Institute of Pacific Relations

Japan's Merchandise Trade Gravely UnbalancedAuthor(s): M. S. F.Source: Far Eastern Survey, Vol. 7, No. 6 (Mar. 23, 1938), pp. 68-69Published by: Institute of Pacific RelationsStable URL: http://www.jstor.org/stable/3021886 .

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68 Japan's Merchandise Trade Gravely Unbalanced March 23

expansion as far as the exigencies of the present situa? tion permit. Several cotton mills are moving to Chung? king, a cement plant is booming, banking facilities are

being extended, and plans are being broached to develop Szechwan's coal resources and other mineral deposits which have never been exploited along modern lines. In its salt supplies, especially, Szechwan is a key area. With Shanghai industry largely destroyed, and, in any case, cut off from access to the far west, with Tientsin under Japanese control, and with Hankow exposed to air raids, Chungking is being rejuvenated as an eco? nomic as well as political center for that part of China which gives no sign of compromising with the Japanese Army.

Agriculturally, Szechwan is badly in need of rehabili- tation?a problem which now assumes military signifi- cance because of the importance of the province as a

producer of rice and other foodstuffs. To judge from

reports, the air is buzzing with schemes to reclaim waste lands, improve agricultural technique, organize cooperatives, and conserve food supplies by centralized

storage and distribution schemes. While there is little doubt of the urgency of such reforms, it is too early to

judge the effectiveness with which they can be carried out or what the results will prove to be.

Nevertheless, it is clear that the tide of war has cre- ated two tendencies in this region. The first is the reassertion of greater independence from the trading and financial systems of the coastal areas. The second is the introduction of new forms of political and eco? nomic organization based upon the growth of national consciousness. Consequently, if the westward migra? tion of the National Government brings with it a shift-

ing balance of forces within that government, it also marks a new era in the history of West China.

W. W. L.

JAPAN'S MERCHANDISE TRADE GRAVELY UNBALANCED

Interest in the development of Japanese foreign trade in the year 1937 centers chiefly on two things: the effects of the war with China which broke out in the middle of the year, and the condition of Japan's balance of international payments, admittedly one of the weak- est points in her economic armor. On neither point are conclusive data yet available. The effects of the war on trade have undoubtedly been adverse, and Japan's international financial position is far from satisfactory, but there is no indication as yet that a critical point has been reached. Political as well as economic uncer- tainties are so evenly balanced that any prediction as to the future of the yen would be extremely hazardous.

In 1937, the exports of the Japanese Empire gained 17.6% over 1936 and imports 36.9%, the figures being ?3,175 million and ?3,783 million respectively. As

expected, the passive balance of merchandise trade reached record proportions, amounting to ?636 million in comparison with ?130 million in 1936. No accurate estimates will be available for some time on the invisible

trade, which normally provides a substantial credit

balance; on long-term exports of capital, chiefly to

Manchoukuo, which swell the debit side; or on short- term capital movements. (See "Manchoukuo, the Key to Japan's Foreign Exchange Problem," Far Eastern

Survey, May 12, 1937.) The fact that in 1937 Japan was compelled to export gold in large quantities is

evidence, however, of a severe strain on her foreign balances. Although the publication of figures on gold and silver movements was suspended in 1937, we know that during the year some $245 million (approximately ?846 million) entered the United States from Japan.

By gold shipments coupled with a rigid policy of

exchange control designed to restrict imports and pre? vent the flight of capital, the exchange value of the yen

has so far been maintained. It was possible to do this in 1937 by using the profits accruing to the treasury from the revaluation of Japan's gold supply to corre-

spond more nearly with its actual exchange value. Gold reserves at the end of December were reported at ?801 million. During 1937 the government purchased about ?181 million worth of gold (valued on the basis of the official buying price, which is somewhat above the world price), and it is hoped to increase this figure in

1938. It is obvious, however, that gold cannot be

shipped this year to the extent that it was last year without seriously depleting the domestic currency re? serve. Hence if the yen is to be maintained on its pres? ent basis, further restriction of imports and considerable caution in permitting the export of capital to Man? churia and North China will probably be necessary. The alternative would be either yen depreciation, or

a complete and arbitrary control of the currency and

price structure. As a matter of fact the grave unbalance of Japanese

merchandise trade in 1937 resulted more from the pre- war armament boom than from the war itself (see "United States Trade and the Sino-Japanese War," Far Eastern Survey, Jan. 5, 1938). During the first six

months of the year Japan's imports were at an ab-

normally high level, not all of which can be accounted

for by higher world prices. In May imports into Japan

Proper reached ?420 million, nearly twice as large as

in May 1936. With the outbreak of war the system of

exchange control was drastically tightened; some im?

ports were prohibited altogether and others were ra-

tioned in accordance with war needs. The import con?

