalexistence. Originally, the Iocational problems of a firm, have been given
attention in the industrial world, as the size of business enterprises has grownlarger and Iarger through the remarkable industrial development since the last
half of the 19th century. The present large plants are very difficult to movefrom their localities for improvement of their locational conditions, because of

the heavy stationary equipment. Consequently, industrial firms need to give
carefu1 consideration in choosing the locations of their establishments. But on

the other hand, owing to the same reason, the firm is bound to adapt internaland external changing conditions, as much as possible, technically, economicallyand socially on the basis of a certain fixed locational construction of its
constituent establishments. Thus a firm confronts time problems relating to
its spatiality. Such time problems may be solved by the active improvementof the existential conditions of a firm and the passive adaptation of the internal

conditions of a firm.

The economic spatial phenomena in general has be6n formed by theaccumulation of various activities of many industrial firms which have adopted
individual spatial business policies, characteristically. Therefore, a static obser-

vation in general for the economic spatial phenomena is possible, since respective
specialities of various economic activities in individual firms considerably offset

each other as a whole. But it is of less value to investigate statically thespatial problems of individual firms, because it is substantiallY an indisPensable

theme for an individual going concern to confront time problems relating to
its spatiality.

Thus, the spatial problems of an individual firm, are not to be studied on
the basis of the " one-point-situation " which seems to be the assumption of theso-called location theory, but must be investigated by considering the relations

132 MINORU BEIKA
between the external 1ocational factors and internal spatial differentiation of

an individual firm, and the time problems which the firm confronts in certain
1ocations of its various constituent establishments. Therefore, such spatialproblems of an individual firm cannot be solved by the idea of the "most"suitable location, but the idea of possibility or limitation of the suitability forthe location tends to become more important for the actual establishment of
an individual firm. These spatial considerations are necessarily related to thespeciality 6f the business features, which are formed by the characteristic
combination of the several existential factors of the firm. Namely, the reference
to the relations with the business features of an individual firm is an important

theme for the study of the spatial problems of an individual firm.

II
A study of the spatial problems relating to the business feature of a firm.
A considerable part of the locational factors for a certain firm is represented

in the cost structure of the products in the concerned manufacturing estabIishment, So far as it is limited to such scope, the spatial problems may begrasped by practical calculative considerations, and so the analysis of thetransfer (procuring and selling) cost and the processing (manufacturing) cost,
may be the principal theme of the study in choosing the most suitable location
for a certain establishment of a firm. Such a program is a static research, on
the assumption that the internal and external situations of the concerned firm
and its establishments, the business features of the firm, do not change. But
as stated before, the spatial theme of the business activities of an industrial
firm, essentially consists of space and time problems, and has a close relation to

the internal and external situations of a firm. Therefore, a mere static researchby practical calculative considerations will be too diMcult to clear up the actual

spatial problems which an individual firm confronts under complicated conditions by internal diffcrentiation, and internal and external changing factors.
In other words, the firm confronts such problems by an appropriate modificationof a combination of the existentia1 factors relating to its spatial feature.

The problem for the optimum combination of the existential factors of a
firm is ideally the theme for calculative consideration, in the case of the spatialproblems stated here. But the physical business features are even now toocomplicated to grasp the points of the actual spatial problems in general only

SPATIAL PROBLEMS OF BUSINESS ACTIVITIES 133
by a mere calculative consideration, in spite of the recent remarkable develop-

ment of mathematical methods for the investigation of business activities.
Thus a realistic analysis of the characteristic business 'features of an individual

firm is a` significant approach to spatial problems. A calculative considerationof locational factors should also answer the purpose with the help of such a
research relating to the business features.

An industrial firm is operated for attaining its economic purpose, basedon a certain technical system and depending on certain economic, especiallymarketing conditions, both of which are chosen by the firm and affect the firm.

Accordingly, the spatial problems of a certain firm are also one of the representations of the characteristic business features formed by the concerned firm.

Thus, in short, the spatial problems of a firm (including its constituent
establishments) relate directly not only to the so--called 1ocational factors of thetechnical and economic (especially marketing) existential forces, but also indi-

rectly to the business features which are characteristically formed by thesetechnical and economic forces. Such an approach to the business features
relating to the spatiality of the firm, consists of three phases, which are directly

and indirectly technical, economic, and structural characteristics Qf the firm,
as follows :---

( 1 ) The technical characteristics ofa firm relating to its spatial problems.

The technical characteristics of a certain firm are found in two phases.

The one relates to the characteristics about the materials used and the
products manufactured in the firm, and the other relates to the technologicalcharacteristics in manufacturing processes, which the concerned firm adopts.

A considerable number of the technical characteristics of a firm'are also
directly regarded as locational factors which affect the 1ocation of its
establishments. These are, for instance, climate, geology, weather, motive

power, technical nature and relative weight of materials and products,
transportability, quality and quantity of required labour, the extent ofprogress of a technical method to overcome natural restrictions, and soon. These factors affect the spatial feature of a firm not only as technicalcharacteristics themselves, but more remarkably through the filter of
economic consideration. Those problems were in general, under consideration by the usual Iocational study. But the technical characteristics,
especially the technological in manufacturing processes have often formed

134 MINORU BEIKA
the structural specialities of a firm, and moreover these specialities relate

to the spatial business featuress of a concerned firm to a considerable
extent. Namely, one point of such specialities is whether the technologicalcharacteristics of a certain firm depend on mechanical industry, orapparatus industry, and the other point is the physica} divisibility of
manufacturing processes. Although these features do not always affectdirectly the 1ocational factors, these form the structural characteristics ofa firm, and are actuaily found in the size of' its establishment, the internal
spatial differentiation etc. within the firm. The size of the operative unit

and the internal differentiation also give the firm a speciality on spatialproblems, These points have often been overlooked by the usual locational

study. -The technical characteristics of a firm are directly and indirectlydifferent in respective kinds of industries and even in individual firms,
Especially in the case of their indirect effect, in Japanese industries, therepresentative firms of the cotton spinning industries have respectively aconsiderable number of middle-sized plants, manufacturing relatively thesame kinds of products, the large mechanical engineering industrial firms

have several large plants, each of which are manufacturing different
products, and the considerably large chemical firms have a small number•of excessively Iarge-sized plants. These facts are related characteristicallyto their spatial problems,(2) The economic characteristics of a firm relating to its spatial problems.
The marketing nature of materials and products as the object for business'activities of a firm is directly found as some of the 1ocational factors for

an industrial firm. The industries are generally divided from the viewpoint of the transported weight and its transfer cost into several kinds,such as material-oriented, market-oriented, and other-factors-oriented. Of
course, " the transfer cost " in these cases must be considered as including
the problems about the kinds of transportation means, freight rates, extent
of freight absorption by buyers or sellers, and so on.

