Japan by the Japanese/Chapter 15.2

Industry must be promoted, and any step for that development is worthy of hearty encouragement. But one thing is necessary, and that is that it must be developed systematically. With regard to railways, I may say that, according to my own investigations, of late years even the lines presenting the fewest difficulties in construction have necessitated the use of imported materials to the extent of 20 per cent. Taking an average of lines, 35 to 40 per cent. would be nearer the mark. Taking, then, the average at 35 per cent., it follows that no railway can be completed in Japan without much specie being taken abroad. How many years will suffice to bring it back to the country? Ten or twenty years will hardly be long enough. In the case of spinning companies, from 70 to 80 per cent. of the materials are brought from abroad. The ratio, at first sight, appears extraordinary, but ​the money thus spent returns to Japan much more quickly than in the other case. It was on that account that I have endeavoured to save the spinning establishments from ruin—because the future interests of the economic community were largely bound up in their success. These establishments have led to a great reduction in the import of yarns. In 1889 the import of yarns aggregated 120,000,000 to 130,000,000 yen, but the figures had decreased in 1893 to 7,284,243 yen, and by 1901 to 4,870,000 yen. We at first obtained coarse yarns from India and fine from England. At present the former are not imported at all, the latter alone being brought into the market, and as factories are now in existence in Osaka and Tokyo for the manufacture of the so-called gasu-ito, a decrease in that item is to be contemplated. In short, the development of the spinning industry has stopped the exodus of gold to a certain extent, and has indeed helped to bring specie into the country from China. I want to draw attention to the gradual increase in the number of blanket and cloth manufactories; which has tended to decrease the imports in these lines and so to reduce the outflow of specie. The encouragement of manufactories which supply substitutes for imported articles is absolutely indispensable.

Japan must devise some scheme that will make her industrially and economically self-supporting. Unless that is done the outflow of gold will remain permanent. The Bank of Japan or the Specie Bank, or the Legislature itself, may take steps to palliate the present evil, but the effect of such steps will be only temporary. Investigations I have made lead me to the conclusion that the manufactures which may be profitably undertaken by Japanese amount in value to 51,000,000 yen approximately. But how are they to be organized? The rates of interest are high, and there is a difficulty in obtaining capital. Some industries can hardly be carried on at a profit except on a small scale, or by the amalgamation of capital, and others, established on a great scale, suffer from undue foreign competition. According to the present arrangements the Government, in the case of purchases of blankets, cloth, and other commodities, advertise for competitive tenders as prescribed by the Law of Accounts. So-called competitive tenders outwardly look fair and just, but are really full of abuses. When domestic manufactures are concerned things may be arranged smoothly, but when articles that require special processes of manufacture are wanted it may be advisable that contractors should be able to obtain from Government special terms to prolong contracts for a period, say, of five or ten years. Such a concession would, indirectly, be the means of promoting industry. Without a boon of this kind ​no industry can possibly make progress. Again, the Law of Accounts to which I have alluded may have been suitable to the time at which it was framed, but subsequent changes have necessitated some alterations. Considered as a whole, in its present form, it has a tendency to encourage the importation of supplies from abroad. Fifty million yen a year can be secured to native enterprise. Even half the amount will do for the present to retard the exodus of gold. This consideration induces me to urge the necessity of a systematic development of industry. It is advisable to suspend all railway enterprises for two or three years hence, inasmuch as the Government, having established an iron foundry in Wakamatsu with an outlay of 14,000,000 yen in specie (in addition to expenses incurred in harbour building), will probably soon be in a position to supply rails. The inconvenience resulting from delaying certain railway enterprises for a few years will not, I am confident, be so great as to counterbalance the advantage of using the iron foundry’s rails. It is necessary to stop the spirit of speculation in railways and such enterprises, and nothing will achieve this but an attitude of moderation on the part of capitalists and enterprising men; even laws and ordinances would be comparatively ineffectual. The aggregate total of exports and imports from the 1st to the 31st year of Meiji shows an excess of 225,960,000 yen in favour of the latter. To that amount, therefore, specie must have gone abroad. Against this remark some may point to the indemnity of over 350,000,000 yen from China and to other sums, making a total of 365,000,000 yen approximately. Out of this amount appropriations were made for the extension of the navy and army, and for the establishment of an iron foundry, while considerable amounts were included in special accounts, and also in general accounts for the 30th year of Meiji, as well as in the grants to the Imperial household. A portion was also set apart as a capital fund for education, a natural calamities reserve, and a fund for war vessels and torpedoes, while, again, other sums were carried to the general account for the 31st year of Meiji, the remainder being reserved for liquidation of industrial liabilities.

