Publications of the Carnegie Endowment for International Peace Division of Economics and History John Bates Clark, Director JAPANESE MONOGRAPHS EDITED BY BARON Y. SAKATANI, D.C.L. Formerly Minister of Finance of Japan Conscription System in Japan, by Gotaro Ogawa. Expenditures of the Russo-Japanese War, by Gotaro Ogawa. Military Industries of Japan, by Ushisaburo Kobayashi. War and Armament Loans of Japan, by Ushisaburo Kobayashi. War and Armament Taxes of Japan, by Ushisaburo Kobayashi. Expenditures of the Sino-Japanese War, by Giichi Ono. War and Armament Expenditures of Japan, by Giichi Ono. EXPENDITURES OF THE RUSSO-JAPANESE WAR BY GOTARO OGAWA, D.C. L. Professor of Finance in the University of KIoto NEW YORK OXFORD UNIVERSITY PRESS AMERICAN BRANCH: 35 WEST 32ND STREET LONDON, TORONTO, MELBOURNE, AND BOMBAY 1923 ' COPYRIGHT 1923 BY THE CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE PRINTED IN THE UNITED STATES OF AMERICA AT THE RUMFORD PRESS, CONCORD, N H NOTE BY THE DIRECTOR The plans of the Division of Economics and History of the Carnegie Endowment for International Peace have been transformed by the World War. Problems now calling for study transcend in importance those with which this Division has been dealing and material for research and record so far transcends any that was formerly available that it will demand almost exclusive attention for some years to come. The process of warfare itself is now so unlike that of former days that many military rules of the past have gone into the scrap basket. The late war ended when its deadliest tools had barely been brought into action. The peoples have fought as they had worked, by machinery; mechanical and chemical engines of destruction have decided the result and will decide in like manner the result of all wars of the future. Machine shops and chemical laboratories will so largely determine what armies shall win that fighting strength will be as much a matter of available capital and of science in applying it as of numbers of troops and strategy in directing them. It is safe to say that the death-dealing arts and instruments will far surpass in destructiveness those which made the late war so deadly, and to a soldier of the future the order to march into a cloud of poisonous gas and a whirlwind of missiles will resemble an order to plunge into the rapids of Niagara. This is one central and obvious fact which the war has taught us and it has many corollaries, some of which have to do with the increased costs of war and the importance of the particular resources that make a nation powerful for offense and defense; but there are less conspicuous economic facts which are more fundamental, since they may determine where and when, if at all, wars shall hereafter occur. Causes of warfare are always partly economic and those which incited the recent one were mainly so. The business plans of a powerful state reached to the ends of the earth and so crossed and interlaced the claims of other states that some writers, then and afterwards, pronounced the war inevitable. If we assume a settled purpose on the part of such a V vi NOTE BY THE DIRECTOR state to encroach on the rights of others, we may say that it doubtless was inevitable. The victory of the defending countries has saved them from an immediate and intolerable domination, but it can not be taken as an assured fact that similar attempts will never again be made. The economic inducement continues and the means may at some time be forthcoming. War has both centralized and somewhat democratized industry within the several states-a change that if continued will entail momentous consequences; but still greater effects have been produced on the relations of states to each other. The world as a whole has changed more than its component parts and the new relation of the parts to one another is the critical element in the situation. The great increase in the economic functions of governments is one cause of this condition. Within the great international community in which the several states are units extensive economic functions have gravitated into the hands of governments and caused them to face each other as business rivals and to deal with each other in a multitude of ways in which the merely selfseeking policy of private business is intolerable. Power to invoke principles of justice and international law as interpreted by a competent court has become an indispensable means of allaying strife and this fact exalts to supreme importance the high court of nations which has just been established. It magnifies also the importance of the economic facts and principles with which the law itself will have to deal. It is not merely individual men or private corporations who now meet each other in the rough and tumble of a world-wide mart but states themselves, each representing its own population and seeking to foster its interests as a zealous and faithful agent The chances of friction that are inherent in ordinary commerce inhere today in vast international transactions and will increase in the measure in which the intercourse grows. All this means a great increase in incentives to warfare, on the one hand, and in the motives for preventing it, on the other. Private com NOTE BY THE DIRECTOR vii merce unites more than it separates those who participate in it, and it remains to be seen whether international commerce will act in the same way; but, in view of what modern war means, the human race will deserve to perish, and much of it will probably do so, if the forces of strife are allowed to get the upper hand. Whether they will or not-whether the recent economic changes will tend to reduce warfare or to increase it-depends on the ability of nations to create and maintain the instrumentalities that in the new state of the world are necessary. Certain it is that the feeling which prevails today, the world over, is not one of security. The dread of further war is greater than it was before I914. In some areas war still prevails, in others peace is held by a precarious tenure and in all it can be firmly established only by conscious and intelligent action by the states themselves. Mere exhaustion holds war dogs temporarily in leash, but it will take more than that to tame them as they must be tamed if peace is to endure. We here confront a wide difference between the several states in comparative desire for peace and disposition to maintain it. One portentous fact is the grim determination of Russian communists to extend their system by crude force from state to state. Bolshevism is government by the few, and largely the bad, masquerading as government for and by the people. In its mother country, Russia, the economic measure by which it began its career was confiscation of private wealth-in itself an ultra-democratic measure. If this had brought in a true communism, it would have been a ruthless and unjust measure for creating a peace-loving state. Democracy, socialism, communism and bolshevism all appear in the aftermath of the war. The first of them makes for future peace and so does even the conservative element in the second, while all else in the series means certainty of civil strife and danger of international war. By a compulsion that there was no resisting, the war forced the nations of the Entente into economic cooperation with viii NOTE BY THE DIRECTOR each other. Commissions centering finally in the Supreme Economic Council adjusted in a harmonious way questions that would otherwise have led to rivalry and conflicting action in purchasing war materials, securing ships, apportioning food, controlling railroads, financing the war and doing a multitude of other things with the one common purpose of victory. The special compulsion of the struggle is over, but it has left an aftermath of issues grave enough to make peace insecure unless something equivalent to the Supreme Economic Council survives in full efficiency. The agency that did so much to win the war can do as much to prevent another one, but to that end it will have to be guided by economic principles and it is a saving fact that these still survive. The war has not abolished the law of demand and supply, though governments may forget it. In the coming era they must build better than they now know. Economic knowledge must either go in advance of action and prevent disaster or follow action and be learned from disaster. The Japanese monographs in the present series have reference to wars which were concluded before the World War began. Although they were completed several years ago, their publication has been delayed as a result of war-time conditions. This series is to be followed by a series of studies of the World War itself, made under the direction of the same committee of accomplished Japanese scholars as the present one. Both series will contribute much to the solution of postwar problems in all parts of the world. JOHN BATES CLARK, D rector. NEW YORK, February I, 1923. PREFACE Since the Imperial Restoration in I868 Japan has fought no less than three international campaigns, namely, the SinoJapanese, the Russo-Japanese and the Germano-Japanese Wars. Of these the most sanguinary was the Russo-Japanese conflict. In this greatest of the Far Eastern engagements, Japan staked everything, because she was pitted against a renowned military power whose troops were then reputed to be the strongest in the world. When its dreaded fighters covered in swarms the fields of Siberia and pressed down to the front, while its devastating warships approached the Japanese waters and threatened the annihilation of our navy, the hearts of fifty million men, women and children quaked for the safety of their country. And yet Japan unsheathed her sword valiantly, because she knew that her fate would be sealed should Russia be allowed to occupy Manchuria and extend her influence to Korea. This desperate struggle fortunately ended in our victory, but the sacrifices Japan made were by no means light. Japan lost a large number of men in this campaign and millions of yen were unproductively spent. It was not an easy task to raise this enormous amount of war expenditures. Extraordinary special taxes were imposed and great public loans w7ere floated, both for the same object. The former were devised as a temporary war measure, but the effects of the Russo-Japanese War on our national finance were so baneful that the extraordinary special taxes could not be abolished with the restoration of peace, and most of them are still being levied. It is not, therefore, too much to say that, even to this day, the people of Japan are groaning under a heavy burden of taxation, as a result of their war with Russia. The flotation of the war loans wrought yet weightier effects on our finance. Because large sums of money were borrowed from abroad, no small amount of interest has been paid year after year since the close of the war, and this in its turn has affected our exchange with foreign countries. This last, again, ix x PREFACE has affected our foreign trade. On the other hand, as the total issue amount of war-time bonds increased, the circulation of convertible notes also gradually swelled and prices rapidly soared. W\ages, however, did not rise in proportion, living became harder for the masses and the gulf between the rich and the poor visibly wider. Turning our attention to the agricultural, industrial and commercial activities of the country, it may be observed that, in the early stage of the war, every branch suffered more or less. But the strenuous and persistent efforts of the people soon overcame the difficulties, the former prosperity was steadily recovered as one victory after another on land and sea was reported, and the foundation was laid for great development after the war. All this, therefore, may be called the bright side of the dark picture of carnage. The economic growth of Japan in the last twelve years, in short, has been stimulated by the Russo-Japanese War. This work comprises the results of studies and investigations on the points referred to above. Its author is Mr. Hisashi Oyama, assistant in the Seminary of Economics in the Law College of the Kyoto Imperial University. He complied with my request to undertake the present task, went through a wide range of literature bearing on the subject, extensively culled statistics and spent a long time in research, before the results thus obtained were finally put down on paper. His first draft was much more comprehensive and extensive, but, in order to bring the volume within reasonable compass, it was necessary to omit some of his illuminating material. The author, therefore, asks the reader's leniency for whatever defects may be found in the arrangement of the material. On behalf of the author, the assistance rendered him in completing this study by Mr. Yasuma Takata, lecturer at the Law College of the Kyoto Imperial University, is gratefully acknowledged by the editor. GOTARO OGAWA. KYOTO, JAPAN, December, 1916. BIBLIOGRAPHY ARIGA, DR. CHOYU, Diplomacy for the Last Thirty Years (Saiklin Sanj'tinen Gaokoshi), 1910. ARMY DEPARTMENT: Military Annual Statistics (Riku-gunsho Nempo), i901-i909. DEPARTMENT OF AGRICULTURE AND COMMERCE: Annual Report of Department of Agriculture and Commerce (Noshomu-sho Nempo), i90i-i909. Effects of War on Forestry and Mining (Jik'ioku no Ring'io oyobo Kogio ne oyoboseru Eikio), I 905. Effects of War on Home and Foreign Trade and Commerce (Jik'ioku no Naiga'i Boeki oyobi Shog'io Hi oyoboseru Eikio), 1906. DEPARTMENT OF FINANCE:, References for Monetary Circulation (Kin yii Jij6 Sanko 81w), 1901-1909. Annual Report of the Government Settled Accounts (Kessan Sho), i901-i909. Annual Report of the Department of Finance (Okorashio Nempo), i901-i909. Annual Statistical Report of the Revenue Bureau (Sh'uzei kioku Tokei Nempo), i901-i909. Annual Report of Foreign Trade of Japan (Dai -nikon Gai-koku Bo-eki Nempo), i901-1909. Local Economics and Finance during the War (Senji ni okeru Chilho Keizai Zaisei), 1905. Report on the Extraordinary Expenditures (Rinji Gunjihi Shimatsu), 1907. Investigation concerning Military Bills (Gunyo Kippit ni kansuru Chosa), 1908. Annual Statistics of National Loans (Kokusai Tokei Nempo), i908-i910. Report on Financial Administration during the RussoJapanese War (Meiji Sanju shlichi hachi nen Senji Zaesei Shimatsu 31w), 1909. Report on Financial Readjustment after the RussoJapanese War (Sen go Zaisei Shiimatsu Hokoku), 1 91 i. xi xii xii ~~~BIBLIOGRAPHY DEPARTMENT OF HOME AFFAIRS: General Sketch of the Local Administration during the Russo-Japanese War (Meiji Sanju Shichi Hachi Nen Chiho Keiei Taikan), 1907. Gaiko6 Jiho6 Sha (Magazine for Diplomacy), vols. vi-ix, I903-I906. GENERAL STAFF OF JAPAN: History of the Russo-Japanese \Var (Nichiro Senshi), 1912. JAPAN RED CROSS SocIETY: Report on Relief during the Russo-Japanese War (Meiji Sanju Shichi Hachi Nen Eki Nihon Sekijuji-sha Hokoku), 1905. MAKINO, YOSHI-TOMO: China Diplomatic History (Shina Gai-ko Ski), 1914. NAGAOKA, DR. SHUN-IcHI: Modern Diplomatic History (Sai -kin Gai-ko Ski), 1909. NAvy DEPARTMENT: Annual Report of the Navy Department (Kai-gun-sho Tokei Nempo), i901-i909. OSAKA PREFECTURAL OFFICE: Report on the Effects of War in Osaka (Senji Eikio Chosa Hokoku), 1906. STATISTICS BUREAU OF CABINET: Annual Statistical Report of the Japanese Empire (Nikon teikoku Tokei Nenkan),i1901-i909. TODA, UHACHI: Treatise on the Postbellum Administration (Sengo Kei-ei ni kansuru Meika no Iken), 1906. Toyo-keizai-shimpo Sha (Oriental Economic Journal). WASEDA -UNIVERSITY: History of the Russo-Japanese War (Nichiro Senekishi), i906. EXPLANATORY TABLES VALUE OF JAPANESE CURRENCIES Japan adopted the gold standard system in 187I, but the inconvertible paper money became principal currency a few years later. In 1886 the paper money became convertible into silver and after that date the Japanese currency system was the silver standard de facto, until on October i, 1 89 7, the gold standard system was legally adopted. The figures necessary to ascertain the value of Japanese currencies are given below: (i) i gold yen (according to Coinage Law of 18 71) contains 1.5 gramme pure gold. (2) i gold yen (according to Coinage Law of 1897) contains 0.75 gramme pure gold. (3) i silver yen contains 24.26i gramme pure silver. (4) The value of i silver yen in the English currency (according to the demand rate of exchange on London in the average of the year) is as follows: s. d. s. d. s. d. 1874......4.02.0 1882.....3.08.8 1890.....3.04.5 1875......4.00.8 1883.....3.07.9 1891.....2.02.6 1876......3.11.2 1884.....3.07.9 1892..... 2.I0.5 1877..... 3.II7 1885.....3.06.0 1893.....2.06.7 1878......3.09.4 i886.....3.03.2 1894.....2.OI.2 1879..... 3.08.0 1887.....3.02.0 1895.....2.0I.3 i88o..... 3.08.9 i888.....3.0I.0 1896.....2.02.0 i88i..... 3.08.4 1889..... 3.01.1 1897.....2.00.4 (5) The value of i yen of paper money in the English currency (calculated on the basis of the above mentioned exchange rate and the quotations of the silver price in the Tokyo Exchange in the average of the year) is as follows: s. d. s. d. s. d. 1877......3.10.1 1880.....2.06.4 1883.....2.I0.7 1878..... 3.05.6 1881.....2.02.1 1884.....3.04.3 1879..... 3.00.3 1882.....2.04.5 1885.....3.03.7 (6) i ry5 (unit of value of the old currency system) was declared in the Coinage Law of 1871I to be equal to i yen. CHRONOLOGICAL TABLE Meiji 1st 1868 A. D. Meiji I~th 1882 A. D. Is 2d 1869 i6th 1883 Ad 3d i870 " 17th 1884 di 4th 1871 " i8th 1885 5 th 1872 " i9th i886 6th 1873 ""2oth 1887 7th i874 " 21st i888 8th 1875 "" 2d18 " 9th 1876 "" 23d 1890 ioth 1877 ""24th 1891 iith 1878 ""25th 1892 " 12th 1879 ""26th 1893 i3th i88o "s 27th 7894 I 14th i88i " " 28th 7895 i xiii x1v xlv ~~EXPLANATORY TABLES Meiji 29th it3oth gIt3st it 32d di34th d3 5th I 36th I 37th I 38th I 39th I 40th CHRONOLOGICAL 1896 A. D. i1897 1898 1899 I 1900 4 1901 1902 1 903 9 I904, 190,5 190o6 1907 TABLE-(Continued) Meiji 41st it42d It43d it44th It45tfl Taisho ist it 2d it 3d I( 4th it 5th it 6th. 1908 A. D. 1909 1910 1911I 19I2 1913 9 1914 i 1915 I 1916 19I7 S WEIGHTS, MEASURES AND MONEY With English, American, French and German Equivalents Great Japan Britain Ri=36 Ch5 (2.44030 = 2,i6o Ken Miljes =I2,96o Shaku.... Ri (Marine).{.... I.15152 rs5. 95505 Square Ri...... SqMie Cho =io Tan 2.-45064 = 100, SeAce = 3,000 Bu. Acres. Tsubo = i oGJ f3.9,5369 = i oo Shaku.... 'Sq. Yards Koku= ioTor = ioo Shn3 4.96005 = 1,000 G5 Bushels =10o,000 Shaku.. Kokut (Capacity of f 1/lo-of ship).........Ione Ton U. S. of America 2.44029 Miles I. 15151 Miles 5.95501 Sq. Miles France 3.92727 Kiloms. 1.-85318 Kiloms. 15.42347 Km. Carre's Germany 3.92727, Kiloms. i.853i8 Kilomns. I5.42347 Quadrat Km. 2.-45062 Acres 3.95367 Sq. Yards 47.65389 IGallons (Liq.) 5. I11902 Bushels (Dry) I/Io of one Ton 99.17355 99-I7355 Ares Ar. 3. 30579 Centiares. 1.80391I Hectolitres I //o de Tonne 3.75000 Kilogs. 3.30579 Q uadratm. 1.80391 Hectolitres I/l0 Tonne 3.75000 Kilogs. Kwan =i,ooo Momme (8.26733 8.26733 =1I0,000 Fun lbs. (Avoir.) lbs. (Avoir.) = 1 00, 000 Rin.. I0.047II I0.047II Llbs. (Troy) lbs. (Troy) T1. 322771I.32277 Kin= i 6o Momm-e.. lbs. (Avoir.) lbs. (Avoir.) i. 60754 i.60754 lbs. (Troy) lbs. (Troy) Yen = ioo Sen f2.0.582 0.4984 =1 00 in sd. Dollar =1J0,000 MO....S o.6oooo o.6oooo Kilogs. Kilogs. 2.583 2.0924 Francs Marks CONTENTS PART I.-EXPENDITURES OF THE RUSSO-JAPANESE WAR CHAPTER PAGE I Introduction............................... 3 Causes of the Russo-Japanese War......... 3 Progress of the Russo-Japanese War........ 16 Results of the Russo-Japanese War......... 30 II Cost of the Russo-Japanese War............. 33 The WAar Estimates....................... 33 The War-time Military Expenses........... 38 The War-time Administrative Expenses...... 42 III Resources for Defraying War Expenses........ 51 War Loans............................ 51 D om estic loans......................... 54 Foreign loans.......................... 65 W ar-tim e Taxes.......................... 71 D irect taxes........................... 72 Indirect taxes.......................... 77 Communication taxes and fees........... 84 The Special Account Funds, the Annual Account, Surplus, etc...................... 91 IV Means Adopted to Fill Temporary Deficits in the Funds for War Expenditures............... 102 V Conclusion.............................. 107 PART II. —EONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR I Introduction............................... I13 II Effects on Public Finance................... 16 General Remarks......................... 116 Expansion of Expenditures................ 117 Military expenditures................... I19 Expenditures for financial affairs......... 123 Expenditures for government industries.... 127 Expenditures for peace preservation and development administration, and for colonial affairs........................... 136 Taxes and Other Duties................... 141 Taxes on receipts....................... 142 Taxes on consumption.................. I46 Taxes on transactions................... 148 Inflation of the National Debt............. I49 Public loans......................... 149 Treasury bills and temporary borrowings.... 152 xv xvi CONTENTS III Effects on Monetary Circulation............. 60 General Remarks......................... I60 Supply and Demand of Capital............ 67 General survey......................... 167 Changes in the rate of interest........... 69 Bank deposits and loans................. 172 Inflation of Convertible Notes and Specie Reserve............................... 176 IV Effects on Commerce....................... 80 General Rem arks......................... 80 Domestic Commerce...................... I80 General View of the Effects................ 80 Observations according to classes of business I84 Observations according to localities....... 86 Foreign Trade........................... 188 General view of the effects............... 88 Observations according to merchandise.... I92 Observations according to countries....... 99 V Effects on Industry......................... 204 General Remarks......................... 204 Conditions of Industrial Capital............ 206 Conditions of Manufacturing Workers....... 213 Amount of Manufactured Goods........... 216 VI Effects on Communications.................. 218 General Remarks......................... 218 Land Transportation...................... 218 Effects on Shipping....................... 225 General observations.................... 225 Effects on home routes.................. 227 Effects on foreign routes.................230 Too many vessels after the war..........232 VII Effects on Agriculture....................... 234 General Remarks......................... 234 Burdens of the Farming Class..............235 General Economy........................ 238 Changes in Various Other Directions........241 VIII Effects on the National Life................ 244 General Remarks......................... 244 Wages and Prices.........................244 The Distribution of Wealth................249 IX Conclusion............................... 251 IN DEX........................................... 253 PART I EXPENDITURES OF THE RUSSO-JAPANESE WAR NOTE.-In the tables throughout this volume, fractions of:yen greater than one half have been counted as a whole yen,and the other fractions have been disregarded. CHAPTER I INTRODUCTION CAUSES OF THE RUSSO-JAPANESE WAR In studying the expenditures and economic effects of the Russo-Japanese War, we must first make clear the causes that led to these results. At the outset, therefore, an outline of the origin of the conflict, of its progress and consequences, should be introduced. The Russo-Japanese War of I904-I905 was no more and no less than a collision of influence between Russia and Japan in Manchuria and Korea. From geographical propinquity and historical relations, Japan always had a vital interest in Korea, both politically and economically; and in order to maintain and develop this interest, she felt constrained to prevent the intrusion of exclusive power on the part of any other country, and thereby to uphold the independence and territorial integrity of the peninsular Kingdom. Manchuria bordering on the northern frontiers of Korea and bearing close relations to the latter, Korea's safety also depended upon the territorial integrity of Manchuria under the Chinese sovereignty and the expulsion of exclusive influence of any other power. Russia, however, had long entertained the idea of acquiring an ice-free port in East Asia, in order to have access to the Pacific Ocean. For this purpose she improved every opportunity of extending her activity in Manchuria and Korea, so that territorial integrity for these countries became absolutely impossible at last and an armed collision of Japan and Russia no longer avoidable. The Sino-Japanese War of I894-I895, it must be admitted, though it added to the strength of Japan, exposed the weakness of China to the world. After the triple intervention of Russia, France and Germany succeeded in I895 in compelling Japan to return the Liaotung peninsula to China, which had been ceded to Japan in the Shimonoseki Peace Treaty, 3 4 EXPENDITURES OF THE RUSSO-JAPANESE WAR the floodgate of European influence was turned on East Asia, diplomacy with respect to which became extremely precarious. In this situation Russia boldly took drastic measures in Manchuria and Korea, in order to carry out her prescribed program, while Japan had merely to watch over the Russian moves and concentrate her attention on the expansion and repletion of armaments. Japan, after expelling China's influence from Korea by the Sino-Japanese War, had pursued single-handed a policy of shielding the peninsular Kingdom from foreign aggression. In October, I894, she had proposed that the Seoul Government reform its institutions and methods in accordance with the twenty articles of administrative plan outlined by her representative in Korea. The adoption of this suggestion by Korea had greatly strengthened the political influence of Japan there, so that not only had the Cabinet at Seoul been composed of pro-Japanese men, but every department of the administrative government had Japanese advisers and the Korean troops had been trained by Japanese officers. But this reform was somewhat too radical and the public sentiment of the Korean people soon began to drift away from Japan. This was a fine opportunity for the Russian Minister at Seoul, who had been making friends with the Korean court and secretly extending Russia's influence over the peninsula, to manipulate the anti-Japanese elements from behind the curtain and assist in their intrigues no less than three times. The political crises of July and October, I895, fortunately ended in the suppression of hostile elements and the maintenance of the pro-Japanese Ministry, but the Japanese influence suffered a gradual decline, especially after the second commotion, in which the Queen was atrociously murdered. The last-mentioned incident made the King bitterly hate Japan, and fanned the flame of popular indignation against the Japanese. This was due to the fact that, when the proJapanese party entered the palace with a band of troops before their opponents' conspiracy had taken practical shape, Queen Min, considered the central figure of the anti-Japanese INTRODUCTION 5 movement, was ruthlessly assassinated, and that the Japanese Minister and advisers at Seoul were alleged to have been implicated in the coup d'etat. In January of the following year the anti-Japanese party finally succeeded in carrying out their plot of overthrowing the pro-Japanese Ministry, the Russian Minister supported the coup by bringing up a contingent of Russian marines from Chemulpo to the Korean capital, and on February I I both the King and the heir apparent found shelter in the Russian Legation. Thenceforward all governmental orders began to emanate from the Russian Legation, all Japanese advisers and army officers were discharged and all Japanese influence was summarily expelled from Korea. Russia thus stepped into the shoes of China and dominated the peninsular Kingdom, dismissing Japan, so that the latter's special position there, a fruit of the SinoJapanese War, was largely impaired before one year had elapsed after securing it. In consequence, therefore, Japan had to give up the policy of protecting Korea single-handed and was obliged to maintain the residue of her interest in the country by a compromise with the northern power. Two conventions were signed between Japan and Russia in May, I896. By their provisions, Japan sacrificed an important part of her acquired rights in Korea, while Russia obtained so much new influence that the power of the two countries in the peninsula almost balanced. It was arranged that the two countries should render financial assistance to Korea by mutual agreement, that they should not take part in the military and police administration but leave the matter entirely with the Seoul Government, and that Russia should advise the King to return to his palace. In defiance of these conventions, however, Russia vigorously tried to improve her fresh opportunity with a view to putting herself in Japan's former position in Korea. She prevailed upon the King, before he left the Russian Legation, to employ Russian officers, who began to train Korean troops as early as June, I896. Subsequently, taking no notice of Japanese protests, she induced the Korean Government to 6 EXPENDITURES OF THE RUSSO-JAPANESE WAR engage more officers and financial advisers as well, and endeavored to place Alexieff in the place of Brown, the British adviser to the Finance Minister and Inspector General of Maritime Customs. The pressure put upon the Seoul Government on the last-named demand finally extorted its consent, but the scheme ended in failure in December, I897, through determined opposition of Japan and Great Britain. Owing to these excessive demands and a high-handed policy, antiRussian feeling began to weigh more and more on the official and popular mind of Korea. The Russian influence over Manchuria made rapid strides in the meantime. Russia, Germany and France each obtained remuneration from China for their triple intervention against Japan, and Great Britain also acquired fresh rights to counterbalance them in the Far East. But it was Russia that grasped the largest share of concessions. By the so-called Cassini Treaty of June, I895, she secretly acquired the rights of constructing the Chinese Eastern Railway across North Manchuria, of stationing Russian garrisons on strategic points along this line, and of working mines in Manchuria. She also seems to have obtained the lease of Kiaochow Bay as winter quarters for Russian warships, the pledge of not ceding Port Arthur and Dalny to any power, and the right of the Russian use of these ports in time of war. The Russian Government ordered the Chinese Eastern Railway Company, attached to the Russo-Chinese Bank considered its official organ, to apply itself to the work of railway construction. The greatest value of the intended railway being military in nature, the first step was thus securely made for the Russian policy of marching southward through Manchuria. When the murder of German missionaries in Shantung Province was perpetrated in November, I897, and German warships were dispatched at once to occupy Kiaochow Bay, demands of the powers on China became more extortionate and urgent. Russia seized this opportunity to capture Port Arthur with her Vladivostok fleet in the following month, and, under the pretext of the loss of her acquired rights in INTRODUCTION 7 Kiaochow Bay through the German occupation of the place, demanded of the Chinese Government the lease of Port Arthur and Dalny for shielding China, as she claimed, from foreign invasion. Although not opposed to the Russian lease of these two ports, Great Britain insisted that Russia should open them for international commerce. Russia, of course, intended to use the ports exclusively for her military purposes, so she silenced the British opposition in a diplomatic way, and replied to the Japanese demand for explanation in the matter that it was only a temporary seizure until the Moscovite Government should acquire a port in Shantung. The treaty in question was signed on March 27, I898, by which Russia obtained the rights (I) to lease Port Arthur and Dalny for 25 years, the whole of the former and one harbor of the latter to be used exclusively for military purposes, while the rest of Dalny was opened to international commerce; (2) to set up military works in these places, and (3) to construct a branch railway from a certain point on the Chinese Eastern Railway to the leased ports, and another connecting the ports with a suitable spot in the Liaotung peninsula. In possession of a long-desired ice-free port at last, Russia was enabled to make warlike preparations there, to facilitate the connection of her territory and leased outport through ownership of all the trunk lines of the trans-Manchurian Railway, and to get direct access to the Pacific Ocean through the waters in the west of Korea. This was indeed a second master stroke in the Russian policy of Manchurian occupation and East Asian domination. In the midst of these circumstances Japan merely obtained from China, besides some minor advantages, the assurance of not ceding any part of Fukien Province opposite Formosa to any power, thus offsetting the power of Russia and other European nations in the Far East. Russia furthermore undertook the loan for the Peking-Hankow Railway, upon which Great Britain tried a counter move by promising the fund for a new railway between Shanhaikuan and Shinmintun. Both countries agreed, however, that these arrangements encroached upon 8 EXPENDITURES OF THE RUSSO-JAPANESE WAR each other's sphere of influence, and their direct negotiations resulted in April, I899, in the mutual recognition of the Yangtze Valley regions as within the British sphere of influence, and of Manchuria as within that of Russia. Thus this convention gave no little facility for the Russian exploitation of Manchuria. The Russian policy in Korea became intolerably overbearing during this time and hostile sentiments grew in proportion among the Koreans. When Russia demanded a coaling station for her navy at Port Hamilton in May, I898, the public opinion in Korea stoutly opposed the plan and it had to be suspended. Not only that, but in order to conciliate Japan and forestall her objection to the Russian lease of Port Arthur and Dalny, the Czar's government ordered a significant compromise in Korea and made the Russian military instructors and financial advisers resign. In consequence thereof a treaty was made between Japan and Russia in April of the same year, by which the two countries promised each other that they would not interfere in the home politics of Korea and that the appointment of military instructors and financial advisers should be made on mutual agreement. In this way the Japanese and Russian influence in Korea returned to its former state of approximate equality. Japan subsequently acquired the new right of constructing the Seoul-Fusan Railway, and a Japanese concern bought the Seoul-Chemulpo line in its unfinished condition from the American capitalists. Russia, in possession of Vladivostok in the north and Port Arthur and Dalny in the south, was still afraid of their oversea connection being intersected by Japan in the Channel of Korea. Early in I899, therefore, she resumed her activity in Korea and tried to acquire certain rights in the south of the peninsula. In March, I900, the Seoul Government yielded to demands for the right of establishing a coaling station and a hospital at Masampo for the Russian Navy, and for the pledge not to cede Koji Island and the mainland directly opposite to any Power. The Russian position in the Far East thus became stronger than ever before. INTRODUCTION 9 The outburst of the Boxer trouble in North China in May, I900, necessitated the powers' dispatch of troops to Peking. While the world's attention was engrossed by the anti-foreign outrages, a band of Chinese soldiers on the northern frontiers of Manchuria suddenly crossed the Amur River-from what motive is still unknown-and surprised Blagovestchensk in the Russian territory. Interpreting this as an act of hostility on the part of China, Russia hurried her troops to Manchuria to forcibly seize all its important points and brought pressure to bear upon the Chinese officials to permit her to exercise military and administrative authority in their stead. And in order to seal this de facto seizure with legal sanctity, the Russian Government strongly urged the Peking authorities to conclude a secret treaty on the subject. According to the draft of the secret treaty, February, I901, China was to recognize the continuance of the Russian administration, then obtaining in Manchuria, as long as Russia occupied that country, and, in regard to military matters, Chinese troops in Manchuria were put under such restrictions that they had to be withdrawn almost entirely. Russia also was to obtain the right of demanding, according to needs, the dismissal of the Governor General at Mukden, as well as local civil servants, and China promised not to employ any other nationality than Russian for the training of troops in North China. Exclusive rights of Russia were furthermore recognized with respect to the mining and other interests in Manchuria, Mongolia and Sinkiang (Chinese Turkestan). These provisions, one and all, clearly violated the principles of territorial integrity, an "open door" and equal opportunity in commerce, which the United States of America had propounded for China and to which other powers had subscribed. Therefore Great Britain, America and Japan warned the Chinese Government against signing such a treaty, on the one hand, and on the other, Great Britain and Japan filed a protest with Russia. Hard pressed by Russia, China had nothing to do but seek interference from other powers. Great Britain insisted that Russia should submit the Manchurian question to the 10 EXPENDITURES OF THE RUSSO-JAPANESE WAR Peking conference of the powers' representatives, which was then considering matters related to the Boxer trouble; Russia in reply denied the existence of any secret treaty and retorted that the Manchurian question concerned only Russia and China. Great Britain in a subsequent protest exposed the contents of the secret treaty, upon which Russia produced her last card by saying that the powers might either believe in the Czar's assurances of withdrawing his troops when order was restored in Manchuria, or do what they deemed it was to their interest to do. Great Britain, however, being occupied with the Boer War at the time, found it inconvenient to deal directly with the Russian Government in the matter, so Japan took up the task of negotiating with resolute firmness. Accordingly the Japanese Government intimated to Russia that it deemed proper that such a question as the special Russo-Chinese agreement should be submitted to conference of the powers at Peking. The Russian reply to this note was that the Czar's government did not wish to discuss a Russo-Chinese agreement with a third power; but that the special arrangement in question was solely an agreement as to steps leading up to the withdrawal of Russian troops in Manchuria, so that neither China's sovereignty nor the powers' interests were affected by it; that the contents of the special agreement would be submitted to the powers as soon as it was concluded, in the belief that they would surely be satisfied with every detail; and that, if there was any dissatisfaction on the part of Japan, Russia would try a friendly compromise with her. On the other hand, Russia pressed China for the ratification of the secret treaty with the warning that it would be summarily withdrawn should the Peking Government hesitate to sign, and that the withdrawal would result in disasters for China. Early in April, the Elder Statesmen of Japan held a conference to deliberate on serious affairs of state, the government began to show extraordinary signs of activity, and the General Staff Office appeared to be preparing for warlike operations. Determined to carry through her point with Russia without the cooperation of INTRODUCTION II another power, Japan delivered