Moreover, transportation factors for industrial 1ocation do not only
relate to cost problems, but also to time problems, that is the timing of

the transportation of raw materials, products and persons concerning thetransactions, and communication for business use. The time element is fairly

SPATIAL PROBLEMS OF BUSINESS A(]TIVITIES 135
diMcult to grasp directry by cost calculations, so that it tends often to beoverlooked. But this too is one of the essential factors for severe competitionin the present industrial world. Such time elements relate to the formsof transactions. It must be suggested that the scope of the market area isconsiderably different according to the forms of transactions carried on asreal goods, samples, standard goods, or branded goods. By the result of
the consideration on the transfer cost as above stated, a firm may modify

the combination of the kinds of raw materials used or of products

manufactured. .

Apart from the direct spatial effect by the economic characteristics

stated above, these may specialize the structural features of a firm and its

establishments, and as a result, indirectly may characterize the spatialproblems of a firm. In other words, they are the problems relating to
the economic environment affecting the business activities, which are found,

limitedly as establishment-community relations, and broadly as the effects

on a firm by the specialities of national economy. The special structureof the national economy has more or less characterized the business featuresof industrial firms and as a result, firms will have spatial problems
different from those in the other countries to some extent. Such indirect
effects on spatial business features by the national economy can be actually

understood by comparing the spatial features of industrial firms in thesame kind of industries among several similarly-industrialized countries, forinstance, in the cotton textile industry, the iron and steel industry, orthe electric machinery industry. The approach to these points is not usuallytreated by the so-called locational study, and yet it must be attached tothe study aimed here, without setting it aside, due to the proper natureof the spatial problems which an individual firm confronts. .

(3)

The structural characteristics of a firm relating to its spatial problems.

As said before, considerable parts of the technical and economic
characteristics of a firm are not only the locational factors directly, butalso those that determine the type of the structural features of a firm, andindirectly such effects tend to characterize the spatial feature of a firm.
The structural characteristics which indirectly form the spatial features ofa firm more or less, mean actually the form of the operating establishments

which constitute a firm, the sizes of the establishments, the type of theMINORU BEIKA

136

internal spatial differentiation, and the spatial mutual relations between

the concerned firm and its associated industrial firms. The external
problems of a firm as the spatial mutual relations stated above, are foundin the physical types of centralization and decentralization, or vertical,

horizontal and synthetic integration among the firms. Converse!y, thesestructural characteristics of a firm also determine the technical and economic
characteristics to some extent and as a result, indirectly relate to the spatial

features. It could be generally said that when the size of a firm is larger

and a firm has more establishments, the concerned firm will have more
adaptability to changing conditions, (in other words to the time problems)
externally and internally,

In short, if an individual firm confronts space and time problems due
to its physical existence, it must be the substantial theme for its spatialproblems to investigate actually and synthetically the interaction among

the technical, economic, and structural characteristics relating to thespatiality which forrn certain business features of the firm.

III
Attenda(1) Program of approach
The program of these approaches to the spatial problems can notremain in a stage of general observation, but it is forced to step forward

to an observation of several types which can be grasped by kinds ofindustries, and by the types of certain industries, and more minutely by
individual firms. Because the business features are not only specialized by

the kinds of industries, but also by the types of firms even in the same
industry. Moreover, as a result of the growing development of industrial
enterprises, a simple ciassification by the kinds of industries is often very

diMcult because of the fact that present firms have not only several
integrated industries, related or non-related, but also the manufacturing
establishment of the firm itself has also often included several industries on

the same sites. Therefore, the general conception for the study of thespatial problems relating to the business features of a firm tends to be
insuMcient in definiteness, but this means the real feature of the spatialproblems which the individual firms confront.

SPATIAL PROBLEMS OF BUSINESS AerIVITIES 137(2) Land use competition
In addition, the study of spatial problems must be supplemented byfurther investigation in view of the land use competition. The spatial
characteristics of an industrial firm may be not only given by its own
business features, but also may be relatively affected by the mutual relations

for land use competition among many operating establishments of the
independent firms belonging to the various kinds of industries in a certain
district.

The present large plants are not regarded as being of one point inlocality, but as of having some extent in themselves, and moreover, thegrowing tendency of spatial concentration by many plants has increased
the necessity of the regional approach to industrial districts. Land has
originally the utilities of quality and locational value for business activities.

Accordingly, land can be regarded as having some possibilities and limitations to the existence of an industrial firm, which differ according to
the kinds of industries, in the specialities of their individual businessfeatures, and in the mutual relations among the concerned establishments
of independent firms. The approach in view of the qualities and Iocational
values of the land, and of the land use competion, could be helpful to thestudy of the spatial problems of an individual firm.

(3)

Spatial business policy.

The spatial problems will necessarily be confronted by the spatial
business policy of the firm. The spatial business policy is thought to be

divided into two phases, which are the problems of the locational
decision-making by choosing the relatively more suitable locality, and of

the locational adaptation to the changing conditions (the time prob!ems)
in a certain Iocation. The policy of the locational adaptation, the lattertheme,consists of the external and internal policies. The external policy ofthe locational adaptation is chiefly the problem of community-relations andthe active formation of more suitable conditions. The internal policy ischiefly the managerial problem of the coordination and communication
among the spatial differentiated establishments in an individual firm, andthe problem of the passive adaptation within the firm to the changing
conditions. The latter, the passive adaptation, means the problems ofchanging the technical process, the market, and price policy and so on.

