Institute of Pacific Relations

Japanese Alarmed by Rising Cost of LivingAuthor(s): M. S. F.Source: Far Eastern Survey, Vol. 6, No. 6 (Mar. 17, 1937), pp. 65-66Published by: Institute of Pacific RelationsStable URL: http://www.jstor.org/stable/3022570 .

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1937 Japanese Alarmed by Rising Cost of Living 65

as a substitute for butter. Doubtless the Ukraine or

Bessarabia could produce soya beans as well as Man?

churia, so far as technical factors are concerned, but such regions cannot compete on a price

Tic with basis with the combination of fertile Manchoukuo's Manchurian soil and the low Chinese

Economy standard of living. Moreover, German bean purchases considerably affect

the agricultural development of Manchuria and the

finances of the South Manchuria Railway Co. Hence

the Kwantung Army's favorable attitude toward Ger?

many is partly rooted in economic factors. As the

foreign Office spokesman in Tokyo put it in 1935:

"German-Japanese trade relations are a question of

soya beans."

GERMAN IMPORTS OF MANCHURIAN SOYA BEANS (figures for first half of year)

Tons Million RM. 1934 . 486,233 36,685 1935 . 308,180 26,553 1936 . 325,344 29,597

Germany has also permitted the import of the few

raw materials from Japan which she can use, as vege? table oils, fish oils and fish flour (used as food for

animals). It is noteworthy that exports of the simplest kinds of cotton tissues from Japan to Germany have

risen considerably. Evidently Germany uses her favor?

able balance of trade in this way for an indirect pur- chase of raw materials not from, but via Japan. Ger?

man imports of ramie, cotton waste and other fibers

from China have also increased since 1934. The same

spirit of cooperation between Germany and Japan is

revealed in the figures of Chinese imports, particularly

in the chemical field, where Chinese imports from

Germany and Japan have risen together while those

from the United States, Great Britain and France have receded :

CHINESE IMPORTS OF CHEMICALS AND PHARMACEUTICALS (in thousands of G.U.)

1935 1936 Germany . 6,417 9,207 Japan . 4,474 4,810 Great Britain . 4,270 3,389 France . 885 777 United States. 1,932 1,737

Total (incl. others). 20,330 22,967

Because of their lack of capital, both Japan and

Germany have had to build fast, new boats for their

shipping routes between Europe and the Far East, since additional speed means a saving of time and therefore a quicker turnover of the credits in foreign trade and the capital invested in merchant fleets. Here, too, an

original disadvantage is turned into an advantage. On the whole, the theory that Germany is the natu?

ral political friend and economic ally Events of the nations of Asia which are rising Confirm to industrial independence seems to fit

Theory very well the actual developments of recent years. Germany's trade with

the Far East is increasing and, if peace continues, she will be able rapidly to regain the ground lost during the depression.

PRINCIPAL SOURCES: China Maritime Customs, Monthly and Annual Returns of Foreign Trade; Monthly and Annual Returns of the Foreign Trade of Japan; Statistisches Jahrbuch des Deutschen Reiclis; Ostasiatische Rundschau, Hamburg; Statistische Berichte des Ostasiatischen Vereins Hamburg nach den Ergebnissen der amtlichen deutschen Aussenhandelsstatistik; Eildienst fur Aussenhandel und Auslandswirtschaft, Berlin; Geopolitik, Munich; Deutsche Allgemeine Zeitung, Berlin; Asahi Shimbun, Tokyo; Chugai Shogyo Shimbun, Tokyo; North China Daily News; Ostasiatischer Lloyd, Shanghai; Netherlands Indies Review, Batavia; Bulletin de VAgence Economique de L'Indochine, Paris.

SIGNIFICANT DEVELOPMENTS

JAPANESE ALARMED BY RISING COST OF LIVING

One of the most serious problems faced by the new

Hayashi cabinet in Japan is that of the rising cost of

living. The sharp advance in commodity prices which

set in about the first of the year has already reduced

the slim subsistence margin of the masses to the point where fear of social unrest is being openly expressed in the press.

That Japan's recent profit prosperity has been of

little benefit to workers and farmers has already been

pointed out in these pages (see Far Eastern Survey,

July 15, 1936, pp. 151-156). The trend of wage rates

has been steadily downward since 1931, and while this

has been partly offset by longer hours of employment, actual money earnings are now little higher than they were at the trough of the depression. Meanwhile the

cost of living has steadily advanced. In September 1936 the Oriental Economist's index of wage rates was

90% of November 1931, that of earnings 103%, and

that of living costs 117%. On this basis, real wages were 77% and real earnings 88% of the 1931 level.