another note of protest, more resolute than before, to the Czar's government on May 5. China still resolutely refused to sign the secret treaty. Whereupon Russia changed her wonted tactics and issued a notice of the withdrawal of the special agreement under date of May 3. Although the Russian demands contained in the secret treaty were thus removed for a time, the conditions in Manchuria underwent no alteration and its Russian occupation progressed as steadily as ever. Russia after this episode continued to press the ratification of the same secret treaty on the Peking Government, while Japan, Great Britain and America as persistently cautioned China against it. In January, 1902, a treaty of alliance was concluded between Japan and Great Britain, whose interests and policies in the Far East had been in perfect accord. This exerted a not insignificant influence on the general situation in East Asia, for the Anglo-Japanese Alliance was no doubt a direct counter move against the Far Eastern policy of Russia. In consequence, therefore, Russia and France published a proclamation in March of the same year that their alliance obligations were extended to East Asia. This was of course to confront the Anglo-Japanese Alliance. However, Russia adopted a more conciliatory attitude on the formation of the last-mentioned alliance and on April 8 concluded a treaty with China for the restitution of Manchuria. According to its terms the withdrawal of the Russian troops from Manchuria was divided into three periods and was to be completed in eighteen months after date. A temporary solution was made in this way of a problem that had caused a protracted dispute among the powers. Russia fulfilled the promise in the first period specified and removed her troops from the southern parts of Shengking (now Fengtien) Province. But at the end of the second period, i. e., April, I903, not only did she fail to fulfil the promise, but brought forward fresh demands on China as conditions for the withdrawal of troops. Furthermore in the following month, the Russian troops in North Manchuria began to 12 EXPENDITURES OF THE RUSSO-JAPANESE WAR pour down to the south and a new contingent was dispatched from home. This seemed to indicate that the Russian authorities at Petrograd had agreed by this time on a permanent occupation of Manchuria. Although the new demands were rejected through the protest of Japan, Great Britain and America, Russia skilfully maneuvered out of the opposition of the powers and expedited the progress of her Manchurian occupation. General Kuropatkin, the War Minister of Russia, whosevisit to Japan about this timewas rumored to have been for military inspection, stopped at Port Arthur on his way back and held an important conference of the civil and military officials stationed there. As results of this conference, the Russian forces in South Manchuria were further strengthened and new barracks were built at Port Arthur. It was also reported that Russia notified the Chinese Government of the impossibility of the withdrawal of troops and forced it to ratify the secret treaty that had long been in abeyance. In August, the Russian Government General for the Far East was established at Port Arthur, and the militarist leader, Admiral Alexieff, was appointed Viceroy, vested with full powers for administrative, military and diplomatic affairs. The warlike preparations on land and sea were thus brought to speedy completion, the Pacific fleet of Russia being largely augmented; forts were hurriedly built at Vladivostok, Port Arthur and other strategic points in South Manchuria, and the transportation of arms and ammunition became brisker day by day. In October Mukdenwas reoccupied, and the Chinese Governor General of Mukden was taken into custody. Besides opening in July a direct negotiation with Russia on the Korea-Manchuria question, Japan demanded of the Chinese Government the opening of Manchuria to foreign trade as a measure for checking the exclusive occupation of the country by one power. This move resulted in the opening in October of Mukden and Taitungkou, while the United States at the same time succeeded in inducing China to open Mukden and Antunghsien. Simultaneously with the increasing of the Russian forces INTRODUCTION 13 in Manchuria, the troops stationed on the Korean frontiers crossed the Yalu River and penetrated the Korean territory, nominally to protect the Russian timber concern; and in defiance of the Seoul Government's protest, the soldiers were sent in May to the seat of the concern, Yanganpo. These men began building in June as if they meant to stay in the place permanently, while a telegraphic communication was set up under the river bed of the Yalu to connect Yanganpo with Antunghsien where the Russian artillery was stationed. Realizing the futility of protests, the Korean Government acceded, in July, to the Russian demand for the lease of Yanganpo, and a contract was signed between the Seoul authorities and the timber company. This contract was later abrogated on a Japanese protest to Korea, but Russia disregarded the course of this negotiation and went on completing military works at Yanganpo, and in October it was discovered that she was constructing fortifications there. Japan, Great Britain and America repeatedly warned Korea of the danger, and demanded that Russia open Wiju and Yanganpo to foreign trade. While Russia thus occupied the whole of Manchuriaand commenced operations to possess herself of the Korean territory, Japan, who had been out-marshaled in diplomacy for nearly ten years, quietly succeeded in augmenting her armaments. A collision of Japan and Russia now became well-nigh unavoidable. Public opinion in Japan unanimously and vigorously demanded war. The Tokyo Government, which had been negotiating with Russia about Manchuria and Korea, presented a draft of the conditions that were to be the bases of a Russo-Japanese convention. Roughly speaking, the fundamental thesis of this proposition was that, in order to clearly delimit the respective interests of the two countries which then threatened to clash with each other, Korea should be recognized as within Japan's sphere of interest, and Manchuria as within Russia's. But the two powers disagreed at the outset on the basic conditions and the place of conference, Japan insisting upon discussing her proposition at Petrograd, while 14 EXPENDITURES OF THE RUSSO-JAPANESE WAR Russia demanded that her counter proposition as well as Japan's draft be discussed at Tokyo. Finding it impossible to come to a speedy agreement on these points and considering it disadvantageous to waste time in the midst of steady expansion of Russian armaments in Manchuria, Japan yielded to the Russian position in every respect and requested that the counter proposition be submitted at once. It was after considerable delay that Russia's counter proposition was presented on October 3. It differed from Japan's proposition in basic principle and excluded Manchuria from the province of the intended negotiations. Making Korea the only topic of discussion, moreover, it was provided that neither power should use any part of the Korean territory for military purposes; that no military works calculated to menace the free navigation of the Channel of Korea should be constructed on the Korean coast, and that nearly one third of the Korean territory north of 390 of north latitude should be made a neutral zone. Whether or not there was room for Japan to consider such a counter proposition, we need hardly say. Foreign Minister Komura adopted the two propositions as bases of negotiations and had the first interview, on October 6, with Minister Rosen, representing Russia at Tokyo. This and subsequent interviews did not result in any compromise of divergent views; therefore, on October 30, Japan presented an amended draft and sought Russia's reconsideration. In this amendment, the fundamental principle embodied in the original proposition was still maintained, but it compromised in various respects and recognized, among other things, the Russian contention of prohibiting the construction of military works on the Korean coast, while insisting upon the creation of a neutral zone on both the Korean and Manchurian frontiers. Russia's reply to this was again considerably delayed and at last, on December II, a second counter-proposition was submitted to the Japanese Government, merely compromising as to the circumstances under which Japan might despatch her troops to Korea; and maintaining the original Russian position in almost all other re INTRODUCTION I5 spects. In the meantime, Japan had put forward a second amendment, on November 21, claiming that she could not agree to excluding Manchuria from the province of discussion, insisting that the clause prohibiting the military use of the Korean territory be struck out, and stating that if Russia failed to concur with the Japanese amendment on the point the clause referring to the neutral zone should be omitted altogether. While trying to retard the progress of diplomatic negotiation, Russia pressed on with her military preparations in the Far East. Japan therefore issued on December 28 an urgency ordinance on the disbursement of extraordinary military expenses, an ordinance regarding the speedy construction of the Seoul-Fusan Railway, and other ordinances necessary for the conduct of a prospective war. The purchase of two warships on December 30, was a further step in Japan's preparedness for emergency. The popular sentiment of the Japanese also attained a white heat by this time and indicated a determination to fight as one man in this national calamity. The Russian reply to Japan's second amendment came on January 6, 1904. Though appearing to have compromised on various points, it still held to the former position of Russia in the main, namely, that should Japan agree to the prohibition of the military use of Korean territory and to the Russian insistence upon the creation of a neutral zone, Russia would guarantee the rights that Japan and other powers possess in Manchuria by virtue of the existing treaties. Needless to say whether Japan could or could not consent to such a condition as this. Yet on January 17 she proposed the last compromise and called for Russia's reconsideration. The proposition insisted upon the omission of the clauses regarding the limitation of territorial use and the creation of a neutral zone. It also amended the Russian proposal about Manchuria. Russia, however, neither replied nor appointed a date of reply. Thereupon Japan took a decisive stand and on February 6 instructed her representative at Petrograd to notify the Russian Government of the severance of diplomatic relations. War was declared on February Io. I6 EXPENDITURES OF THE RUSSO-JAPANESE WAR PROGRESS OF THE RUSSO-JAPANESE WAR Japan and Russia were now pitted against each other. The main force of the Pacific fleet of Russia was concentrated in Port Arthur, only four ships remaining in Vladivostok. The Japanese fleet gathering at Sasebo started for Port Arthur, early in the morning of February 6, under the command of Admiral Togo. On the way, a detachment of the Japanese navy, under Rear Admiral Uryu, entered Chemulpo on the afternoon of February 8, escorting a number of our military transports. After a slight engagement with the two Russian warships lying in the harbor, the landing of troops was finished. At noon on the following day an engagement was opened outside the port, and after a fight lasting thirty minutes the Russian vessels were so badly injured that they retreated into the port and later were blown up by their own crews. Two battalions of Japanese troops, landing at Chemulpo, entered Seoul on February 9 and garrisoned the town. The Japanese fleet sent against Port Arthur steamed on, reconnoitering en route, its destroyer squadron delivering an attack upon the Russians on the night of February 8. Pressing on to Port Arthur, our destroyer squadron sank two Russian battleships and one cruiser. On the following day the Japanese fleet made a general attack upon the Russian squadron at Port Arthur. The enemy vessels, assisted by the land batteries, poured shells upon our fleet, which prosecuted the attack with utmost vigor and put out of action four of the enemy ships. The Russians retreated into the harbor one after the other. Several days later, on February 14, our destroyer squadron tried a night attack on the enemy squadron off Port Arthur for a second time, in spite of the heavy seas, and skilfully resisting the onslaught of the enemy, succeeded in inflicting great injury upon the Russian flagship. In these several engagements the Russian squadron had sustained heavy damage and lay concealed in the harbor, declining to come out to fight. Taking advantage of this opportunity, the Japanese fleet decided to shut up the enemy INTRODUCTION I7 in Port Arthur and set about carrying out the program on the night of February 23. In this attempt, five special steamers provided with devices for blowing them up and manned by brave and picked crews proceeded, under heavy enemy fire, right to the entrance of the harbor and sank themselves on reaching their allotted positions. By this enterprise the blockade of part of the entrance to PortArthurwas completed. On February 25, five of the Russian ships were sighted maneuvering outside Port Arthur and our fleet made an attack upon them. One of the enemy ships was sunk and the rest went back into the harbor. The next day, the Japanese fleet dispatched four warships and took possession of Haiyang Island, which occupies an important position in the Yellow Sea. Meanwhile, the Russian squadron at Vladivostok tried to relieve the pressure of the Japanese Navy upon Port Arthur by attracting our fleet northward, and for this purpose the Russian ships made several excursions into the Sea of Japan, attacking our merchantmen. The steamship service on the Sea of Japan was, consequently, interrupted for a time. But when the Russian squadron at Port Arthur lay concealed in the harbor and the Japanese naval force had only to watch them, seven of our ships were set apart to form the second squadron, which was detailed to keep watch over Vladivostok waters. This second squadron, under the command of Vice Admiral Kakimura, made on March 6 and 7 a reconnoitering cruise along the coast of Vladivostok. The squadron bombarded the port, but, as the enemy made no reply, it returned to its temporary anchorage. The Russian ships that had sustained heavy damage were undergoing repairs in Port Arthur. On March Io the Japanese fleet sent a squadron of destroyers to reconnoiter the enemy and to lay mines at important points. Our destroyers met a squadron of eight enemy destroyers coming out of the harbor, and sank one and inflicted heavy injury upon the others. During this engagement, our main force opened fire upon the Russians to cover our destroyer squadron, break3 I8 EXPENDITURES OF THE RUSSO-JAPANESE WAR ing up several of the enemy batteries. On March 27, a second program was carried out to block the entrance of Port Arthur. At three o'clock, A.M., of the same day, four steamers were driven into the channel in the face of enemy fire and were sunk in their designated positions. While rescuing the crews of these steamers, our torpedo flotilla encountered and sank a Russian destroyer. On April 12, the Japanese fleet again made an attack on Port Arthur. The destroyer squadron advanced first and laid mines at points of importance. Then the fleet pressed forward to positions directly under the Russian batteries, and, after cannonading them and inflicting heavy damage upon the enemy, returned without sustaining any injury. Early in the morning of the following day, after a Russian destroyer was sunk, the enemy squadron consisting of seven ships came out to fight. The main force of the Japanese fleet proceeded to encounter them, steaming in regular lines. The Russians saw the attacking force and were making for the harbor when their flagship struck a mine laid by the Japanese and sank in a few minutes, carrying the Russian admiral, Makaroff, together with many sailors, to the bottom. Another battleship of the enemy struck a mine and was disabled. The rest retreated into the port. On April 15, our Navy repeated an attack on Port Arthur and greatly damaged the enemy forts, silencing part of the batteries. However, with the break-up of ice, the Russian squadron at Vladivostok made frequent excursions into the Sea of Japan and watched our operations. The second squadron steamed northward on April 23 to search for the enemy; but a dense fog hampering its movement, the squadron returned to Wonsan on April 26. On the previous day the Russians had sunk one Japanese military transport and two merchant vessels. The second fleet again started on a cruise to search for the enemy and approaching Vladivostok on April 30 bombarded its batteries. Although the Japanese Navy had twice repeated its blockading operations at Port Arthur, the main force of the enemy could still make an egress. When the Japanese saw this, INTRODUCTION 19 they determined to complete the blockade and made a third attempt on a larger scale under cover of the night, on May 3. Because a strong wind was blowing and heavy seas running, the steamers experienced no small difficulty in their operations. Four of the steamers abandoned their enterprise and two of them failed to attain their object; but all the other seven succeeded in reaching their allotted points in the channel and blew themselves up. The blockade of the harbor was now accomplished and the passage of cruisers and any larger vessels was rendered impossible. During this blockading operation our fleet, together with the destroyer squadron and torpedo flotillas, covered the steamers; but owing to the very bad weather, the list of casualties proved very heavy, not a single person of the crews of three steamers being saved. On May 12, while our torpedo flotillas were engaged in sweeping the mines off Port Arthur, under the protection of cruisers, two torpedo boats sank by striking mines laid by the enemy. On the I5th of the same month, the Japanese cruisers Yoshino and Kasuga collided in a very dense fog, and the former vessel was sent to the bottom. Moreover, on the same day, our battleships Hatsuse and Yashima struck mines laid by the enemy and sank immediately. These losses were the heaviest sustained by the Japanese Navy during the Russo-Japanese War. In spite of the complete blockade of Port Arthur for the passage of large vessels, gunboats and destroyers made an egress from time to time, so the Japanese destroyer squadron and torpedo flotillas began on May25 a reconnoissance in force and laid mines at important points, finishing the operations on June 13. Thereupon, the Japanese Navy obtained absolute command of the sea, from the Yellow Sea to the Sea of Japan. To turn to the operations of the Japanese Army: Beginning with the entry of Pyongyang by the advance contingent on February 24, the First Army under Lieutenant General Kuroki, with constant reinforcements, marched gradually up the Korean peninsula, clearing the Russians on the way. It took possession of Wiju on April 4, without any fighting. The 20 EXPENDITURES OF THE RUSSO-JAPANESE WAR army advanced still farther to the Yalu and faced the Russians across the river. With the perfection of preparations, it started its movement on April 25. It crossed the Yalu on the night of April 30, after an artillery engagement of several days, and upon the completion of pontoon bridges thrown across the river. The First Army, now on the other side of the river, immediately fell upon Kiuliencheng on May I. The Japanese placed their artillery on a twelve-mile front. When a part of the enemy's artillery was silenced after the exchange of fire lasting some two hours, our army made a general advance and occupied Kiuliencheng and its neighborhood. Pursuing the enemy it then captured Mohatang and obtained possession of Feng-hwang-cheng and Kuantiencheng. Driving out the Russians on the way, the Japanese continued their advance northward in the direction of Liaoyang. In the Liaotung peninsula, the Second Army, under Lieutenant General Oku, landed at Pitszewo on May 5. It immediately took Plantien, and then prepared to attack Kinchowcheng and Nan-shan, reaching a point some 800 meters from the Kinchow wall at one o'clock A.M. on May 26. The sappers were first dispatched to destroy the gate and wire entanglements. Then the whole army took the first opportunity to assault the enemy's position. Kinchowcheng fell into our hands before dawn of the same day. The victorious army immediately pressed upon the strong forts of Nan-shan. The Russians, who were solidly entrenched in this position of natural advantage, offered strong resistance. The attacking army, with the assistance of a naval detachment sent to Kinchow Bay, put up a vigorous fight and made an assault upon a flank of the enemy, but to no effect. But when the Japanese right wing, assisted by the naval guns, made a severe attack upon the enemy's left flank, his powder magazine exploded and the batteries on his left wing became silent. At dusk of the same day, May 26, our whole body of troops rushed against the enemy forts and obtained possession of them at 7 P.M. The battle continued full sixteen hours, and the Japanese casualties totaled 2,200, including officers. A detach INTRODUCTION 21 ment of our force pursued the Russians and secured the control of the shores of Tailien Bay on the following day, May 27. The Second Army, leaving a force to defend Nanshan, turned around and advanced toward Liaoyang in the north. On June I5 this Second Army approached Telissu. Opening cannonade in the morning and with the assistance of a naval detachment, it fought desperately and carried the Russian position. In this battle the losses by death or injury on our side were 900 and those on the Russian side were no less than Io,ooo. On June 21 the Second Army cleared the enemy at Hsiungyocheng and also captured Funshuiling. This army continued its march to the north and drove away the enemy near Kaipinghsien, closing on July 24 upon the Russian troops on the heights in the vicinity of Tashihchiao. The Russians fell back upon the forts erected on the heights, which commanded the position of the Japanese Army. The attack was, therefore, extremely difficult. During the night the infantry of our right flank carried by assault one or two of the enemy forts. The next morning our army opened artillery fire and succeeded in capturing the whole Russian position on the heights by a well-timed general assault, and a Japanese detachment was sent to occupy Yingkow. At this time the Fourth Army, under the command of Lieutenant General Nozu, was already at Siuyen. Marching northward, this army reduced Shimucheng on August i, but the enemy retreated to Haicheng. Accordingly, the Second and Fourth Armies advanced upon Haicheng and captured it. Previous to this the First Army, coming from the direction of Feng-hwang-cheng, was marching upon Motienling. While reducing the various forts en route, it finally captured Motienling, a post of natural advantage held by the enemy, on July I. But on July 17, the Russian troops attempted a counter attack in large force, which the Japanese succeeded in repulsing. The Russians retreated to the Hsie-ho and prepared against our army, taking their position on the river. The Japanese Army attacked the Russians on July I8, but failed to take 22 EXPENDITURES OF THE RUSSO-JAPANESE WAR the position because of strong resistance. On the following day the attack was renewed and towards evening the position was finally carried. After this fight, it seemed that the enemy was being steadily reinforced. Therefore, the First Army made a general advance on July 30, to forestall the enemy before his strength was full. The enemy fought well and the attack produced little effect. But finally, on August I, the Japanese Army succeeded in defeating the enemy and secured the possession of Yangtzuling and vicinity. Here the three Japanese Army corps were able to advance in unison and reach a position some distance from Liaoyang on August 24. There were large corps of the Russian Army at Liaoyang. On a stretch of high ground in front were constructed the defense works of the enemy. Here was fought a great battle. The Second Army, which formed our left flank, advanced west of the Liaoyang road; the Fourth Army, which formed the center, proceeded east of the road while the First Army which constituted our right flank marched from the east side, threatening to turn the enemy's flank. In this disposition, the Japanese armies attacked the enemy without interruption, captured several forts, and came into perfect touch with each other on August 29. Our right wing took possession of the heights north of Hsuchiakau on August 30, but had to abandon it, being unable to resist the counter-attack of the enemy. But, since this would interfere with the advance of the armies as a whole, the right wing made a desperate effort, recovered the heights on August 31 and insured occupation of Penchihu. On September I, the Russians were observed to be gradually retreating to Liaoyang, so our center and left wing pursued the enemy, cannonaded and destroyed the Liaoyang station where Russian troops were assembled, causing a fire in the warehouses near-by. The next day our right wing threatened to cut off the retreat of the enemy. Upon this, the Russians set fire to their own stores and retreated to the lines on the Shaho. In this battle, the casualties on the Japanese side were 17,500, while the Russian losses were estimated at 25,000. INTRODUCTION 23 The Japanese armies that had occupied Liaoyang started their operations against the Russians who had retreated and taken up their position on the Shaho. But on October io a large body of the enemy came to attack our right wing, which was forced to abandon the high ground east of Penchihu. Our troops recovered the position the next morning, however, and making a further advance reached the enemy lines on the Shaho on October 14. The center and left wing of the Japanese forces crushed the stubborn resistance of the enemy and captured his positions in various places. With the reduction of Shahopao by the Japanese left wing on October 15, the battle of Shaho which continued a week ended in a splendid victory for the Japanese. Our armies sustained in this battle a loss of 15,800, killed and wounded, while the Russian casualties reached 67,000. In the land operations against Port Arthur, the Third Army, under Lieutenant General Nogi, which had entered Kinchowcheng as the investing force of Port Arthur, started its movement on June 26. After severe and prolonged fighting the Japanese wrested several of the enemy's positions, taking possession on July 30 of a line extending from the heights south of Tuchengtzu to the heights east of Takushan. They now came within a few miles of the town of Port Arthur and were in position to commence siege activity, so that the Russians escaped and retired from the fortifications of Port Arthur. Our army continued to attack the enemy, capturing Takushan and Hsiaokushan on August 7 and 8. The Russian squadron lying in the harbor of Port Arthur found the artillery fire of the Japanese Army daily increasing in violence. To be relieved from this intolerable situation, it put to sea under cover of a dense fog on August Io. The Japanese fleet encountered the enemy and inflicted heavy damage upon his flagship and two other battleships, when two of the Russian cruisers and several destroyers made their escape southward, while all the rest went back into the harbor. General St6ssel, commander of the Russian garrison, refusing to accept the permission for escape of noncombatants in the enemy 24 EXPENDITURES OF THE RUSSO-JAPANESE WAR zone and the advice to surrender sent by our besieging army, a general attack was opened on August I9. The enemy was provided with all possible means of defense and the besiegers had to fight for every inch of ground. They at last succeeded in securing the east and west batteries of Panlungshan. Meanwhile fire had started in the town of Port Arthur from the bombardment by the Japanese Navy. The fortress of Port Arthur, constructed in positions of natural advantage and with the highest art of modern engineering, had been reputed impregnable and the Japanese force failed to make such progress as was contemplated. Accordingly, our army changed its method of attack and took to digging zigzag lines for troops to march through. On the completion of these engineering works, a second general attack was opened on September I9. Our army fought throughout the night and wrested from the enemy the Kropatkin fort, a part of the battery south of Shuishihying and the I74-Metre Hill, in succession. The Japanese made assaults on the 203-Metre Hill from three sides and kept up the struggle for three consecutive days and nights, only to fail in their attempt. But our investing force never relaxed its pressure upon the Russians and repulsed their frequent sorties, taking on October I6 the forts on the sides of Hachimakiyama (Japanese name) and Erhlungshan. Meanwhile our army, in cooperation with the navy, fired on the Russian ships lying in the port. On October 26, the Japanese force tried a third general attack and made a violent onslaught upon the enemy, with the support of the naval guns, capturing Sungshushan and Erhlungshan. On the 29th, our troops recovered the trenches south of Hachimakiyama, which had been retaken by the enemy, and on the following day took a fresh battery. On November 29 the Japanese Army reopened its assaults on the 203-Metre Hill, the heart of Port Arthur. Our forlorn hope rendered repeated rushes useless until the next day, when the assaults finally took effect and the hill fell completely into our hands at eight o'clock in the evening. The enemy made a violent counter-attack, however, and the Japanese fought desperately INTRODUCTION 25 to defend their position, succeeding at last in consolidating their possession of the hill on December 2. With the 203 -Metre Hill in our possession, the Japanese artillery, with the cooperation of the navy, cannonaded from that commanding height the remaining Russian ships in the harbor. This continued from the 3d to the 9th of December. The effective shots numbered as many as 248, which annihilated the enemy ships. After this, our investing army took the rest of the forts one by one, but the fate of Port Arthur had already been sealed with the fall of the 203-Metre Hill. Finally the enemy lost the power of resistance and surrendered to the Japanese Army on January I, I905. The siege of Port Arthur, which involved the most terrible fighting ever witnessed for half a year, thus came to an end. The number of Russians surrendered was over 32,000 prisoners and I6,000 wounded. The Japanese Army made formal entry into the town on January 13. In the field campaign against Mukden our three army corps had spent 120 days in winter quarters on the Shaho. During this time preparations for the fight were completed. The Third Army that had arrived from Port Arthur reinforced the extreme left, while the Yalu River Army, under the command of Lieutenant General Kawamura, was added to the extreme right. The Japanese forces were commanded by General Oyama. The enemy had put up defenses on a vast stretch of ground on the left bank of the Hun-ho, which runs south of Mukden. General Kropatkin was in chief command. The Japanese armies were set in motion during the last ten days of February, and there resulted the great conflict known as the battle of Mukden. Previously to this the enemy had come pressing upon our extreme left in large force. The Japanese engaged these Russians on January 25. After continual fighting they took Heikautai on January 29, and pursuing the enemy drove him to the right bank of the Hun-ho. Meanwhile, the battle of Mukden was developing. On March I, the Japanese armies started extensive operations on a 125-mile front. Our extreme right advanced toward 26 EXPENDITURES OF THE RUSSO-JAPANESE WAR Fushun from the east and swept round the enemy's flank; our extreme left turned eastward to outflank the enemy and threaten his rear after crossing the Hun-ho and taking Shinmintun in the northwest; while our center and right flank advanced east of the railway and our left flank west of the railway, to hold the Russian center. In the progress of the battle each of the Japanese armies took the enemy's positions one by one. On March 5 our forces were hotly engaged along the whole front, making violent attacks upon the enemy. On March 7 the Russians began to retreat and the attacks of our armies increased in violence. On the 8th, theJapanese left flank approached Mukden in pursuit of the enemy, while our corps on the extreme left pressed on the rear of the Russians, capturing the railway north of Mukden. On the 9th, our extreme right took possession of Fushun. On the Ioth, our center and part of the left flank fell directly upon Mukden and occupied it. Thus the great battle of Mukden ended in complete victory for the Japanese. The Russian losses in this battle were about 137,700 killed and wounded, while over 20,700 were taken prisoners. The Japanese armies went in pursuit of the retreating Russians. The enemy had defense works constructed on the way which well covered the retreat of his troops. Our forces took Yingpan on the i th of March, Hsingking on the I3th, Tiehling on the I6th, Fakumen on the i8th and Kaiyuan on the g9th. Then the Japanese armies kept up their advance northward, pursuing the enemy by the four routes of the Kaiyuan-Kilin, Fukumen-Changtu, Fushun-Hailung, and Hsingking-Tinghua roads. To return to the operations of our navy: Though, after the annihilation of the Russian squadron at Port Arthur, the absolute command of the sea in Far Eastern waters fell into our hands, the enemy squadron at Vladivostok had made frequent sorties into the Sea of Japan. In the excursion in June, 1904, it had sunk three Japanese military transports, including the Hitachi Maru, in the Straits of Tsushima, and had also injured our merchant vessels in the northern part INTRODUCTION 27 of the Sea of Japan. But on August 14, when three Russian vessels again appeared in the Straits of Tsushima, they met with an attack by our second squadron, which was then off Ulsan. Fire started on all of the Russian ships, one of which went to the bottom. After the complete destruction of the Port Arthur squadron, our navy tightened its hold on Vladivostok, keeping watch over the smuggling ships and cutting off the supply by sea of munitions and provisions to the enemy. Seeing that the Pacific fleet was fast declining, Russia dispatched a second Pacific squadron in October, 1904, and a third Pacific squadron in February, I905. On May 12, these squadrons all assembled on the sea of Annam. Entering the China Sea, the whole fleet of more than forty vessels steamed northward. The Japanese fleet, finishing its preparations, was awaiting the enemy in the Straits of Tsushima. At 5 A.M., on May 27, the Japanese scouts sighted the Russian fleet steering for the east channel. At 2 P.M., the Russian ships reached the vicinity of Okinoshima, moving in double columns, while our battleships and armored cruisers, steaming in a single column, pressed the head of the Russians from the west, delivering a severe attack upon the enemy. Violent fires soon breaking out on the flagship and two other battleships of the enemy, the Russian fleet, in disorder, attempted escape. The Japanese main force never ceased to press the enemy to the south. Meanwhile, our cruiser squadron and three other flotillas attacked from the south, the ships forming the enemy's rear dispersing them with heavy damage. Our fleet pursued the scattered enemy until sunset. During the day, the Russian flagship Swaroff and three other battleships and one special service vessel were sunk. In the night, our destroyers and torpedo boats attacked the enemy in spite of heavy seas. So far as the results could be told, these Japanese ships deprived at least one battleship and two armored cruisers of fighting and steaming power and sank one battleship. The Japanese losses were only three torpedo boats. With the dawn of May 28, the Japanese squadrons searched for and 28 EXPENDITURES OF THE RUSSO-JAPANESE WAR pursued the enemy and harvested the fruits of the victory of the previous day. They captured two battleships and three other ships and sank two cruisers and several other ships. One battleship and two cruisers which were disabled the day before were also sunk. The Russian commander-in-chief, who had been transferred to one of his destroyers, was made our prisoner during the second day of the sea fight. Thus, out of the thirty-eight Russian warships which participated in the engagement, only a few each of cruisers, destroyers and other classes of ships escaped sinking or seizure. One cruiser and one destroyer only escaped to Vladivostok. The Japanese Navy lost no other ships except the three torpedo boats already mentioned. The world looked upon this miraculous victory of ours with astonished eyes. The issue of the Russo-Japanese War was practically decided by the battle of Mukden on land and by the battle of Tsushima on sea. The military and naval forces, of Japan, however, opened activities against Russian possessions from this time. Our army in north Korea, under cover of the navy, marched in June to invade the Russian territory across the Tumen River. Our troops dispatched to Karafuto (Saghalien) obtained possession of the whole island in July, while our navy was also operating upon the coast of the littoral provinces of Russia. Immediately after the battle of Tsushima, however, President Roosevelt of the United States of America tendered his good offices to restore peace between Japan and Russia. Both belligerents intimated acceptance of the offer, and appointed plenipotentiaries who met to negotiate peace at Portsmouth, New Hampshire, August 9, 1905. On September I, the plenipotentiaries of the two powers signed a treaty of truce, and on September 5 a treaty of peace. In conclusion, we add a brief remark about the strength of the Japanese forces employed in this war. The accurate figures are, of course, inaccessible. But according to our investigations, the whole land forces put in service in the Russo-Japanese War comprised 17 divisions of active service troops and first reservists, 2 divisions of second reservists, 4 INTRODUCTION 29 brigades of second infantry reservists, 7 mixed brigades of second reservists, and a number of second reservists and militia. Classified by the fields of operation, the North Korea Army consisted of I division and I brigade, the Karafuto Army, I division, while practically all the rest went to form the Manchuria armies. The approximate strength of our Manchuria armies was: 250 infantry battalions, 20 cavalry regiments, 200 artillery batteries (some I,ooo guns), 6 engineer companies, and machine-gun corps and commissariat troops. The forces that took part in the war total I,088,996 persons, of whom 999,868 went to the front. The losses from this war were not so large as is generally supposed. The following are the details: LOSSES OF RUSSO-JAPANESE WAR Noncommis- Civilians Causes Officers sioned officers in army Total and privates and navy Killed in battle.........,926 58,I05 52 60,083 Died from disease......... 278 2I,I97 404 21,879 Dismissed from service.. 71 29,367... 29,438 Total.............. 2,275 108,669 456 I 11,400 It will be seen from this table that 60,000 were killed and 22,000 died from disease, totaling 82,000. Even including over 29,000 dismissed from service on account of ill health and other disabilities, the total figure does not much exceed II,OOO. It may be here added that the horses lost in the war totaled 38,000, including those invalided. The Japanese naval forces put in service during this war were 72 warships of various classes totaling 261,629 tons. In addition, there were 50 torpedo boats representing 5,429 tons. The losses from the war were twelve warships of various classes totaling 45,352 tons, and 7 torpedo boats representing 558 tons. Most of these losses, however, were due to collision or to striking mines, and not to fighting itself. The following table shows our naval forces employed and lost during the war: 30 EXPENDITURES OF THE RUSSO-JAPANESE WAR NAVAL FORCES EMPLOYED AND LOST Employed Lost Classes No. of ships Tonnage No. of ships Tonnage Battleships................. 