CONTROLOFTHEMORGAN
THENATURE
Tadakatsu INOUE

Much has been written about the concentrated control of American businessin the hand of John Pierpent Morgan, but the mature of his control has neverbeen made very clear. What we have tried to do in the following paper,
therefore, has been to show by what means he acquired such pewer in somany large corporations ; what circumstances were favorable for his aquisitionof power and why he aequried and used his power in a number of important.
corporatlons.

I'

An investigation of the Pujo Committee in 1912-13 shows the degree ofpewer that Morgan obtained in banks, trust companies, transportation systems,
and public-service and industrial corporations. It appears there that a groupcompesed of J. P. Morgan & Co,, the First National Bank, the National City
Bank, and the Bankers' and Guaranty Trust (]os. together held 341 directorships

in 112 corporations having aggregate resources or capitalization of over 22
billion dollars. Of these 341 directorships, the members of the firm ofJ. P.
Morgan & Co., the recognizod 1eader of the group, held 72 in 57 of the greater.
corporatlons.
The references used were as fo' 11ows: N. S. B. Gras and H. M. Larson, Casebook in American

Business Historr (1939); C. Hovey, The Ltfe Storr of J. Pierpont Morgan (19I2); J. Moody, The
Master of Capital <1919) ; S. Daggett, Raitroad Reorganization (1908) ; E. G. Campbe11, 7'he Reorganization of the Ainerican Raitroad System, 1893-1900 (1938); A. Cotter,.United States Steel;a Corporation with a Soul (1921) ; A. Berglund, The United States Steel Corporation (1907) ; E. Jones,rhe Trust Problent in the United States (1921); R. A. Gordon, Btes'ireess Leadership in the Large

Corporation (1945). ,139

140 TADAKATSU INOUE
In acquiring pewer in these corporations stock ownership was not essential

to Morgan. Morgan's strength by which he extended his influence in these
corporations was based fundamentally upon his strategic position,as an in-vestment banker. ''Backed by his father's strong position with English investors, John Pierpont

Morgan entered upon his banking business in New York in l860 or 1861.
Henceforth he played an active r61e in furnishing capital to the government,
railroads and industrial corporations. Morgan's first large operation in govern-

ment finance was in the sale of the refunding loans of the United States in
the period from }876 to 1879. It was in the refunding operations that Morgan

won his first recognition as the ranking investment banker in the UnitedStates. Thereafter Morgan continued to advance in government finance. In

1895 the Morgan-Belmont Syndicate succeeded in selling gold bonds toprotect the dwindling gold reserves of the United States, In 1899 Morgan
participated in a large Mexican loan offered in Europe. And in 1901--02
Morgan subscribed to British government loans in connection with the Boer
War financing.

Morgan played a more important part in railroad finance. In 1879 hesold in London a large part of the holdings of W. H. Vanderbilt in the New

York Central. The affair was regarded as a grand financial operation andit gave Morgan a strong position of 1eadership in railroad finance. In 1880

Morgan arranged for the underwriting of $40,OOO,OOO bonds of the Northern
Pacific by a syndicate composed of several of the best known bankers in the

United States as well as in Europe. In the late eighties Morgan took theleading hand in reorganizing and refinancing some of the tottering railroacls.

These were the Philadelphia & Reading, the Baltimore & Ohio, and the
Chesapeake & Ohio. The most spectacular operation in railroad finance,
however, was the large scale reorganization of the leading American railroadsin the nineties. Morgan had charge of the reorganization of the Richmond &West Point Terminai, the Reading, the Erie, and the Northern Pacific andwas concerned in the reorganization of the Baltimore & Ohio and the Atchison.
Morgan also furnished much financial service for American industry at thetime when the over-rapid expansion and the resulting destructive competition

had to be curbod. In 1892 he he}ped organize the General Electric Cb. by

combining several concerns. In l898 he financed the organization of theTHE NATURE OF THE MORGAN coNTROL 141
Federal Steel Co. in which three large companies were combined. In 1901
he directed and financed the formation of the United States Steel Corporation,a holding company with a capitalization of $l,400,OOO,OOO. And in 1902 heorganized the International Harvester Co.

While Morgan rose to outstanding 1eadership through his own activities

in reorganizations and combinations and in underwriting and wholesaling
securities, he also succeeded in gaining the active co6peration of financial

institutions. Morgan and George F. Baker, head oMcer and dominant powerin the First National Bank, had been close friends and business associates fromalmost the time they began business. And this bond was strengthened when
Baker invited Morgan te make a considerable investment in the stock of theFirst National Bank. Morgan likewise acquired an interest in the National

Bank of Commerce and in the National City Bank of New York. Morgan
also developed close relations with two trust companies. In 1903 the Bankers'

Trust Co. was organized and a Morgan partner became one of the threemembers of its voting trust. And in l909 Morgan acquired an interest in thestock of the Guaranty Trust Co. with representation upon its board of directors.

About the same time Morgan and his associates aquired a majority of thecapital stock of the Equitable Life Assurance Society.

By establishing close relations with these institutions which ranked highamong banks of the country, Morgan further strengthened his own position
as an investment banker. The community of interest among these individuals
and institutions resulted in the growing concentration of the control of investable

funds in the hands of a few leaders, among whom Morgan was the dominantfigure. It seems fair to say that one of the most important sources of Morgan's

strength was his strong control over the channels of supply of fund andfinancial services.

