The Birmingham age-herald., 1919-03-12
HOW JAPAN MADE
 TRADE EXTENSION
By HOLLAND

By HOLLAND
 New York, March 1i.-(Speciall 1911 the Japanese government approached the American money market with intent to secure a loan amounting to many mil- lions. Japan's credit was SO good that the government at the time of Japan's war with Russia was able to float large loan in the United States The money thus obtained was used by Japan to pay for purchases made in the United States of material needed by her in the war Therefore almost all the money thus secured remained in this country. Notwithstanding Japan's excellent cred lit and the favorable financial experience with her at the time of the war with Russia she was compelled to pay a high rate of interest upon the loan which she did secure in this country in 1911. One New York bank lent her s10,o0o,0oo, but exacted interest at the rate of per cent. It may be that other New York banks also made loans at about this rate of interest.
 Having secured the money, the govern ment of Japan let the industrial leaders of that country know that if they need ed funds to carry on their enterprises the government would lend them reason ble amounts. All of the $l0'Oooooo which were borrowed in this country were lent to the managers of Japanese industries who were charged only Az per cent in- terest upon the loans. The government, | t1o lnor,
 would be utilized in developing upon
 large scale certain textile industries and one or two others. These pledges were given and there speedily began the man
 ufacture in Japan of certain kinds of
 cotton cloth, particularly blue jeans.
 These cloths were manufactured for the
 purpose of securing market for them In China. The Chinese were tempted to buy these goods because the quality was excellent and the price reasonable. Ulti-
 mately a large market was found for
 these commodities in China.
 In that way the government indirectly at least recouped itself on account Of the difference between the interest 1t was obliged to pay to the NAmreican banks. l9 per cent. and the interest which 1t
 charged the Japanese, 41a per cent, for the loans
 
 The capture by Japan of a considera- ble part of the Chinese market for cer- tain kinds of cotton goods inevitably in- volved to some extent the loss of so much of that market as the United States had before possessed. Some of the banking authorities of this city estimate that UT trade with China fell off within the course of two years by approximate ly $50 ,0OO due in great measure to the fa aof fbaf ToD of the American market for cotton goods. There therefore arose a situation which has been referred to many times recent ly in financial circles when the question of loans by banks and individuals to other nations has been under discussion. For it is assumed that it is not improba- ble that American money represented by loans to other nations even if the rate of interest is high. is to be employed in creating or developing industries which will be able in time to capture markets heretofore held by American manufacturers.
 This is a point which nCne of those who have in public discussed the league of nations proposition has mentioned. Possibly 1t did not occur to any of the senators who have recently spoken in opposition to the plan which is now un- der consideration in Paris. But it has oc- cured to men who many be called upon hereafter to make loans to other nations. There seems to be some hint of this feel ing contained in the recent statement said to have been made by Frank A. Vanderlip MT. Vanderlip has been in
 Europe for some weeks for the purpose of seeing with his own eyes, and investi- gating by means of personal touch with authorities over there. the conditions so
 that he might be able to recommend the
 granting of loans to private interests abroad or on the other hand. to disprove
 proposed action of that kind. He is
 quoted as having said that he did not
 now feel justified in recommending loans
 by American bankers or individuals to
 private interests or private individuals
 in Europe. One of the reasons for this opinion is undoubtedly to he found in
 the fact that until readjustment is com
 pleted and peace permancntlv estab
 lished, a serious question respecting the
 security behind loans of this kind will be raised. Furthermore American bank
 CTS may be asked to lend large amounts of money to manufacturers and others in
 foreign lands. If this be done then the chances are that considerable part of
 this money will be employed exactly in
 the way which Japan made use of the
 millions which she borrowed in the
 United States in 1911. The money would
 be used for the purpose of highly devel-
 oping industries. especially those which
 will seek world trade. In other words. American money lent to industrial lead CTS abroad may be used in such manner las to enable those who borrowed this
 money to manufacture commodities which they could place in other markets in
 competition with American manufac-