6 85,043 2 27,320 Armored coast defense ships.... 2 I,447..... Armored cruisers............ 8 72,915..... Cruisers.................. 7 61,961 2 8,320 Dispatch boats.............. 4 5,487 I 1,772 Depot ships for torpedo boats.. I 4,I20.... Gunboats................... 9 7,870 3 3,404 Coast defense ships.......... 3 5,576 2 3,798 Destroyers.................. 22 7,2IO 2 738 Total................... 72 261,629 12 45,352 Torpedo boats............... 50 5,429 7 558 The navy lost 2,657 persons, of whom 2,010 were killed in battle and 647 died from disease. RESULTS OF THE RUSSO-JAPANESE WAR It was the Russo-Japanese treaty of peace signed on September 5, I905, and the Sino-Japanese treaty signed on December 23, 1905, in connection with this treaty of peace that confirmed the altered situation in the Far East in consequence of the war between Japan and Russia. A survey of the Far Eastern relations thus established shows that the material and moral interests secured by Japan were not at all inconsiderable. It came to be recognized that Japan had paramount political, military and economic interests in Korea and that she had the right to take the necessary measures for guidance, protection and control in Korea. Recognition of this fact and right had already been made by Great Britain in the new Anglo-Japanese Alliance Treaty, prior to the conclusion of peace between Japan and Russia. The Russian influence thus absolutely expelled from Korea, the country came under the protection of Japan. In Manchuria, Japan received the transfer from Russia of the lease of Port Arthur and Tailien, together with the Russian rail INTRODUCTION 3I ways south of Changchun (Kuan-cheng-tzu) and all collateral coal mining privileges. She obtained from China a fresh concession for working the Antung-Mukden line. Japan and Russia, under certain restrictions, withdrew their military forces from Manchuria and restored the territory to China's sovereign rights. In this manner, the spheres of Japanese and Russian interests were marked out in Manchuria; that is to say, Japan acquired fresh interests in south Manchuria and Russia retained her former interests in north Manchuria. And besides these interests in Manchuria and Korea, Japan acquired by her victory in the war the southern half of Karafuto and the fishery rights for her subjects along the Russian coasts between the Sea of Japan and Bering Strait. The circumstances of the time did not allow Japan to obtain any other rights or indemnity. Needless to say, the relations between Japan and Korea underwent a marked change in consequence of the war with Russia. At the beginning of the war, after Japan had forced the Russian Minister in Seoul to leave Korea, the initial steps for the establishment of Japan's protectorate over Korea were taken with the protocol signed February 23. Japan's right of protection was extended by the Japanese-Korean Agreement, August 22, by which Korea was compelled to engage financial and diplomatic advisers from Japan and required to consult with her previously in regard to important diplomatic matters. When her special position in Korea came to be recognized by Great Britain and Russia, Japan concluded with Korea, November 17, I905, a new agreement consisting of five articles which provided: (I) that the diplomatic rights of that country be transferred to Japan; (2) that the Japanese minister to Korea be substituted by a Resident General representing in Seoul the Imperial Government of Japan, and that subordinate residents be substituted for consuls at the open ports and other important places, to discharge official duties under the Resident General. It was this agreement that supplemented and completed the protocol and the agreement previously signed, and consolidated and defined Japan's position in 32 EXPENDITURES OF THE RUSSO-JAPANESE WAR Korea. Hereupon the foreign affairs of Korea fell into the hands of Japan, and there was no longer any necessity for the powers to retain their representatives in Korea. The ministers withdrew from Seoul, headed by the British Minister who left on November 30. The diplomatic business concerning Korea thus came to be conducted through the ministers in Tokyo. And the Residency General and subordinate residencies opened official business on February I of the following year, I906. The material results acquired by Japan from the war with Russia have been described in the foregoing paragraphs. Her moral acquisitions were by no means small. The international prestige of Japan in the Far East enormously increased after the war. It came to be recognized that Japan had the strength to prevent any other power from interfering in affairs of the Far East without her consent. Japan's position as a firstclass power was thus established. CHAPTER II COST OF THE RUSSO-JAPANESE WAR THE WAR ESTIMATES When a rupture seemed imminent in the relations between Japan and Russia, the government framed the estimates for extraordinary expenses in October, I903, and later as the situation developed it thrice compiled, besides the regular estimates for the war, extraordinary war estimates. These estimates were to be defrayed as an urgent financial measure or in the shape of a temporary expenditure, outside the regular budget, to meet the expenditures directly related to the war (called the extraordinary military expenses), and those (called extraordinary affairs expenses) required by various branches of the Administration. Finding it impossible to resort to increase of taxes for raising these necessary sums, because such taxation could not under the circumstances supply the state with a large amount of revenue, and because the people had already been burdened by repeated increases of taxes for military expansion, the government adopted the course of covering the main portion of war expenses by public loans. The increase of old taxes or the imposition of new ones, or the revenue from the government's new undertakings were to be resorted to as a secondary means, and its surplus and other funds were to be the resource. In October, 1903, the government decided on the defrayal of the extraordinary affairs expenses amounting to 1,420,000 yen, the source of revenue being the second reserve fund and the Treasury surplus. When the relations between Japan and Russia were on the verge of rupture in December of the same year, the government decided on the disbursement of I55,970,000 yen for military preparations, and of 250,000 yen for extraordinary affairs expenses as an urgent financial measure, with the special accounts fund and Treasury bonds as the 4 33 34 EXPENDITURES OF THE RUSSO-JAPANESE WAR source of revenue. The estimates for these war expenditures may be tabulated as follows: ESTIMATES OF WAR EXPENDITURES, DECEMBER, 1903 Expenditures Amount Source of Revenue Amount Yen Yen Yen Yen Extraordinary military Special account fund 25,000,000 expenses (emergency Treasury bonds.... I30,971,036 measure).......... 55,971,036 155,971,036 Extraordinary affairs expenses Temporary defrayal. 1,422,585 Second reserve fund 370,500 Treasury surplus....,052,085 Emergency measure. 257,894 Special account fund 257,894 r,680,479 I,680,479 Total........... I57,651,515 Total.........I57,651,515 As stated above, the estimates for war expenses before the war broke out were I57,650,000 yen, of which I55,970,000 yen represented extraordinary military expenses and I,680,ooo yen, extraordinary affairs expenses. The diplomatic relations between Japan and Russia were severed in February, I904, when Japan declared war upon Russia. The 20th session of the Imperial Diet in March of the same year passed the first estimates of war expenses. The estimates consisted of the extraordinary military affairs expenses amounting to 380,000,000 yen, and the extraordinary affairs expenses amounting to 40,000,000 yen, a total of 420,ooo,ooo yen, the sources of revenue being the special accounts fund, the increase of taxes, national loans and the Treasury. The above statement may be tabulated as follows: ESTIMATES OF WAR EXPENDITURES, MARCH, I904 Expenditures I Amount Source of Revenue Amount Yen Yen Yen Extraordinary military Special accounts fund 30,000,000 expenses......... 380,000,000 Increase of taxes, etc. 60,20I,879 Extraordinary affairs National loans..... 280,000,000 expenses.......... 40,000,000 Treasury surplus.... 9,798,I2r 380,000,000 Treasury surplus.... 40,000,000 Total........... 420,000,000 Total......... 420,000,000 The war situation had largely developed by November, 1904, the Japanese forces having gained repeated victory over COST OF THE WAR 35 the enemy; but the stronghold of Port Arthur had not yet fallen, the enemy squadron in the bay of Port Arthur had not yet been shattered, and our army in the north of Manchuria was quartered for the winter in Shaho, in preparation for a decisive battle at Mukden, while the second Russian Pacific squadron had already started for the Far East. Under these conditions, no one could predict what would be the final outcome of the war. The second war estimates, therefore, consisting of 700,000,000 yen for extraordinary military expenses, and 80,000,000 yen for extraordinary affairs expenses, totaling 780,000,000 yen, were passed in the 2Ist session of the Diet. The sources of revenue to meet these requirements included the special accounts fund, the income from increased taxes etc., national loans, the Treasury surplus, a small sum of war-fund contributions and miscellaneous incomes. The deficits in the estimates of the extraordinary affairs expenses were filled up in December of the next year by the extraordinary defrayal of 28,820,000 yen from the special accounts fund and the yearly account surplus, and by the supplementary estimates amounting to 7,200,000 yen which were to be defrayed from the surplus fund. Deficits in the estimates of the extraordinary military expenses were covered by the extraordinary defrayal of 60,000,000 yen with the revenue of public loans. These details can be tabulated as follows: SECOND ESTIMATES OF WAR EXPENDITURES, DECEMBER, 1904 Expenditures Amount Source of Revenue Amount Extraordinary military Yen Yen Special accounts Yen Yen expenses (second fund........... 8,ooo,ooo estimates)........ 700,000,000 Increase of taxes, etc............. 19,ooo,ooo National loans.... 57r,ooo,ooo Public contributions to war funds... 1,500,000 Miscellaneous incomes........... 500,000 Extraordinary defrayal 60,ooo,ooo Public loans...... 60,000,000 760,000,000 ------ 760,000,000 Extraordinary affairs Treasury surplus... 48,328,977 expenses (second Increase of taxes, estimates)........ 80,ooo,ooo etc............. 31,671,023 Extraordinary defrayal 28,825,409 Treasury surplus... 24,825,409 Supplementary esti- Special accounts mates............ 7,200,000 fund........... 4,000,000 Treasury surplus... 7,200,000 i I6,025,409 i I6,025,409 Total.......... 876,025,409 Total.......... 876,025,409 36 EXPENDITURES OF THE RUSSO-JAPANESE WAR Thus the second estimates, including extraordinary defrayal, amounted to 760,000,000 yen for extraordinary military expenses and II6,025,409 yen for extraordinary affairs expenses, making a grand total of 876,025,409 yen. The peace treaty was concluded between Japan and Russia in September, 1905, and war was brought to an end. But more expenses were required for the withdrawal of expeditionary forces, the grant of rewards for services in the war, and other objects. As the previous estimates had already shown deficits, the government introduced the third war estimates to the 22nd session of the Imperial Diet, in December, 1905. The third estimates passed consisted of the extraordinary military expenses amounting to 450,450,000 yen, and the extraordinary affairs expenses amounting to 79,500,ooo yen, the sources of revenue being public loans and Treasury surplus. For deficits in the extraordinary affairs expenses the supplementary estimates to the amount of 2,500,000 yen were drawn up the next year. The details are as follows: THIRD ESTIMATES OF WAR EXPENDITURES, DECEMBER, 1905 Expenditures Amount Source of Revenue Amount Yen Yen Yen Yen Extraordinary military Public loans....... 450,450,000 expenses (third esti- Public loans....... 63,I93,242 mates)........... 450,450,000 Extraordinary affairs Treasury surplus.... 16,306,758 expenses (third esti- Treasury surplus.... 2,500,000 mates)........... 79,500,000 Supplementary estimates............ 2,500,000 82,000,000 8 2,000,000 Total.......... 532,450,000 Total........ 532,450,000 The third estimates thus comprised 450,450,000 yen for military expenses, and 82,000,000 yen for extraordinary expenses, making 532,450,000 yen in all. To sum up, the entire estimates for the expenses of the Russo-Japanese War amounted to 1,746,420,000 yen in extraordinary military expenses and to 239,700,000 yen in extraordinary affairs expenses, thus making the total of 1,986,I20,000 yen. The sources of revenue for the extraordinary COST OF THE WAR 37 military expenses were the special accounts fund, amounting to 63,000,000 yen, the revenue from the increase of taxes, etc., of 8 1,200,000 yen, the revenue from national loans of 1,492,~420,000 yen, the Treasury surplus to the amount Of 7,790,000 yen, the contributions to the war funds amounting to 1,500,000 yen, and the miscellaneous incomes Of 500,000 yen, aggregating 1, 746,420,000 yen. For the extraordinary affairs expenses, the sources of revenue were the second reserve fund amounting to 370,000 yen, the Treasury surplus Of 140,210, 000 yen, the special accounts fund Of 4,250,000 yen, the increase of taxes amounting to 31,670,000 yen, and the revenue from national loans to the amount of 63,190,000 yen, aggregating 239,700,000 yen. For the sake of convenience the extraordinary military expenses SUMMARY OF ESTIMATES FOR WAR EXPENDITURES a Estimates Frt Scn hr drawn up Frt Scn hr Total before war estimates estimates estimates Yen Yen Yen Yen Yen War expenditures......157,65I,5I5 420,000,000 876,025,409 532,450,000 i,986,I26,924 Extraordinary military expenses........155,971,036 380,000,000 760,000,000 450,450,000 1,746,421,036 Ordinary budget........ 380,000,000 700,000,000 450,450,000 1,530,450,000 Urgency measure. 1.. 55,971,036............ 155,97I,036 Extraordinary defrayal......... 6o,ooo,ooo.... 6o,ooo,ooo Extraordinary affairs expenses.1......,680,479 40,000,000 ii6,025,409 82,000,000 239,705,888 Ordinary budget........ 40,000,000 80,000,000 79,500,000 199,500,000 Supplementary budget......... 7,200,000 2,500,000 9,700,000 Urgency measure... 257,894............ 257,894 Extraordinary defrayal. 1,422,585.... 28,825,409.... 30,247,994 Sources of revenue for war expenses........ 57,651,5I5 420,000,000 876,025,409 532,450,000 1,986,126,924 Sources of revenue for extraordinary military expenses..1.... 55,971,036 380,000,000 760,000,000 450,450,000 1,746,421,036 Special accounts fund.. 25,000,000 30,000,000 8,ooo,ooo.... 63,000,000 Increase of taxes, etc....... 62,20i,879 I119,000,000.... 181,20I,879 National loans..... 130,971,036 280,000,000 631,000,000 450,450,000 1,492,421:,036 Treasury surplus......... 7,798,121,........, 7,798,12I Public contributions to war funds........... I,5oo,ooo.... 1,500,000 Miscellaneous incomes...,...... 500,000.... 500,000 Sources of revenue for extraordinary affairs expenses.1......,680,479 40,000,000 116,025,409 82,000,000 239,705,888 Special accounts fund. 257,894.... 4,000,000.... 4,257,894 Increase of taxes, etc......... 31,671,023.... 31,67I,023 National loans...........,... 63,193,242 63,193,242 Treasury surplus.. 1.,052,085 40,000,000 80,354,386 18,806,758 140,213,229 Second reserve fund.. 370,500.......,....,. 370,500 a This table is based upon the Department of Finance Report on the War-time Finance of the Russo-Japanese War. The extraordinary defrayal of December, 1905, is included in the second estimates in order to make clear the distribution of the extraordinary affairs expenses over several fiscal years. 38 EXPENDITURES OF THE RUSSO-JAPANESE WAR were handled as special accounts and the extraordinary affairs expenses as general accounts. In the special accounts of the extraordinary military expenses, therefore, the interval between the beginning and the end of the war finance, that is, between December, 1903, and March 31, 1907, was considered one fiscal year. The details of the war expenses, stated above, may be seen in the table on page 37. Of the extraordinary affairs expenses incorporated in general accounts, the estimates of each period in the above table are considered estimates for that fiscal year. So the first are estimates for 1904-5, the second for I905-6, and the third for I906-7. The special accounts of the extraordinary military expenses were closed on March 31, I907, and their defrayal was brought to an end in June of that year. Of the special accounts still unsettled on the date last named therefore, the necessary items were transferred to general accounts to be defrayed, under the name of extraordinary military expenses, between the fiscal years I907-8 and I912-13. THE WAR-TIME MILITARY EXPENSES The above is the outline of the financial program in connection with the Russo-Japanese War. It is to be noted that the war expenses consisted of the war-time military expenses incurred for war itself, and the war-time administrative expenses caused by the war directly or otherwise. It may be proper to consider the extraordinary military expenses belonging to the special accounts as the whole of the war-time military expenses, and to exclude the extraordinary military expenses transferred to the general accounts from the war-time military expenses, regarding them as the peace-time armament expenses. The war-time military expenses were incurred to keep in operation for 19 months an army of I,ooo,ooo men and a navy of 72 warships with an aggregated tonnage of 260,000. They amounted to over 1,508,470,000 yen, of which the Army incurred over 1,283,3I0,000 yen and the Navy over 225,150,000 yen. Their details will be explained by dividing them into COST OF THE WAR 39 the personnel expenses, the equipment expenses, and the miscellaneous expenses. The personnel expenses included the general pay, rewards and special allowances to the soldiers and others who participated in the war, and amounted to 314,910,000 yen, more than 20 per cent of the whole of the war-time military expenses. Of this amount, some 150,310,000 yen, IO per cent of the war-time military expenses, was the general pay, and some 164,600,000 yen, also 10 per cent of the war-time military expenses, was the total of the rewards and special allowances. Classified according to the Army and the Navy, the Army personnel expenses totaled 290,290,000 yen, or over I9 per cent of the whole of the war-time military expenses, of which 8.9 per cent, that is, some 134,000,000 yen, was for the general pay, and more than Io per cent, that is, some 156,290,000 yen, for the rewards and special allowances. The Navy personnel expenses amounted to 24,610,000 yen, only 1.6 per cent of the war-time military expenses, of which I per cent, that is, some 16,300,000 yen, was for the general pay, and 0.5 per cent, that is, 8,300,000 yen, was for the rewards and special allowances. The details are shown in Table A at the end of this chapter.1 The equipment expenses amounted to I,I85,410,000 yen, 78.6 per cent of the war-time military expenses. In order to study these expenses accurately, it is necessary to divide them into human fighting-power expenses, or those incurred for the maintenance of the fighters; material fighting-power expenses, or those incurred for arms, buildings, fortifications, warships and the like; and communication expenses, or those incurred for the transportation of troops, arms and munitions, and for correspondence. All expenses which do not come within the above three divisions are included under the heading " Other expenses." The details of the equipment expenses are shown in Table B at the end of this chapter.2 It is to be noted that the Army equipment expenses totaled over 986,I80,000 yen, 65.4 per cent of the war-time military 1 Post, p. 49. 2 Post, p. 50. 40 EXPENDITURES OF THE RUSSO-JAPANESE WAR expenses. Of this amount, some 390,810,000 yen, 25.9 per cent of the war costs, was for the human fighting-power expenses, of which food and clothing were the chief items. The material fighting-power expenses for arms, building and fortification, horses, forage, etc., were some 278,900,000 yen, 18.5 per cent of the war costs; and the communication expenses amounted to 264,000,000 yen, 17.5 per cent of the entire costs. The transportation expenses, which form the main part of the communication expenses, were incurred for the construction and management of military railways in Manchuria and Korea, for the chartering of ships, and for other purposes connected with military transportation. Of the "other expense" items, the store expenses amounted to 52,460,000 yen, 3.5 per cent of the war costs. The Navy equipment expenses totaled some I99,220,000 yen, only 13.2 per cent of the war-time military expenses. Of this amount, some 13,700,000 yen, 0.9 per cent of the entire costs, went toward the human fighting-power expenses, while some II2,630,000 yen, 7.5 per cent of the war costs, went toward the material fighting-power expenses, which included the manufacture and repair of arms, the construction and repair of ships, the repletion of units, and the purchase of warships. The communication expenses were 21,61o,000 yen, 1.4 per cent of the war costs, mostly incurred by the shiptransportation work. The "other expense" items amounted to 51,270,000 yen, 3.4 per cent of the entire costs, and comprised the expenses for the maintenance of units, the greater part being incurred for the purchase of coal and other necessaries for the operation of units. Most of the equipment expenses for the Army and Navy, that is, 404,520,000 yen, 26.8 per cent of the military expenses, were incurred for the human fighting power. Next, the material fighting-power expenses were 391,530,000 yen, 26 per cent of the entire costs; the communication expenses, 285,620,000 yen, I8.9 per cent of the entire expenses; and the "other expenses," 103,730,000 yen, only 6.9 per cent of the entire expenses. There were also the miscellaneous expenses totaling 8,140,000 yen, of which COST OF THE WAR 41 6,830,000 yen were for the Army and 1,3I0,000 yen for the Navy. The details follow: MISCELLANEOUS EXPENSES Army Navy Yen Per Cent Yen Per Cent Secret service money.... 3,224,435.... Secret service money..... 824,928.... Enlistment expenses..... 3,67,500.... Expenses for the triumphal Lost money............ I3,37I.... ceremony............. 29,193.... Hiroshima City sanitation 40,975... Lost money............. 402,958.... River Edo bridge con- Sanitary expenses........ 55,997 struction............,700.... Expenses for the compilaContributions to the tion of the naval hygienic Yasukuni Shrine...... 265,000... history during the Russo-Japanese war....... 93 Total.............. 6,832,981 0.5 Total........ 1......,313,269 o.I Grand total....................................................... 8,146,250 0.5 To recapitulate briefly, the war costs for the Army totaled some 85 per cent, the equipment expenses some 65 per cent, the personnel expenses some I9.0 per cent, and the "other expenses" only 0.5 per cent of the entire war expenses. But the war costs for the Navy amounted to only 14.9 per cent of the entire war expenses. Indeed, they were so low that they were below the Army personnel expenses alone. The equipment expenses, the greater part of the Navy war costs totaled some 13 per cent, the personnel expenses 1.6 per cent, and the miscellaneous expenses less than o.I per cent, of the total war expenses. That the costs for the Navy were comparatively small may be explained by the fact that the fighting power of a navy consists mainly in such material equipments as warships and armament, which can not be rapidly increased in war, and calls for rapid increase of the personnel, which is of secondary consideration. But the case is quite different with the Army whose fighting power in war can be rapidly increased in its personnel, at the same time enlarging its material fighting power represented by the arms and munitions, which are subordinate to the personnel. It is also to be remembered that the expenses in connection with the personnel are generally larger than those for the arms and munitions. It is not strange, therefore, that the war costs for the Army are far 42 EXPENDITURES OF THE RUSSO-JAPANESE WAR higher than those for the Navy. Furthermore, of the Army war costs the human fighting-power expenses are much larger than those for the material fighting power; and the personnel expenses are comparatively large in proportion to the equipment expenses. Of the war costs for the Navy, however, the material fighting-power expenses are much larger than those for the human fighting power; and the personnel expenses are comparatively small in proportion to the equipment expenses. Of the Army war costs, the expenses relating to the men occupy the most prominent place, whereas the greater part of the Navy war costs is for material equipments such as warships and armaments. Of the total war costs, however, 78.6 per cent is for equipment expenses, 20.9 per cent for personnel expenses, and 0.5 per cent for miscellaneous expenses. THE WAR-TIME ADMINISTRATIVE EXPENSES The expenditure on the management of the general affairs caused by the Russo-Japanese War may be termed the wartime administrative expenses. The money for the purpose was laid out under the name of the extraordinary-affairs expenses between the fiscal year of 1903-4 and that of 1907-8. The amount was some 1,560,000 yen in the first year, 31,540,ooo yen in the second year, Io9,630,000 yen in the third year, 65,220,000 yen in the fourth year, and I3,6IO,OOO yen in the fifth year. The details, classified according to the Departments of State, are as follows: Departments 1903-4 1904-5 1905-6 1906-7 1907-8 Total Yen Yen Yen Yen Yen Yen Foreign........ 1,229,545 2,642,643 2,502,294 2,094,287 360,903 8,829,672 Home.......... 11,513 635,169 1,213,400 155,498.... 2,015,580 Finance........ 256,966 19,196,740 96,591,293 11,631,690 I,I48,16I 128,824,850 War.................... 27,720,591 8,545,00I 36,265,592 Navy.......... 20,990 I15,002 49,048 21,300,809 3,553,541 25,039,390 Education...... 9,289 77,281 112,483 60,150.... 259,202 Agriculture and commerce.... 31,905 1,718,931 2,433,975 734,660.... 4,919,471 Communications..... 7,163,147 6,735,814 1,525,799 3,089 15,427,849 Total...... 1,560,208 31,548,913.109,638,306 65,223,484 I3,610,695 221,581,606 It is to be noted that the war-time administrative expenditure totaled some 221,580,000 yen for all the departments, and COST OF THE WAR 43 that the expenses for the Finance Department were the largest, being some 128,820,000 yen, which came next in order to those for the War Department, some 36,260,000 yen, those for the Navy Department, some 25,030,000 yen, those for the Department of Communications, I5,420,000 yen, and those for the other departments, 7,I90,000 yen. In order to understand the make-up of the expenditures more clearly, it is necessary to leave the formal for the concrete classification, and to subdivide it into ordinary administration expenses, economic administration expenses, financial administration expenses, military expenses, and expenses relative to Manchuria and Korea. The ordinary administration expenses are the expenses needed by the Home, Foreign, and other departments for ordinary administration. Those for the Foreign Office, totaling some 6,860,000 yen, were mostly spent on the secret service and the telegraph service, as well as for the dispatch of police officers to Korea and the withdrawal of some Japanese residents abroad. Those for the Home Office totaling, some 2,010,000 yen, were chiefly needed for the removal of the impediments caused by the war, some being taken by the local governments, or for the purpose of giving temporary rewards. The "Other" administration expenses, 5,440,000 yen in total, were mostly spent on the honors and gratuities granted in connection with the war, some going for the expenses of meteorological observation in Manchuria, the Prize Court, and Cabinet miscellanies. These ordinary administration expenses total some 14,320,000 yen. Their details are tabulated on the following page. The economic administration expenses were those expenses for coping with the new development of the economic situation caused by the war, comprising some 4,940,000 yen for the Department of Agriculture and Commerce and some 9,740,000 yen for the Department of Communications, totaling I4,690,ooo yen. The bulk of the economic expenses for the Department of Agriculture and Commerce were incurred for the extension of the Government Ironworks to meet the war 44 EXPENDITURES OF THE RUSSO-JAPANESE WAR ORDINARY ADMINISTRATIVE EXPENSES, 1903-I907 a I903-4 I904-5 I905-6 I906-7 Total Foreign Office Yen Yen Yen Yen Yen Secret Service money........... 1,089,994 837,72 1,160,965 I99,958 3,288,648 Telegram charges................. 1,299,994 I,070,915.... 2,370,909 Miscellaneous expenses......... 139,551 504,928 270,414 285,606 I,200,499 Total...................... 1,229,545 2,642,643 2,502,294 485,574 6,860,056 Home Office Extraordinary police expenses.... 6,905 I2I,oio 273,997 13,498 415,410 Relief expenses for soldiers' families.... 354,701 365,862 2,626 723,189 Extraordinary sanitary expenses..... I9,743 273,403.... 293,146 Extraordinary reward expenses..... 53,592 10,73I I00,937 265,260 Miscellaneous expenses......... 4,608 86,123 189,407 38,437 318,575 Total...................... 1,5I3 635,179 1,213,400 155,498 2,0I5,580 Other Expenses For manufacture of decorations, medals, etc................... 299,260 596,353 3,804,628 4,700,241 For extraordinary meteorological observation............... 9,289 77,281 12,482 60,150 259,202 Miscellaneous................. 5,587 31,826 134,877 214,586 486,876 Total....................... 14,876 408,367 843,712 4,I79,364 5,446,319 Grand total............... 1,255,934 3,686,79 4,559,406 4,820,436 14,321,955 aThe expenses for the Kwantung Government General are excluded from the Foreign Office expenses; the Home Office expenses are the same as the expenses under the control of the Home Office; and the "other" administration expenses include the expenses for the Cabinet under the control of the Finance Department, small items belonging to the Audit Board, the extraordinary meteorological observation expenses of the Education Department, the expenses for the handling of the war honors and allowances for the Department of Communications, and the expenses of the Prize Court. created demands for iron and steel and some were incurred for the encouragement of horse gelding, for the cutting of firewood for the Army, and for mining business expenses. The expenses for the Department of Communications were those incurred for the rapid increase in mails and telegrams, for the construction of the rolling stock necessary for military transportation, and for the quick construction of the railway line between Fukuchiyama, Sonobe, and Maizuru. The details are shown in the table at the top of the following page. The military expenses, some 6I,300,000 yen in all, were under the control of the Department of War and Navy. It appears proper to include them in the war-time military expenses, which were discussed in the preceding section, but they are considered here simply because they were a part of the extraordinary-affairs expenses. And the expenses for the Department of War totaled some 36,260,000 yen, of which COST OF THE WAR 45 ECONOMIC ADMINISTRATION EXPENSES, I903-I907 a I903-4 1904-5 I905-6 I906-7 Total Agriculture and Commerce Department Yen Yen Yen Yen Yen Ironworks establishment expenses.. 31,905 1,576,871 2,307,271 724,378 4,640,425 Miscellaneous expenses............... 148,173 149,001 10,282 307,456 Total......................... 31,905 1,718,931 2,433,975 734,660 4,947,99I Communication Department Communication expenses........... 2,171,742 4,I71,477 388,940 6,732,159 Expenses for accelerated construction of railways..................... 1,336,928........ 1,336,928 Expenses for manufacture of rolling stock........................... 315,025 I,02I,815 162,247 1,499,087 Miscellaneous expenses............... 9,452 21,182 149,440 180,074 Total............................ 3,833,147 5,214,474 700,627 9,748,248 Grand total................... 31,905 5,552,078 7,648,449 1,435,287 14,696,129 a The expenses for the Department of Agriculture and Commerce are inclusive of the economic expenses under the control of the Finance Department; the expenses in connection with Manchuria and Korea and the expenses for handling of the war honors and allowances are excluded from the ordinary expenses of the Department of Communications and put under the head of the economic expenses of the Department. some 27,780,000 yen was for the equipment expenses and some 8,360,000 yen forthe personnel expenses. The expenses for the Navy were some 25,030,000 yen mostly for the equipment purpose, of which over 11,120,000 yen were for the repletion of units, some 4,I80,000 yen for the manufacture and repair of arms, and some 6,o80,ooo yen for the construction and repair of ships. The details are as follows: MILITARY EXPENSES, I903-I908 1903-4 1904-5 I905-6 I906-7 1907-8 Total War Office Yen Yen Yen Yen Yen Yen Personnel expenses................... 8,235,797 126,20I 8,361,998 Equipment expenses................. 19,366,794 8,418,800 27,785,494 Secret service money.............. I I8,ooo.... I I 8,ooo Total............................. 27,720,591 8,544,001 36,265,592 Navy Department Units completion expenses.......... 9,745,976 1,381,220 11,127,196 Expenses for manufacture and repair of arms............... 3,481,853 703,95I 4,185,804 Expenses for construction and repair of ships.............. 5,009,397 1,072,515 6,081,912 Expenses for maintenance of units............................ 1,690,842 395,854 2,086,696 Miscellaneous expenses..... 20,990 115,002 49,048 1,372,741.... 1,557,782 Total.................. 20,990 115,002 49,048 21,300,809 3,553,541 25,039,390 Grand total............ 20,990 115,002 49,048 49,021,400 12,097,542 61,304,982 I I I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 46 EXPENDITURES OF THE RUSSO-JAPANESE WAR The expenses in connection with Manchuria and Korea, I,380,000 yen in total, were those political expenses incurred for the accelerated construction of means of communication during the war-time and also for the enforcement of the rights secured by Japan through the war. The expenses for the accelerated construction of means of communication, 5,480,ooo yen in all, included the subsidy for the construction of the Seoul-Fusan Railway, loans to the Seoul-Fusan Railway Co., and the expenses for the management of the communication work in Korea. The political expenses, 5,900,000 yen in total, were the expenses for the Kwantung GovernmentGeneral and Korean Government-General Offices, and the subsidies to the Korean Government. The details are as follows: EXPENSES IN MANCHURIA AND KOREA, I904-I908 1904-5 I905-6 1906-7 1907-8 Total Political expenses a Yen Yen Yen Yen Yen Expenses for the Kwangtung Government-General Office........... 1,608,713 360,903 1,969,616 Advances to the Korean Government......................... 1,500,000........ I,500,000 Expenses for the Korean ResidentGeneral Office................ 273,205 2,027,781 132,441 2,433,427 Total..........................,773,205 3,636,494 493,344 5,903,043 Expenses for the accelerated construction of means of communications Subsidies for the construction of the Seoul-Fusan Railway.... 1,750,000 450,000........ 2,200,000 Loans to the Seoul-Fusan Railway Co......................,580,ooo............ 1,580,000 Expenses for management of communication work in Korea....... I,071,340 630,625 3,089 1,705,054 Total....................... 3,330,000 1,521,340 630,625 3,089 5,485,054 Grand total................. 3,330,000 3,294,545 4,267,119 496,432 11,388,097 a Of the political expenses, the expenses for the Kwantung Government-General were under the control of the Foreign Office, the expenses relating to Korea, under the control of the Finance Department, and the expenses relating to communications, under the control of the Department of Communications. The financial administration expenses totaled some I 19,870,ooo yen, more than half of the entire war-time administration expenses. They were incurred for the issue of the war-time bonds, the payment of interest, the collection of war-taxes, the creation of Government monopolies of tobacco and salt, COST OF THE WAR 47 the utilization of national wealth, and for other purposes. The interest on the national loans totaled some 78,630,000 yen; the expenses for the tobacco monopoly, some 15,280,000 yen; the expenses for the salt monopoly, some 9,8Io,ooo yen; the expenses in connection with the issue of the bonds and the national bonds in general, I3,050,000 yen; and the taxation expenses, some 1,120,000 yen. The expenses for the utilization of national wealth, some 1,360,000 yen in total, were those expenses required in connection with the handling of loan subscriptions, the issue and conversion of military convertible notes at the front, and the mintage and transportation of silver coins for circulation in Manchuria. The subjoined table shows the details: FINANCIAL ADMINISTRATIVE EXPENSES, I903-I908 a I903-4 I904-5 I905-6 I906-7 I907-8 Total National debts interest Yen Yen Yen Yen Yen Yen Public loan interest..... 7,004,329 66,136,777........ 73,I4I,106 Temporary loan interest............. 3,755,701 1,738,648........ 5,494,349 Total...............,760,030 67,875,425........ 78,635,455 Expenses in connection with the issue of national loans.... 204,883 2,481,256 7,004,962 3,368,844.... 13,059,945 Monopoly expenses Tobacco monopoly expenses........... 4,444,321 9,792,6II 630,271 413,i58 15,280,361 Salt monopoly expenses............ I52,345 7,827,669 1,235,I60 596,597 9,8II,771 Total............... 4,596,666 17,620,280 1,865,431 I,009,755 25,092,132 Taxation expenses......... 337,578 790,354........ 1,127,932 Expenses for utilization of national wealth. 46,496 500,958 476,736 337,521.... 1,361,7r1 Miscellaneous expenses.... I83,037 296,788 I07,432 5,964 593,221 Grand total...... 251,379 I8,859,541 94,064,56I 5,679,242 1,015,720 II9,870,443 a This table is compiled from the expenses relating to financial matters under the control of the Department of Finance. Fractions of yen are included in the grand total but are excluded from the totals of other items; hence the difference in sums. To sum up the foregoing statements under the various heads of the war-time administration expenses, the ordinary administration expenses totaled some 14,320,000 yen, or 6.5 per cent of the grand total; the expenses relating to Manchuria 48 EXPENDITURES OF THE RUSSO-JAPANESE WAR and Korea, some 1,380,000 yen, or 5.1 per cent; the economic administration expenses, 14,690,000 yen, or 6.5 per cent; the military expenses, some 61,300,000 yen, or 27.7 per cent; the financial administration expenses, II9,870,000 yen, or 54. I per cent; and the entire war-time administration expenses amounted to 221,581,606 yen. These figures may be tabulated as follows: Yen Per cent Ordinary administration expenses... 14,321,955 6.5 Political expenses relating to Man- 9. I churia and Korea.............. 5,903,043 2.6 Communication expenses relating to 18.2 Manchuria and Korea.......... 5,485,054 2.5 9 J 4 Economic administration expenses.. 14,696,129 6.6f ' 45.9 Military administration expenses... 6I,304,982 27.7 27.7 27.7 J Financial administration expenses... 119,870,443 54. I 54. I 54. I 54. I Total....................... 