II
In examining how Morgan acquired his power in a number of important
corporations, we must take into account not only his strong control over thechannels of supply of financial services but also the conditions of demand for

those services. It was in the period between !879 and the beginning of the20th century that Morgan played a dominant part in railroad and industrial
financing. Although it is seldom safe to generalize about characteristics of that142 TADAKATSU INOUE
period in American business history, the period was firstly characterized bysevere and disastrous competition between specialized firms. Accordingly, theperiod was also marked by bankruptcy or near bankruptcy in many of thesefirms. Reorganization became the great issue and it was done in two ways.
In some firms, by great efforts business was reorganized from within. In othercases there was no alternative but to disperse or to be reorganized by someone

from the outside, especially by investment and commercial bankers. Both ways

were used, but generally speaking the latter was more common. Lastly theperiod was marked by the movement toward combinations. The combination
movement, both horizontal and vertical, was well under way by 1897. From1898 to l903 there was a real mania for combination, Great combinations
were organized in every field where large-scale business was possible. Like
reorganization, the support of bankers and financiers was almost essential to
the formation of combinations, though some firms needed no outsiders in doing
this. In all, an unprecedented demand for the services of bankers marked thedecades following 1879 when Morgan initiated railroad financing on a publicscale. Thus the demand factor in the capital market was also favorable forthe extension of Morgan's influence.
In practice, certain occasions were particularly favorable for the aquisitionof pewer by Morgan. In the first place, as has already been suggested, heacquired power in the case of a reorganization. Reorganization was one of
the most fruitfu1 occasions for the extension of Morgan's control. This wasparticularly true of the railroad reorganizations during the nineties.

The earliest of Morgan's reorganizations at that time was the creationfrom the ruins of the Richmond Terminal system of the Southern Railway.
In 1893 a reorganization committee drew up a plan for the rehabilitation of
about 6,OOO miles of track, excluding the Central of Georgia, one of four
members of the Terminal system. The first problem which arose was thatof the cash requirement occasioned both by the physical and the financial
conditions of the system, The necessary cash was to be provided by theassessments levied on the stockholders and by the sale of new securities.

The more important problem, however, was that of the reduction in fixedcharges. The new company was to issue stock and bonds which would rep!ace
the old securities, The result would be an immediate reduction in fixedcharges from $9,500,OOO to $6,789,OOO. The syndicate, headed by Drexel,THE NATURE OF THE MORGAN coNTROL 143
Morgan & Co., would guarantee the sale of the new securities and succeed to
the rights and privileges of any former stockholders not wishing to pay theassessments. And the stock was to be placed under a Morgan voting trust.
In 1894 the reorganization was finally completed and the Southern became thestrongest system in the South.

Likewise, by taking the leading hand in its reorganization Morgan gained

control over the Erie. He also entrenched himself in the Reading, theNorthern Pacific, and the Baltimore & Ohio,
Another type of situation in which Morgan often acquired pewer occurredin the case ofa combination. This was true, for example, in the formationof the United States Steel Corperation in 1901, and also of other combinations
at that time.

When the steel trust was formed by acquiring ten large companies, Morgan
and his partners and associates were placed at the head of the giant organization.

The testimony of Morgan before the Pujo Committee made it apparent thatthe board of directors was under the strong control of the banker who was also

the member of the board. Beside Morgan himself, Robert Bacon was thechairman of the finance committee and was succeeded by George W. Perkins,another partner of J. P. Morgan & Co. Elbert H. Gary, the chief executive
oMcer of the corporation, was also close to Morgan.
Morgan's domination over the United States Steel Corporation was acquired,
not through stock ownership, but through his financial services in backing theorganization of the company. The suppert of bankers and financiers was almost
essential to the combination which was intended to absorb ten large companies

with an aggregate capitalization of about $867,550,OOO. A syndicate, headed

by J. P. Morgan & Co., was formed to subscribe suMcient cash to back anarrangement for exchanging the new corporation's stock for that of constituent

companies, The syndicate members then entered into an agreement with thecorperation by which they undertook to secure at least 51 per cent of the stockof the constituent companies and immediately to furnish $25,OOO,OOO in cash.
On its part, the corporation agreed to purchase the stock and to issue its own
securities in certain specified amounts. The result can best be shown by quoting

from Arundel Cotter's United States Steel : A Corperation With A Soul (1921).
" Practically all the stockholders of the old companies, satisfied that with

Morgan backing the new company its success was fairly well assured, took

144 TADAKATSU INOUE
advantage of the exchange offer, with the result that at the end of the firstnine months of its existence less than one per cent of the old securities werestill held in the hand of the public and of the Corporation's capital as

authorized $1,319,229,OOO had been issued" 'The United States Steel Corporation, thus, stands as a striking example ofMorgan's control which was extended through consolidation.

There were also other circumstances in which Morgan extended his influence in particular companies. For instance, he established intimate relations
with a firm when the nearly monopolistic owner of its stock sought to transfer

his ownership to the public. Such was the case in the sale of,-the New York

Central stock in 1879. When William H. Vanderbilt succeeded his father in
the absolute control of the New York Central in 1876, public opinion wasaroused against him and the legislature began to impose heavy taxation.
Then Vanderbilt asked Morgan to sell $25,OOO,OOO of his stock. Only apowerfu1 banking house could possibly handle the sale of so large a block ofstock without upsetting the market. The sale was made in London with easeand netted Morgan a profit of about $3,OOO,OOO, in addition to inaugurating

an alliance between the Vanderbilt and Morgan interests. Not only was
Morgan made a director of the New York Central and his firm the company's
financial agents, but Morgan found it easy to maintain his infiuence subsequently

as a result of the weakening of the control power of Vanderbilt through thediHusion of ownership.

The affair of the New York Central shows us that the power of Morgan
was more easily acquired and used when the strength of owners have declinedwith the diffusion of ownership. Similar factors entered in the case of combi-

nations. On the contrary, Morgan met diMculties in retaining his control
when the relative strength of owners was strong. This was true, for example,
in the financial readjustment of the Baltimore & Ohio in the late eighties.