Attention to the Chinese markets is also as necessary as the adjustment of domestic industrial conditions. Japanese business men are very little in evidence in China. This is not because of the inefficiency of our diplomacy, but to the want of enterprise on the part of our commercial classes. Our merchants in China are unworthy to be called merchants; their transactions are petty. In the case of England, the efforts of merchants precede action by the Government. Representations are made to the Government by business men or ​corporations, such as the Hong Kong and Shanghai Bank, or the China Association, or Jardine, Matheson and Co., urging the Government to secure railway and mining concessions, etc. The English Government then gives instructions to its representative in Peking to open negotiations with the Chinese Government for attaining the object in view. But in the case of the Japanese no such representations have ever been forwarded. If Japan wishes to keep pace with other nations her business community must prove more alive to its opportunities.

The idea was formerly entertained that the revision of the treaties and the opening of the country to mixed residence would have the effect of inducing foreigners to come to Japan to engage in various industrial enterprises and to buy land. Yet since the revised treaties came into operation no single instance of the purchase of land by foreigners has come to our notice. It was expected also that foreign money would flow into the country. The fact, however, has proved the contrary. Specie needed in the interior has had to be borrowed from abroad. The recent loan amounted to 100,000,000 yen, for which 4 per cent. interest has to be paid annually. Four million yen in the form of such interest is therefore destined to go abroad irrespective of the balance of trade. There are, besides, Consols and war bonds aggregating on which interest to the amount of no less than 6,000,000 yen must also flow out of the country in specie every year. While such is the case views are still expressed by a majority condemning the foreign ownership of land and shares as detrimental to the interests of the country. The narrow-mindedness of the Japanese has prevented foreigners from investing their capital in industrial enterprises with any sense of security; their disinclination to invest seems to be owing to their inability to acquire full rights over land in this country. The only way of introducing foreign capital, therefore, in the present condition of affairs is by a loan. The abolition of extraterritoriality has really militated against the inflow of foreign funds. The interests of Japan demand that efforts should be made to secure intimate relations between the Government and business community with a view to allowing foreigners to engage in any enterprise in the interior with the utmost confidence and safety. Unless such an arrangement be made in future native capital alone cannot achieve much. The Russian Minister of Finance, at a recent meeting of the Cabinet, showed in his speech that conditions in parts of Russia are somewhat analogous to those in which Japan is now placed. In the abundant production of petroleum English capital is invested to a considerable amount. With unfriendly feeling towards the English, some of the Russian ​Ministers attempted to put restrictions upon them with a view to preventing them engaging in any enterprise whatever. These steps, however, were vehemently opposed by Mr. de Witte, who insisted that Russia could not develop herself without having recourse to foreign capital. Some time ago a certain Englishman wished to establish a factory in Nagoya for refining sugar-cane from Formosa, but he was deterred from doing so by his inability to acquire land. If this factory had been established Japan would have benefited to the extent of the outlay incurred in connection with it and the employment it afforded to labour. So long as the only means of introducing foreign capital is by obtaining a loan it is hardly possible to strengthen the foundations of the national economy or to secure the systematic development of commerce and industry. The adoption of a more liberal policy is absolutely indispensable.