221,581,606 IOO.O I00O. IOO.O IOO.0 It is to be noted that in a broad sense the ordinary administration expenses and the economic administration.expenses, the former including the political expenses relating to Manchuria and Korea and the latter including the communication expenses relating to Manchuria and Korea, are almost the same amounts, each 9.I per cent of the entire war-time administration expenses exclusive of the financial and military items. Added, they amount to 18.2 per cent. Of the entire expenditure, of which the military expenses are 27.7 per cent, the remaining 54.I per cent, that is, more than half of the war-time administration expenses, was for the financial administration, especially for raising the war-time national loans, for collecting the war-time taxes, and for creating government monopolies of tobacco and salt. TABLE A.-PERSONNEL EXPENSES a Army Navy Total Yen Per cent Yen Per cent Yen Per cent General pay.......... 134,004,327 8.9 General pay.......... 16,306,007 I.I I50,30,334 I0.0 Salaries............. 77,786,320 5.2 Salaries........... 15,342,209 I.0 93,128,529 6.2 Wages and miscellanWages.............. 56,202,142 3 eous expenses... 472,626 57,81803 3.8 Miscellaneousexpenses 5,863 Allowances........ 49I72 Rewards and special Rewards and special allowances...... 56,292,465 10.3 allowances.... 8,307,636 0.5.64,600,0I I0o.8 Total............. 290,296,792 19.2 24,613,643 i.6 314,910,435 20.8 a The above table and the statistics on page 39 are compiled from the Government Reports on the Extraordinary Military Expenses and the vouchers and other documents of the Audit Board, but classified in a manner somewhat different from the official classification. o 0 CB O 0 til 5d M TABLE B.-EQUIPMENT EXPENSES Cn 0 Army Navy Total I_ I._.... Human fighting-power expenses........ Feeding and forage a Clothing.......... Hospital.......... Material fightingpower expenses.. Arms............. Building and fortification........ Horses.......... Communication expenses......... Transportation.... Traveling......... Postal and telegraph Other expenses...... Store............. Maneuvers........ War medals....... Miscellaneous.... Total........... I I_ - -I - Yen 390,812,098 261,795,339 I74,919,59I 8,737,168 278,900,648 I54,3IO,773 46,504,062 23,445,813 264,007,800 249,163,400 I3,269,199 1,575,201 52,467,731 40,475,186 1,799,759 606,683 9,586,103 Per cent 25.9 17.3 1I.6 0.6 i8.5 10.2 3.1 1.6 17.5 I6.5 0.9 O.I 3.5 2.7 0.8 Human fighting-power expenses........ Feeding........... Clothing.......... Hospital........... Material fighting-power expenses....... Arms manufacturing and repairing.. Ship building and repairing........ Repletion of units... Purchase of warships Naval and strategic ports........ Communication expenses......... Shipping......... Traveling......... Hydrographical.... Other expenses....... Maintenance of units Repairs.......... Foundations....... Arsenals and dockyards........ War medals....... Miscellaneous...... Yen 13,708,461 7,905,450 5,469,789 333,222 112,632,347 22,418,882 26,079,874 46,698,890 15,984,593 1,450,108 21,616,041 20,329,626 1,213,072 73,343 51,270,722 39,540,645 5,I08,206 1,048,002 693,288 40,408 4,840,173 199,227,571 Per cent 0.9 0.5 0.4 o 7.5 1.5 1.7 3.1 I.I 0.I 1.4 1.3 0.I 3-4 2.6 Yen 404,520,559 391,532,995 285,623,841 103,738,453 M Per cent X 26.8 t 3 26.0 o U) H I8.9 U2 0 _ 6.9 > z i J 0.8 986,188,283 65.4 13.2 1,185,415,954 78.6 a Separate figures for feeding and forage expenses are not available. CHAPTER III RESOURCES FOR DEFRAYING WAR EXPENSES WAR LOANS Though various resources were utilized for the purpose of raising the necessary funds to carry on the war with Russia, it was the loans that supplied practically the whole of these needs. The government, coincidentally with compiling the estimates of the war expenditures, six times promulgated laws and ordinances concerning the defrayal of the expenses, and laid plans for issuing war loans on an extensive scale during the period from December, 1903, to February, I906. According to these programs, (I) the amount of issues as determined by concrete figures reached the total of 1,688,000 yen; and, besides, it was arranged that (2) the balance between the total amount of issue prices and the total amount of face values of the bonds previously issued could be covered by fresh loans from time to time, when such a necessity arose; and that (3) over and above the delimited figures, loans could be raised when it was needed to consolidate or redeem temporary loans, funds of the special accounts and national bonds, borrowed or issued to meet the war expenses. The loans coming under the last category were intended for the consolidation of war bonds and others, having no connection with those loans which formed resources of the war expenditures, while it was the loans of definite amounts under the first and second categories that supplied the war needs. As we shall have later occasion to deal with the loan issues falling under the second category, we omit them here and tabulate on page 52 only the amounts of loans belonging to the first category. After the opening of the war, various loans were issued one after another, within the limits authorized, in order to meet the estimated requirements of the war expenditures. The amount to be raised by domestic loans was 790,720,000 yen, while 800,560,000 yen was to be obtained from foreign loans, 5I 52 EXPENDITURES OF THE RUSSO-JAPANESE WAR LOAN ISSUES a Authorization Amounts Yen Imperial Ordinance No. 29I, December, I903.......... I00,000,000 Statute No. I, April, I904.......................... 280,000,000 Imperial Ordinance No. 228, November, I904.......... 120,000,000 Statute No. 12, January, I905....................... 455,000,000 Imperial Ordinance No. I94, November, 905........... 300,000,000 Statute No. I, February, I906....................... 433,000,000 Total......................................... i,688,ooo,ooo a The Imperial Ordinance of December, I903, did not specify the amount of issue. This loan, however, is included under the first category, taking the amount authorized in the budget as the specified amount. the two items aggregating 1,591,280,000 yen. It was, however, no light task for Japan at that time, with her limited financial power and her low international position, to raise such a large amount of money by loans. But the success or failure of these loans would immediately affect the working of the budget of war expenditures, constituting one of the important factors in deciding the fate of the Russo-Japanese War. The people therefore, out of patriotic fervor, gave an enthusiastic response to the call of the state, and the government took every step to enhance the value of domestic bonds and to insure the success of bond issues at home, upholding thereby Japan's financial credit abroad and facilitating the flotation of foreign loans. The government, in consultation with representatives of the money market, determined the valuation of the bonds (minimum issue price). For the purpose of maintaining this level so far as concerned the payments to or transactions by the government, it engaged that it would accept the bonds issued for the defrayal of war expenses in lieu of cash in payment of deposit moneys to be placed with the government by officials in charge of accounts, of securities by commission merchants or contractors of government works, or of other kinds of deposits or securities, taking the bonds at the minimum issue price in case of the bonds paid in full, or at the value already paid in case of the bonds in instalments, even when the market prices of these bonds were below the RESOURCES FOR DEFRAYING WAR EXPENSES 53 minimum issue price. Although the settlement of debits was to be made at their market price in accordance with provisions of the Commercial Law, a special exception was made in favor of the war bonds, making them acceptable in payment for these debits at the minimum issue prices, irrespective of the current market rates. Besides giving by such direct means a higher valuation to the war bonds, it was also provided that the interest on the loans should be exempt from liability to assessment for the income tax, thus increasing the profit of the bonds and providing against their depreciation in market rates.1 These measures conferred direct benefits on the holding of the war bonds. The government also tried other measures to increase the circulating power not only of war bonds but of public bonds in general by extending the uses to which these bonds could be put. Of course, this was done to indirectly increase the profit from the bonds, and thereby raise the value of the bonds in general and facilitate the issue of war loans. So when the unregistered national-loan bonds the redemption of whose capital had already commenced, and the coupons attached to the unregistered national-loan bonds whose interest was already due, were tendered in payment for taxes and other revenues to the Treasury, it accepted them in lieu of cash at the face value in respect of the bonds and also at the face value, as a general rule, in respect of coupons, treating the presentation of such bonds or coupons as demands for the payment of capital or interest.2 These measures covered the government bonds in general, but no doubt conferred special benefits on the exchequer bonds issued for war loans. While thus taking steps, on the one hand, to advance, directly or indirectly, the incomes derived from the holding of national bonds, and thereby to maintain the prices of these Financial Department Order No. 48, October, I904, Naval Department Notice No. 26, November, I905, and Imperial Ordinance No 20, January, I905, provided for special treatment to be accorded war bonds deposited as securities in lieu of cash. Statute No 20, February, I905, provided for an exception in the settlement of debits in accordance with the Commercial Law Statute No. I9, February, 1905, provided for the exemption of the interest on war bonds from the income tax 2 Payment with national-loan bonds and coupons to the Treasury in lieu of cash was provided for by Imperial Ordinance *No. 34 and by Financial Department Ordinance No. 7, both issued in February, 1905 54 EXPENDITURES OF THE RUSSO-JAPANESE WAR bonds, the government endeavored, on the other hand, to insure the success of the loans by appealing to the sentiment of the people to subscribe to them. DOMESTIC LOANS The domestic loans issued as war bonds consisted of two kinds, namely, short-term exchequer bonds and long-time emergency loans. The exchequer bonds were issued for this purpose five times during the continuance of the war, that is, from March, 1904, to May, I905, and totaled 480,000,000 yen in estimates, while the emergency loans, which were issued in March and June, I906, and afterward, to meet the extraordinary needs after the war, aggregated 310,720,000 yen. It was therefore the exchequer bonds that were issued to supply the imperative necessities for prosecuting the war. The reason the short-term exchequer bonds were adopted for war loans was because the interest rates were necessarily high in Japan on account of the small accumulation of capital, which was, in turn, due to the backward condition of the country in comparison with Europe and America, and because the flotation of loans at a time when the interest rates at home were taking an upward tendency on account of the war involved necessary disadvantages to the Treasury. The Treasury, under these circumstances, intended to convert its bonds into low-interest loans, especially foreign loans, to be floated at a proper time after the war. It was no easy task, however, for Japan at that time to raise such a large amount of funds, and yet it was considered that the results of the issues of exchequer bonds would affect the loan flotation abroad, reflecting, as they must, Japan's financial credit and the extent of her economic power. The government, therefore, paid strict attention to the issue of these bonds, and directed the local governors and financiers throughout the country to support the loan issues to the best of their powers, fixing at the same time the conditions of issue so as to bring the loans within reach of all classes of people. The exchequer bonds issued consisted, as a rule, of unreg RESOURCES FOR DEFRAYING WAR EXPENSES 55 istered bonds with coupons, and were directly issued by the government on its own responsibility, the Bank of Japan being ordered to attend to the issuing business. As regards the conditions, the amount of each issue was IOO,OOO,OOO yen, excepting the third issue, which was 80,000,000 yen. The bonds were to be redeemed within seven years, except for the first issue, the term of redemption of which was fixed at five years. The minimum issue price per IOO yen nominal capital was 95 yen for the first issue, 92 yen for the second and third issues, while the price fell to 90 yen for the fourth and fifth issues. The interest rate was 5 per cent per annum for the first three issues, but it was raised to 6 per cent per annum for the fourth and fifth issues. The conditions of issue in this way gradually became disadvantageous to the government with the increase of its liabilities and the decrease of the power of the people to purchase the bonds. The following table shows the conditions for the five issues of the exchequer bonds: ISSUES OF SHORT-TERM EXCHEQUER BONDS, MARCH, I904, TO MAY, 1905 i~~o X <~ c |Commission ^ ^ -..y '- 1) 3 to bankers Issue ' o _ - __ I SM 0 M I. - I I On sub- On X c g.S g X a) op. g scription amounts a < ~ = d QH <.= deposits paid in In mil- Per 1904 lion yen Yen cent Years Yen Per cent Per cent First..... Mar. I00 95 5 5 2.. 8 2 or 3.3 or0.4 Second... June I00 92 5 7 2. 9 3 0.4 Third.... Oct. 80 92 5 7 2'.. 8 3 1.3 I905 Fourth... Mar. Ioo 90 6 7 4.. 6 1.5 0.7 Fifth.... May Ioo 90 6 7 4.. 6 1.5 0.7 aAcceptance subject to the following conditions: (I) All applications above minimum issue price. (2) Accepted applications at minimum issue price in proportion to the amount applied for. (3) Applications of small amounts accepted without reduction, except the fifth issue, in which such applications were accepted with reduction. To bring these national-loan bonds within reach of all classes, denominations were made as varied as possible. The bonds were issued each time in seven denominations, namely, 56 EXPENDITURES OF THE RUSSO-JAPANESE WAR 25, 50, 100, 500, I,000, 5,000, and Io,ooo yen. Again, the number of instalments was multiplied in order to make payment easy for subscribers in general. The first issue was thus made to be paid in 8 instalments in 9 months, the second issue in 9 instalments in 10 months, and the third issue in 8 instalments in 8 months, while in the fourth and fifth issues the number of instalments was lessened and the subscriptions were called up in 6 instalments in 6 months, as it was pretty certain in these cases that the greater part of the loans would be taken up by banks and other corporations. Each time payment of instalments in advance was allowed, and beginning with the third issue the payment in advance was encouraged by raising the interest rate for the prepaid amounts, while a higher interest rate was charged for the payments overdue, thus discouraging arrears. The method of acceptance, in cases where the loans were oversubscribed, was so arranged as to take in the subscriptions of the people in general. First, all applications above the minimum issue price were accepted, and then the applications at the minimum issue price were added up to the required sum, distributing the balance in proportion to the amounts of those applications. But in the first issue an exception was made in favor of small applications below 200 yen, which were accepted without any reduction. In the second, third, and fourth issues, however, the interest of large subscribers was considered, and no exceptions favorable to small subscribers were made except that subscriptions which fell below the minimum denomination of 25 yen, in consequence of the proportional distribution, were also taken in at 25 yen. But the fifth issue did not allow even this concession, refusing acceptance in all such cases. The deposit accompanying the applications for the first, second, and third issues was fixed at 2 yen per Ioo yen applied for, but each time there was a very large number of subscribers, and not a few who failed to pay instalments by their proper dates, so in the last two issues the deposit was increased to 4 yen, with a view to remedying this defect. The commission allowed to bankers, for the issue of exchequer RESOURCES FOR DEFRAYING WAR EXPENSES 57 bonds, represented the actual expense required for the disposal of business relating to the issue, and did not include the compensation for the risk involved in undertaking the flotation of loans, as in the case of foreign loans issued during the war. This commission, therefore, could hardly be counted among the conditions of issue in the ordinary acceptation of the term. However this might be, the first rate of commission for the first issue was 0.3 per cent on the instalment allotments (excluding that part of the allotments which was paid in the shape of deposits) and 2 per cent on the deposits. But in consideration of the fact that there was a large number of applicants, entailing time and trouble on the part of the bankers, the former was subsequently increased to 0.4 per cent and the latter to 3 per cent. These increased rates applied as well to the second issue. In the third issue, which required particular efforts on the part of the financiers, the commission on instalment allotments was raised to 1.3 per cent, while that on deposits remained unaltered. In the fourth and fifth issues the former was lowered to 0.7 per cent, while the latter was also reduced by half, that is, to 1.5 per cent, because of the fact that the deposits in these issues were double the amount for the earlier issues. The results of these issues of the exchequer bonds were that the first issue was widely taken up among the people, but that this feature changed with the repetition of issue, until the subscribers came to be limited practically to very wealthy men in the fourth and fifth issues. However, every issue was a success and oversubscribed several times. As the result of a vigorous campaign, the first issue secured the largest number of applicants, and was oversubscribed four and a half times, of which 33 per cent was represented by applications above the minimum issue price. The number of applicants markedly decreased in the second and third issues, yet the amount of subscriptions exceeded the issue amount by more than three times. The applications above the minimum issue price represented 6 per cent and 2 per cent, respectively, of the amount subscribed for on these two occasions. The 58 EXPENDITURES OF THE RUSSO-JAPANESE WAR last two issues met with an enthusiastic reception because of the profitable conditions. They were oversubscribed five times, though the number of subscribers was nearly the same as in the second and third issues. In the fourth and fifth issues the applications over the minimum issue price represented between over 77 per cent and over 29 per cent of the subscribed amounts. The details follow: NUMBER AND AMOUNT OF SUBSCRIPTIONS AT AND ABOVE MINIMUM ISSUE PRICE FOR SHORT-TERM EXCHEQUER BONDS Above minimum issue At minimum issue Total price price Total Issue Amount Subscribers Amount Subscribers Amount Subscribers Yen Yen Yen First..... 33,439,675 234,595 418,690,800 1,111,363 452,I30,475 1,345,958 Second... 6,267,675 15,527 315,923,275 364,276 322,190,950 379,803 Third.... 1,872,625 10,203 243,956,575 467,575 245,829,200 477,778 Fourth... 77,023,900 34,851 408,852,350 494,478 485,876,250 529,329 Fifth..... 29,437,275 41,041 468,823,950 614,044 498,261,225 655,085 Total 148,041,150 336,217 1,856,246,950 3,051,736 2,004,288,I00 3,387,953 Of these subscribed amounts, the applications above the minimum issue price were all accepted, while those at the minimum issue price were accepted to the limit of making up the issue amount. But since the subscriptions were raised from the general public, there were a large number of deposits and instalments forfeited because of the failure in the payment by proper dates. This defect, however, gradually lessened as the subscribers came to be limited to wealthy men. The forfeitures reached the total of 6,930,000 yen, so that the exchequer bonds actually issued amounted to 473,o60,ooo yen. The details are tabulated at the top of the next page. Of over 473,o60,000 yen, the total amount of the exchequer bonds actually issued, the income to the Treasury was over 435,190,000 yen, comprising over 434,130,000 yen for payments at the minimum issue price, over 750,000 yen for premium, and over 300,000 yen for forfeitures of deposits and instalments previously paid. The amount of income each time was as shown on the opposite page. RESOURCES FOR DEFRAYING WAR EXPENSES 59 AMOUNT OF SHORT-TERM EXCHEQUER BONDS ACTUALLY ISSUED AT AND ABOVE ISSUE PRICE ApplicationsBanc Issue Amount -For- Bctalanc accepted Above issue At issue feitures actuall price price Yen Yen Yen Yen Yen First.... 100o,000,000 33,439,675 66,560,325 3,022,750 96,977,250 Second. 100.io,000,000 6,267,675 93,732,325 1,123,350 98,876,650 Third.... 80,000,000 1,872,625 78,127,375 2,51I9,300 77,480,700 Fourth. 100.o,000,000 77,023,900 22,976,100 63,850 99,790,575 Fifth.. 100..o,000,000 29,437,275 70,562,725 63,850 99,936,150 Total..480,000,000 148,041,150 331I,958,850 6,938,675 473,06i,325 NET RECEIPTS FROM THE SHORT-TERM EXCHEQUER BONDS AT MINIMUM ISSUE PRICE Receipts Issue Payments at For- Net receipts minimum issue Premiums Total feitures price Yen Yen Yen Yen Yen First..... 92,128,388 247,736 92,376,124 1 68,481 92,544,605 Second. 90,966,518 15,278 90,981,796 47,592 91,029,388 Third. 7I,282,244 6,431 71,288,675 68,506 71,357,18i Fourth. 89,811,51I8 443,444 90,254,962 i6,126 90,271,088 Fifth.. 89,942,535 41,546 89,984,081 4,991 89,989,072 Total.. 434,13I,202 754,436 434,885,638 305,696 435,191,334 NET AMOUNT OF FORFEITURES ON SHORT-TERM EXCHEQUER BONDS AT AND ABOVE ISSUE PRICE Forfeitures Issue Bonds at or Amount Net above issue Premiums Total paid forfeitures price Yen Yen Yen Yen Yen First.... 2,871,613 6,953 2,878,565 1 68,481I 2,710,084 Second. 1.,033,482 774 1,034,256 47,592 986,664 Third.. 2,317,756 298 2,31I8,054 68,506 2,249,548 Fourth. I 88,483 136 i88,6i9 16,126 172,493 Fifth..57,465 66 57,531 4,991I 52,540 Total.. 6,468,798 8,227 6,477,025 305,696 6,171I,329 60 EXPENDITURES OF THE RUSSO-JAPANESE WAR It will be seen from the foregoing table that the nominal amount of revenue to the Treasury from forfeitures reached 6,470,000 yen, of which only 305,696 yen was actually received by the Treasury in the form of deposits and instalments forfeited. The commission allowed to bankers was directly defrayed from the Treasury and not out of the proceeds of the bond issues, as was the case with the foreign loans floated to supply the expenses of the war. However, the rates of commission are subjoined for reference. RATE AND AMOUNT OF COMMISSIONS ON SHORT-TERM EXCHEQUER BONDS Commissions on Commissions on instalment allotments deposits Total Issue __ amount of commissions Rate Amount Rate Amount Per cent Yen Per cent Yen Yen First............ 0.3 or 0.4 362,449 2 or 3 I80,852 543,301 Second.......... 0.4 347,414 2 I93,320 540,734 Third.......... I.3 900,958 2 I47,498 1,048,456 Fourth.......... 0.7 601,394 I.5 291,526 892,920 Fifth.............7 601,063 I.5 298,957 900,020 Total.......... 2,813,279.... I, I 2,I52 3,925,43 During the continuance of the war, exchequer bonds amounting to large figures were issued as detailed above. However, emergency bonds of considerable amounts had to be floated immediately after the conclusion of peace. To supply the deficits in the expenses during the war, and to meet the expenses for withdrawal of troops after the war and for the grant of rewards for military services, an emergency loan amounting to 200,000,000 yen was floated in March, 1906, and other loans of the same kind were issued during and after June, I906, according to needs. The conditions of these loans were absolutely the same, except that, while the first loan was offered to public subscription, the later ones were issued as substitutes for grants rewarding services rendered in connection with the war. RESOURCES FOR DEFRAYING WAR EXPENSES 6i The emergency loan of March, I906, was issued directly by the government, and the business of the loan was disposed of by the Bank of Japan, as in the case of the exchequer bonds. As the money market was gradually reviving at the time, the government could secure better conditions for the loan than for the exchequer bonds. The minimum issue price of the March loan was fixed at 95 yen per IOO yen nominal capital, the interest rate 5 per cent per annum, and the term of redemption 25 years after a term of maturity of 5 years from the date of issue. The bonds were in denominations of 50, Ioo, 500, I,000, 5,000, and Io,ooo yen. The deposit accompanying the application was made 5 yen per IOO yen subscribed for, to secure greater certainty as to the payment of instalments than in the case of exchequer bonds. The method of acceptance adopted was the same as in the case of the fifth issue of the exchequer bonds. The six instalments had to be paid in six months. Payments in advance of date were encouraged, allowing a discount for the 'nstalments paid in full at the time of the second payment, while for the purpose of minimizing arrears a higher interest rate was charged for the instalment paid after the proper date. As the fourth and fifth issues of the exchequer bonds, bearing a high interest, were being converted at this time into new 4 per cent sterling bonds, it was allowed that these exchequer bonds be tendered in lieu of cash in payment for instalments on the emergency loan. In such cases the face value of the exchequer bond plus its interest to the month of redemption was taken as its valuation. When the separate amounts of emergency bonds applied for exceeded the total sum required, and when the amount in excess was reduced from the applied sums in proportion to their respective sizes, subscriptions to be paid in exchequer bonds were accorded a preferential right and exempted from being reduced. This encouraged the payment in exchequer bonds in lieu of cash. Though this was a loan of a far greater amount than any previously floated at one time, it yielded results which were highly satisfactory. The subscribers numbered 800,000, 62 EXPENDITURES OF THE RUSSO-JAPANESE WAR while the loan itself was nearly twice oversubscribed. The applications above the minimum issue price reached 6 per cent of the total amount subscribed for. The applications above the minimum issue price and those of which payment was to be made in exchequer bonds were all accepted as a matter of course, while applications at the minimum issue price were taken to the extent of I52,000,000 yen. Of the subscriptions accepted, bonds worth over 320,000 yen were forfeited on account of delay in payment. The amount of the bonds actually issued was, therefore, a little over I99,670,000 yen. The result in detail was as follows: VALUE AND NUMBER OF APPLICATIONS FOR EMERGENCY LOAN OF MARCH, I906, AT AND ABOVE ISSUE PRICE Above issue price At issue price Total Amount applied for (i) Ordinary applications........ (2) Applications in exchequer bonds Total........... Amount accepted (I) Ordinary applications........ (2) Applications in exchequer bonds Total........... Forfeitures.......... SV ub- Sub- SubValue scribers Value scribers Value scribers Yen Yen Yen 8,273,300 9,oo6 325,468,I50 760,419 333,741,450 769,425 3,827,550 1,420 35,603,200 23,275 39,430,750 24,677 I2,o00,850 I0,426 361,071,350 783,676 373,172,200 794,I02 8,273,300.... I52,295,950.... I60,569,250.... 3,827,550.... 35,603,200.... 39,430,750.... I2,I00,850.... I87,899,I50.... 200,000,000....................... 328,900.... Balance actually issued.................. 99,67,I00.... From the bonds actually issued in March, I906, exceeding I99,670,000 yen in value, the Treasury obtained more than I89,080,000 yen, including over I89,040,000 yen as payments at the minimum issue price, over Io,ooo yen as premiums, and over Io,ooo yen as forfeitures. Emergency bonds issued from time to time during and after June, I906, totaled more than II0,720,000 yen at the end of March, I907. The income to the Treasury, that is, grants at issue price, aggregated over RESOURCES FOR DEFRAYING WAR EXPENSES 63 105,I8o,ooo yen by that date. The two kinds of emergency loans exceeded 310,390,000 yen in the total amount actually issued, the income to the Treasury from these loans being shown in the following table: NET RECEIPTS FROM EMERGENCY LOANS, MARCH, I906, AND DURING AND AFTER JUNE, I906 Amount received Actual Date of amount of Payments Net issue issue Payments at forfeited receipts minimum Premiums Total issue price Yen Yen Yen Yen Yen Yen March, i906 a.. 199,67I,I00 189,048,763 15,456 I89,064,2r8 17,213 189,081,431 During and after June, I9o6... 11,722,950 105,I86,803.... 105,186,803.... I05,I86,803 Total..... 3Io,394,050 294,235,565 15,456 294,25I,02I 17,213 294,268,234 a In the March issue, instalments were discounted when they were paid in full before the second instalment was due. The instalment allotments for which a discount was allowed totaled 75,216,628 yen, the amount discounted being 638,782 yen. This last amount is not, of course, included under the payments at minimum issue price in the above table. The bonds forfeited exceeded 320,000 yen in face value, which was more than 3Io,000 yen at issue price. This amount was lost to the Treasury, excepting over 17,000 yen, which had been paid. The commission allowed to bankers for the issue was more than 2,380,000 yen. The details are tabulated at the top of the following page.1 We have so far dealt with the domestic bond issues directly connected with the supply of war expenses. Besides these, and simultaneously with an increase of taxes for war purposes, the government monopoly of the tobacco business was established, and a loan called the tobacco monopoly exchequer bonds was issued to supply the initial expenses for taking over the business. In undertaking the tobacco monopoly, the government granted, first, certain sums of money to the tobacco manufacturers as compensations for their business profits surrendered; secondly, it paid for their movable and immovable property used in tobacco making, which it commandeered from the manufacturers; and, thirdly, such other property as 1 Forfeitures and commissions on the emergency bonds issued during and after June, I906, are not included in these two tables. 64 EXPENDITURES OF THE RUSSO-JAPANESE WAR FORFEITURES IN MARCH, 1906, ISSUE OF EMERGENCY LOAN BONDS Face value Issue price Premium Total Payments Balance made not paid Yen Yen Yen Yen Yen Yen 328,900 312,455 25 312,480 17,213 295,267 COMMISSIONS PAID BANKERS FOR FLOATING THE MARCH, 1906, ISSUE OF EMERGENCY LOAN BONDS was not commandeered was bought up by the government on application. The government gave- exchequer bonds in payment for the first item, and did the same thing in payment for the second and third items on application of the recipients. These exchequer bonds were unregistered bonds with coupons, and were issued in denominations of 50, Ioo, 500, I,ooo, and 5,000 yen. The bonds bore an interest rate of 5 per cent per annum, were to be redeemed within seven years from the date of issue, and were delivered to the tobacco manufacturers at their face value. These bonds were issued during the fiscal years I904-5 and I905-6, and totaled over 12,310,000 yen. The particulars are as follows: DISTRIBUTION OF TOBACCO MONOPOLY EXCHEQUER BONDS IN TAKING OVER THE TOBACCO FACTORIES Compensa- Payments for.Issue Grants for tions for purchase of Payments profits property imported ooh Total surrendered tobacco purchases Yen Yen Yen Yen Yen I904-5...... 2,886,800 542,650 3,142,700 IO8,650 6,68o,800 I905-6...... 5,629,700......... 5,629,700 Total... 8,516,500 542,650 3,142,700 o8,650 12,310,500 RESOURCES FOR DEFRAYING WAR EXPENSES To recapitulate: The actual amount of domestic loans issued for supplying the war expenses aggregated more than 783,450,000 yen, comprising over 473,030,000 yen of exchequer bonds and over 310,390,000 yen of emergency loans, while the total income to the Treasury from these sources exceeded 729,I30,000 yen, including over 434,880,000 yen from the exchequer bonds and over 294,250,000 yen from the emergency loans. FOREIGN LOANS The most important part of the war expenditures was supplied by the proceeds from foreign loans, which formed more than half of all the war loans. The foreign loans consisted of two kinds, namely, the first and second 6 per cent sterling bonds, which were short-term loans and issued in May and November, 1904, and the first and second 42 per cent sterling bonds, which were long-term loans and issued in March and July, I905. These loans were placed on the markets in Great Britain and America or Great Britain, America, and Germany. They were floated by the indirect method of issue, each of the loans being taken up by a syndicate of banks. Between the two short-term loans and the two longterm loans there was a great difference in the conditions and results of issue, because the former were floated in the first half of the war, when the final issue of the conflict was yet unknown, while the latter were issued in the second half of the war, when the prospective victory of Japan became almost certain. This was, however, ten years after the Sino-Japanese War, and the development of Japan's economic resources during these years was not unknown to the world. Her international position was still low; consequently the offering of securities was a necessary condition for the loan issue, not only in the first but in the second half of the war. The conditions of issue for the four loans are set forth in Table A at the end of this chapter.' The first two sterling loans, ~Io,ooo,ooo and ~I2,000,000, respectively, were floated in London and New York in equal 6 1 Post, p. 94. 66 EXPENDITURES OF THE RUSSO-JAPANESE WAR amounts. The bonds were unregistered, provided with coupons, and issued in denominations of ~Ioo and ~200. The issue price of the first of these loans was ~93, Ios. per ~Ioo nominal capital, the net receipt of the government ~90, the commission allowed to the underwriting banks ~3, Ios., while the interest rate was 6 per cent per annum. The issue price of the other loan fell to ~90, Ios., and the net receipt of the government also decreased, falling to ~86, I5s., while the commission was raised to ~3, I 5. The rate of interest, however, remained stationary at 6 per cent. The two loans were to be redeemed within seven years, and were redeemable at six months' notice at any time after three years from the date of issue. Both capital and interest were a charge upon the customs revenue of the government of Japan. The last coupons and prize tickets for redemption were receivable for customs dues at the rate of I yen per two shillings and half a penny. The ~30,000,000 sterling bonds, the first of the second two sterling loans bearing 4.5 per cent interest, were issued in London and New York in equal amounts. These were unregistered bonds with coupons, and had three denominations of ~xoo, ~200, and ~500. The last of the second two sterling loans bearing 4.5 per cent interest also amounted to ~30,000,ooo, and was raised in London, New York and Germany. These bonds were unregistered and provided with coupons, as in the previous case, but were issued in small denominations of ~20, ~Ioo and ~200, so as to bring them within reach of the general public. The conditions of issue for these two loans were practically the same: the issue price was ~90 per ~Ioo nominal capital; the net receipt by the government, ~86, I5s., the commission ~3, 5s., the interest rate 4.5 per cent, the term of redemption 20 years, redeemable, however, at six months' notice at any time after an elapse of 5 years from the date of issue. Both loans were a charge upon the profits of the tobacco monopoly of the Japanese Government. The four foreign loans issued one after another during the war were accorded an unexpected reception in England, America and other countries, and each time secured a remark RESOURCES FOR DEFRAYING WAR EXPENSES 67 able success. The first 6 per cent bonds, which were placed on the market in London on May I I and closed on the same day, were oversubscribed thirty-three times, the amount applied for exceeding ~151,970,ooo and the number of applicants 30,000. The list of applications was opened in New York on May 12 and closed on the next day, being oversubscribed five times. The second 6 per cent loan was placed on the London market on November 14, and the list of subscriptions was closed on the following day. The applicants numbered 29,000, and the amount applied for reached more than ~80,530,000, being over thirteen times the amount floated in London. The same loan raised on the New York market from November 14 to November I8 was also greatly oversubscribed. The first 4.5 per cent loan was three times the amount of each of the 6 per cent loans; but since the Europeans and Americans had come to recognize the real strength of Japan by her victory in the war, not only the subscriptions in England and America but applications from continental countries of Europe reached large figures. In London the list of subscriptions was opened on March 29 and closed on the same day. The applications in the United Kingdom amounted to ~I5I,ooo,ooo, and those from the continental countries reached ~I,940,000, totaling ~I62,940,000, or eleven times the amount required. In New York subscriptions were received on March 29 and 30, the amount subscribed for aggregating about $500,000,000, or seven times the amount of the loan placed on the market. The second 4.5 per cent loan was issued after Japan's great victories on land and sea. There was already strong prospect of peace, and Japanese bonds were steadily rising. For these reasons the subscriptions increased in spite of the fact that large amounts had already been borrowed abroad by Japan. The applications in London, New York and Germany were some ten times, four and a half times, and ten times the respective amounts placed on the markets in these centers. It was a noteworthy fact that in this issue Germany was made a market for Japanese loans. The applicants included all classes 68 EXPENDITURES OF THE RUSSO-JAPANESE WAR of people, and consequently there was a large number of subscriptions of small amounts. This was particularly the case in America and Germany. The loans thus raised on foreign markets poured in to the government for several months; and the net receipt of the government was the issue price minus the commission, which can be tabulated as follows: NET RECEIPT FROM FOREIGN LOAN BONDS, I904 AND I905 Amount of issue Issues Issue price Commission Receipt In pounds sterling In yen ~ Yen Yen Yen Yen First 6 per cent.......... I0,000,000 97,630,000 91,284,050 3,417,050 86,834,171 Second 6 per cent........ 12,000,000 117,156,000 I06,026,I80 4,393,350 100,463,595 First 42 per cent......... 30,000,000 292,890,000 263,601,000 9,518,925 251,158,987 Second 44 per cent....... 30,000,000 292,890,000 263,601,000 9,518,925 251,137,817 Total............... 82,000,000 800,566,000 724,512,230 26,848,250 689,594,570 It will be seen from the above table that the foreign loans issued aggregated ~82,000,000, or over 800,560,000 yen in nominal capital and over 724,510,000 yen in issue price. Of this sum, the commission allowed to bankers exceeded 26,840,000 yen. The net receipt of the government was over 689,590,000 yen. The loans issued to finance the Russo-Japanese War consisted of domestic and foreign loans. The former included short-term exchequer bonds of over 473,060,000 yen and longterm emergency loans of over 3Io,390,000 yen, making a total exceeding 783,450,000 yen. The latter was composed of short-term 6 per cent sterling bonds of over 585,780,000 yen, totaling upward of 800,560,000 yen. The grand total reached over 1,584,020,000 yen. The receipts from these loans were over 729,I30,000 yen in domestic loans, and were over 689,590,000 yen in foreign loans, the aggregate of the two items exceeding 1,418,730,000 yen. The particulars are as follows: RESOURCES FOR DEFRAYING WAR EXPENSES 69 SUMMARY OF FOREIGN AND DOMESTIC LOANS, I904-I906 a Issues Estimates Amunt ac- Receipts ually issued Domestic loans Yen Yen Yen Exchequer bonds........... 480,000,000 473,o61,325 434,885,638 Emergency loans........... 