In I887-88 Morgan undertook to place the road on a sound financial basis

and organized a syndicate to furnish the money. In return the syndicate
made three demands : the company's statement must be verified ; the management must be placed in competent hands'acceptable to the syndicate; andagreements must be made with other trunk lines about the New York traffic.
At the request of the Syndicate Samuel Spencer was made president of theroad, replacing the younger Garrett, and a thorough reform of the system wasTHE NATURE OF THE MORGAN CONTROL 145
initiated. As part of this program an investigating committee began a careful

investigation of the past management. But this was more than would bepermitted by the Garrett family. At that time the Grarrett holding amounted
to from 50,OOO to 60,OOO shares out of a total of 150,OOO shares, or, deducting

the 32,500 shares held by the city of Baltimore, which had no voting power,

to about one-half of a total of 117,500 shares. This gave them undisputed
control. The family interests efected their own candidate president and Spencer

was ousted. Of course the syndicate refused to go ahead with the refinancing

scheme and Morgan's efforts were in vain.
The experience in the Baltimore & Ohio, and also in the organization of

the Philadelphia & Reading in 1886-87 taught Morgan an important lesson
for the future: the work in financial readjustment and reorganization may
prove to be in vain if control is still exercised by the stockholders before thecompany is firmly established. Thus, in the railroad reorganization of thenineties which we have already described, Morgan perpetuated his control bymeans of voting trusts and even after the voting trusts had expired his
representatives were usually found on the boards.

III
In the last section of this paper, we shall attempt to get some understandingof why Morgan acquired and used his power in a number of corporations
whose securities he offered to sale. AIthough Morgan had charge of a certain
department of the business of the commercial bank, his first concern was theinvestment banking business. From 1902 to 1912, far example, his firm wasdirectly responsible for leading in the marketing of corperated issues totaling
almost two billion dollars.
In order to carry on a successfu1 investment banking business, it is especially

neccssary for a banker to get the trust of his clients. By winning the relianceof his customers, an investment banker is more easily able to sell a large amountof securites which he purchases at his own risk, or to guarantee the sale of thesesecurities. The basis of that reliance is the investment quality of the securities

which he offers or offered in the past. On the part of the investment banker,
here arises the necessity of protecting his clients' interests against loss. In doing

this he will resort to every means : he may undertake the work of reorganizing

bankrupt companies whose securities he has sold, so that they may again be146 TADAKATSU INOUE
put upon a solvent basis; he may take the leadiag hand in combining rival
firms, one of which he has financed ; he may play a leading part in selecting

the directors and chief executive oMcer who are to head a new company whose
securities he offers to sale; and he may create a voting trust with himself or
his associates as voting trustees in the rcorganizations dominated by him.

As an investment banker Morgan went ahead in just the same way.
As to the relations between Morgan and his c'lients, the Wall Street Journal(April 1, 1913) reported as follows:"•••••.Mr. Morgan would go to the extreme in protecting any clients orbanking house which had been in close and honorable association with him,

and he expected from them the same loyal support in times of stress andfinancial trouble."

Morgan himself testified as fo}lows in the Money Trust Investigation on
the question why he acquired his influence in the corpc)rations whose securities'

he sold"•••••• Many questions were asked as to the wisdom in having representa-

tives of private banking houses sit upon the boards of corporations, whose
securities the same bankers frequently offer for sale. This practice••••••hasarisen not from a desire on the part of the banker to manage the daily affairsof the corporation or to purchase its securities more cheaply than he otherwise
could ; but rather because of his moral responsibility as sponsor for the corporation's securities, to keep an eye upon its policies and to protect the interestsof investors in the securities of that corporation. For a private banker to sit
upon such a directorate is in most instances a duty, not a privilege."Though there will be a difference of opinion as to the validity of thetestimony of Morgan, there is probable no question that one of his principal

purposes of acquiring pewer in such corporations was the protection of his
clients which would result in putting him into a strong position among thoseinvestors. It should be noted that one source of Morgan's strength was his
intimate relations with his clients.

ON THE EFFECT OF ACCELERATEDAMORTIZATION FOR TAX PURPOSES
Nobuko NOSE

I. Preface
During World War II and the post-war period, the accelerated amortization

for capital assets was introduced into the tax system of many nations toencourage private investment. The Japanese government also, enacted a new
tax law in 1951 which contained an act for accelerated amortization.
Lately, a greater intensification of this system is expected, because theJapanese government and business men believe that accelerated amortization isa suitable weapon for encouraging investment and consider this a substitutefor subsidies. Thus, we have need to analyse the effect of accelerated amortization on economy as a whole. We shall examine this taking special noticeof its distribution effect and effect on the industrial concentration in Japan.

Our steps of analyzation are as follows.
1. Theoretical view of accelerated amortization for tax purposes.

2. A survey of its function in Japanese economy.
3. Conclusion.

II. Theoretical view of aeeelerated amortization for tax purposes.
In the early work by Mr. Brawn(]), the effect of corporation tax onprivate investment is investigated. His idea is represented by Prof. Goode(2),who shows that tax savings produced by accelerated amortization encourage
private investment through (i) decreasing the uncertainty and (ii) increasing147

148 NOBuKo NosE
the availability of funds to invest. Prof. Domar(3) and Mr. Eisner(4) try
to generalize the abQve idea, and they show that the benefit of tax savings is
not uniformally given to all firms and that the growing firm receives the mostbenefits through the famous Domar-Eisner model. Moreover, they analyse theeffect of accelerated amortization to economy as a whole. Mr. Domar showsthat the induced private investment and the rising rate of growth of invest-

ment raise the level of the national income and the rate of growth of
economy. But contrary to Domar's optimistic view, Eisner takes the redistribution effect of tax savings seriously, and suggests that the depressive effecton consumption demand is so large that the induced investment by accelerated
amortization would scx)n be absorbed and the level of national incomc and its
rate of growth would not be raised.

Obviously, these discussions improved the matter. But, we yet have somequestions unsolved. These are as follows;

i Does accelerated amortization encourage concentration among firms andindustries or not?

ii Does the redistribution effect caused by accelerated amortization effectthe recipients of dividend and the laborers indifferently or only the laborers?

iii How can the private investment induced by accelerated amortization
be realized in an underdeveloped economy?
These questiQns should be solved in order to investigate the function ofaccelerated amortization in Japan. So we investigate these as follows.

