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ment would be much increased, and the foreign investor would have the assurance that his money was safe, even if the business in which it had been invested ceased to exist. The entire loss caused by the failure of Japanese business enterprises would thus be borne by the Japanese.

The financial difficulty in Japan in 1900–1901 was only the natural sequence of the overexpansion of business of some years back. In every country there are waves of prosperity followed by periods of depression. I have known, in the economic history of Japan since the Restoration, five or six such waves, and they do not necessarily injure the real financial standing of the country. The two first peculiarities of the Japanese business character have much to answer for in the way of increasing the appearance of financial insecurity during the time of depression. After the prosperous times of 1893 came the war with China and the subsequent indemnity. Much of the money paid by China was spent in Japan, and the Japanese people came to the conclusion that this increased circulation of money would be permanent. They acted impulsively in many enterprises, and rushed into all kinds of business, because the Government had overexpanded her enterprises after the Chino-Japan War. Then came the depression, at its height in 1900 and 1901, and the second characteristic came to the front; businesses being abandoned or reduced because it was not such easy work as formerly. While I agree with Viscount Watanabe in his view on the financial situation of the country in 1900–1901, I do not agree with him in his opinion that it must inevitably result in national bankruptcy. This is not so, because by a proper management our national income can be made still greater than our expenditure.

I do not think that it will be easy for Japan to compete in American or European markets as far as the production of everyday manufactured goods is concerned. The superior machinery of the older countries necessarily tends to cheapen the cost of production of the finished articles. Besides, Japanese workmen, though their wages are cheaper, are not as a rule skilled artisans. It is true that there are many such, but it will take two or three generations before the mass of labour is equal to that of older countries in skill. Until that time comes it is more profitable to export unfinished goods to foreign countries to be finished there. This pays far better than to attempt to produce the finished articles here. I think, however, that we can supply the Oriental markets (Chinese and Corean) even now better than other nations can do, although the trade is necessarily more in the form of an exchange of products than in any other way. For instance, from Corea we receive rice, beans, hides, bones, and we send there cotton-thread, cotton-stuff, silk cloth,