310,722,950 3I0,394,050 294,251,021 Total................... 790,722,950 783,455,375 729,136,659 Foreign loans 6 per cent sterling bonds..... 214,786,000 214,786,000 187,297,766 4.5 per cent sterling bonds... 585,780,000 585,780,o00 502,296,804 Total................. 800,566,000 800,566,000 689,594,570 Grand total............. I,591,288,950 1,584,021,375 1,418,731,229 a The above table does not include the payments forfeited, 17,213 yen for emergency loans and 305,669 yen for exchequer bonds, totaling 322,909 yen. Comparing the results shown in the foregoing table with the original loan schemes, we find that the flotation of war loans was concluded with a large margin of issue capacity. The following table gives the margin of respective loan issues as compared with the figures determined and authorized by laws and ordinances relating thereunto: MARGIN OF ISSUE CAPACITY OF FOREIGN AND DOMESTIC LOANS, 1903-1906 a Margin of Amount authorized Actual amount of issue issue capacity Imperial Ordinance Yen ist exchequer bond Yen Yen No. 29, 1903... I00,000,000 issue........... Ioo,ooo,ooo None 2d and 3d exchequer Statute No. I, I904.. 280,000,000 bond issues..... 176,357,350 6,012,650 [ Ist sterling loan......97,630,000 Imperial Ordinance No. 228, 1904... 120,000,000 2d sterling loan...... 120,000,000 None 3d and 4th exchequer Statute No. 12, I905. 455,000,000 bond issues..... I62,IIo,000 None 3d sterling loan...... 292,890,000 Imperial Ordinance No. I94, I905... 300,000,000 4th sterling loan..... 300,000,000 None Statute No. I, g906.. 433,000,000 Emergency loans.... 3I,394,o50 I22,605,950 Total.......... I,688,ooo,ooo Total........... 1,559,381,400 128,618,600 a The above table is based on the- Report on the Russo-Japanese War Finances. The figures for emergency loans are corrected in the foregoing table so as to include the issue during and after June. 70 EXPENDITURES OF THE RUSSO-JAPANESE WAR As regards the loans authorized by the Urgency Imperial Ordinance, it is impossible to give the balance between the estimated figures and the figures of actual issue, as the margin of issue capacity was not indicated; hence the estimates are given in the table. Of the actual amount of issue of the fifth exchequer bonds, 37,616,725 yen was intended to cover the balance between the nominal capital and the issue price of the bonds previously issued; so this amount was excluded from the statistics. Hence the total is different from that of the actual amount of issue in the preceding tables. It will thus be seen that out of 1,688,ooo,ooo yen, the authorized amount, more than 128,610,000 yen remained unissued. The total of the balance between the nominal capital and the issue price (not minimum issue price but actual issue price) of the loans previously issued formed also, as already mentioned, a part of the authorized amount in the general loan schemes. The following table shows these balances: Issue Nominal capital Issue price Balance Yen Yen Yen Exchequer bonds............ 473,061,325 434,885,638 38,175,687 Emergency loans........... 310,394,050 294,251,021 16,143,029 Ist and 2d sterling bonds..... 214,786,000 I97,3I0,230 I7,475,770 3d sterling bonds............ 292,890,000 263,601,000 29,289,000 Total.................. 1,291,890,ooo 1,190,047,889 101,083,486 4th sterling bonds.......... 292,890,000 263,601,00o....a a The Imperial Ordinance No. 194, 1905, which authorized the issue of the fourth sterling loan, did not allow the making up of the balance. The balance thus totaled o10,083,486 yen, of which 37,616,725 yen was raised as part of the fifth exchequer bond issue, and 63,466,761 yen remained as the margin of issue capacity. This amount, added to the figure representing the margin of issue capacity left over from the authorized amount of loans,' makes a total of I92,085,36I yen which was not issued. The comparison of the net receipt with more than 1,555,870,000 Ante, p. 69. RESOURCES FOR DEFRAYING WAR EXPENSES 7I yen of the amount demanded in the estimates shows that there was no need of raising I37,140,942 yen out of that amount. WAR-TIME TAXES We have seen how Japan floated enormous loans in order to meet the expenses caused by the war; at the same time she increased several of the taxes and charges and opened the government monopoly of tobacco and salt. The taxes and charges were first increased by the enactment of the Special Extraordinary Tax Law (Law No. 3) in March, 1903, when the first program of war finance was formed; and on the same occasion two or three new taxes were created and the manufacture and monopoly of tobacco by the government was opened. In January of the following year, when the second budget of war finance was made, the Special Extraordinary Tax Law was revised. By this revision the taxes were further increased, more new taxes were created, and the government monopoly was further extended to salt. The government expected to obtain 62,200,000 yen in the fiscal year 1904-5 from the first increase of taxation and other sources, and I50,670,000 yen in 1905-6 from the first and second increase of taxes. The people had been considerably burdened by the frequently increased number of new taxes owing to the maintenance and extension of national armament in the ten years following the Sino-Japanese War, but now they had to bear a far greater burden under these programs for financing a greater war. In view of these circumstances, the government took special care to lighten the local taxes. Thus, when the first increase of the taxes was decided upon the local public bodies were prohibited from levying supplementary taxes on the increased amounts in the land, business, and income taxes. In the second increase of taxes they were, besides, prohibited from surtaxing the increased amount of the mine-lot tax. The surtaxes on such important taxes as the land, business, and income taxes being important in themselves as local sources of revenue, special restrictions were placed on them with the 72 EXPENDITURES OF THE RUSSO-JAPANESE WAR object of lightening them. Thus, the Hokkaido and the prefectural governments and certain public bodies in Hokkaido and Okinawa were permitted only to surtax land up to 50 per cent of the land tax, or 40 sen on an average on a tan (0.245 acre) of land. The maximums allowed to the other public bodies were 30 per cent on the land tax, or 40 sen on an average on a tan of land. In cases where both surtaxing the land tax and surtaxing by the tan were resorted to, the total of the two was not allowed to exceed 50 per cent of the land tax with the former bodies and 30 per cent of the same with the latter. With regard to the business and income taxes, the public bodies, except the Hokkaido and the prefectural governments, were prohibited from surtaxing them more than 30 per cent. In this way efforts were made to lessen the burden of local taxes in order to secure satisfactory results in the war-time taxation. Direct taxes In order to meet the exigencies of the war finance, the direct taxes, viz., taxes on land, business, income, mining, the patent-medicine trade, and shooting licenses, were raised and a succession tax was created as a permanent tax. Land formerly had been taxed uniformly. Whether it was land for building houses in cities, provincial towns or villages, or whether it was other kinds of land, the rate had been in every case 2.5 per cent of the assessed value of the land. After the war with China, that is, from 1899 to I903, a further 2.5 per cent was added in the case of building land in cities and 0.8 per cent in the case of other land. In the first increase of taxes in connection with the Russo-Japanese War, the rate was again increased by 1.8 to 5.5 per cent, and in the second increase by 1.2 to 12 per cent, so that the war-time rates of the land tax ranged between 3 and I7.5 per cent. The value of building land, especially in cities, had risen to such an extent, in consequence of the economic development of the nation, that the legal price of land became merely nominal. Import duties on rice, hulled or unhulled, wheat, beans and other agricultural products had been RESOURCES FOR DEFRAYING WAR EXPENSES 73 created or raised in the second financial program with a view to protecting farm land; but as the landowners are largely of the wealthier classes, they were found capable of bearing this extraordinary burden of the war-time taxation. The business tax, which is levied on commerce and manufacture as the land tax is levied on agriculture, was created in Japan in I897 as a source of national income after the war with China. The tax was levied on the capital of the business, the gross income from the same, the rent of the building in which the business is carried on, the number of employees, and other visible standards. According to the kinds of business, from.0005 to.0015 of the capital or of the gross income, from.02 to.06 of the rent, and I yen per employee, were imposed. These rates were raised 70 per cent in the first increase and 80 per cent in the second, so that the war tax became one and one-half times as much as the original duty. Since the nation was then making rapid progress in commerce and industry, the business tax proved a sure source of increased income to the Treasury. The income tax was more or less increased in the revision of the Income Tax Law, in February, 1899, but was now raised to nearly the same extent as the business tax, on account of its capacity to bear more for the needs of the war with Russia. Formerly the incomes of juridical persons or corporations, designated Class I, were taxed at the uniform rate of.025; the interest on public bonds and bonds issued by business companies, called Class 2, at the rate of.020; and personal incomes, called Class 3, above 300 yen a year, at the rate of from.oIo to.055. The personal incomes were divided into twelve grades, the highest being above Ioo,ooo yen a year, and the rate increased with the amount of the income. In the first increase these rates were uniformly raised 70 per cent except the second-class incomes, and in the second increase 80 per cent with all the classes. The juridical persons, according to their tax-bearing powers, were divided into (A) joint-stock companies and limited partnerships consisting of twenty-one or more shareholders or shareholders and partners; 74 EXPENDITURES OF THE RUSSO-JAPANESE WAR and (B) which comprised all the partnerships consisting of family or other kindred members. The rate for the A division was uniformly raised 80 per cent, but the B division being more of the nature of an individual person, it was subdivided into eight grades between less than 5,000 yen and more than 100,ooo yen, and the rates were increased in proportion to the size of income, so that the total was an increase of from IO to 330 per cent. The personal incomes were graded into ten classes, and the rate was increased from 30 to 200 per cent. The tax on the interest of bonds was exempted from increase to further the cause of public loan for the war, since the interests on war bonds constituted a greater part of the revenue from this source. The mining tax was formerly of two kinds: the tax levied on the value of the mineral obtained-the mining tax in the strict sense-at the rate of I per cent; and the mine-lot tax, imposed on mine lots under operation at the rate of 30 sen per I,000 tsubo (I tsubo = about 6 square feet). Itwas thought that to increase the former might hinder the development of the mining industry, and consequently the latter only was raised, and mine lots, which had hitherto been free, were newly taxed. In the first increase 10 sen was further taxed on each I,ooo tsubo; in the second increase another Io sen was added, while the mine lots under prospecting, which had hitherto been untaxed, on the ground of encouraging the mining industry, were now taxed 20 sen per I,ooo tsubo. The places where alluvial gold was obtained had also been free of duty, but they now came to be taxed at the rate of 30 sen per cho (2.45 acres) of river bed or I,ooo tsubo of other land. The prospecting right and alluvial gold fields were subject to speculation, and immunity from taxation afforded little help in the development of mining. The new taxation, therefore, aimed at preventing this as well as at obtaining increased revenue for the Treasury. In the second increase of taxation a new Mining Industry Law was enacted, by which the tax on mine lots under operation was raised to 40 sen, or IO sen more than before, while the mine lots under prospecting were newly RESOURCES FOR DEFRAYING WAR EXPENSES 75 taxed IO sen. The new law was carried into effect in July, I905. Patent medicines were formerly taxed at the uniform rate of 2 yen a year for every prescription. In the second increase of taxes, however, the rate was raised in proportion to the value of each patent medicine manufactured, in view of the varying capacity to bear taxes; and from I to Ioo yen was charged on the thirteen grades of annual production between less than 300 yen and more than Ioo,ooo yen. With regard to the shooting-license tax, the payers had formerly been divided into three grades: those who paid Ioo yen or more as income tax, 500 yen or more as land tax, or I50 yen or more as business tax, or members of their families; those who paid 3 yen or more as income tax, 30 yen or more as land tax, or 20 yen or more as business tax, or members of their families; and all others. The first were taxed 20 yen a year, the second io yen and the third 2 yen. In the first and second increases they were all raised, the increases amounting to as much as or more than the original taxes. The succession tax was created in the second increase of taxation by a special law, since it was intended as a permanent tax. Formerly the heir had only to pay a fee for the registration of any real estate or ships that might have come into his possession, but all inherited property was now taxed. An inheritor of large property comes into opulence without effort and by mere chance; consequently he is a fit subject for taxation. Putting aside the consideration of social policy, it was an excellent source of revenue when the need of war funds was so great. The succession tax was levied in the following way: The value of the property inherited was taken as the standard of taxation, and the rate differed according to the difference between the succession to a house and the inheritance of property, or according to the relationship between predecessor and successor; and it increased in proportion to the value of the property inherited. In the case of succession to a house, the rate was light, inasmuch as the successor succeeded to the 76 EXPENDITURES OF THE RUSSO-JAPANESE WAR duty of supporting the family as well as to the property, but that for inheritance by gift or bequest was heavy, since it entailed no responsibility. Even in the case of succession to a house, the rate differed according as the successor was a direct descendant of the predecessor, which was called the first kind, or as the successorwas one nominated by the predecessor, chosen in conformity with the Civil Code, Article 182, or a direct superior member of the family of the predecessor or a husband who married into the family, these cases forming the second kind of succession, or was appointed in conformity to the Civil Code, Article 985, which was called the third kind. In the case of inheritance by gift or bequest the rate differed according to whether the successor was a direct descendant of the predecessor (first kind), the consort of the predecessor or a direct superior member of the family (second kind), or whether he or she belonged to none of these catagories (third kind). In either case a direct descendant was regarded as the nearest in relationship, and the farther the relation the higher was the rate of taxation. The above were the direct taxes increased or created to answer the demand of war finance. The first increase was enforced in 1904 as far as the land, business, and income taxes were concerned; and the increases in the shooting-license and the mine-lot taxes were put into effect on April I in the same year. The second increases were carried out in 1905 for the land, business, income, and patent-medicine taxes. On July I of the same year, when the Mining Law came into effect, the tax on mine lots under prospecting was first enforced, while the rates for all the other taxes were enforced on January I, 1905. With the exception of the shooting-license tax, which was a small sum, the government counted on obtaining 34,330,000 yen by the first increase in the fiscal year 1904-5; 38,990,000 yen by the first collection and 35,520,000 yen by the second, a total of 74,510,000 yen, in I905-6; 38,990,000 yen by the first collection and 36,80,000o yen by the second, a total of 75,170,000 yen, in I906-7. The sums realized under these RESOURCES FOR DEFRAYING WAR EXPENSES 77 estimates were 34,790,000 yen by the first increase in 1904-5; 39,850,000 yen by the first collection and 32,530,000 yen by the second, a total of 72,390,000 yen, in 1905-6; 41,380,000 yen by the first collection and 38,I00,000 yen by the second, a total of 79,480,000 yen, in 1906-7. The details of this are set forth in Table B at the end of this chapter.' Indirect taxes To meet the financial needs of the war, taxes were increased on alcoholic drinks, sugar consumption, and soy, the customs tariff was raised, while government monopolies of tobacco and salt, as well as a consumption tax on petroleum and woven fabrics, were created. These taxes being borne by the consumers and therefore falling on the lower classes as well as others, an excessive rate of taxation would render the living of the poorer people very difficult and consequently might frustrate the very object of increasing the national revenue. Yet the exigencies of war were such that it was necessary to call upon even the poor classes to share the national burden to a certain extent. The liquor duty formerly comprised the duty on sake, beer, spirits, and all other drinks containing spirits, and in Okinawa prefecture an export duty on intoxicating drinks as a special liquor duty. The sake brewing duty was divided into three classes according to the quantity of the alcohol contained; the greater the quantity the higher the rate. The duty on the first class was 15 yen per koku (39.7033 gallons), on the second class I6 yen, but the third class was taxed 75 sen per koku for every per cent of pure alcohol contained. In the first increase of taxes the rate on the first and second classes was raised by 50 sen each and that on the third by 2.5 sen; and in the second increase, the rate on the third class was further raised by 7.5 sen and that on the other classes by 1.50 yen. The liquor duty had frequently been raised after the war with China, but now it had to undergo another and a far greater increase in this way. Beer-brewing was first 1 Post, p. 95. 78 EXPENDITURES OF THE RUSSO-JAPANESE WAR taxed after the Boxer trouble (1901) at the rate of 7 yen per koku, and the rate was increased twice, each time 50 sen being added to the former rate. The rate on spirits and drinks containing spirits was raised in the same proportion with the sake brewing tax, inasmuch as it was a complementary duty to the liquor duty. The liquor export duty in Okinawa was levied only on liquors produced in that prefecture when they were exported to other localities; but the commodities taxed and the rate of duty being identical with those of the liquor duty at home, the increase was in the same proportion with the latter. Moreover, in the second increase the sake tax was revised, and in order to make clear the principle of taxing the alcohol contained, the second class was subdivided into three kinds, and was taxed at the rates of I8, 20, and 23 yen, respectively, instead of the old uniform rate of i6 yen per koku. The Okinawa spirit export duty was also revised on the same principle. The sugar consumption excise was instituted for the same reason as the beer brewing duty, but in view of the fact that the middle and higher classes consume more sugar per capita than the lower classes-especially refined sugar-it was thought that there was plenty of room for increase in the sugar excise. Consequently a domestic excise was imposed on refined sugar (Classes 3 and 4) and an import duty on crude sugar (Classes I and 2). In the first increase, the rate on the third-class sugar, which had up to that time been 2.20 yen per Ioo kin (i kin equals one and one third pounds) was raised by 3.30 yen, and that on the fourth class, which had been 2.80 yen, was raised by 3.70 yen. The crude-sugar excise was raised for the six months up to the enforcement of the increased import tariff, the rate on the first class being i yen in addition to the old rate of i yen per Ioo kin, and that on the second class being 3 yen in addition to the former rate, I.60 yen. This increased rate on the second class was retained even after the six months mentioned above. In the second increase, the rate for the second class was further raised by 50 sen and the other classes by i yen. RESOURCES FOR DEFRAYING WAR EXPENSES 79 Soy for sale was formerly taxed 2 yen per koku, while soy for household use was taxed I yen for the same quantity. But soy being a commodity of daily use by all classes, the rate on the former was raised only 50 sen and on the latter 25 sen in the first increase. Formerly, soy manufactured for household use by private individuals except the keepers of hotels and restaurants was untaxed, provided it did not exceed one koku in quantity. It was found, however, that private manufacturers were greater in number among the richer classes than among the poorer, with the result that while the richer people used untaxed soy the poorer people paid duty. Consequently, soy less than a koku manufactured for private use also came to be taxed, and the rate was 50 yen a koku. Woolen fabrics and silk stuffs being luxuries of life for the Japanese and excellent articles for taxation, a new consumption tax was imposed on woven fabrics. In the first increase, therefore, a.15 ad valorem duty was imposed on woolen fabrics, and in the second increase Io per cent was levied on all woven textiles other than woolen articles. The import duty on petroleum was raised also on account of the war. As in the case of the sugar excise, a consumption tax was levied on domestic petroleum for the six months up to the enforcement of the new customs tariff, in order to prevent any sudden fluctuation of the market through anticipatory importation or the falling off of the customs income through the same reason afterward. The rate of the excise was 3.20 sen per gallon. Additional import duties were raised upon such articles as were capable of adding to the revenue of the Treasury or necessary for counterbalancing the increased or newly created burdens of the taxpayers. In the first increase the following measures were taken: (I) with the object of increasing the national revenue, 10 per cent ad valorem was added to the former tax on silks (specified in Class 13, Import tariff rates appended to the Customs Schedule), 20 per cent ad valorem on clothing and accessories made of silk, partly or entirely (Class 3), 5 per cent ad valorem on tea, coffee, and the like 80 EXPENDITURES OF THE RUSSO-JAPANESE WAR (Class 2), and IO per cent ad valorem on petroleum (Class Io); (2) in order to compensate the increased taxation on liquor, the duty on Chinese spirits and refined sake was raised 20 per cent ad valorem on drinks containing over 50 per cent of pure alcohol, and on any spirits and medicinal preparations containing alcohol (Class 4), 3 sen per liter. To compensate the increase of sugar excise, the sugar import duty (Class 12) was raised by from 20 to 25 per cent ad valorem, and the duty on cakes and sugar preserves under the category of sweetmeats (Class 2) from 5 to Io per cent ad valorem. To counterbalance the increase of the land tax, the duty on wheat flour, etc., under the category of eating and drinking stuffs (Class 2) was raised 5 per cent ad valorem, and to offset the rise in the price of tobacco through government monopoly the tariff on imported manufactured tobacco was raised Ioo per cent ad valorem. In the second increase, the scope of import duties to be increased was extended, and the rates on all goods (except those to which the conventional tariff was to be applied or raw materials which were not produced in Japan) were raised. Thus, in order to counterbalance the newly created textile consumption tax, 20 per cent ad valorem was added to such clothing and accessories (Class 3) as contained gold, silver, or precious stones, or those made of platinum, gold, or silver, and 15 per cent ad valorem on other similar imports. On textiles other than silks (Class 12), Io to 20 per cent ad valorem was added. In order to counterbalance the increased liquor duty, the rate on Chinese spirits and refined sake was raised Io per cent, while the standard of taxation and rates on other alcoholic drinks, which had been fixed in the first increase according to the quantity of alcohol contained, were revised and the rates were increased by 5 sen per liter, and the rate on spirits and medicinal preparations containing alcohol was increased by 3 sen per liter. Against the increase of the land tax, a IO per cent ad valorem duty was added on agricultural products among the eating and drinking stuffs, and 5 per cent ad valorem on cotton seeds among the grains and seeds (Class 7), and Io per cent on other grains and seeds was imposed. A new duty of RESOURCES FOR DEFRAYING WAR EXPENSES 8i o1 per cent ad valorem was instituted on silk cocoons of all kinds, and of 15 per cent on rice, hulled and unhulled. With regard to other imported goods, the duties on raw material (of all classes), with the exception of those towhich the conventional tariff applied or which were not produced in the country, were raised 5 per cent ad valorem. This new rate applied to dyestuffs, colors, and paints (Class 5); horn, ivory, tortoiseshell, etc. (Class 8); metals (Class 9); wax and oils other than petroleum (Class io); raw materials specified in Class I6, etc. As to manufactured goods, except those coming under the conventional tariff, 5 per cent ad valorem was added on necessaries of life, io per cent on ordinary goods, and io per cent was added to or newly imposed on luxuries. To find new sources of revenue for war expenditures, the government established the monopoly for the manufacture and sale of tobacco at the time of the first tax increase, and the monopoly of salt at the time of the second increase. The income from these monopolies is a business profit as well as a tax; yet in view of its being a method of imposing consumption duty de facto, we will dwell upon it further side by side with other indirect taxes. On the conclusion of the Sino-Japanese War, the Japanese Government formulated a plan for the monopoly of the tobacco industry in the country as a part of the post bellum financial program. In January, I898, it began to buy the tobacco leaves grown by cultivators at home or imported from abroad, and sold leaf-tobacco to the general customers until in 1903-4 it obtained over 14,890,000 yen, a sum about five times as large as that received from the tobacco duty previous to the monopolization. To meet the financial needs of the RussoJapanese War, the monopoly was extended further to the manufacture of tobacco; on July I, I905, the monopoly of cigars and cigarettes was opened, while on April I, I906, fine-cut tobacco was also monopolized, so that the government undertook the manufacture and sale of all kinds of tobacco. Of the proceeds from the tobacco monopoly, the profit from the manufacture of tobacco alone went to the war 7 82 EXPENDITURES OF THE RUSSO-JAPANESE WAR funds. In April, I904, the Tobacco Monopoly Law was promulgated, and a temporary bureau was established for preparing for the manufacture of tobacco. The work of this bureau was to buy up the business of the tobacco manufacturers, as well as to make ready for the manufacture by the government. The initial expenses required by the monopoly work have already been mentioned among the war-time administrative expenses, so we shall now state the net incomes (handled as special account) from the government tobacco monopoly from I904 to 1907. I904-I905 I905-90o6 I906-I9o7 Yen Yen Yen Total receipts8............. 45,437,688 68,416,212 77,947,521 Total expenditures.......... 17,975,681 34,814, 54 45,374,337 Net proceeds.......... 27,462,007 33,602,057 32,573,I83 a Only a part of the above proceeds was appropriated to meet war expenses. Salt was entirely free of duty after the abolition of the miscellaneous taxes in 1875, but when the taxes were first raised in the Russo-Japanese War the government tried to increase its revenue by creating a salt consumption duty, and then to replace it with salt monopoly after due preparations were completed. It introduced a bill for the same purpose in the Imperial Diet, but the proposal was rejected. When, however, the taxes were raised the second time under more pressing needs for increasing the Treasury revenue, the government introduced a bill for the monopolization of salt. The bill was passed and was carried into effect on June I, 1905. The salt monopoly was intended for buying salt from the manufacturers or importing it from abroad, to sell to general customers at a profit. Its selling price was fixed at the compensation paid to the manufacturer plus 2.50 yen per koku or less, or 1.48 yen or less per 10O kin. Foreign salt and salt produced in Formosa being cheap, larger additions were made in order to bring up the standard selling price. These additions or balances between the buying and selling prices formed RESOURCES FOR DEFRAYING WAR EXPENSES 83 the net profit for the state. Salt was graded into five classes by its quality and the place of production; and the official purchase price was subject to frequent fluctuations according to the state of the economic world, but the highest stated prices per kin were Class I, from 1.43 to I.8I yen; Class 2, from 1.30 to 1.68 yen; Class 3, from I.I8 to 1.56 yen; Class 4, from I.07 to 1.45 yen; Class 5, from 0.97 to 1.35 yen. Therefore, the selling prices, which were the sums of the above figures and 1.48 yen added to each of them, became almost double the purchase prices. We have already stated the expenses entailed by the salt monopoly, so its receipt and net profits are tabulated here as follows: 1905-1906 1906-1907 Yen Yen Receipts from the salt monopoly....... 13,987,304 24,o67,344 Expenses.............................. 7,288,566 11,776,046 Net profits....................... 6,698,738 12,291,299 a These figures have been worked out by a method of counting similar to that for the profit from the tobacco monopoly, and they do not agree with the previously given figures regarding the salt monopoly expenses or with those showing the receipts to be given later. At the inauguration of the salt monopoly, by virtue of the Monopoly Law, the government commandeered the salt in the hands of the manufacturers. But the salt held by the sellers was taxed at the heavy prices. The price of tobacco and salt rose in consequence of the monopoly enforced, and the government fixed a special low price, besides the ordinary selling price, and applied it to exports of the same commodities; while the salt used in certain industries was sold at cost, thus encouraging exports and giving protection to industries. The indirect taxes levied as war taxes have been described above. From these sources the government planned to obtain, according to estimates, over 23,700,000 yen in the fiscal year 1904-5 as the revenue of the first increase in taxation; over 57,I80,ooo yen in I905-6, consisting of more than 33,220,000 yen as the first revenue and more than 23,960,000 yen as the second revenue (not including the consumption 84 EXPENDITURES OF THE RUSSO-JAPANESE WAR tax on textiles other than woolens); and over 70,580,000 yen in I906-7, consisting of more than 34,290,000 yen as the first revenue and more than 36,290,000 yen as the second revenue (not including the consumption tax on textiles other than woolens). The actual income from these taxes amounted to over 2I,150,000 yen in the fiscal year 1904-5, over 60,030,000 yen in I905-6, and over 80,710,000 yen in 1906-7. The particulars are set forth in Table C at the end of this chapter.' The consumption tax on textiles other than woolens, which was created in the second increase of taxation, is not included in the foregoing tabulation, because this tax was collected in the form of stamps and therefore was included in stamp revenues; also that part of the consumption tax on sugar which was collected in stamps is excluded. The indirect taxes in the first increase of taxation, except the customs duties, were enforced in April, 1904, while the customs duties came into force on October of the same year. Those in the second increase of taxation were enforced on January I, 1905, excepting the customs duties, which came into force on July I, the same year, and the consumption tax on textiles was enforced on February I. Communication taxes and fees 2 Communication taxes, exchange duties, registration duties, and stamp duties were among those which were increased for war purposes; and transit duties, imposed on the passengers on trains, tramcars, and steamers, were created in addition. Stamp duties on documents respecting civil cases and commercial litigation were also increased, whilst stamp duties were newly assessed on the documents regarding administrative litigation. The rate of.0003 of the amount of every transaction in national and local bonds, and.0006 of the amount of every transaction in other securities and merchandise, had hitherto Post, pp. 96-7. 2 The taxes referred to under this brief title include taxes on certain acts, such as stock exchange transactions, etc., as well as communication taxes strictly so called. There is no concise word in English to cover all the cases. RESOURCES FOR DEFRAYING WAR EXPENSES 85 been levied as exchange duties. At the first increase of taxation the former was increased by.0002 and the latter by.0003; at the second increase of taxation the latter was again increased by another.0003. Thus the exchange duties became almost double the original rates through the war. The comparatively lower rates of taxation on the national and local bonds were intended to enhance their popularity. The registration duties were first levied, in April, I896, in order to meet the increased expenditure after the Sino-Japanese War. As they were once increased in I899, they could not bear a further general increase. In consequence, the duties were increased on such items of registration as could bear an increase and promised to be a fair source of fresh revenue. For this purpose the registration respecting such important items as real estate, shipping, mining, etc., and the registration of juridical persons were selected. In the first increase of taxation, the levy on the registration of real estate and shipping (Registration Duty Law, Clauses 2 and 3) was increased by from.0002 to.0020, while its original rate ranged between.oooI and.0040. This increased rate applied to the acquisition of property (I) by virtue of legal succession to a house; (2) through other ways of succession to a house or inheritance of possession; (3) through will, bequest, or channels without compensation; (4) by reasons other than the three preceding ones; (5) by the retention of property (No. 5) which was already in one's possession; and (6) the creation of the permanent estate of a peer (No. I I). The registration tax on all juridical persons (Clause 6) was increased by.oooI of capital on juridical persons organized for profits, while the former rate had been.oooI to.0004; by from 50 sen to 5 yen per item of registration, over and above I to Io yen of the original charge; and by 20 sen to 2 yen per item of registration for juridical persons not intended for money-making, the previous rate having been between 50 sen and 5 yen. Every registration of the creation, acquisition, etc., of trade names (Clause 6, II) had hitherto been assessed 50 yen, but now it was increased by 20 sen to 2 yen. For the registration of 86 EXPENDITURES OF THE RUSSO-JAPANESE WAR mining (Clause 14), 30, 75, or 150 yen per item had hitherto been levied on prospecting (No.1), on the increase in prospecting lots, or increase or decrease in mining fields (No. 4), on the purchase or transfer of prospecting or mining rights (No. 5), on mining (No. 2), and on the increase in prospecting lots or the revision regarding increase or decrease in mining fields (No. 3). But it was increased by 10, 25, or 50 yen, according to the case. In the second extraordinary special taxation, the registration duties were revised in consequence of the establishment of the succession duties and the amendments of the mining law. Through the imposition of succession duties, the acquisition by inheritance of property in real estate or shipping was specially taxed. It became necessary, therefore, to decrease or abolish the registration duties on it. Thus the duties on the acquisition of property in real estate by virtue of succession, which had been from.007 to.015, were now lessened to.005 uniformly (Nos. I and 2). Those, also, on the acquisition of property in shipping by virtue of succession were lessened from.006 to.003 uniformly (Nos. I and 2), while the first increased duties on them were subsequently abolished At the same time, however, in order to prevent the evasion of the succession duties and also to increase the revenue, the duties on the acquisition of property in real estate or shipping other than by succession (Nos. 3 and 4), with or without compensation, were increased by from.005 to.oIo in the second increase of taxation. A thorough revision was effected in the duties on mining in accordance with the amendments in the mining law and the number of dutiable items for registration was enlarged, besides increasing succession rates in accordance with the institution of the succession duties. The main registration duties on the transfer of prospecting and mining rights by virtue of succession were lessened, while the first increased duties on it were abolished, but the main duties on the registration of a few items were heavily increased. The establishment of prospecting rights (No. I), the increase in mining fields or the registration of RESOURCES FOR DEFRAYING WAR EXPENSES 87 increase or decrease of the same (No. 5, I ), and the transfer of mining rights other than by succession (No. 6, I) were taxed at the rate of 75 yen for the main registration duties and 25 yen for the increased duties; and the new registration of mining rights (No. 4,I) was taxed at the rate of 150 yen for the main duties and 50 yen for the increased duties, all as before the revision. But the main duties on the increase in prospecting lots or the registration of increase or decrease in the same were increased from 30 yen (No. 3) to 35 yen; the main duties on the transfer of prospecting rights other than by succession were lessened from 75 yen (No. 3,1I) to 35 yen; and the increased duties on the former were left at io yen, as before the revision, while those on the latter were lessened from 25 yen (No. 5) to Io yen (No. 3,II). In this connection, however, it must be remembered that the revision of the registration duties regarding mining was effected for the purpose of equalizing the miners' burden, not for the purpose of increasing the revenue. In short, in the second increase in the registration duties, the levy was lessened on some items and increased only on the acquisition of property in real estate and shipping other than by virtue of succession, the balance being a trifling gain for the government. At the first increase of taxation, the stamp duties saw no increase; but at the second increase, some of the most important of them were increased. That is, the duties on the deeds and account books mentioned in Article IV of the Stamp Duty Law were increased. Heretofore, the stamp duties on deeds and account books, except letters of attorney, chit books, and promissory notes, had been 2 sen per deed or per book intended to be used for one year, but they were increased by I sen. The duties on letters of attorney became 2 sen instead of I sen, as before; those on the chit books for one year were increased from 20 sen to 25 sen. Previously, the duty on a promissory note had been only 2 sen, although this instrument had been frequently used for loan purposes, whereas the duty on a bond of debt had been.0005 of the amount, according to Article II of the Stamp Duty Law, bonds below 50 yen being exempted. 