(1) The effect on firms.
To analyse whether accelerated amortization promotes concentration ornot, first we need to see what firms have the conditions to utilize this tax
system. The conditions are as follows,a. The power to prepare a fund to invest.
The point by which accelerated amortization is distinguished from the othertax benefits, i. e. reduction of corporation tax, is that this is realized only when

the firm acquires capital equipment. To acquire ,a capital asset a firm musthave ' a certain fund for purchasing. Of course, accelerated amortization

immediately brings back the fund (equal to tax saving) to the entrepreneur'shand, so the firm only need a fund for a certain short period as comparedwith a case without such a benefit, At any rate, a firm must have somefund to invest, If not, he would be disqualified from receiving such a tax

ON THE EFFECT OF ACCELERATED AMORTIZATION 149
benefit.

b. Capacity to absorb high cost. . .

To carry accelerated amortization, a firm must. have the capacity of profit

to absorb the abnormally high cost which consists of normal cost plus thedifference of the accelerated depreciation cost and normal depreciation cost.

Defining that (1) the depreciation cost by accelerated amortization is thenormal depreciation cost D multiplied by acceleration multiplier a, and (2) the
current profit is the difference of sales price P and current cost c which contains

normal depreciation cost per quantity multiplied by quantity x, this condition
is noted as follows;(P-c)x;.}ll"D(a-l)•••-••••••-••-•••••••••(1)c. The average rate of profit after accelerated amortization.
In a capitalistic economy, capital funds flow from unprofitable firms thatfail in getting an average rate of profit to very profitable firms. Marx called

this `the law of the average rate of profit'. In the real world, there aremany firms in different conditions. And the firm that has the capacity toabsorb abnormal costs and is able to carry on accelerated amortization must
maintain its rate of profit after accelerated depreciation at the level of theaverage rate of profit in economy. If it fails to do so the fund flows out andflows into other firms which can maintain a level above or equal to such a rateof profit.

Defining the rate of profit after accelerated depreciation and the average

economy as /i and P respectively and the degree of utilization of capital per

quantity and normal depreciation cost per quantity as k and d respectively,
this condition is represented as follows.

tL,ilpt -••-•••-•••-•••--•-••••-•(2)p- (c+d(a+1))
pt= k -.•---.-••---(3)Now we shall reexamine the above three conditions. As for the first, it

depends upon the other two conditions because the fund to invest would
increase as good expectations about the other two are given. Next, the second

condition is satisfied when a firm minimizes cost and/or increases quantity
to sell and/or maintains the most profitable price. This condition is relieved

to some extent by the system of carrying over the loss(s). As for the third

condition, the matter is not the amount of profit but its rate. Then, for150 NOBUKO NOSE
example, if the profit maximization to absorb the accelerated depreciation
were accompanied by an unproportional increase of capital, the third condition.

could not be satisfied. So, to satisfy it, a firm has to (i) maintain the monopoly

price and/or (ii) apply a method of production that minimizes the cost per
quantity and lessens the degree of capital utilization below a certain level at
the same time, A firm would use one or both of them according to its ability.
Under free competition, a competitive firm is oblige to sell at the price determinedon the market and only introduce (ii). On the contrary, under a perfectmonopoly, the monopolistic firm can use both of them.

From the above consideration, we can see that the tax benefit byaccelerated amortization is not given to all firms in general, but to a special
firm, i. e. a firm that is able to satisfy the above conditions, Then, we returnto the problem of growing firms, brought forward by Domar and Eisner.
Does the profitability of a growing firm mean that of all growing firms?

We cannot agree with this. First, a growing firm is defined (by Domar) as
a firm that acquires a capital asset at a constant (positive) rate. This firm

is a firm that has continuously the pewer of preparing an investment fund,that is, it has continuously to satisfy the above first condition. Moreover,to be able to carry on accelerated amortization, a firm must satisfy the above

conditions 2 and 3 continuously. To say it repeatedly, this growing firm isa firm that continuously maintains a profit to absorb the cost of accelerated
depreciation and average rate of profit after such depreciation.

In a growing firm, thehump of accelerated cost with the constant rateof growth is considerably high in the initial years. So, on!y such a growing
firm as being able to satisfy the above conditions even in the early stage can enjoy

the benefit of accelerated amortization. This means that the firm to benefit
the most is.not a growing firm but a special one, i. e. a growing big business.

Next, we advance to the effect of accelerated amortization. As for its

effect on a firm that can carry accelerated amortization, we agree with
Eisner, Goode, etc., that is the encouragement of private investment. An
investment induced by accelerated depreciation affects the firm in two ways;

i. e. (i) unchanged method of production and (ii) introduction of a new
method. Both methods increase profit and the rate of profit. (When the
new method is still not prevalent, the latter case, brings extra-profit to a firm.)

Then, the firm that cannot utilize this system is obliged to lessen its profit

ON THE EFFECrlr OF ACCELERATED AMORTIZATION 151
and the rate of profit relatively and sustains a capital loss. Therefore, we

understand that accelerated amortization is of advantage only in growing
bigger and intensifies the tendency toward concentration among the firms.

(II) The effect on income distribution.
• Mr. Eisner says that accelerated amortization makes the firm pay less to
his interest groups, i. e. wage earners and dividend recipients. But we mustnote that the dividend recipient can decide choice the firm to supply his fundand in doing so his measure is the average rate of dividend in the economy.
There are certain minimum levels of'dividends paid by firms. So it is hardly
possible that the distribution effect caused by accelerated amortization torecipients of dividend is so large. Still more, the depressive effect on consumption by this is negligible.

The distribution effect on wage earners is, on the contrary more serious.

When an investment induced by accelerated amortization does not change theold method of production, whether the reduction of profit (resulting fromdeductions of abnormal high cost) brings reduction of wages or not, dependson (i) the relation between a firm and its trade union and (ii) the level of

unemployment in economy as a whole. When an investment introduces a
new method of production, the firm substitutes capital for labour, as Eisnerpointed out, so the wage tends to go down.

(III) The effect on the economy as a whole.
i Uneven impact on industrial structures.
Mr. Eisner is right in so far as he points out that accelerated amortization

has an uneven impact on economy. But his opinion that all consumption
industry is less favorable than all investment industry is not so exact.
The wage earner suffers from the distribution effect but the recipient ofdividends is exempted, Then, the consumption industry which is unfavorable
is only the wage-good industry. On the other side, Mr. Domar suggests thatinvestments induced by accelerated amortization bring an increment of national
income through a multiplier chain. But this effect is not so large, because in

the less advanced economy the investment demand is not met by home
investment goods but by foreign investment goods. Even in the investment
industry, a considerable part cannot enjoy the increase of investment demand.
So, even for a short period, the investment multiplier is not so large as Domarsuggests,152 NOBuKO NosE
ii Uneven impact caused by government's depreciation policy.