This was the situation before the year-end spurt of

prices. According to figures quoted in the Yomiuri, bread went up 29% between November and January,

eggs 26%, beef 18%, pork 14%, tuna fish 75% and

cabbages 183%. Restaurants increased their charges and employees took to bringing lunches from home. Rice was still comparatively cheap on account of a

good crop, but was expected to rise later. The general index of Tokyo retail prices, which had stood at 160 in

September, reached 170 by January 15. Even so,

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66 Dutch Airways in Far East Show Rapid Growth March 17

retail prices had not yet fully reflected the rapid advance in wholesale prices which has been in progress since the middle of 1936. In January 1937, the Bank of Japan's index of wholesale prices in Tokyo stood

8.6% higher than in the previous month and 21.6% higher than in January 1936. Of 110 commodities

surveyed, the prices of 93 had risen, the increase being especially marked in imported commodities or their

manufactures, such as metals, cotton, wool, lumber and textiles.

Back of this phenomenon lies the cumulative efifect of a depreciated yen on import prices, and the prevail- ing fear of inflation as a result of the government's budgetary policy. In anticipation of inflation, official

import licensing and impending tariff increases, there was a wave of speculative buying toward the end of the year, which doubtless played a part in forcing the institution of extraordinary restrictions on foreign exchange in January. It also had the effect of driving up the domestic price level. Confronted by wide-

spread demands that it take measures to deal with this threat to the people's livelihood, the Hirota govern? ment minimized the seriousness of the situation, char-

acterizing the movement of prices as in part merely a

temporary speculative phenomenon, and in part as the reflection of a generally rising world price level. Whether or not this diagnosis is correct depends upon whether the speculators' anticipations were justified: that is, upon whether the government can succeed in

avoiding open inflation.

The new finance minister, Mr. Yuki, has stated that

arbitrary measures to check the rise of prices would not affect its underlying causes, but that he hoped to deal with the latter by cutting unnecessary expendi- tures from the budget. (See Far Eastern Survey, Nov.

4, 1936, pp. 240-41; Nov. 18, 1936, p. 249.) This, how?

ever, is more easily said than done, and the reductions

so far effected have in fact been slight. Mr. Yuki is

said to favor revision of the business taxes formulated

by his predecessor, but an increase in the tariff and

other consumption taxes is still generally anticipated. This, of course, would also tend to raise the cost of

living. What this may mean in a country of low wage levels is intimated by the Kokumin, which commented in January that "although the same conditions would cause no serious hardships in such self-sufficient coun? tries as the United States . . . social conditions are on too weak a footing in Japan to withstand rapid and unforeseen economic changes."

Coincident with the rising prices of daily necessities have come widespread demands on the part of workers for higher wages to meet the increased cost of living. Beginning with state and municipal employees, the movement spread rapidly to private plants and even led to occasional strikes. Several large companies have granted or promised to grant wage increases; for

example, the Kanegafuchi Co. raised the wages of

4,000 operatives by 5 sen a day, but at the same time it increased its dormitory, house rent and canteen charges. The Social Bureau of the Home Office, seriously con? cerned over the situation, is reported to be considering a minimum wage law with a sliding scale fluctuating with commodity prices, reminiscent of the plan recently announced by U. S. Steel. Little hope is entertained, however, of putting such a measure through over the

opposition of the industrialists. The movement of

wages commonly lags behind that of prices; moreover, Japan is under constant pressure to reduce costs in order to maintain her export trade. Hence an inflated

price level would almost certainly lead to a reduction of real wages below even their present low standard, with social consequences that could only add to the

prevailing economic and political uncertainty in Japan. M. S. F.

DUTCH AIRWAYS IN FAR EAST SHOW RAPID GROWTH

Direct air communication between the United States and Java appears more imminent as negotiations for the establishment of through service between the

Philippines and Batavia have been transferred from Manila to Washington. A Dutch plane has already visited the Philippine capital and it is reported that

plans are made to start the service as soon as terminal

arrangements are completed. With alternate routes for Batavia-Hongkong and American-Asiatic traffic also provided, this extension will be a forward step in the growth of East Indian aviation.

From a small beginning in 1924, when an experi- mental flight was made between Batavia and Amster-

dam, commercial aviation in these islands has ex-

panded until planes now travel more than half a million miles and carry more than 14,000 passengers,

50,000 pounds of mail and 150,000 pounds of freight annually. With lines spreading out from Batavia to

Singapore, Medan, Surabaya and Tarakan, the service

completely girdles the Archipelago and may be ex- tended not only to the Philippines but also to French Indo-China and northern Australia.

Although military and naval planes had been oper- ating in Netherlands India since 1914 and the flight of Van der Hoop in 1924 had given indication that air communication with Europe was possible, it was not until 1928 that definite steps were taken to make this a reality. In that year the Deli Company and the Netherlands Trading Society, along with other East Indian commercial enterprises, jointly established the Royal Netherlands Indies Airways with a capitali- zation of 10,000,000 guilders of which one half has been

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