Japan Public Finance

The economic situation in Japan is currently very weak. World War II severely damaged its industries; the export trade of manufactured goods is greatly reduced; the merchant navy, which contributed extensively in the pre-war period, with the services rendered abroad, to cover the trade deficit today has a minimal consistency; this complex of factors seriously jeopardized the balance of payments equilibrium and Japan was able to survive only thanks to American aid which is estimated to have amounted, during the first two years of occupation, to around 600 million dollars. At the same time, from the internal financial point of view, the effort made by the country during the war and The extremely sensitive burden of employment expenses led, on the one hand, to growing deficits in the state budget which were covered to a considerable extent by resorting to the issuing institution, and on the other hand made the internal reconstruction effort very difficult.. Hence an extremely tense monetary situation characterized by an accentuated inflationary process. During the decade 1938-48, the state budget varied as follows:

According to rrrjewelry, the burden for employment expenses, which amounted to about 55 billion yen for the 1947-48 financial year, is expected to reach 93 billion yen in the 1948-49 financial year. The public debt amounted to 258 billion yen at the end of February 1948, of which 881 million of foreign debt.

The situation of imbalance in the state budget affected the monetary circulation, which registered an increasing expansion starting from 1937. In that year the circulation of notes of the Bank of Japan amounted to 2305 million yen, the state one to 481 million; at the end of 1944, as a result of the war, they had risen respectively to 17,745 and 1194 million yen. Immediately after the end of the war, the upward movement registered a sudden accentuation: at the end of 1945 the bank circulation had risen to 55,440 million, that of the state to 1217.

To stop the inflationary process, the currency was exchanged in March 1946. Each presenter of the old tickets was only given 100 new yen; the rest was paid into special blocked accounts into which wages and income were also paid, from which only limited sums could be withdrawn each month; the existing bank deposits were also blocked and as a result of these measures the circulation contracted from 54,342 million in February to 23,322 million in March. In the following August all the deposits were divided into two categories, accounts n. 1 and those n. 2. The former, available only to a limited extent, were credited with sums ranging from 15,000 to 32,000 yen, according to the composition of the families, and for no more than 15,000 yen. for commercial enterprises. The other sums paid were entered in accounts no. 2 declared unavailable. The newly formed savings were paid into entirely free deposits. But ticketing continued at an ever-increasing pace. At the end of February 1948, the bank circulation amounted to 215,319 million and that of the state to 1704 million; at the same date, the Bank of Japan’s credit to the state amounted to approximately 179 billion yen. At the end of February 1948 free deposits (new accounts) with all banks amounted to 169 billion yen, those no. 1 to 35 and those n. 2 to 14 billion; in July 1948 the release of deposits no. 1 and n. 2.

The control of the employment authorities over the issuing institution is generally exercised ex post.

Until 1 September 1947, foreign trade, which took place under the control of the Supreme Allied Command, was the exclusive monopoly of state organs; since that time some private transactions have been allowed, however to a very limited extent. The Japanese Ministry of Commerce is the body through which all financial transactions are carried out between Japanese importers and exporters and foreign states or traders.

In 1938 the US dollar was quoted at 2.97 yen ; since the end of the war there is no longer a single exchange, neither official nor free. However, the exchange rate set by the allied command is currently in effect (270 yen per dollar, since July 1948); it is used exclusively for the calculation of the salaries of the occupying troops, of certain expenses of the Command itself and of certain financial remittances of a welfare nature; it does not apply to any commercial operation. For commercial transactions with foreign countries, a system of multiple exchanges is used, different for each category of goods for import and export; these exchange rates, also fixed officially, are determined on the basis of the relationship between world prices in dollars and domestic Japanese prices for each commodity; for imports, the domestic prices used for the calculation are the official ones.per US dollar

The Japanese banking system currently includes, besides the Bank of Japan, eight special banks, sixty-two ordinary banks, five savings banks and a number of other institutions, co-operative banks, etc. largely connected with major banks.

Since the peace treaty has not yet been signed, the problem of reparations still remains unsolved.

Japan Public Finance