Adding to the above, the government's policy brings a more uneven
impact to economy. The present governments regulate the rate of accelerationand differentiate it in every industries. Limiting the kind of capital asset for

accelerated amortization, the Japanese government gives an uneven impact
among the industries which possess much authorized capital assets and industries
which possess little or none(6).

Then, we can conclude that accelerated amortization accentuates businessand industrial concentration and makes the problem of income distribution
more serious. This is the negative side of this system,

III. A survey of the function of accelerated
amortization in Japanese economy.
Now we return' to the Japanese economy in 1950-55 with the above
viewpoint.

The Japanese government enacted, three kinds of accelerated amortization.
These are (i) 50e/o increase of normal amortization in three years, (ii) initial

allowance and (iii) the accelerated amortization to capital assets for research

purposes. These methods are applied to capital assets and tunnels for mining
and ships to encourage investments in them. Now let us investigate the former

two. Tables `I' and`II'show the industries which applied the 50% increaseof normal amortization in three years and initial allowances respectively.
The fact that tax savings are exclusively given to these industries implies that

this system gives an uneven impact to the industrial structure in Japan.
Next, we take its effect on firms. Table III shows the rates of depreci'

ation in these industries. Comparing with prewar rates, we see that postwar

rates are considerably higher, specially in the steel and communicationequipment industry. So, we can understand that accelerated amortization
raises the rate of depreciation and makes depreciation the main source offunds in these industries. A firm which can absorb such a high rate ofdepreciation would not be a firm, or a growing firm in general, but agrowing big business. Now we shall examine whether the concentration inbusiness has been intensified by accelerated amortization or not in Japano).

Table `IV' shows the movement of the degree of concentration in theseindustries. In communication equipment, in pulp and cement industries,

ON THE EFFECT OF AC(]ELERATED AMORTIZATION 153
business are deconcentrated, but in other industries they are concentrated, andas a whole, they show a slight tendency toward concentration(s).

Next•, we shall examine the distribution effect. From table `V', we seethat the rate of dividend in these industries are slightly higher than the

average rate of manufacturing and of all other industries. Moreover, comparing with the rates of growth in table`VI', we see that the rate of growthof wages is lower than the rate of the growth of dividends and slightly lower

than the rate.of national income since 1954. So we can understand that the
distribution effect of this system is sustained by the labourer, and not by thedividend recipient. Lastly we return to the effect of accelerated amortization

on economy as a whole. Table `VII' shows that since 1951 the import ofmachine is very large, the import from the U. S. A. amounting to 60-70%.
The introduction of accelerated amortization for tax purposes in Japan was
accompanied by the imports from U. S. economy. The Japanese white paper(g)reports on this as follows;`the import of machine and technique has increased
in steel, petroleum and electric power industies but on the other side machinery

is relatively dull.' In Japan the industry to benefit most from this tax Iaw
is the iron and steel industries as table `VIII' shows. In the prewar period,

this industry was unprofitable and its rate of dividend and depreciation wasconsiderably low. The cause of the recent growth of steel is partly attributableto accelerated amortization. Moreover, we must notice that in this industry

the concentration in business tends to become intensified. Then, we canconclude that the firms most to benefit are the growing big businesses in theiron and steel industry.

IV. Conclusion
The survey of Japanese economy in the previous section proves ourtheoretical viewpoint in [ 2.

Now we can summarize it as follows;
i The accelerated amortization being utilized by special firms- growing
big business only, the industrial concentration is intensified.
ii Its effect on distribution is limited to the laborers and the recipientsof dividend are exempted.

iii This system gives an uneven impact to the industries. The most to
benefit in Japan is steel. On the contrary, a few investment goods industries,

154 NOBUKo NosE
i. e. machinery, are not so prosperous and the demand on them are consi-

derably absorbed by their competitor in foreign economy. This means aleakage in the investment multiplier chain,

The above points are the negative side of accelerated amortization, andhave been overlooked by analysts. We must notice these points and give amore general aspect to the theory of accelerated amortization.
Note (1) E. C. Brawn,`Income tax and Investment Motive,' in`The Essays in Honor of Mr.
A. Hansen.'(2) R. Goode, `Accelerated Depreciation Allowance as A Stimulus to Investment,' Q. J.

E., Vol LXIX, May, 1955.
(3) E. Domar, `Depreciation, Replacement and Growth,' A. E. J., Vol. LXIII, Mar.,
1953, `The Case for Accelerated Amortization; Q. J. E., VoL LXII, Nov,, 1953.
`Accelerated Depreciation : A Rejoinder,' Q. J. E., Vol. LXIX, May, 1955.
(4) R. Eisner, `Depreciation Allowance, Replacement Requirement and Growth,' A. E.
J., Vol. LXIII, Mar., 1933, ` Accelerated Amortization, Growth and Net Profit,' Q.
J. E., Vol. LXVI, Nov., 1952. `Accelerated Deprociation: Some Further Thought,'

Q. J. E., Vol, LXIX, May, 1955.
(5) The Japanese government stimulates the carry over period as four years.
(6) The ratios of the investment of capital assets authorized for accelerated amortization
to the whole investment of capital ssets are not uniform. The ratios in steel, cement

and motor vehicles are 42%, 18% and 38% respoctively. Source; `The White
Paper on the Rationalization of Industry,' published by Ministry of Internationa!
Trade and Industry, p. 83.
(7) The effect on industrial concentration is naturally realized after some lag. So, ourinvestigation is a portion of the whole effect.

(8) After the end of the war, Japan gradually returned to free economy and tended todeconcentrate up to 1953. From l955, she has the tendency to concentrate.

(9) `The white paper on the Japanese economy in 1957,' published by the Economic
Planning Board in Japan. p. 102.