88 EXPENDITURES OF THE RUSSO-JAPANESE WAR The charges on these two items, therefore, had been by no means equal, but it was considered improper to increase the duties on promissory notes, which were negotiable instruments, regarding them as the same as ordinary bonds of debt. Hence, the ascending rates of increase, dividing them into eight classes, from I sen to 4 yen and 98 sen, according to the amount of money, for promissory notes from below I,ooo yen to above 100,OO yen. Formerly, checks had been free from stamp duties, but i sen was levied upon each. As regards transit duties, fares tend to decrease in proportion to the development of the means of communication. Hence, a definite tax levied upon passengers is a good source of revenue with little trouble attending the collection. At the second increase of taxation, therefore, transit duties were first imposed upon passengers on trains, tramcars, and steamers, according to the distance to be covered by them as well as according to the class of the compartments in which they traveled. "Fees" connected with civil cases and commercial litigation had not been increased since 1890, but at the first increase of taxation their rates were raised. In civil cases, they were charged per petition or application, according to the classification of first instance, appeal to superior court, demand for revision, and application for order for payment. In addition to the regular fees, applications regarding property had to have additional stamps affixed in proportion to the value of the property at issue; those having no relation to property had also to have stamps; and other applications and petitions were required to have a certain amount of stamps affixed, according to their kind, provided the question at issue were 20 yen or more in value. In commercial bankruptcy, additional stamps were required to be affixed in proportion to the net liability of the legal person involved. Besides the regular fees when the bankruptcy procedure was commenced or recommenced, petitions or applications for bankruptcy also needed more stamps to be affixed, according to their kinds. Formerly, in administrative litigation no fees had been charged; RESOURCES FOR DEFRAYING WAR EXPENSES 89 but at the second increase of taxation various amounts of stamps were required to be affixed to the documents relating to the litigation, in order to increase revenue and keep balance with other "fees." Apart from the extraordinary special taxation, there were other communication taxes and fees that were increased. Previously, the transfer of landed property, duly registered, had been entered in the land register upon the notification of the registry office, whereas the transfer of landed property, not registered, had been entered in the land register without the notification of the registry office. This meant that in the latter case the transferee had been able to enter his ownership in the land register only by the registration of his retention of landed property, whereas the transferer should have first made the registration of his retention of landed property and then the transferee should have made the registration of the transfer of ownership. Thus, the registration of the transfer of ownership had been omitted in this case and the government had been unable to charge the registration tax. Therefore, at the first extraordinary special taxation, the detailed regulations for the enforcement of the land register law were revised, and it was provided that the transfer of landed property should be entered in the land register upon the notification of the registry office, whether the ownership had been registered or not. The land register law was also revised at the first increase of taxation so as to increase the fees charged for the grant of the verified copy of the land register from 2 sen to 5 sen per item of registration. This was to keep balance with other kinds of fees and increase the Treasury income. As a result of the revision in the mining law at the second increase of taxation, the fees in regard to mining were also increased. The first increase of these communication taxes and fees came into force on April I, 1904, their second increase on January I, I905, as a rule. But of the latter, the registration taxes regarding real estate and shipping were enforced on April I, I905, when the succession duties came to be levied, 90 EXPENDITURES OF THE RUSSO-JAPANESE WAR while the registration taxes and fees regarding mining were enforced on July I of the same year, when the revised mining law came into effect. Their estimated revenue was some 3,210,000 yen for the first increase of taxation in the fiscal year of 1904-5; some 3,150,000 yen for the first collection, and some 5,710,000 yen for the second collection, in 1905-6, making a total of some 8,870,000 yen for the second increase of taxation; and in 1906-7, some 7,920,000 yen, of which some 3,I50,ooo yen was for the first collection and some 4,760,000 yen for the second collection. Their actual revenue, inclusive of other taxes collected in the form of stamps, according to the Report on the Extraordinary Military Expenditures, was some 3,230,000 yen for the first increase of taxation in the fiscal year of 1904-5; in 1905-6, some 21,600,000 yen, of which some 3,1 I0,000 yen was from the first collection and some 18,540,000 yen from the second collection; and in 1906-7, some 24,630,000 yen, of which some 4,I90,000 yen was from the first collection and some 20,440,000 yen from the second collection. The details are given in Tables D(I), D(2), and D(3) at the end of this chapter.1 The above is an outline of the increased taxation to meet the costs of the Russo-Japanese War. Now, the total revenue for I904-5 was some 59,170,000 yen in the first increase of taxation, a decrease of some 3,020,000 yen from the estimates; that for I905-6 was some 77,720,000 yen from the first collection and some 76,360,000 yen from the second collection, totaling some 154,090,000 yen, an increase of some 3,420,000 yen over the estimates; and that for I906-7 was some 82,840,ooo yen from the first collection and some IOI,990,000 yen from the second collection, totaling some 184,830,000 yen, an increase of some 22,330,000 yen over the estimates. The details are given in Table E at the end of this chapter.2 It is to be noted, further, that the increased levy of the direct taxes over the estimates was some 34,790,000 yen for 1904-5, some 72,390,000 yen for 1905-6, and some 79,480,000 yen for 1906-7; that for the indirect taxes was some 2 I,50,000 1 Post, pp. 98, 99, Ioo. 2 Post, p. IOI. RESOURCES FOR DEFRAYING WAR EXPENSES 9I yen for 1904-5, some 60,030,000 yen for I905-6, and some 80,7IO,000 yen for I906-7; and that for the communication taxes and stamp revenue was some 3,230,000 yen for 1904-5, some 21,660,000 yen for I905-6, and some 24,630,000 yen for I906-7. In a word, every fiscal year witnessed an increase in the revenue of all taxes; but the revenue of the indirect taxes increased most rapidly, so much so, indeed, that in I906 -7 it exceeded the revenue of the direct taxes, although it stood far below the latter in I904-5. THE SPECIAL ACCOUNT FUNDS, THE ANNUAL ACCOUNT, SURPLUS, ETC. As mentioned above, various funds belonging to the special account funds, the war-fund contributions, the miscellaneous revenue, and the annual account surplus (which includes the reserve funds), in addition to the revenue from national bonds and taxes, were adopted in the budget as sources of revenue for war expenditures. Besides these, the sale of government property, transportation earnings, and the special revenues were also included in the sources of revenue for the war costs. The actual revenue from those sources, except the annual account surplus, amounted to some 124,300,000 yen against the estimated revenue of 69,250,000 yen, including the special account funds, war-fund contributions, and miscellaneous revenue. The details are tabulated at the top of page 92. Some 7,790,000 yen of the annual account surplus was apportioned in the budget to the war-time military expenses, and some 140,580,000 yen to the war-time administrative expenses. The total was 148,381,850 yen, but the annual account surplus considerably increased later. The surplus of the annual accounts occupied an important place, therefore, next to the increase of taxation, among the sources of revenue for the war funds. In order to increase this surplus, drastic retrenchments were effected in the ordinary expenditures of 1904-5 and 1905-6, while at the same time not only were new enterprises put off as much as possible to avoid expense, but rigid economy or postponement was 92 EXPENDITURES OF THE RUSSO-JAPANESE WAR REVENUE a Estimated Actual Increase Special account funds: Funds for maintenance of warships Yen Yen Yen and torpedo boats........... 32,407,894 38,719,871 6,3I,977 Distress relief funds............. 12,30o,ooo 12,310,000.... Education funds................ 10,540,000 10,540,000.... Forestry funds.................. 4,000,000 4,000,000.... Miscellaneous................... 8,ooo,ooo 8,ooo,ooo.... Total........................ 67,257,894 73,569,87I 6,3 1,977 War-funds contributions........... 1,500,000 2,331,176 831,176 Sales of Government property........... 8,875,115 18,875,115 Transportation earnings................ 9,908,784 9,908,784 Special revenues...................... 3,516,325 3,516,325 Miscellaneous revenue............. 500,000 I6,IO7,52I 15,607,521 Grand total................. 69,257,894 124,308,792 55,050,898 a The surplus of the special account funds over the estimated amount was included in the funds for maintenance of warships and torpedo boats, thus passing the same amount of annual account surplus to the special account of the extraordinary military expenditures. The advance to the special account of the military expenditures from the general account was reduced by the same amount at the same time. adopted also regarding prearranged expenditures. In the ordinary expenditure, redemption of domestic bonds was postponed, together with no small curtailment of the communication and other expenses. In the extraordinary expenditure, rigid economy or postponement was effected with regard to railway construction and improvement expenses, public works expenses, conservancy expenses, Hokkaido colonization expenses, subsidy to the expenditure for Formosa, construction expenses for schools, prisons, etc., and various other items of expenditure. As a result, on the other hand, of the fact that the Army and Navy were mobilized through the war and their ordinary expenditures were transferred to the war-time expenditures, there remained a large surplus from the Army and Navy estimates of ordinary expenditure; there was also no small surplus from the expenses for the steamship-line expansion and navigation encouragement. The details are as shown in the following table. It will be seen that the amounts economized or postponed out of the estimated expenditures totaled some 126,580,000 RESOURCES FOR DEFRAYING WAR EXPENSES 93 EXPENDITURES a 1904-5 1905-6 Total Ordinary Expenditure: Army and Navy expenses.......... Redemption of national loans....... Communication expenses........... General education expenses......... Other departments' ordinary expenses Total.......................... Extraordinary Expenditure: Railway construction and improvement expenses............... Expenses for the steamship-line expansion and navigation encouragem ent.................... Public works expenses............. Conservancy expenses............. Expenses for foundation of schools... Expenses for construction of schools, prisons, etc................... Hokkaido colonization expenses...... Subsidies to expenditure for Formosa.. Construction and repair expenses for various departments.......... Treasury reserves................ Other departments' extraordinary expenses................ Total......................... Yen Yen Yen 21,334,296 32,758,064 54,092,360 8,500,000 6,335,400 14,835,400.... 1,603,938 1,603,938 449,244 500,000 949,244 I75,134.... I75,134 30,508,675 41,197,402 71,706,077 9,I75,207 12,955,105 22,130,312 5,062,987 4,999,999 10,062,986 3,115,654 2,072,093 5,I87,747 I10,039 1,594,937 1,704,976 531,809.... 531,809.... 1,969,887 1,969,887 873,000 1,602,852 2,475,852 296,115 3,500,000 3,796,II5 628,994 1,309,968 1,938,962.... 2,200,000 2,200,000 618,908.... 618,908 20,412,715 32,204,84I.... _. 52,617,556 Other expenditure..................... 2,2,2 2,258,211 Grand total................... 50,921,390 75,660,458 126,581,848 a In the public works expenses, the subsidies to local self-governing bodies for sand-stopping and the engineering works are included; and in the railway construction and improvement expenses, the expenses for the construction of the Hokkaido railways are included. Various expenses belonging to the ordinary and extraordinary expenditures are included under "other expenditure." The surplus from the Army and Navy estimates for 1904-5 covers only that up to the end of I904, the surplus for the rest of the fiscal year, that is, for the three months ending in March, 1905, being estimated at 8,997,599 yen. yen, some 50,920,000 yen in 1904-5 and some 75,660,000 yen in I905-6. The figure would swell to more than I35,570,000 yen if the surplus of the Army and Navy expenses for the remaining three months of the fiscal year I904-5 were added. Thus a part of the war funds was raised by the retrenchments of expenditure on the one hand and by the increase in the revenue on the other. TABLE A.-ISSUES OF FOREIGN LOAN BONDS, I904 AND I905 Net re- Commis- Term of Issue Date Amount Price ceipt of Interest Security redemp- Denomiment First 6 per cent..... May o10,000,00 93 10 90 3 10 6 Customs revenue 7 yrs. ~Ioo and ~200 Second 6 per cent... Nov. 12,000,000 90 10 86 10 3 15 6 Customs revenue 7 yrs. ~Ioo and ~200 1905 Third 6 per cent.... Mar. 30,000,000 g9 86 I5 3 5 42 Profits tobacco 20 yrs. ~ Ioo, monopoly ~200 and ~00oo Second 4 per cent... July 30,000,000 90 86 I5 3 5 42 Profits tobacco 20 yrs. ~20, ~IOO monopoly and ~200....... tij z ~0,)d 0 CD t~j Pd til U) c: (I TABLE B.-DIFFERENCE BETWEEN ESTIMATES AND RECEIPTS FROM TAXES, 1904-1907 a Amount estimated Amount realized Year and kind of tax Fid Difference First Second Total First Second Total increase increase increase increase 1904-5 Land....................... Income................... Business.................... M ining..................... Patent medicine............. Succession.................. Total................... 1905-6 Land...................... Incom e..................... Business.................... M ining.................... Patent medicine............. Succession.................. Total................... I906-7 Land....................... Income.................... Business.................... Mining..................... Patent medicine............ Succession.................. Total................... Yen 23,936,213 5,287,315 5,036,199 79, I5 34,338,842.... 34,338,842 Yen................ Yen 23,936,213 5,287,315 5,036,199 79,II5........ Yen 23,893,I45 5,660,129 5,154,609 86,484 Yen............ Yen 23,893,145 5,660,129 5,154,609 86,484 34,794,367.... 34,794,367 34,338,842 34,794,367 Yen - 43,068 + 372,814 + 118,410 + 7,369........ + 455,525 - 941,2I3 +2,856,714 + 281,794 - 725,106 - 14,624 -3,679,912 28,549,736 5,266,641 5,083,016 91,276........ 18,640,678 5,286,461 5,809,007 1,389,586 89,279 4,309,596 47,I90,414 I0,553,103 10,892,023 1,408,862 89,279 4,309,596 27,882,302 6,615,581 5,259,834 97,013........ 18,366,899 6,794,236 6,013,983 658,744 74,655 629,684 46,249,201 13,409,817 11,273,817 755,756 74,655 629,684 C) 0 C) (C) e, m UA 38,990,669 35,524,608 74,515,277 39,854,730 32,538,201 72,392,929 -2,122,347 _ _ _ - - - -. _-.- I. _ 28,549,736 5,266,641 5,083,016 91,276........ 21,700,372 5,286,462 5,809,007 876,667 89,279 2,426,434 50,250, O8 Io,553,IO3 10,892,023 967,943 89,279 2,426,434 28,278,262 7,471,974 5,538,477 99,79I........ 21,624,720 7,975,176 6,328,799 613,201 80,868 1,460,656 49,920,982 15,447,150 11,867,276 712,99I 80,868 1,460,656 - 329,126 +4,894,047 + 975,253 - 254,952 - 8,411 - 965,778 +4,3I I,033 38,990,669 36,I88,22 I 75,I78,890 41,388,504 38,101,420 79,489,923 a The figures relating to the shooting license duty will be found later among the receipts from stamps. \O TABLE C.-DIFFERENCE BETWEEN ESTIMATES AND RECEIPTS FROM INDIRECT TAXES, FISCAL YEARS 1904-1907 Amount estimated Amount received Date and kind of tax Difference First Second First Second Total estimate estimate income income 1904-5 Yen Yen Yen Yen Yen Yen Yen Tax on sake............ 183,882.... 183,882 182,205.... 182,205 - 1,677 Consumption tax on sugar 8,212,382.... 8,212,382 1,936,763.... 1,936,763 - 6,275,619 Tax on soy.............,I38,952.... I,I38,952 1,383,811.... 1,383,811 - 244,859 Consumption tax on woolens............ 2,138,661.... 2,138,661 4,423,766.... 4,423,766 + 2,285,105 Consumption tax on petroleum............. 1,238,599.... 1,238,599 1,882,983.... 1,882,983 + 644,384 Profit from tobacco monopoly............... 8,466,285.... 8,466,285 8,929,793.... 8,929,793 + 463,508 Customs receipts....... 2,330,633.... 2,330,633 2,413,999.... 2,413,999 + 83,366 Total............. 23,709,394.... 23,709,394 21,153,320.... 21,153,320 - 2,556,074 z tl 0 -7I CB 0 z U) U) 0 tl-l CD m I905-6 Tax on sake............ Consumption tax on sugar Tax on soy........... Consumption tax on textiles................. Profit from tobacco monopoly.............. Revenue from salt monopoly............... Tax on salt............ Customs receipts....... Total............. 1906-7 Tax on sake............ Consumption tax on sugar Tax on soy............ Consumption tax on woolens............ Profit from tobacco monopoly............... Revenue from salt monopoly............... Customs receipts....... Total............. 1,978,313 7,376,595 1,632,OI2 2,183,602 14,440,787 5,610,368 33,221,677 2,632,660 2,400,104........ 16,239,667 2,687,626 23,960,057 4,6o1,973 9,776,699 1,632,012 2,183,602 14,440,787 16,239,667 8,297,994 57,181,734 1,707,168 5,402,551 1,716,753 5,261,869 15,157,888........ 5,502,740 34,748,969 4,773,977 I,303,58I 58,030 I,998,012 481,359 6,671,644 25,286,303 6,481,145 6,706,131 1,716,753 5,319,899 15,157,888 I,998,012 481,359 12,174,384 60,035,571 + 1,870,I72 d - 3,070,568 t + 84,741 O Cj + 3,136,297 d + 717,101 n) - 4,241,655 O + 481,359 P + 3,876,390 t + 2,853,837 ' 1,978,313 2,837,067 4,815,380 2,102,84I 6,173,423 8,276,264 + 3,460,884 7,376,595 2,400,104 9,776,699 6,926,266 3,071,085 9,997,351 + 220,652 1,632,012.... 1,632,012 1,717,959.... 1,717,959 - 85,947 3,260,333.... 3,260,333 5,036,71 6.... 5,036,716 + 1,776,383 14,440,787.... 14,440,787 14,679,794.... 14,679,794 + 239,007 5.....26,274,83I 26,274,83I.... 23,227,96I 23,227,961 - 3,046,870 5,610,368 4,778,00o I0,388,369 6,796,613 IO,985,1oo 17,781,713 + 7,393, 44 eV z 0 0-4 z C,) X M Itt tiz m M cV) 34,298,408 36,290,003 70,588,411 37,260,189 43,457,569 80,717,758 + IO,I29,347 Ia The above figures are based on the Report on the Extraordinary Military Expenditures, issued by the Finance Department. TABLE D(I).-REVENUE FOR THE FISCAL YEAR 1904-1905 Estimated Actual Kind of tax Difference First Second First Second ToDi collection collection otal collection collection m Ml I Exchange duties........ Other duties and taxes: Registration duties...... Registration duties not includedintheextraordinary special taxation Total................ Fees: Stamp duties on civil cases Stamp duties on commercial litigation....... Fees for verified copies of land register........ Total................ Other duties: License-fees for shooting. Part of sugar consumption taxes............. Total................ Grand total.......... Yen 532,846 Yen I Yen 532,846 1,654,814 1,654,814 352,463 352,463 Yen 232,682 2,977,767a Yen Yen 232,682 2,977,767 2,007,277.... 2,007,277 547,098.... 547,098 13,277.. 13,277 119,14.... II9,0I4 679,389.... 679,389 123,782.... 123,782 8IO,349.... 8IO,349 Yen V -300,164 H cl to H -643,030 0 >. M Pd 934,131 934,131 - 4,153,643 4,I53,643 3,21I,449 3,210,449 -943,194 a Stamp revenue. TABLE D(2).-REVENUE FOR THE FISCAL YEAR 1905-I906 Estimated Actual Kind of tax Difference First Second First Second Tota collection collectioncotal collection collection collection collectiontal I I _io n Exchange duties......... Transit duties............ Other duties and taxes: Registration duties...... Registration duties not included in the extraordinary special taxation Stamp duties........... Total................ Fees: Stamp duties on civil cases Stamp duties on commercial litigation....... Fees for verified copies of land register........ Stamp duties on administrative litigation.... Fees with regard to mining Total................ Other duties: License-fees for shooting. Part of sugar consumption taxes.............. Consumption taxes on textilesotherthan woolen fabrics............. Total................ Grand total.......... Yen 471,903.... Yen 432,566 3,I88,I8o Yen 904,469 3,I88,I80 Yen 560,276.... Yen 560,272 2,211,869 Yen 1,I20,548 2,211,869 1,654,814 699,174 2,353,988 352,463.... 352,463.... 1,181,466 1,181,466 2,007,277 1,880,640 3,887,917 547,098.... 547,098 13,277.... 13,277 19,014.... 119,I14 5,058 5,058.... 212,8o8 212,808 679,389 217,866 897,225 123,782 292,77I 426,553 1,047,527 325,249 1,372,776.... 8,306,862 8,306,862 Yen + 216,079 d - 976,311 U 0 C) o +3,449,576 3 d ti 2,558,030 a 15,772,909 I 8,330,939 1,I71,309 8,924,882 10,096,I9I 18,974,012 4,329,878 14,644,134 3,118,306 18,545,050 21,663,356 +2,689,344 a Stamp revenue. TABLE D(3). —REVENUE FOR THE FISCAL YEAR I906-I907 a Estimated Actual Kind of taxDifference Kind oftax First Second First Second Diffe cocollection collectioncollection collection Exchange duties.......... Transit duties........... Other duties and taxes: Registration duties...... Registration duties not included in the extraordinary special taxation............... Stamp duties........... Total................ Fees: Stamp duties on commercial litigation... Stamp duties on civil cases Fees for verified copies of land register........ Stamp duties on administrative litigation.... Fees with regard to mining Total............... Other duties: Shooting-license fees..... Part of sugar consumption taxes............. Consumption taxes on textiles other than woolen fabrics.......... Total............... Grand total......... Yen 471,903.... Yen 471,891 2,I20,992 Yen 943,794 2,I20,992 Yen I,I69,958.... Yen 1,169,958 2,463,900 1,654,814 699,I74 2,353,988 352,463.... 352,463.... 18I,466 I,181,466 2,007,277 1,880,640 3,887,917 I3,277.... 3,277 547,098.... 547,098 119,014.... I19,014 5,058 5,058 283,744 283,744 679,387 288,802 968,191 123,782 292,771 426,553 1,047,527 325,249 1,372,776....-.7,o28,883 7,028,883 I Yen 2,339,915 2,463,900 Yen + 1,396,121 + 342,908 0 0 U) I3 zj U) 0 cl CD >7 ^d 3,o21,364t 16,806,573 19,827,937 + 6,153,617 1,I71,309 7,646,903 8,818,212 4,329,878 I2,409,228 I6,739,I06 4,I91,322 20,440,43I 24,631,752 + 7,892,646 a This table is compiled from the Report on the Extraordinary Military Expenditures, and the details of the estimated revenue are compiled from the Report on the Finances of the Russo-Japanese War. b Stamp revenue. TABLE E.-INCREASED REVENUE, I904-I907 a Estimated increase Actual increase Year and kind of tax Difference First Second First Second To collection collection Total collection collection 1904-5 Yen Yen Yen Yen Yen Yen Yen Direct taxes. 3...... 34,338,842 34,338,842 34,794,367.... 34,794,367 + 455,525 Indirect taxes.......... 23,709,394.... 23,709,394 21,153,320.... 21,512,320 - 2,556,074 Communication taxes and stamp revenue...... 4,I53,643.... 4,153,643 3,230,449.... 3,230,449 - 923,194 Total................ 62,2,879.... 62,20,879 59,I78,138.... 59,I78,I38 - 3,023,74 1905-6 Direct taxes........... 38,990,669 35,524,608 74,515,277 39,854,730 32,538,201 72,392,929 - 2,122,347 Indirect taxes.......... 33,221,677 23,960,057 57,I8Ir734 34,749,969 25,286,603 60,035,571 + 2,853,837 Communication taxes and stamp revenue...... 4,329,878 14,644,134 18,974,0I2 3,II8,306 18,545,050 21,663,356 + 2,689,344 Total............... 76,542,224 74,128,799 150,671,023 77,722,004 76,369,855 I54,091,859 + 3,420,836 1906-7 Direct taxes......... 38,990,669 36,188,22I 75,I78,890 41,388,504 38,10,420 79,489,923 + 4,3II,033 Indirect taxes.......... 34,298,408 36,290,003 70,588,41I 37,26o,189 43,457,569 80,717,758 10IO,129,347 Communication taxes and stamp revenue...... 4,329,878 12,409,228 16,739,106 4,191,322 20,440,431 24,631,752 + 7,892,646 Total............ 77,618,955 84,887,452 162,506,407 82,840,014 IOI,999,420 184,839,433 +22,333,026 a The second increase of taxation collected in the fiscal year 1904-5 was 1,390,208 yen, but the figure is excluded from the above table. 1) 0 CI) 0 0 Ci) til It 0 P4 x::, XP Pd U) m CB 0 CHAPTER IV MEANS ADOPTED TO FILL TEMPORARY DEFICITS IN THE FUNDS FOR WAR EXPENDITURES We have dealt with the war expenditures and their resources, separately and statically, in the two preceding chapters. If we now consider the dynamic relation between these, we shall find that deficits in the revenue of war funds from the sources selected were neither infrequent nor inconsiderable, and that occasionally there was a considerable amount of excess in the disbursement of war expenditures demanded by the exigencies of the war. To supply temporary deficits in the funds for war expenditures, items of revenues to the Treasury other than war funds were temporarily appropriated, exchequer bonds were issued, temporary loans were made from the Bank of Japan, and war tickets payable at sight were issued, all limited to such an extent as to be redeemable with the revenue of war funds. As already stated, the war expenditures consisted of extraordinary military expenses and extraordinary affairs expenses. The latter were treated as part of the ordinary expenditure in the general accounts and the amount was also comparatively small; therefore this item is left out for our present purpose. Of the extraordinary military expenses, we shall consider those below the dynamic condition of revenue and expenditure and the various means adopted to fill the temporary gaps between the two, these forming the main part of the war costs. As is evident from what has already been stated in previous chapters, the funds raised to meet the extraordinary military expenses were composed of receipts from loans, funds transferred from the general accounts consisting almost entirely of revenues from the tax increase, etc., and funds from the special accounts, contributions to war funds, and others. To show the general results of revenues from these sources, we give below the receipts for every six months: 102 MEANS ADOPTED TO FILL DEFICITS10 I03 REVENUE TO MEET EXTRAORDINARY MILITARY EXPENSES Funds transPeriod ~ Receipts ferred from Funds from Ohr oa Period ~~from loans general special Ohr oa accounts accounts Yen Yen Yen Yen Yen Oct.-Dec., 1903............... Jan.-June, I904..... 78,7I4,472.... 15,000,000 1,477,58i 95,192,052 July-Dec., I904..... 1i80,552,418 31,028,846 18,742,106 781,163 231,104,535 Jan.-June, 1905..... 474,746,894 32,401,283 17,000,000 2,126,242 526,274,420 July-Dec., 1905..... 371,430,004 75,355,184 1 8,5 69,871I 2,4I7,22I 467,772,280 Jan.-June, 19o6..... 138,057,967 43,644,81i6.... 17,325,146 199,027,930 July-Dec., igo6.. 1... 69,814,1I90....... 15,880,998 i85,695,186 Jan.-July, 1907..... 5,415,285....... 10,730,568 16,145,853 Total........1,418,731,229 82,430,129 69,311,977 50,738,921 1,721,212,256 The disbursements of the military expenses of over I,283,000,000 yen and the naval expenses of over 225,000,000 yen, totaling over 1,508,000,000 yen, were made as follows: MILITARY AND NAVAL DISBURSEMENTS, 1903-1907 Period Military Naval Total Yen Yen Yen October-December, 1903. i.. 6,011,320 i6,011,320 January-June, I904. --- —112,118,831 3I,937,375 144,056,206 July-December, 1 904. 300,240,120 38,8,52,902 339,093,022 January-June, 1905. 365,506,930 43,020,254 408,527,184 July-December, I905.-250,424,007 45,276,648 295,700,655 January-June, 1906....... 78,280, 134 28,224,617 10o6,504,751I July-December, 1906..137,593,604 14,352,930 151I,946,534 January-June, I907. 39,1I54,43 I 7,478,437 46,632,868 Total...1,283,3I8,056 225,I54,482 1,508,472,538 From the beginning of the war to the conclusion of the important battles, the total of disbursements at the end of regular periods. always exceeded the total of revenues, the deficit varying from over i6,ooo,ooo yen to over 172,000,000 yen. However, after the conclusion of the important battles, the total of revenues always exceeded the disbursements. The relations between revenue and expenditure are shown in the table at the top of the following page. I But the revenues of war funds in the table represent the nominal figures to the credit of the Treasury, including that amount which could not at once be used at home. I104 EXPENDITURES OF THE RUSSO-JAPANESE WAR VARIATION IN REVENUE AND DISBURSEMENTS OF WAR FUNDS, I903-1907 Date Revenue Disbursements Balance Yen Yen Yen December, 193i. 6,011,320 - i6,011,320 June, 1904. 95,192,052 160,067,526- - 64,875,474 December, I904. 326,296,587 499,i60,548 -172,863,96i June, 1905. 853,571,007 907,687,73I - 55,116,724 December, 1905. 1,320,343,287 1,203,388,388 ~1I16,854,900 June, 1906.1I,519,371,217 1,309,893,136 +209,478,080 December, 1906. 1,705,066,403 1,461,839,670 ~243,226,733 July, 1907.1I,721,212,256 1,508,472,538 ~2I2,739,7i8 Consequently, the amount of deficit in the table is much -smaller than it really was. At the end of each regular period the total of actual deficits in the war funds and the amount of funds from various sources applied to fill these deficits were as follows: MEANS OF FILLING TEMPORARY DEFICITS Amount transDate ~Deficits in ferred from Exchequer Temporary War Date ~~war expenses other accounts honds loans tickets a in Treasury Yen Yen Yen Yen Yen Dec. 31I, 1903...... 16,011,320 9,011,320.... 7,000,000 June 30, 1904......64,875,474 20,8Ii,908.... 35,500,000 8,56~3',56 5 Dec. 3 1, 1904......172,863,961 21,254,I33.... 92,000,000 59,609,827 June 30, I905.. 1... 90,5I9,023 58,I31,023 35,000,000 9,000,000 88,388,000 Dec. 31, I905......222,207,451 i5,883,925 100,000,000 34,000,000 72,323,526 June 30, igo6......29,976,747.... 115,200,000.... 18,350,232 Dec. 31I, 1906...... 5,916,700.... 48,200,000.... 10,774,105 June 30, I907...... 3I,232,51I............ 7,647,503 a The war tickets represent the figures excluding the amount redeemed. During the six months ending December, 1906, the amount of revenue for the war funds exceeded the amount of the war expenditure, but in other months the war revenue was always short of the required sums. The monthly deficit was more than i0,000,000 yen from August, 1904, to April, 1906, and the maximum of deficit exceeded 200,000,000 yen. To fill up this temporary deficit, the government resorted to various measures: the transfer from one 'Item to another in the revenue to the Treasury, the flotation of exchequer bonds, the incurring of temporary loans in the form of circulating MEANS ADOPTED TO FILL DEFICITS I05 bonds, and the issue of war tickets. The first mentioned of these measures was carried on from the outset of the war until December, g906, the largest amount at any transferred month end being 63,000,000 yen. The exchequer bonds issued from February, 1904, to the end of the war amounted to from Io,000,ooo yen to 115,200,000 yen monthly, the amount ranging between 30,000,000 yen and 40,000,000 yen a month in most cases. The temporary loans raised from December, 1903, to May, I906, amounted to from 4,000,000 yen to 92,000,000 yen monthly, generally amounting to about 40,000,000 yen. The war tickets were first put into circulation in February, 1904, the largest amount of their monthly circulation being 96,000,000 yen. The monthly circulation of these tickets generally amounted to from 50,000,000 yen to 90,000,000 yen, rarely below Io,ooo,ooo yen. The war tickets were not different from the exchequer bonds or from temporary loans, in that they were all intended to fill up the temporary deficits in the Treasury revenue; but in real object these tickets were materially different from those circulating notes. The objects of the issue of war tickets were, on the one hand, to put off specie payment at home, so that the government could pay a large amount in specie to foreign countries, and, on the other hand, to facilitate the payment of war expenses at the Korean and Manchurian fronts. The government was thus able to maintain the specie reserve at home and to make use of that amount of funds which was paid in war tickets, free of interest. The war tickets were of the nature of promissory notes payable at sight, to be exchanged for Japanese I yen silver coins circulating in the regions where the tickets were used. These tickets had six denominations of 10, 5, and I yen; 50, 20, and io sen. The following measures were taken by the government to augment the credit and to increase the circulation of the war tickets: (I) The exchange of war tickets for Japanese silver coins was made at the military cash office and Treasury branch offices in Manchuria and Chosen; and the Yokohama Specie Bank branch at Tiehling and Newchwang bought from time to time I o6 EXPENDITURES OF THE RUSSO-JAPANESE WAR those tickets at the current price. (2) The branches and subbranches of the Yokohama Specie Bank and the Dai Ichi Ginko (First Bank) in Manchuria accepted the tickets for remittance of money to Japan or to Chinese ports having commercial relations with Manchuria. (3) The branches of the Yokohama Specie Bank and the Dai Ichi Ginko in Manchuria and the Specie Bank branch and subbranch at Tientsin and Chefoo accepted the tickets for deposits of money. (4) The tickets were accepted for payment of taxes, etc., by our field post offices in Manchuria and our post offices in North China and Korea, and also by our military administration office and the Chinese local authorities, and were issued as allowances to our troops and civilians at the front. (5) The tickets were exchanged for current coins at the current price of Japanese silver coins, at designated cash offices at home and at Treasury branches in Manchuria and Korea, for the benefit of those who wanted to use current coins in Japan or in Korea. At first the war tickets were not in ready circulation in Manchuria, but the repeated victories of the Japanese Army in Manchuria ensured the success of the measures taken by the Japanese authorities, so that these tickets practically became legal tender in Manchuria. The total of the war expenses paid in war tickets from the beginning of the war (December, I903) to July, I906, amounted to 206,398,813 yen, out of which 191,145,455 yen were redeemed and the balance of 15,253,358 yen remained unredeemed. This meant that the government utilized without interest a large amount of capital and economized the payment in cash to the amount of the unredeemed tickets. The adjustment of these unredeemed tickets was entrusted, after the war, to the Yokohama Specie Bank, which also took over the business for the amount of tickets that had not been redeemed by the end of July, I906. To accomplish the purpose the Specie Bank issued promissory notes payable at sight as substitutes for the war tickets, and thus gradually effected the redemption of the war tickets. CHAPTER V CONCLUSION The expenditures of the Russo-Japanese War consisted of,508,470,000oo yen for war-time military expenses and 221,580,ooo yen for war-time administrative expenses, making a total of 1,730,050,000 yen. These actual defrayals, compared with the estimates, may be tabulated as follows: EXPENSE ESTIMATES AND DEFRAYALS, ETC. War-time War-time military administrative Total expenses expenses Yen Yen Yen Estimates................... 1,746,42I,036 239,705,888 I,986,126,924 Settled accounts............. 1,508,472,538 221,581,606 I,730,054,I44 Excess of estimates........... 237,948,498 18,124,282 256,072,780 Transferred to general account. 137,243,733.... 37,243,733 Not used.................... Ioo,704,765 18,124,282 II8,829,047 As seen from the above table, the estimates for the war expenditures under the special accounts for the extraordinary military expenses exceeded the settled accounts by 237,940,000 yen, of which the sum of 137,240,000 yen was transferred to the general accounts and the sum of I00,700,000 yen was not used at all. The estimates for war-time administrative expenses under the general accounts exceeded the settled accounts by I8,I20,000 yen, the amount that was not used at all. The items of revenue taken into the special accounts as funds for the war expenditures were, among various sources of income described in Chapter III, the subscriptions for public loans (not including, of course, the revenue from the tobacco monopoly and from the exchequer bonds), contributions to the war funds, income from sale of government property, revenue from transportation services, special revenues, 107 0o8 EXPENDITURES OF THE RUSSO-JAPANESE WAR all miscellaneous revenues, revenue from tax increases, the main portion of the special account funds, and a part of the surplus of the annual accounts. The total revenue for the war expenditures amounted to 1,721,2I0,000 yen, a decrease of 25,200,000 yen as compared with the estimates. REVENUES a Estimates tual Difference revenue Yen Yen Yen Subscription for public loans.... 1,492,421,036 1,418,73I,229 -73,689,807 Increase of taxes, etc........... I81,20I,879 178,178,138 - 3,023,74I Surplus of the annual accounts.. 7,798,121 4,251,991 - 3,546,I30 Funds for special accounts...... 63,000,000 69,311,977 + 6,3II,977 Contributions for war funds, etc. 2,000,000 50,738,921 +48,738,92I Total.................... 