trol has yet to be made completely effective, but it was

without doubt an important factor in reducing imports to ?210 million by November, although some seasonal

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1938 U.S.S.R. Increasing Oil Reserves in Far East 69

drop was to be expected. Seasonal factors and fluctuating world economic con?

ditions also make it difficult to estimate the effect of the war on the export trade. Sales to China have been

sharply curtailed, and reports have been current for some time of a falling off in orders from other countries. Some apprehension is also expressed lest the import controls and other war measures may be applied in such a way as to embarrass key export industries. Neverthe?

less, exports gained as usual in the latter part of 1937, reaching their peak in October, after which there was some decline. December, usually a banner month, not

only ran below the October figure, but also, for the first time in 1937, recorded a total lower than the corre-

sponding month of the previous year?an omen which

may or may not have significance for the future. The China trade, of course, is the principal sufferer.

Exports to South China ports completely disappeared in October; those to Central China almost did so, but

by December had recovered to nearly a third of the

July figure; while exports to North China, now largely under Japanese military occupation, likewise recovered and in December surpassed those of July. Nevertheless

exports to China as a whole in the last six months of the year amounted to only ?54 million as against ?125 million in the first half, while imports fell from ?103 million to ?40 million. It remains to be seen whether tariff and currency adjustments favorable to Japanese trade in North China can make up for the loss of trade with that part of China still under Chinese control.

Japan's imports from the United States, it may be of interest to note, rose to ?1,270 million in 1937, or

49.9%, while exports to the United States were only ?639 million, a gain of 7.6%. How much of these im?

ports were directly or indirectly for war purposes, it is of course impossible to say. It is improbable, however, that this level of imports from the United States can be maintained in the present year unless special credit

arrangements can be made. M. S. F.

U.S.S.R. INCREASING OIL RESERVES IN FAR EAST

Approximately ten American tankers sailed from the west coast of this country for Vladivostok during 1937

carrying high grade gasoline, according to a reliable source. It may be readily assumed that these shipments like the earlier ones of 1936 (see Far Eastern Survey, July 1, 1936, pp. 147-148) were destined for storage in various points of the Soviet East as part of the program to build up reserves against the eventuality of Far Eastern war. Concurrently from the Soviet Union come

reports of extension of oil reserves through geological discovery.

Soviet trade statistics report a total import of oil

products for 1936 of 47,306 tons, with 46,940 tons

coming from the United States. This last was in the form of gasoline. Figures for 1937 are only available

through September and in that period total imports

equalled 189,529 tons with 109,259 coming from the United States, again representing refined oil. While

the Soviet statistics do not give the port of importation, news from the west coast of this country indicates that

the U. S. shipments have been destined for Vladivostok. In our studies of the Far Eastern region mention has

frequently been made of the output of oil from Soviet

Sakhalin and of the development of cracking plants for

its refining (see Far Eastern Survey, Apr. 10, 1935,

p. 50; May 8, 1935, p. 71; Dec. 18, 1935, pp. 208-09;

Sept. 9, 1936, p. 206). Latest production figures avail?

able (1936) indicate that the Sakhalin output is

amounting to around 300,000 tons a year. The extent

to which the refineries are able to transform the oil into

gasoline is not known. A discovery in the last half of 1937 was made by the

Far Eastern geological trust which has established the

fact that the Region will in the course of time have considerable additions to its oil supply. For the first time an oil-bearing region has been established on the

mainland, about 300 kilometers inland from the Sea of

Okhotsk, in the vicinity of the River Maia in the lower Amur region. The oil-bearing area is estimated at 8,000 square kilometers and is reported to be very rich.

Topographical surveys and further studies of the re? sources of the area will be made this year. The signifi- cance of this discovery is linked by one of the main Soviet experts in the field with discoveries of oil that have been made in Yakutia. The oil-bearing strata in Yakutia as in the Far Eastern Region belong to the Lower Cambrian geological era, and it is expected that further discoveries will be made east of Lake Baikal. It is believed that a new field of oil-bearing districts will be established which will be of consider? able importance to the development of the Soviet East. The oil being found in the lower Cambrian strata is

reported to be of considerable scientific interest as here are located the oldest geological formations in which oil to date has been discovered; and no other country has as yet discovered oil in formations of this area.

In the middle of 1937 it was announced at the Geo?

logical Congress that the Soviet Union oil resources were tentatively estimated to be 6,376.3 million tons, of which 3,877.2 million were proven resources. Dis? coveries since that time, it is reported, have already thrown those estimates considerably out of line. Planned production of oil and gas in 1937 was 34.5 million as compared with fulfilled production of 29.2 million for 1936 and 26.9 million for 1935. But despite the increase in production, Soviet exports of oil and

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