ON THEEFFEer OF ACCELERATED AMORTIZATION

155

Supplemeiltary Data
Table 1.

Industries authorized to 50.e/e increase in three years.

100 million
Industry

Source ;yen

AmountTextile Products

39,023

Machinery

14,691

Pulp Products

9,999

Chemical Products

9,796

Iron and Steel

6,644

Mining2,524

Others13,332` White Paper on the Rationalization of Industry,' published bynational Trade and Industry. pp. 86-7.

the Minister of Inter-IOO million yen

Table II. Industries authorized an initial allowance

Industry
Iron and SteelAmount35,816

Petroleum Products

9,160

Dyeing6,877

Ckiment

6,290

Ship Building

Coal

14,852Motor Vihicles

4,688

Cable and Wire

4,087

aonstruction

3,194

Tin Product1,621

Alloying of Ferroas Metals

1,492

Rolling of Non-ferrous Metals

1,439

Fertilizer

1,269

Communication Equipment

1,209

Bearing

1,138

Metal Machine Tools

1,108,

Sourece ; ` White

Paper on Rationalization of Industry'; ibid. pp. 88-91.

NoSE
NOBUKO

156

Table III. Ratioof depreciation

1955

PrewarManufacturing

1L7

5.7

Cotten Products

9,49

6.1

Synthetic Fiber Products

16.08

7.5

Pulp and Paper Products

937

6.5

Fertilizer

12,58

4.9

Petrdleum Products

16.38

6.6

aement11.78

6.8

Iron and Steel

11J9

3.6

Non-Ferrous Metals

9.18

3.0

MqchineryCommunication Equipment

10.89

5.3

11.08

1.6

Ship Building

10.12

4.3

Motot Vehicle

18.71

Mining12.77

Construction

20.04

4.4

1

Source ;`Analysis of
by Stasistics

Finacial Statements of M

ain Industrial Corporations inJapan, ' published

Department of The Bank of Japan.

Table IV. The tendency

to concentration in Japan
1954

1955

(]otten Products

54.1

54.6

Synthetic Fiber Products

98.8

99.9

Pulp, Paper Products

64.8

62.6

Fertilizers

87.3

87.8

Petroleum Products

99.4

97.9

Cement

88.9

85.2

Iron

94.3

97,9

Steel

74.5

77.3

Alloys of Ferrous Metars

81.1

83.7

appper

85.8

87.6

1oo

lOO

Zinc
Tin
Engines

63.0

65.5

64.9

73.8

Machinery Bearings

96.4

97.1

Industrise

Alminum
Nor-ferrous.

remarks

A
A
A

Tools
Source ;` WhitePaper on National

Income,'published byEconomic Planning Board in Japan.

AMORTIZATION
AocELERATEDON THE EFFEer OF

87.1
80.9
67.8

84.8
78.9
81.6

, 96.5l 90.31
l 55.2• 96.3

Communication Equipment
Cable and Wire
Ship Building
Motor vihicles linti.geg'iiged

F

Coal

1

157

A
A

98,3

l s6.1

ConstructionttNote; A Indicates deconsentration.
Source ; ` The Report on the Industrial Concentration in

Japan,' publishedby the Fair Trade

Mission. pp. 31-41.

Table V. Ratio of dividendin Japan
1955

PrewarAll Industry

13.68

8.4

Manufacturing

15.07

9.5

Cotten Products

18.82

12.9

Synthetic Fiber Products

l9.3

11.0

Pulp and Paper Product

19.4

9.5

Fertilizer

15.71

9.2

Petroleum Products

20.63

7.7

Cement20.78

6.7

Iron and Steel

9.95

7.5

Non Ferrous
Machinery

10.7

10.0

9.16

9.7

Communication Equipment

19.03

11.5

Ship Building

10.35

6.1

Motor Vehicles

15.39

Mining14.01

Construction

15.96

9,9

Source ; ` Analysis of Financial Statements of Main Industrial Corporations
by Statistics Department of The Bank of Japan.

in Japan,'publis hed'
Table VI, Rate of growth in Japan
IncomeNational

WageIncome

Divi dend

1950

21

23

99

l951

30

29

46

19. 52

17

18

32

l953

15

19

31

1954

4

3

22

1955

9

7

18

NOBUKO NOSE

158
Table VII.

lmport of machine induced byaccelerated

amortizatiQn.
1,OOO$

Importod from U. S. A.

Sumof Imported Machine
1949

1,245.6

1950

5,786.6

(58%)

1951

57,33036,678

1952

90,4701953

190,742(61,5%)(72.5%)
123,177 (69.5%)
89,312 (67.4%)
111,244 (69.1%)

I954

177,074

1955

132,4021956

161,168

55,847ll6,184

Source ;As for the amounts in 1949 and 1950, we derived them from `Monthly Return of
The Foreign Trade of Japan, Dec. 1950,' published by the Ministry of Finance. The

amounts after 1951 were derived from `White Paper on Foreign Trade', publishodby the Ministry of International Trade and Industry.

% is estimated by setting Sum of Import=100.

Table VIII. Accelerated amortization utilized in giant corporations

100 million Yen.

Accelerated
Amortization

TaxableIncomeIronandSteel

Mining

28.2%

10.7%

7.5%

43.5

69.8

66.5

Note; % is estimated by
Source ;`Report by the
Finance, p, 74.

Textilesetting taxable income
Research Mission for

Pulp

Bank

O.9%

O.1%

O.4%

54.4

53.9

57.1

Fertilizer=100.
Tax System,'

published by the

Ministry ofTHE RESEARCH INSTITUTE FOR ECONOMICS AND
BUSINESS ADMINISTRATION, KOBE UNIVERSITY.
rd"'va•%1.t""l;<•1"i$•lll:l}..ti.•,im...-,;,•"""l'pt,"/ ltl!l:i'as.srei•'{•'ljE;f'i/L"S-•g'•//'•"'::•"'tT;tw.•'.`"f.t4t•};rv,+ig."'"' The lnstitute was founded in 1919

and attached to Kobe University (the.eAf;ewf, I l

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