1,746,42I,036 1,721,212,256 — 25,208,780 a The revenue from tax increases, etc., together with the surplus of the annual accounts, was taken into the special accounts of the extraordinary military expenses, indirectly through the general accounts, whereas the revenues from other sources were taken in directly. The income from tax increases, etc., consisted of the whole income of the fiscal year I904-5, amounting to 59,r70,000 yen, and part of the income of the fiscal year I905-6, amounting to II9,ooo,ooo yen. As funds for war-time administrative expenses there were counted the surplus of the annual accounts, amounting to I40,580,000 yen, the income from tax increases, etc., amounting to 31,670,000 yen, the fund of the special accounts, amounting to 4,250,000 yen, and the revenue from national loans of 63,I90,000 yen, aggregating 239,700,000 yen. Out of this amount, the income from tax increases, etc., and the surplus of the annual accounts greatly increased, so that the revenue from the national loans remained untouched, except a certain amount paid by the government to the tobacco manufacturers in exchequer bonds for grants, for compensations, and for purchasing goods, as a part of the initial expenses for the tobacco monopoly. The funds actually paid for war-time administrative expenses, therefore, consisted of the fund for the special accounts to the amount of 4,257,894 yen, the exchequer bonds for starting the tobacco monopoly, amounting to 12,3IO,500 yen, and the tax increases, etc., and the surplus of the annual accounts, amounting to 205,013,212 yen. CONCLUSION 109 As for the income and expenditure in the special accounts of the extraordinary military expenses, the expenditure for war-time military expenses amounted to I,508,470,ooo yen as against 1,721,210,000 yen in income, the balance in favor of income being 212,739,718 yen. This excess was transferred to the annual income of the general accounts, of which 137,240,000 yen was transferred as source for the extraordinary military expenses transferred to the general accounts, as stated already. PART II ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR I CHAPTER I INTRODUCTION The Russo-Japanese War was the greatest war that Japan has ever waged. If, in the military sense, she attained nearly all for which she fought, she suffered a most severe blow in every sphere of her social activity. In the economic field in particular the war consumed an enormous amount of capittl, and necessitated the withdrawal of a large number of ablebodied men from productive employment. There was, indeed, not a single economic project or enterprise that was not affected by the exigencies of the war. We have now to consider the extent of this economic blow, and also the extent to which the nation succeeded in repairing the injury. The economic strain came principally from two different directions. On the one hand, the war cost Japan nearly 1,700,ooo,ooo yen. It was inevitable that this sudden increase of her fiscal burden should throw her national finance into a state of dislocation. Domestic funds were absorbed in the form of public loans and taxes, while a large amount of capital was newly imported from foreign countries, thereby producing important changes in the industrial world. On the other hand, the war withdrew about a million workers from domestic industries. The Japanese troops at the front were reckoned at some 800,000, but it may safely be assumed that the number that actually took the field was far above this figure, for any diminution in the fighting strength on account of casualties and sickness had to be constantly filled up. When several hundred thousand combatants and noncombatants in the rear service are added, the number of men who took part directly or indirectly in the war will come up nearly to 2,000,000. In Japan, at the outbreak of the war, there were not more than 10,000,000 males employed in production who led independent lives and supported their families by the fruits of their labor. Out of this productive population of 9 113 114 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR I0,000,000, or the economic backbone of the nation, some 2,000,000 were drafted and put in the war service. It is easy to see that this had a most far-reaching effect upon our economic world. Besides, various organs of communication were put to military uses, which was also a blow to industries. However, the two causes above mentioned were the most important of all. They affected practically every branch of national economy by their complication, interplay, and combination. The question before us, therefore, is to trace the influence of these two factors. It has to be observed that, though the disbursement of war expenditures and the withdrawal of productive labor acted conjointly, there were cases where either one or the other was of particular importance. Consequently, we may divide our study into two departments, i.e., the cases where the effect of war expenses was the dominant influence, and the cases where the effect of the enlistment of labor was comparatively more serious. What effect had the war on the national finance? What changes did the war produce in monetary circulation? Such questions belong to the former department, while we may mention the effects of war upon various industries as belonging to the latter. What blow did the war deal to primary industries? What were the direction and extent of the changes produced in trade and industry? What was the extent of the pressure upon the communication service, intensified by the appropriation of communication facilities for war purposes, which was counted as a subsidiary cause of the changes? Besides these two sets of questions, we may consider what effects the war had on the general life of the people. Thus, the subject-matter of our inquiry is divided into three departments: (I) the effects on public finance and monetary circulation; (2) the effects on primitive industries, developed industries, trade, and communication service; (3) the effects on the general life of the people. We shall consider in the following chapters the consequences of the war in the three departments above outlined. We purpose studying the extent of the blow dealt by the war to INTRODUCTION 115 the activities of each department, as well as the extent of the development the nation attained in her economic life in spite of this blow. The whole question can be synthetically answered only when each particular question has been considered. We shall begin with the inquiries into the effects of the war on public finance. CHAPTER II EFFECTS ON PUBLIC FINANCE GENERAL REMARKS The effects of the Russo-Japanese War on public finance may be viewed in two aspects: the changes brought about in the general finance of the Treasury on account of the raising of war expenditures, and the determination of the sources of revenue for these expenditures. As already stated, the cost of the war aggregated 1,730,000,000 yen, including the wartime military expenditures of 1,508,000,000 yen disbursed in four fiscal years from 1903-4 to 1906-7 and the war-time administrative expenditures of 221,000,000 yen defrayed in five years from 1903-4 to 1907-8. Of the sources supplying the war expenditures, those which met the military expenditures consisted of 1,418,000,000 yen from public loans, 178,000,000 yen from the increases of taxation, etc., and I24,000,000 yen from the funds of special accounts, receipts from sales of public property, and other items of revenue. The administrative expenditures were met by incomes from the increases of taxation, etc., surpluses from the annual accounts of the Treasury, and accommodations from special accounts. During the war finance period comprising the four fiscal years from 1903-4 to 1906-7, the financial resources of the nation were entirely mobilized for the war, with the result that, while ordinary expenditures not connected with the war showed a considerable decrease, the war expenditures and the increase of disbursements for various government industries connected with the war made the expenditures in our public finance expand at a bound to more than ten times their pre-war amounts. The large public loans raised to finance the war after its outbreak caused a sudden rise in the public debt expenses, particularly in the payment of interest and principal of public bonds. The amount of pensions for mili116 EFFECTS ON PUBLIC FINANCE II7 tary and naval men who served in the war suddenly swelled the expenditures for pensions. Such increases in expenditures became a heavy burden on our national finance for a considerable time, hampering the execution of various new enterprises which necessarily followed the termination of the war. After the war, new expenditures were required for the country's outward expansion, i.e., for the maintenance and development of the rights and interests acquired in Manchuria and Korea as the result of the war, as well as for the administration and development of the southern half of Saghalien (Karafuto), which now became Japan's possession. Considerable outlay was also demanded for internal reconstruction and development, i.e., for the resumption of the undertakings suspended on account of the war, as well as for other enterprises which became necessary after the war. On inquiring into the sources that supplied these expenditures, as we have already noted, the greater part of the war expenditures was supplied by public loans, the rest being paid out of the general revenue from increased taxation and the retrenchment of ordinary expenditures and other sources, while to meet the increase in the expenditures for public debt and pensions, which was a direct result of the war, the war taxes which were to be abolished at the end of the year after the war were retained. The expenses for various new enterprises started after the war were raised for the most part by loans. Moreover, the expansion of expenditures after the war necessitated, besides the continuance of the war taxes, the enforcement of a further increase of taxation. EXPANSION OF EXPENDITURES The Russo-Japanese War marked a turning-point in the public finance of Japan. Looking over the annual expenditures (including special accounts), we find that the figures after the war amounted to several times those before the war. The annual expenditures before the war (I900-3) were about 330,000,000 yen, comprising 220,000,000 yen for ordinary expenditures and Ioo,ooo,ooo yen for extraordinary expendi 18 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR tures. During the war finance period, on the contrary, the annual expenditures showed a reduction in ordinary expenditures, but a pronounced expansion in expenditures for war and for government industries connected with the war. As a result, the ordinary expenditures during the war varied between 230,000,000 yen and 475,000,000 yen, rather a fall compared with the pre-war figures, while the extraordinary expenditures totaled from 239,000,000 yen to 832,000,000 yen. Thus, the aggregates of ordinary and extraordinary expenditures ranged from 484,000,000 yen to 1,062,000,000 yen. But after the war, while the national finance gradually returned to its normal conditions, the execution of the after-war program required fresh expenditures, so that the ordinary expenditures rose to some 600,000,000 yen and the extraordinary expenditures to about 200,000,000 yen, aggregating 800,ooo,ooo yen. This was two or three times the amount of annual expenditures before the war.1 V It will thus be seen that the war changed the entire aspect of Japan's public finance. Not only did the large sums of war-time military and administrative expenditures swell the annual disbursements to the utmost degree, but the increase in the expenditures for military supplies and other government industries necessary for the prosecution of war was also a factor which contributed to the inflation of annual expend1 The main parts of our annual expenditures and revenues are treated in the general accounts, besides which there are a number of special accounts Consequently, it is impossible to know the total amount of our annual expenditures and revenues unless we make up one resultant account by adding together the amounts of the general and special accounts The figures mentioned above represent the total of the general and special accounts, so that these figures are different from those of the general accounts which are ordinarily mentioned as representing annual expenditures and revenues If we examine the general accounts alone, the ordinary expenditures before the war were about I6o,ooo,ooo yen and the extraordinary expenditures some I20,000,000 yen, totaling 280,000,000 yen, approximately. In the war finance period, the ordinary expenditures ranged from 126,960,000 yen (1904-5) to 339,950,000 yen (1906-7), while the extraordinary expenditures ranged from 79,830,000 yen (1903-4) to 264,050,000 yen (I905 -6), aggregating from 249,590,000 yen (1903-4) to 464,270,000 yen (1906-7). The war-time military expenditures are, of course, excluded from these figures of the general accounts, though the war-time administrative expenditures are included After the fiscal years mentioned above, the ordinary expenditures varied from 394,I90,000 yen to 409,240,000 yen and the extraordinary expenditures from 138,700,000 yen to 227,II0,000 yen, the total ranging from 532,890,000 yen to 636,360,000 yen. EFFECTS ON PUBLIC FINANCE Il9 itures. Also the increased expenditures for public debt and pensions constituted a considerable portion of the annual expenditures for a long time after the war. We shall consider in the following pages the changes in annual expenditures brought about by the war, under the respective headings of military expenditures, expenditures for financial affairs (public debt expenses and others), administrative expenditures, government industries expenditures, and colonial expenditures. Military expenditures War being the last resort by which the rise or fall of a state in its international position is determined and the result of the conflict controlling its destiny, victory must be secured at any cost, even to the mobilizing of all the national resources, once war is declared; for in the present condition of human life the state is the most important factor for the attainment of the peace and happiness of mankind. During war, therefore, military expenditures must take precedence over all other outlays, even to the sacrifice of the latter. It has already been stated that of the war-time military expenditures, amounting to 1,508,ooo,ooo yen, the greater part, namely, 1,283,000,000 yen, was taken up by the expenses for the Army, and that of the war-time administrative expenses 36,000,000 yen was the amount for the Army. The two items totaled 1,319,000,000 yen, which represents the whole of the war expenditures for the Army and was disbursed in five fiscal years beginning with I903-4. We shall make here, for the sake of convenience, yearly divisions in the military expenditures in order to compare the regular expenditures for the Army with the war expenses for the Army, and to show the changes in the total expenditures for the Army before, during, and after the war. (See table at the top of the next page.) The general trend of the total expenditures for the Army before, during, and after the war will thus be understood from the following table. In the pre-war days, the ordinary expenses ranged from 36,000,000 yen to 39,000,000 yen and the extraordinary expenses from Io,ooo,ooo yen to 38,000,000 yen, 120 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR ARMY EXPENDITURES, 1900-1910 a Regular Army expenditures War Grand Fisl yr O y Extraor- Texpenses total Fiscal year Ordinary dinary Total dinary Yen Yen Yen Yen Yen I900-I..... 36,123,892 38,714,309 74,838,201.... 74,838,201 I901-2.... 37,433,911 20,947,869 58,381,780.... 58,381,780 I902-3..... 39,169,669 I0,272,390 49,442,059.... 49,442,059 1903-4..... 39,355,388 7,529,174 46,884,562 II2,I18,83I 159,003,393 I904-5..... 9,066,468 3,022,042 12,088,510 665,747,050 677,835,560 I905-6..... 8,535,794 2,573,377 11,109,I7I 328,704,141 339,813,312 I906-7..... 38,372,794 2,369,821 40,742,614 204,468,626 245,211,240 I907-8..... 50,870,677 67,849,o64 II8,719,74I 8,545,001 127,264,742 I908-9..... 68,723,299 74,365,825 143,089,124.... I43,089,124 1909-10.... 69,60I,504 36,564,497 I06,I66,00o.... io6,I66,ooi a The regular expenditures for the Army in the above table represent the total of those expenditures of the general accounts which came under the control of the War Office, with the exception, however, of the extraordinary-affairs expense connected with the Russo-Japanese War (part of the war-time administrative expenses), which is left out, while the expenses for the Horse Administration Bureau prior to I908-9 are included as transferred from under the Finance Department. The fiscal years for the war-time military expenditures terminated with 1906-7, i.e., the end of March, I907, but the payment was not concluded until the end of June. So in the above table the expenditures for the twelve months ending in June each year are taken as the expenditures for one fiscal year. The grand total represents the aggregate of expenditures for the Army. totaling from 49,000,000 yen to 74,000,000 yen. This was the normal level of expenditures for the Army, but a sudden change occurred in the war finance period. The ordinary expenses now fell to about 9,000,000 yen, and the extraordinary expenses to about 3,000,000 yen, totaling 12,000,000 yen, approximately, while the war expenditures for the Army ranged from 112,000,000 yen to 665,000,000 yen, bringing up the grand total to large sums varying from I59,000,000 yen to 677,000,000 yen. Next, the war expenditures for the Navy were 225,000,000 yen in the war-time military expenditures and 25,000,000 yen in the war-time administrative expenditures, with the aggregate of 250,000,000 yen. The relations of these figures to the whole expenditures for the Navy are showdn in the following table. The table indicates the general trend of the whole naval expenses. Before the war, the ordinary expenditures were from I6,000,000 yen to 2I,000,000 yen and the extraor EFFECTS ON PUBLIC FINANCE 2 I2I NAVY ExPENDITURES, 1900-I9 10 a Regular expenditures ________ ____ - ________ - ____ _____ -W ar G rand Fiscl yar rdiary Extraor- Ttl expenses total Fiscalyear Odinary dinary Toa Yen Yen Yen Yen Yen i900-i..... 6,911,000 41,363,895 58,274,895.... 58,274,895 190I-2.. 1.. 9,484,953 24,494,375 43,979,328.... 43,979,328 1902-3.....21I,063,345 15,262,843 36,326,188... 36,326,i88 1903-4.... 21,530,237 14,566,630 36,096,867 47,969,685 84,066,552 I904-5.....8,I32,720 12,365,497 2 0,49 8,21I7 81,988,157 102,486,374 I905-6.....12,332,139 11I,030,754 23,362,893 73,550,31I2 96,913,205 i906-7....27,99I,350 1 2,5 84,511 30,575,861 46J,32,I76 83,708,037 I907-8.... 31,292,936 37,425,843 68,71i8,779 3,553,541 72,272,320 i9o8-9.....34,347,700 37,230,748 71,578,448.... 71,578,448 I909-IO10. — 35,143,432 35,902,959 71,046,39I.... 71,046,391 aThe regular expenditures in this table represent the total of those expenditures of the general accounts which came under the control of the Navy Office, with the exclusion, however, of the wartime administrative expenses. The division of fiscal years for the war-time military expenditures for the Navy has been made in the same way as for the war-time military expenditures for the Army. dinary expenditures from 15,000,000 yen to 41,000,000 yen, aggregating from 36,000,000 yen to 58,ooo,ooo yen, which was the normal level of naval expenditures. The regular expenditures f or the Navy in the war finance period f ell to an average of over i0,000,000 yen in ordinary expenditures and to over I2,000,000 yen in extraordinary expenditures, being reduced in the total to 23,000,000 yen approximately. But the war expenses for the Navy rose to sums varying from 43,000,000 yen to 81,000,000 yen, the grand total, therefore, varying from 83,000,000 yen to 102,000,000 yen. Lastly, we must compare the entire military expenditures with the -war expenditures for the Army and the Navy. In the war finance period, the regular expenditures fell to the total of about 34,000,000 yen, including the ordinary expenditures of about 20,000,000 yen and the extraordinary expenditures of about 14,000,000 yen, while the war expenditures reached sums ranging from i60,000,000 yen to 747,000,000 yen, the grand total rising to figures from 243,000,000 yen to 780,000,000 yen. The pre-war Army and Navy expenditures totaled from 85,000,000 yen to 132,000,000 yen, comprising sums from 53,000,000 yen to 6o,ooo,ooo yen for ordi 122 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR nary expenditures and from 25,000,000 yen to 80,000,000 yen for extraordinary expenditures. It will be readily understood from these figures how great was the effect of the war on the expenditures for the Army and the Navy. After the war, moreover, the extension of our armament necessitated by the expansion of our national power in Korea and Manchuria, as well as the repletion of our Army and Navy armaments weakened by the war, changed the whole aspect of our military expenditures, which became double the amount before the war. The following table shows in detail the changes in military and naval expenditures above outlined. MILITARY AND NAVAL EXPENDITURES, I900-I9IO Regular expenditures - ---------------- ------ W ar Grand Fiscal Ordinary Extraor- Total expenses total year dinary Yen Yen Yen Yen Yen I900-I... 53,034,892 80,078,204 I33,II3,096.... 133,II3,096 I90I-2... 56,918,864 45,442,244 I02,36I,108.... I02,36I,I08 I902-3... 60,233,014 25,535,233 85,768,247.... 85,768,247 I903-4... 60,885,625 22,095,804 82,981,429 I60,088,516 243,069,945 I904-5.-. I7,I99,I88 15,387,539 32,586,727 747,735,207 780,321,934 I905-6... 20,867,933 I3,604,I31 34,472,064 402,254,453 436,726,517 906 —7... 66,364,143 I4,954,332 881,318,475 247,600,802 328,919,277 I907-8... 82,163,613 I05,274,907 I87,438,520 I2,098,542 I99,537,062 I908-9... I03,070,999 111,596,573 214,667,572.... 214,667,572 I909-I0.. I04,744,936 72,467,456 I77,212,392.... I77,212,392 Again, the state had to support or reward those who sacrificed themselves or rendered services in the war. This necessity caused a very sharp advance in the expenses for pensions and annuities after the outbreak of the war, as shown in the following statistics. As is indicated in the following table, the pensions accompanying decorations rose to 13,000,000 yen after the war, or thirteen times the amount before the war, while the pensions for military and naval men advanced to I6,ooo,ooo yen, or nearly eight times the sum before the war. By far the greater part of the increase was entirely due to the war. The pensions EFFECTS ON PUBLIC FINANCE I23 PENSIONS AND ANNUITIES EXPENDITURES, I900-19O1 a Pensions ac- Pensions for Pensions Fiscal year companying military and for Others Total decorations naval men civilians Yen Yen Yen Yen Yen 900-I....... 940,928 2,221,840 1,131,406 213,072 4,507,246 (170,855) I9OI-2....... 946,772 5,477,5I6 1,2IO,034 216,170 7,850,912 (3,149,963) 1902-3....... 954,341 2,745,621 1,365,856 231,712 5,297,530 (93,085) 1903-4....... 941,389 3,005,226 1,500,225 247,203 5,694,033 (5,472) 1904-5....... I,I98,29I 3,412,090 1,635,629 276,878 6,522,888 (99,646) (120) (99,766) 1905-6....... 2,I26,I59 9,223,791 1,742,369 359,91.3 3,452,232 (785,933) (785,933) I906-7....... 3,310,568 16,644,825 1,883,393 397,566 32,136,352 1907-8....... 12,148,660 14,673,697 2,043,069 432,277 29,297,703 1908-9....... 10,406,757 I4,5II,I00 2,146,462 471,329 27,535,648 1909-10...... 10,201,620 14,771,135 2,278,200 5I0,609 27,761,564 a The figures in parentheses denote partial payments disbursed as extraordinary expenses. for civilians and others underwent no appreciable change. As regards the total of pensions and annuities, we see that the amount, which was about 5,000,000 yen before the war, swelled to 32,000,000 yen after the war, more than a sixfold rise. The increase of taxation and the inauguration of government monopolies during the war brought about an increase in expenditures. But even after the war the increased taxation and monopolies were retained in order to meet the expansion of national debt expenditures. The greater demand for coins during the war naturally resulted in a sharp increase in the expenses of the mint. Expenditures for financial affairs The expenditures for financial affairs as understood in these pages cover roughly all of the expenses incurred for the raising of funds and the disposition of these funds, including those relating to public debt, taxation and monopolies, the expenses for pensions, which are allied in nature to the expenses for public debt, as well as other expenses connected with financial 124 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR affairs. The imposition of war taxes caused a rise in the expenditures for collection of taxes, the inauguration of government manufacture and monopoly of tobacco and monopoly of salt augmented the expenditures for monopolies, the issue of war bonds swelled to a conspicuous degree the expenditures for public debt, the expenditures for pensions rose with the extent of sacrifices of life or health in the war, while the expenses for other financial matters also showed considerable increase. FINANCIAL AFFAIRS EXPENDITURES, I900-19I0 a Fiscal year Public debt Pensions cia affairs Total cial affairs Yen Yen Yen Yen 900-I................ 36,880,593 4,507,246 20,854,618 62,242,458 90-2................ 39,706,746 7,850,912 18,685,332 66,242,991 I902-3................ 59,498, 80 5,297,530 17,443,474 82,239,I84 I903-4............... 41,39I,177 5,694,033 22,660,780 69,745,990 1904-5............... 47,302,587 6,522,888 40,368,437 94,193,912 I905-6............... II5,287,I47 13,452,232 65,820,632 I94,560,0 I 1906-7........... I45,423,768 32,136,352 64,826,239 242,386,359 I907-8............... 82,330,351 29,297,703 78,399,528 290,027,582 908-9................ 201,636,543 27,535,648 81,943,384 311,115,485 I909-10.............. 88,509,809 27,761,564 76,653,29I 292,924,664 a The figures in this table comprise all the expenditures belonging to the general and special accounts. As indicated in the above table, the expenditures for financial affairs, which were from 62,000,000 yen to 82,000,000 yen before the war, made a striking advance during the war, reaching figures from 242,000,000 yen to 3II,000,000 yen, which was nearly a fourfold rise. Of these expenses for financial affairs, those for public debt, which were from 37,ooo,ooo yen to 59,000,000 yen before the war, declined more or less during the war. The figures rose again after the war, reaching amounts varying from 145,000,000 yen to 20I,000,000 yen, which are nearly four times the figures in the pre-war period. The expenses for pensions ranging from 4,500,000 yen to 7,850,000 yen before the war began to rise during the war, amounting to sums from 28,000,000 yen to 32,000,000 yen EFFECTS ON PUBLIC FINANCE I25 after the war, or about a fivefold increase. The expenses for other financial affairs, which were from I7,ooo,ooo yen to 2I,000,ooo yen, multiplied about four times, reaching figures from 65,000,000 yen to 82,000,000 yen after the war. We shall now explain how the expenditures for public debt quadrupled in consequence of the war. As will be noted later on, the public debt of Japan (excluding Treasury bills and temporary borrowings) stood at 530,000,000 yen before the war or at the end of the fiscal year I902-3 (March 31, I903); but the flotation of war bonds totaling 1,584,000,000 yen swelled the volume of public debt to 2,420,000,000 yen at the end of the fiscal year I906-7 (March 31, I907), which was an inflation to more than four and one-half times the amount before the war. Besides, there was a large increase in Treasury bills and temporary borrowings due to the requirements of the war. These factors caused an enormous increase in the payment of interest and principal on the public debt. In order to consolidate the public debt thus inflated, the government established a sinking fund (national debt consolidation fund) in the fiscal year I906-7, by which system it was designed to specially dispose of the issue and redemption of public bonds and other revenues and expenditures connected with national debt. An annual amount not less than I 0,000, yen was transferred to this fund from the general accounts to effect the redemption of principal and payment of interest on national debt incurred on account of the war with Russia. The changes in the expenditures for public debt are indicated in the table at the top of the next page. It will have been observed from the table that the expenses for national debt after the war multiplied to about four times the amount before the war. The expenditures for the redemption of national bonds reached the maximum of 27,770,000 yen before the war, a sum which declined considerably during the war because the necessity of raising war funds compelled the postponement of redemption of national bonds. But the amount began to rise again after the war, as a result of the increase of national debt, which greatly swelled 126 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR PUBLIC DEBT EXPENDITURES, 1900-1910 a Fiscal year debt naInterest on and other Interest on Total Fisc al yIte on Commissions Interest on tal Fredeemed national debt expenses for deposits national debt Yen Yen Yen Yen Yen 1900-1..... 0,677,044 23,685,351 136,30I 2,381,896 36,880,593 I90I-2..... I0,813,828 26,432,854 128,165 2,331,899 39,706,746 1902-3.... 27,770,420 28,846,522 131,I53 2,750,086 59,498,I80 1903-4..... 7,979,556 29,603,350 349,669 3,458,603 41,39I,I77 1904-5. 516,289 4I,062,060 2,584,027 3,140,212 47,302,587 I905-6..... 6,198,585 99,266,506 7,137,026 2,685,029 115,287,147 1906-7..... 21,730,720 I5,839,42I 4,496,470 3,357,157 145,423,768 1907-8... 32,071,646 I43,216,674 2;7I7,666 4,324,365 182,330,351 1908-9..... 57,397,788 136,5I0,718 1,536,171 6,I91,776 201,636,453 I909-I0.. 52,837,491 126,581,080 1,516,320 7,574,919 188,509,809 a This table represents the total amount of expenditures for public debt, consisting of ordinary expenditures belonging to the general and special accounts and of extraordinary expenditures belonging to the general accounts. It includes, as a matter of course, the expenses for public debt on account of the Boxer trouble, and extraordinary affairs expenditures. The national debt redeemed comprises the amount redeemed of national bonds, temporary borrowings, and all other national debt, while the interest on national debt includes the interest on the floating debt, such as Treasury bills and temporary borrowings, as well as interest on funded debt. However, the expenditures for the redemption of national debt by means of conversion are excluded. The interest on deposits denotes the interest on postal savings. the expenses for redemption, bringing the amount up to 57,ooo,ooo yen. The interest on the national debt, which reached the maximum of 28,000,000 yen before the war, advanced rapidly during the war, recording I43,000,000 yen after the war, while the commissions and other expenses for national debt reached the maximum of 7,000,000 yen with the increased flotation of public loans. Thus, the expenses for national debt, which ranged from 36,000,000 yen to 59,000,000 yen before the war, steadily increased during the war, amounting finally to some 200,000,000 yen. (See table on next page.) Before the war, the expenditures for taxation were approximately 4,000,000 yen, those for monopolies about 9,ooo,ooo yen, and those for the mint less than I,ooo,ooo yen, while these amounts began to increase during the war, swelling the expenses for taxation to some 7,000,000 yen after the war, those for monopolies to about 4,000,000 yen, and those for the mint to the maximum of I2,000,000 yen. The advance in the expenditures for other financial affairs came primarily through the refunding of the taxes and other revenues, the filling of EFFECTS ON PUBLIC FINANCE I27 GENERAL AND SPECIAL ACCOUNTS EXPENDITURES, I900-I9IOa Fiscal year Taxation Monopolies Mint Oter finan-r Total cial matters Yen Yen Yen Yen Yen I900-I... 3,877,838 9,634,625 987,405 6,354,752 20,854,618 (5,026) (3,530,340) (3,535,366) I901-2.... 4,109,0I0 8,298,I44 979,514 5,298,664 18,685,332 (2,304,361) (2,304,361) I902-3.... 4,387,177 8,202,018 736,782 4,117,497 I7,443,474 (I,708,686) (1,708,686) I903-4.... 4,437,226 II,593,560 1,472,56I 5,157,433 22,660,780 (370,310) (I,042,715) (I,413,025) I904-5.... 4,645,74I 20,080,410 4,322,920 II,319,366 40,368,437 (337,578) (5,118,029) (7,179,612) (I2,635,219) I905-6.... 5,628,615 43,151,095 9,622,649 7,418,273 65,820,632 (790,354) (17,620,280) (I,190,358) (19,600,992) 1906-7.... 6,249,335 38,676,198 9,217,476 10,683,230 64,826,239 (65,445) (1,865,431) (I,801,206) (3,732,083) I907-8.... 6,600,787 41,066,067 12,181,407 I8,551,267 78,399,528 (8,004) (I,009,755) (3,020,595) (4,038,354) I908-9.... 7,612,598 39,541,239 II,I04,I83 23,685,364 81,943,384 (9,495) (9,585,224) (9,594,719) I909-10... 7,734,594 39,I29,685 8,455,729 21,333,283 76,652,291 (12,914) (5,038,295) (5,051,209) a These figures represent the total expenses belonging to the general and special accounts. The figures in parentheses denote those parts of the prefixed amounts which were disbursed as extraordinary affairs expenses. The expenditures belonging to the special accounts had no distinction made as between ordinary and extraordinary expenses, so that these expenses are all treated here as ordinary expenses for the sake of convenience. deficits, and the increases in the cost for building and repairing. Though this increase was only to a slight extent the direct consequence of the war, it must be said that the amount rose as a result of the inflation of public finance. Thus, the expenditures for financial affairs other than the expenses for national debt and pensions and annuities showed also a noteworthy rise in amount after the outbreak of the war from the total of some 20,000,000 yen before the war to some 70,ooo,ooo yen after the war. Expendituresfor government industries What we call government industries in Japan include, in the broadest sense of the term, all the industries which are owned and operated by the government, yielding revenues in return for expenditures. Consequently, the government industries comprise (I) industries undertaken for profit, such as 128 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR the manufacture of arms and war supplies, manufacture of iron and steel, printing, and the railway business; (2) industries not undertaken for profit, such as postal, telegraphic, and telephone services and forestry; and (3) industries undertaken for the double end of profit and taxation, such as the tobacco and salt monopolies. However, as the industries belonging to the second group are primarily intended for public benefit, they should be regarded as affairs of the developmental adminstration, while the businesses of the third group, which are organized primarily for revenue, should be treated as belonging to the financial administration. So the government industries that have connection with the expenditures to be discussed below are those in the narrow sense and worked for profit only. In considering the effects of the war upon these expenditures for government industries, it will be convenient to divide them into four classes: (I) the manufacture of arms and war supplies undertaken to meet military requirements; (2) the manufacture of iron and steel for assisting in the development of industries; (3) the railway for the advancement of national economies; and (4) other government industries. After the outbreak of the war, the demand for arms and war supplies suddenly increased, as a matter of course, and the government industries connected with their manufacture were rapidly extended and worked to the fullest capacity to supply the needs of the war. The busy manufacture of arms caused at once a sharp rise in the demand for iron and steel, with the result that the government iron foundry was extended. Moreover, the printing business, which is the most important of government industries other than those of munitions and irons, had to be extended with the increasing volume of state affairs on account of the war. As for government railways, the speedy construction of short sections necessary for war-time communications, the construction and improvement of lines had to be curtailed to a considerable extent, under the stress of raising the necessary money for war. The consequence was that while the expenditures for government industries showed a consid EFFECTS ON PUBLIC FINANCE I29 erable diminution in railway expenditures, a phenomenal advance was recorded in the expenditures of practically all other businesses. EXPENDITURES FOR GOVERNMENT INDUSTRIES, 1900-I9IO a Govern- Government Other Fiscal ment manu- Government iron and public Total year facture of railways steel manu- industries war supplies facture Yen Yen Yen Yen Yen 1900-I... I7,583,329 35,456,032 8,180,262 1,685,875 62,905,498 I9OI-2... 19,023,955 35,820,525 9,586,968 1,846,306 66,277,754 I902-3... 15,880,990 37,072,916 3,676,213 1,507,524 58,I37,643 1903-4.. I9,571,920 40,730,664 4,II2,359 1,373,497 65,788,440 (31,905) (1,300) (33,205) I904-5.. 51,286,606 28,738,173 6,937,018 1,730,832 88,692,629 (I,651,953) (1,576,871) (3,228,824) I905-6... 90,437,585 28,419,59I 11,262,603 2,226,888 132,346,667 (I,021,815) (2,307,271) (95,805) (3,424,89I) I906-7... 49,421,96I 44,838,I93 I4,348,009 2,180,626 II0,788,689 (I62,247) (724,378) (724,378) I907-8... 45,034,291 89,321,947 I4,838,I35 2,118,797 151,313,170 I908-9... 39,672,912 I09,775,0I1 I2,812,296 2,426,055 I64,686,274 I909-10.. 37,537,364 90,483,912 9,496,448 2,057,930 I39,575,654 a These statistics will be explained in detail by several other tables printed below. In the abovetable, the figures in parentheses indicate those parts of the amounts prefixed which were disbursed! as extraordinary-affairs expenditures. Of course, these extraordinary items do not show the whole extent of the positive effects of the war, but they are added here for reference. As indicated in the foregoing table, the expenditures for the manufacture of arms and war supplies, which ranged from 17,580,000 yen to 19,570,000 yen before the war, expanded during the war to sums varying from 50,280,000 yen to 90,430,000 yen. Though these figures fell considerably after the war, yet the whole expenditures showed a striking increase, compared with the pre-war time, owing to repletion and extension of armaments. The government railways expenditures totaled, before the war, from 35,450,000 yen to 40,730,000 yen, which declined to amounts varying from 27,390,000 yen to 28,420,000 yen during the war. But after the war the nationalization and purchase of a number of private railways, together with the execution of the works suspended on account of the war, brought about a sudden and remarkable advance in the expenditures for government railways. The steel business of I0 130 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR the government was inaugurated in the fiscal year I899-I900. It was still in the initial stage before the war broke out and naturally required a considerable amount of extraordinary expenditures, bringing the total to 3,670,000 yen and 4, I I0,000 yen, respectively, in the fiscal years I902-3 and I903-4. During the war these expenditures rose at a bound to figures ranging from 6,930,000 yen to 1,260,000 yen, which increased to a still larger amount after the war, owing to the extension of the steel business which was required by the expansion of national economics. In other government industries a large increase was also noticeable, particularly during the war. Thus, the total expenditures for government industries, which varied from 58,130,000 yen to 66,270,000 yen before the war, suddenly advanced to sums from 88,370,000 yen to I31,320,ooo yen during the war. And with the expansion of post bellum government industries the expenditures for these industries showed a striking advance, compared with the time before the war. We have made thus far a survey of the general aspects of total expenditures for government industries. We must now consider the effects of the war upon the expenses of each of these industries. As regards the government undertakings connected with arms and other war supplies in Japan, the Army had military arsenals and the Senju Woolen Mills, while the Navy had naval arsenals and coaling stations. For the same reason that the expenditures for the Army formed the largest item in the expenditures for war, the expenses for military arsenals showed the greatest increase during the war, next in importance being the expenditures for the woolen mills, while the rise in the expenditures for naval arsenals was comparatively slight. (See table on next page.) As indicated in the table, the expenditures for military arsenals before the war were from 8,290,000 yen to I 1,990,000 yen, which increased during the war to large sums varying from 33,620,000 yen to 64,280,000 yen, while the expenditures for naval arsenals, which were from 4,I60o,ooo yen to 7,0I0,000 EFFECTS ON PUBLIC FINANCE I3I MILITARY AND NAVAL EXPENDITURES, I900-I9IO a Fiscal Military Naval Senju Naval Woolen coaling Total year arsenals arsenals Mills stations Yen Yen Yen Yen Yen 1900-I.... I,986,893 4,164,075 1,432,361.... 17,583,329 I90I-2.... I 1,997,,76 5,055,883 1,970,356.... I9,023,955 1902-3.... 8,299,190 6,195,395 1,386,405.... I5,880,990 1903-4... O0,899,IO9 7,014,531 1,658,280.... I9,571,920 I904-5.... 33,625,844 13,157,846 4,502,916.... 51,286,606 I905-6.... 64,281,193 22,561,3IO 3,595,082.... 90,437,585 I906-7... 26,358,087 19,403,759 3,66I,OI5.... 49,421,861 I907-8.... 22,680,399 I8,I50,573 3,415,713 787,606 45,034,291 1908-9.... 20,453,155 15,290,941 2,687,144 1,241,672 39,672,912 I909-10.. I7,983,094 I5,882,343 2,248,182 1,423,745 37,537,364 a The expenditures for military arsenals represent the total of the two special accounts for arsenals at Tokyo and Osaka. The expenditures for naval arsenals before I904-5 show the total of two special accounts, i.e., the fund for naval shipbuilding and materials and the fund for naval ordnance and materials; while the figures for I905-6 and subsequent years represent the special account for naval arsenals, which was the aggregate of the two funds above mentioned. yen before the war, swelled to the figures from 13,150,000 yen to 22,560,000 yen during the war. The expenditures for the Senju Woolen Mills, which were from 1,380,000 yen to I,970,000 yen, rose to amounts between 3,590,000 yen and 4,500,000 yen. Thus, the total expenditures for the government undertakings for arms and war supplies increased to sums varying from 51,280,000 yen to 90,430,000 yen during the war, against the total appropriations before the war, which ranged from 15,880,000 yen to 19,570,000 yen. The amount of each item gradually decreased after the war, but still the figure remained far above the one before the war, showing an altogether new aspect as compared with the pre-war time. The Government Iron Foundry during the war was extended and worked to the fullest capacity, from the necessity of satisfying a suddenly increased demand for war materials. This greatly swelled its expenditures both in ordinary and extraordinary items. The government had inaugurated the iron foundry business in the fiscal year I899-I900, and the program for the first period of the work was nearing completion when the war broke out, compelling the government to extend the business by means of the disbursement of extraor 132 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR dinary-affairs expenditures in order to meet the pressing need of the time. The expenditures for other government industries, viz., appropriations for the Printing Bureau, for factory making supplies for lighthouses and telegraphs, and for the Mining Operation Office at Hiroshima, are items scarcely worth noticing here in comparison with the total annual expenditures of the Treasury. However, owing to the congestion of war-time administrative affairs, the business of the Printing Bureau was extended considerably from time to time, which caused some rise in its expenditures. EXPENDITURES FOR GOVERNMENT INDUSTRIES, I900-I9IOa Operating Creating Fiscal iron i Printing Fiscal iound foundry Total PBurting indus- Total year foundry Bureau (ordinary) dinary) Yen Yen Yen Yen Yen Yen I900-I.,.. 1,054,064 7,126,198 8,I80,262 1,399,195 286,680 1,685,875 (249,383) 1901-2.... 3,4 IO,871 6,176,097 9,586,968 1,558,398 287,908 1,846,306 (313,699) I902-3.... 2,690,667 985,546 3,676,213 1,268,I83 239,341 1,507,524 (89,119) 1903-4.... 3,239,989 872,370 4,112,359 1,186,669 186,828 1,373,497 (31,905) (1,300) I904-5.... 5,070,551 1,866,467 6,937,0I8 1,578,887 I51,945 1,730,832 (1,576,871) I905-6.... 7,774,277 3,488,326 II,262,603 2,073,713 I53,I75 2,226,888 (2,307,271) (95,805) I906-7.... IO,I24,745 4,223,264 14,348,009 2,036,602 144,024 2,180,626 (724,378) I907-8.... O, I08,588 4,729,547 14,838,135 1,921,720 I97,077 2,118,797 (93,920) I908-9.... 8,405,223 4,407,073 12,812,296 2,241,735 I84,320 2,426,055 (394,374) I909-IO... 8,026,325 1,470,113 9,496,448 1,90I,389 I56,54I 2,057,930 (302,337) a The cost of operating the iron foundry was handled in the special account for the iron foundry, while the cost of its creation was included in the general accounts. Of the expenditures for the Printing Bureau, the ordinary expenses were handled in the special account for the Printing Bureau, the extraordinary expenses being included in the general accounts. The expenditures for other government industries, such as the appropriations for the factory supplying lighthouses and telegraphs, and the Mining Operation Office at Hiroshima (abolished in I905-6), formed a special account for each of the businesses. The figures in parentheses indicate those parts of the prefixed amounts which were disbursed as extraordinary-affairs expenses. With respect to the iron business, the ordinary expenses before the war were from I,50o,ooo yen to 3,410,000 yen, while EFFECTS ON PUBLIC FINANCE I33 the extraordinary expenses diminished gradually to 870,000 yen, the total of the two items ranging from 9,580,000 yen to 3,670,000 yen. But during the war, the ordinary expenses rose to figures from 5,070,000 yen to 7,770,000 yen, and the extraordinary expenses increased to amounts ranging from I,86o~ooo yen to 3,480,000 yen, the two items totaling from 6,930,000 yen to I1I,260,000 yen. After the war, however, the second extension program of the iron foundry was executed, which greatly swelled its expenditures compared with the pre-war period, instead of bringing down the figures to the former level. The expenditures for various government industries above noticed increased in amount as the positive effect of the war. The expenditures for government railways, on the contrary, showed a very large decline as the negative effect of the war, though the speedy construction of such lines as were necessary for war-time communications required a certain amount of f resh outlay. ExPENDITURES FOR RAILWAYS, J900-I910 a Ordinary Extraordinary Fiscal RiwyGrand year Railway Rappiwa Railway Railway total operation an an. Total improve- construc- Total facture ment tion Yen Yen Yen Yen Yen Yen Yen 1900-I.... 10,111,313 7,584,208 I7,695,52I 4,53I,224 I3,229,287 I7,760,511 35,456,032 I90I-2... II,796,378 8,i98,239 I9,994,617 3,I4I,89o I2,684,018 I5,825,308 35,820,525 (50,000) I902-3... 12,354,087 8,40I,555 20,755,642 2,805,860 I3,5II,4I4 i6,317,274 37,072,916 (50,000) 1903-4.... I3,649,335 10,577,475 24,226,808 2,89I,859 I3,6iI,997 i6,503,896 40,730,664 (5o,ooo) I904-S... 13,308,350 7,305,527 20,6I3,877 1,115,742 7,008,554 8,I24,296 28,738,173 (i,65I,953) i905 —6... 16,533,027 6,968,448 23,501,475 543,21I1 4,374,905 4,918,116 27,419,591 (I,02i,8I5) i9o6-'.. 23,292,246 9,615,669 32,907,915 4,249,373 7,680,905 11,930,278 44,838,193 (i62,247) I907-8... 39,829,943 23,082,186 62,9I2,129 8,860,633 17,549,185 26,409,818 89,321,947 I908-.... 46,962,982 29,190,118 76,153,100 10,569,322 23,052,589 33,621,911 109,775,011 I909-I0... 47,292,677 16,692,734 63,985,4II 5,245,260 21,253,241 26,498,501 90,483,912 aThe above table does not include the expenditures for government industries in Chosen and Taiwan. The revenue and expenditure of the government railways were segregated into one special account in I 907-8. The 134 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR expenditures for railway construction and improvement and the railway supplies and manufacture (from I909-Io) were handled in the account of railway capital, while the cost of railway operation was handled in the account of railway revenues. Before the fiscal years named, however, these items had been distributed among the general accounts and various special accounts. So the cost of railway operation in the above table represents, down to the fiscal year I905-6, the total of the same item in the special accounts for government railways, together with the expenditures for Hokkaido railways included in the general accounts. The expenditures for railway supplies and manufacture indicate, down to 1904-5, the total of the special account of the funds for government railway supplies and the special account of the funds for the Hokkaido railway supplies. From I905-6 to I908-9, the expenditures for railway supplies and manufacture represent the special account of the funds for the Imperial Government railway supplies. The expenditures for railway improvement and construction down to 1906-7 show the total of the figures for railway construction and improvement belonging to extraordinary items in the general accounts, together with the figures for the construction of Hokkaido railways. Of the figures indicating the expenditures for railway construction, those in parentheses indicate those parts of the prefixed amounts which were disbursed for speedy construction as extraordinary-affairs expenses or for the Hokkaido railway supplies. Both of these payments belonged to the general accounts, but the former consisted of expenditures for the speedy construction of railways (1,336,928 yen in the fiscal year I904-5) and expenditures for the construction of rolling stock, which are outlays different in nature from the expenditures for railway construction. The same may be said of the latter, but they are included in the main figures for the sake of convenience. The expenses for railway operation belong, of course, to ordinary items, since these were employed for conducting EFFECTS ON PUBLIC FINANCE 135 railway transportation. As to treating as ordinary expenditures the outlays for the purchase and manufacture of railway supplies, there may be some doubt (in view of the fact that expenditures for construction and improvement are not so treated), but the purchase and manufacture of supplies being performed as an ordinary affair, the expenses required may conveniently be treated as ordinary. There is no doubt that the expenditures for construction and improvement are extraordinary outlays both in the nature of expenditures and in the practice of accounts. During the war the expenditures for railway operation more or less increased, due, perhaps, to busy traffic, while the figures for purchase and manufacture of railway supplies showed a considerable fall, as the result of a decrease in the demand for railway materials on account of the postponement of railway improvement and construction. Thus, the ordinary expenditures as a whole did not record any appreciable change. On the other hand, the extraordinary expenditures for railway construction and improvement remarkably declined. In other words, the figures for this item, which ranged between 15,820,000 yen and 17,760,000 yen before the war, fell to sums ranging from 8,I20,000 yen to 4,910,000 yen. Thus, the total expenditures for government railways were reduced during the war to amounts from 28,730,000 yen to 28,4IO,OOO yen, as against from 35,450,000 yen to 40,730,000 yen before the war. The striking advance in government railway expenditures after the war was the outcome of the nationalization of railways, carried out for military and political reasons, which required large sums for the purchase of private railways. To summarize the effects of war on the expenditures for government industries: a very remarkable increase occurred in the items for the manufacture of war supplies, iron and steel, and for printing, while the railway expenditures, particularly outlays for improvement and construction, considerably diminished. 136 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR Expenditures for peace preservation and developmental administration, and for colonial affairs The expenditures for peace preservation include the civil list, expenditures for home, foreign, and judicial affairs, as well as expenditures for other important organs of the state, Ccovering a much wider range than the police expenditures, which constitute the appropriations for peace preservation in the narrowest sense. In the expenditures for developmental administration are included the appropriations for the administration to develop material interests, i.e., for the administration of agriculture, commerce, and communications, which represent the administration for the economic and communication affairs. In the same expenditures are also included outlays for education, which represent the administration for spiritual development. The expenditures for colonial affairs show the total of appropriations for Taiwan, Chosen, Kwantung Leased Territory in China, and Karafuto. The effects of the war on these expenditures showed an advance, as a matter of course, in those items which were directly connected with the events of the war, and a considerable reduction in other items. We shall first consider the expenditures for peace preservation. The ordinary appropriations for foreign affairs and for other important organs of the state rose in amount, those for home and judicial affairs diminished, while there was no change in the civil list. The ordinary expenditures as a whole showed a tendency to decline. The extraordinary expenditures for foreign, home, and other important administrations of the state naturally caused a substantial rise in extraordinary-affairs expenses. Ordinary temporary expenditures temporarily declined were greater than the rise in the expenditures for foreign, home, and judicial affairs as well as for other important organs of the state, so that on the whole the figures showed a decline. Thus, the aggregate of expenditures for peace preservation fell more or less, though there were complicated changes in details. EFFECTS ON PUBLIC FINANCE I37 PEACE PRESERVATION EXPENDITURES, I900-I9IOa Extraordinary Grand Fiscal year Ordinary Grtta Regular War Total Yen Yen Yen Yen Yen I900-I......... 25,485,558 7,546,515.... 7,546,515 33,032,073 1901-2......... 26,906,203 9,452,876.... 9,452,876 36,359,079 1902-3........ 27,769,142 10,962,279.... I0,962,279 38,731,42I I903-4....... 28,841,350 9,258,007 1,245,343 I0,503,352 39,346,002 1904-5......... 27,474,033 6,127,365 3,608,898 9,736,262 37,210,296 1905-6........ 26,80,419 4,382,472 4,446,924 8,829,396 35,630,8I5 1906-7........ 28,204,658 7,550,396 4,565,739 12,116,I35 40,320,793 1907-8....... 30,468,798 11,585,779.... 11,585,779 42,054,577 1908-9......... 31,464,161 17,212,414.... I7,212,414 48,676,575 I909-I0........ 32,318,222 11,843,163.... 11,843,163 44,161,385 a Expenditures included in this table do not necessarily agree in contents with the figures given in the government's reports on settled accounts, as regards the civil list and the expenditures. For judicial affairs the amounts are the same as the figures in the reports on settled accounts. But the expenditures for foreign affairs in the above statistics represent the expenditures under the control of the Department of Foreign Affairs, with the exclusion of the expenditures for colonies, but with the addition of the expenditures of the special accounts for Japanese settlements abroad which are under our exclusive jurisdiction. The expenditures for home affairs mean the expenditures under the control of the Department for Home Affairs, with the exclusion of expenses relating to railways and of expenses other than those for peace preservation. The appropriations described as expenditures for other important organs of the state represent those expenses under the control of the Department of Finance which are appropriations for the Cabinet, the Privy Council, the two Houses of the Diet, and others. As will be seen from the foregoing table, the ordinary expenditures gradually rose to 28,840,000 yen before the war, falling during the war to sums varying from 27,470,000 yen to 26,800,000 yen. Of the extraordinary expenditures, regular expenses, which ranged from 7,540,000 yen to 10,960,000 yen before the war, decreased to amounts from 9,250,000 yen to 4,380,000 yen during the war. There were, however, war expenses reaching 1,240,000 yen to 4,560,000 yen. The extraordinary expenditures as a whole showed more or less decline, totaling from I2,II0,000 yen to 8,820,000 yen. The grand total of expenditures for peace preservation, which advanced from 33,030,000 yen to 38,730,000 yen before the war, saw a diminution during the war, falling to the figures from 35,630,000 yen to 40,320,000 yen. The expenditures for developmental administration also declined, having been influenced by the necessity of raising war funds. Of ordinary expenditures, the appropriations for communications had their tendency to increase arrested, if 138 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR the amount was not actually curtailed, on account of the wartime need of communications, while the expenditures for education showed a decrease all round. In extraordinary expenditures, though various items of extraordinary-affairs expenses went to swell the appropriations, a large reduction in regular expenses had the opposite effect, resulting in a considerable decrease in the total of these expenditures. The expenditures for communications showed the largest decrease in regular items, recording, however, the largest increase in extraordinary-affairs items. The increases or decreases in appropriations for agriculture and commerce as well as for education were comparatively slight, both in ordinary and in extraordinary items. Thus, the expenditures during the war for developmental administration somewhat declined in ordinary items, sharply decreased in extraordinary items, and more or less sharply decreased in the total amount. DEVELOPMENTAL ADMINISTRATION EXPENDITURES, I900-I9IOa Extraordinary Fiscal year Ordinary tota Regular War Total Yen Yen Yen Yen Yen 1900-I......... 25,068,073 I7,035,257.... I7,035,257 42,IO3,330 19OI-2......... 27,258,288 16,179,029.... I6,179,029 43,437,3I7 I902-3........ 28,246,165 17,985,661.... I7,985,661 46,231,826 I903-4....... 29,659,376 I9,095,I67 9,289 I9,I04,456 48,763,832 1904-5....... 28,829,936 9,828,278 2,400,525 I2,228,813 4I,058,749 I905-6........ 28,963,782 7,757,239 4,43I,845 I2,I89,084 4I,I52,866 I906-7........ 32,667,582 I6,399,728 608,8I2 I7,008,540 49,676,I22 I907-8...... 35,903,342 22,641,761.... 22,641,761 58,545,I03 I908-9......... 39,294,07I 28,041,938.... 28,041,938 67,336,009 I909-I........ 41,67I,136 26,965,650.... 26,965,650 68,636,786 a The above statistics represent the expenditures of the general accounts coming under the control of the Departments of Education, Agriculture and Commerce, and Communications, excluding expenditures foreign to the purpose of this table, but adding some items of other kinds of expenditures which ought to be included here, as well as the expenditures for schools and libraries, which were handled in the special accounts. *As indicated in the above table, the ordinary expenditures for developmental administration, which reached 29,650,000 yen before the war, decreased during the war to amounts from 28,820,000 yen to 28,960,000 yen. The extraordinary EFFECTS ON PUBLIC FINANCE 139 expenditures fell suddenly, in the regular items, to sums ranging from 9,820,000 yen to 7,750,000 yen, as against I9,090,000 yen, the highest figure attained before the war, while the annual amounts of war expenses were only from 600,000 yen to 4,430,000 yen. Consequently, the extraordinary expenditures were reduced to aggregates ranging from 12,220,000 yen to 12,180,000 yen. Thus the grand total of expenditures for developmental administration, which had reached 48,760,000 yen, fell td sums varying from 41,050,000 yen to 41,150,000 yen. Finally, the expenditures for colonial affairs consisted exclusively of appropriations for Taiwan before the war (fiscal year 1903-4 and before), but during and after the war new expenditures had to be defrayed for Chosen, the Kwantung Leased Territory in China, and Karafuto. These expenses were disbursed as part of extraordinary-affairs expenditures, from the outbreak of the war down to the fiscal year I907-8, when the colonial administration was consolidated and appropriations made, resulting in a large increase in the amount. Examination of the changes in colonial expenditures during the war discloses that the ordinary expenditures (for Taiwan), instead of being affected by the war, on the contrary, underwent an increase. Of the extraordinary expenditures, the regular item (for Taiwan) showed a more or less remarkable decrease as the effect of the war, while the war expenses reached a comparatively large sum. Therefore, the total colonial expenses during the war showed a more or less substantial increase. (See table at the top of the next page.) No appreciable change occurred during the war in the ordinary expenditures, which varied from 1,990,000 yen to 14,840,000 yen. The extraordinary expenditures decreased to between 7,460,000 yen and 4,490,000 yen in regular items, while there was an increase in war expenditures from 3,290,000 yen to 4,260,000 yen, so the total rose to sums varying from 7,780,000 yen to 11,720,000 yen. Thus, the colonial expenditures during the war expanded, reaching 20,970,000 yen to 22,630,000 yen in the grand total. 1 40 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR EXPENDITURES FOR COLONiAL AFFAIRS, 19o001910 a Extraordinary Fiscal year Ordinary Grand__ _____ Regular War Total total Yen Yen Yen Yen Yen i900-i.11...,693,474 9,442,1I04... 9,442,1I04 21, 135,578 I 901-2.11,... II273,305 7,526,683... 7,526,683 1 8,799,988 I902-3.10I,339,87I 7,434,001OI. 7,434,001 I17,773,872 I903-4.11I,490,835 6,652,036.... 6,652,036 i8,I42,87I I904-5.11I,991, 540 5,651,111 3,330,000 8,98i,111 20,972,651 1905-6.1. 4,847,903 4,490,709 3,294,545 7,785,254 22,633,157 i906-7......20,986,416 7,461,244 4,267,119 I11,728,363 32,714,779 I907-8.. 30,590,086 24,853,295 496,433 25,349,728 55,939,813 i908-9.. 31,502,132 28,560,475... 28,560,475 60,062,607 I909-I0. 3I,219,095 20,761,599... 20,76i,599 51,980,694 a The figures in this table represent all the expenditures for the colonies, including the funds for the Government General of Taiwan and for the supplies to the government railways in Taiwan, funds created in i9o6-7 for the Chosen railways and their supplies, expenditures of the special accounts created in the next fiscal year (I907-8) for forestry in Chosen, the Government General of Kwantung, and the government in Karafuto, as well as other colonial expenditures (under the control of the Foreign, Finance, and Communications Departments) belonging to the general accounts. As regards the distinction between ordinary and extraordinary expenditures, items not formally classed as one or the other in the budget are all treated as ordinary. However, the expenditures belonging to the department of capital in the special account for Chosen railways, which were appropriations for the construction and improvement of railways, are classed as extraordinary; for the same reason, the expenditures for the construction and improvement of railways in the special account for the Government General of Taiwan are treated as extraordinary, It will be understood from the foregoing descriptions that the changes wrought in our annual expenditures as effects of the Russo-Japanese War were by no means slight. During the -war the expenditures not connected with the campaign showed a reduction, while the war expenses reached an enorANNUAL EXPENDITURES, I900-I910 Extraordinary Fiscal. _ _ _ _ _ _ _ _ _ _ __ _ _ __ G rand year Ordinary Reua ~ r - Ttltotal Yen Yen Yen Yen Yen I900-I... 209,548, I80 144,983,851... I44,983,851 354,532,031 I90I-2... 226,710,759 106,767,477 I.. 06,767,477 333,478,236 1902-3... 233,568,351 95,31I3,842.. 9 5,31I3,842 328,882,193 1903-4... 245,299,937 77,928,110o 161,627,734 239,555,844 484,855,781 I904-5... 230,200,560 53,08i,794 779,1I69,11 I8 832,250,912 1,062,451,472 I905-6... 311,495,488 39,710,833 511,843,711 551,554,544 863,050,032 I906-7... 475,870,856 65,I32,277 263,802,886 328,935,13 804,806,01I9 1907-8... 583,086,883 200,719,730 13,610,695 214,330,425 797,417,308 1908-9... 631,011i,894 235,532,628... 235,532,628 866,544,522 i909-i0.. 607,030,085 167,461,491 I. 67,461,491I 774,491,576 EFFECTS ON PUBLIC FINANCE 141 mous amount, inflating our annual expenditures to a very great extent. The war caused a sharp increase in the expenditures for financial affairs, especially in those for national debt and pensions, which continued to press on our public finance for a long time, interfering with the execution of programs which became necessary for keeping pace with the development of our national power. The foregoing table shows the traces which the Russo-Japanese War left on the general structure of our annual expenditures. TAXES AND OTHER DUTIES We must now inquire into the effects of the war on annual revenues, since we have already dealt with the changes wrought in annual expenditures. As was noted in earlier pages, the greater part of the expenditures for carrying on the war with Russia was raised by loans and increase of taxation, so it need hardly be said that this brought about violent changes in the conditions of our public debt and taxation. We propose to consider in this section the effects of the war on taxes and other duties, and in the next section the effects on public debt. As was already noticed, in the fiscal years 1904-5 and 1905-6, a very large increase of taxation was adopted twice relating to practically all sorts of existing taxes, besides the creation of new taxes of importance. The result was that our tax revenues (including stamp revenues and profits from monopolies) so sharply increased that after the war the receipts were far more than twice the amount before the war. Our system of taxation had made considerable growth in volume through important increases in and creation of several taxes carried out from time to time after the war with China (I894-95). In I893-94, the fiscal year preceding this war, the tax revenues of Japan totaled only 72,000,000 yen, while the amount for 1903-4, the year previous to the outbreak of the RussoJapanese War, reached 175,500,000 yen. Thus, the tax revenues advanced some two and one-half times in ten years preceding the war with Russia. Again, the tax revenues 142 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR more than doubled as a result of the increased levies imposed for financing the war with Russia. Therefore, in thirteen years, from I893-94 to I906-7, the tax revenues advanced more than four and one-half times. The volume of national income, on the other hand, expanded more than four and onehalf times in the ten years before the war with Russia, so that it appears that the additional taxation enforced during this war was no intolerable burden on our national economy, though undoubtedly it was sudden and serious enough. It must be noted, however, that while the frequent increase of taxation carried out before the war had begun to disturb the unity in our system of taxation, the large increases imposed after its outbreak threw the whole system, disorganized already, into a state of greater confusion. As a consequence, the distribution of fiscal burdens became more and more unequal, beginning to tell on the people as a heavy exaction. We shall now classify the taxes into three groups, i.e., taxes on receipts, taxes on consumption, and taxes on traffic, and study the changes in the fiscal burden brought about by the additional taxation during the war. Taxes on receipts In our system of taxation, the taxes on receipts comprise the land tax, the business tax (including the patent-medicine tax and the mining tax, which are special business taxes), and the income tax, all of which were increased on account of the war. The land tax is an old institution, the rate in former days being "four-tenths to the government and six-tenths to the people." They were accustomed to this rate and it was felt as a comparatively light burden. This fact had invited frequent increase in the land tax. Moreover, agriculture in this country had nearly reached the limit of intensive cultivation, leaving small room for further development. Due to these circumstances, the opportunity of increasing this tax was limited. On the contrary, the income and business taxes, which were created after the Imperial Restoration of I868, had am EFFECTS ON PUBLIC FINANCE I43 pie room for growth through the development of trade and industry. It is evident, therefore, that even if these taxes were increased at a uniform rate each of them would show a different rate of increase in revenue. Inquiry into the conditions of taxes on receipts during the war discloses the fact that, as regards the land tax, the import duties on rice, hulled and unhulled, as well as the high price of this and other cereals, gave protection to payers of the land tax, which circumstances served to prevent a decrease of revenues from this source. But, on the other hand, the termination in 1904-5 of the temporary increase of the land tax enforced before the war resulted in a direct diminution in receipts from this tax. Moreover, good crops in 1904 indirectly increased the yield from the principal and additional rates of the land tax, while bad crops in the following year had an adverse effect on the yields from this source. In the final result, the revenue from the land tax showed the smallest percentage of increase. However, the case was different with the income and business taxes; for though the war dealt a heavy blow to industries not connected with the war-time demands, it had a very favorable effect on other industries, and our industry and commerce as a whole was never in a state of depression during the war. Consequently, the revenues from these sources recorded a large proportion of increase. The percentages of increase in yield from taxes on receipts, as well as the relations of the principal and additional parts of these taxes, are indicated in Table A at the end of this chapter.1 Taking as Ioo the yields of different taxes on receipts in I903-4, the fiscal year preceding the war, the percentages of the rise in revenues for the four succeeding years were, as the above table shows, 30, 71.6, 80.2, and 81.2 for the land tax; 72.4, I59, I74.4, and 185.3 for the business tax; and 74.2, 182.2, 219.3, and 230.9 for the income tax. The three taxes on receipts taken as a whole for these years averaged 41.1, 97.1, II104, and 1I3.8 per cent. As regards the proportions of the principal and increased parts of these taxes, the latter 1Post, pp 154-5 144 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR occupied roughly 40 per cent as against 60 per cent of the former in the fiscal year 1904-5 (as the result of the first increase of taxation), while the proportion in the following years was 60 per cent of the increased parts as against 40 per cent of the principal parts (as the result of the first and second increase of taxation). Thus, the yields from the additional rates of the taxes became far larger than the amount from the principal rates. Therefore, our revenues from receipt taxes far more than doubled as the result of the war-time increase of taxation. The per capita burden of receipt taxes was 1.303 yen in the fiscal year previous to the war. The tax increases added to it 0.714 yen, 1.454 yen, and 1.555 yen in the three following years, so that the burden per capita successively rose to 1.849 yen, 2.522 yen, and 2.648 yen, or more than twice the amount before the war. In short, the war-time increase of taxes on receipts came to represent 60 per cent of total revenues from these taxes. This was certainly a very sudden and heavy increase of burden. We must consider, therefore, what changes the increased taxation produced in the taxes on receipts. The land valuation, which forms the basis of assessment for the land tax, was determined in 1884. During the twenty years that had elapsed after this date, the utility of land underwent a remarkable change with the development of national economy. As a consequence, there was a general and extraordinary rise in land value, though the extent of the rise was different in different localities. But the same rate of land tax remained in force, which meant a comparatively slight levy in some places and an intolerable burden in others. In spite of this inequality, the rate was raised, taking practically no account of these changed conditions. Hence, it cannot be doubted that the inequality in the burden of this tax became very serious. The business taxes, which are placed on the income from business as the land tax is levied on income from land, were assessed, for the sake of convenient collection, on the conditions of various businesses and not on income from them. In EFFECTS ON PUBLIC FINANCE 145 other words, of the amount of sales, the amount of capital, the amount of contract or remuneration, the amount of rentals for buildings, and the number of persons employed in the business, two or three of the items were taken together and were made the basis for assessment. Moreover the rate was uniform for all sizes of business, but different according to kinds of business. Therefore, the amount of the tax did not agree with the income, which generally represents the efficiency of business, but was heavy for a small business and light for a large one, heavy for some kinds of business and light for other kinds. However, it would be wrong to pass an unqualified condemnation upon this system of business tax, for it would be an extremely difficult and almost fruitless task to attempt to estimate the income from each particular business. When the rates of these taxes are low, their evil effects are small. But during the war with Russia the rate was raised by I50 per cent, for all sorts of business taxes without distinction, which at once made them an unjust and heavy burden. As regards the income tax, it was raised at a uniform rate in the first tax increase. In the second tax increase, however, the rate was graded in consideration of the ability to bear the burden. As a result of these war-time increases, the rate of tax A of the first class was raised by 252 per cent of the principal rate, that of tax B of the same class by I80 per cent to 500 per cent, while the third-class income tax rose by 200 per cent to 370 per cent. Moreover, no small amount of injustice was done in not raising the rate of levy on the secondclass income, that is, interests on national bonds (and company debentures), though this was due to the government's policy to uphold the value of war bonds. When we consider the burden of the whole taxes on receipts, we can not doubt that the charge grew very heavy for the owners of land and those engaged in business, because they had to pay the increased income tax, besides the land and business tax, which were abruptly increased at the same time. We have already noticed how great was the extent of the increase of taxes on receipts, and must now recognize that the II 146 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR increase of taxation necessitated by the war proved an occasion of a far-reaching change in the condition of the levies on receipts. Since these taxes are designed to be placed on the receipts, especially the income, of the individuals, the socalled income tax must theoretically form the basis, the land and business taxes being imposed to supply its deficiencies. Before the Russo-Japanese War, however, the land tax still occupied its traditional position as the most important of the taxes on receipts, and the others appeared in the light of supplementary levies. In consequence of the economic changes from the opening of the war, and in proportion to the economic development, income and business taxes made a striking growth and attained the status of independent taxes, in comparison with the land tax, which had small room for growth. Taxes on consumption Of the taxes on expenditure or consumption, the tax on sake, the tax on soy, the consumption tax on sugar, the hunting-license tax, and customs duties had their rates increased, as already stated, while the consumption taxes on textiles and on petroleum were newly created. At the same time, the government manufacture and monopoly of tobacco and monopoly of salt were inaugurated. Thus, all the important taxes on consumption were either raised in their rate or newly created. As the more important of the taxes on consumption have the necessaries or semi-necessaries of life as the object of taxation, and are charged according to the quantity consumed, regardless of the ability of taxpayers to bear the burden, the incidence of consumption taxes naturally falls upon the lower classes, so that, from the nature of the levies, the rate of these taxes cannot be raised so high as in the case of other taxes. In the general war-time increases of taxation, however, the rates of consumption taxes were unavoidably raised to a considerable extent. In Table B at end of this chapter1 is shown the upward movement in the revenues from consumption 1Post, pp. 156-7. EFFECTS ON PUBLIC FINANCE I47 taxes, distinguishing the principal and additional rates of these taxes. Comparing the revenues from these sources for each successive year during the war with the amount for 1903-4, the year preceding the war, we notice that as against 53,120,000 yen, the amount before the war, the tax on sake rose to 58,750,000 yen, 59,570,000 yen, and 71,100,000 yen, of which the increase of the rate contributed II per cent in I905-6 and 12 per cent the next year. From 3,540,000 yen, the tax on soy advanced to 5,100,000 yen, 5,270,000 yen, and 5,600,000 yen, of which the increased taxation was responsible for 27 per cent, 33 per cent, and 31 per cent, respectively. The consumption tax on sugar, which was 6,940,000 yen before the war, swelled to 8,360,000 yen, 11,340,000 yen, and I6,I50,00 yen, of which 23 per cent, 59 per cent, and 62 per cent were represented by the increased taxation. The profit from the tobacco monopoly, which stood at I4,890,000 yen before the war, advanced to 27,460,000 yen, 33,600,000 yen, and 32,570,000 yen, the percentage represented by the increased rate being 33, 45, and 45, respectively. The custom duties rose from 17,370,000 yen to 23,150,000 yen, 36,750,000 yen, and 41,850,ooo yen, of which 10 per cent, 33 per cent, and 42 per cent were taken up by the rate increase. As regards the newly created taxes, the consumption tax on textiles yielded 5,490,000 yen, 17,800,000 yen, and 18,830,000 yen, the consumption tax on petroleum yielded 1,880,ooo yen, while the salt monopoly yielded 7,200,000 yen and 12,330,000 yen. The total revenues from consumption taxes advanced from 97,730,000 yen, the amount before the war, to I32,330,ooo yen, 174,020,000 yen, and 201,520,000 yen, of which the increased taxation contributed 17 per cent, 38 per cent, and 42 per cent, respectively. The per capita burden of consumption taxes, which was 2.0 19 yen in the year preceding the war, increased during the war to 2.719 yen, 3.527 yen, and 4.014 yen, the sums represented by the increased rate being 0.458 yen, 1.366 yen, and 1.670 yen. From the above it would appear, so far as figures go, that the increase of consumption 148 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR taxes was not so heavy as in the case of taxes on receipts. But when it is remembered that the burden of consumption taxes falls primarily upon the lower classes, who have small ability to bear taxation, the conclusion is that the increased burden was heavier in the case of consumption taxes than in that of taxes on receipts. Taxes on transactions As regards taxes on traffic, the registration tax, stamp duties and other stamp revenues, and the exchange tax were raised, while the transit duties and inheritance tax were newly created. Table C at end of this chapter1 shows the taxes for the years 1903-8. As set forth in the foregoing pages, the revenues from the war-time increases of taxation represented some 50 per cent of the total tax revenues. Of the incomes from taxes on receipts, 60 per cent came from the rate increases, while the rate increases contributed 40 per cent of the incomes in the case of taxes on consumption and taxes on traffic. The wartime increase of taxation was the heaviest on the receipt taxes, while it was light on the taxes on consumption and communications and acts. However, when the question is considered from the viewpoint of tax-bearing ability, apart from mere figures, the 40 per cent of increased consumption taxes, which fell on the lower classes with no property, was by no means light, but, in comparison, was much heavier than the 60 per cent of the increased taxes on receipts, which fell primarily on the well-to-do classes. When the growth of tax revenues is considered, comparing the index numbers before the war with those after the war, it is found that as against 207, to which the total tax revenues rose in I906-7, the yields from taxes on receipts recorded 210.3 in the same fiscal year, which was a very small rise considering the heavy increase imposed-a rise not much different from the same recorded by the other groups, namely, the taxes on consumption and taxes on comlPost, p 158. EFFECTS ON PUBLIC FINANCE I49 munications, which reached 206.I and 200,3 respectively. In other words, the advance in the yields from consumption and communication traffic taxes was quite large, in spite of the smaller rates of taxation, as compared with the taxes on receipts. As shown in the following table of comparisons of different groups of taxes, the percentage for taxes on receipts reached the highest point during the war and declined after the war. This was due to the circumstance that during the war such industries saw temporary prosperity as they were stimulated by the war, while they returned to their former conditions on the restoration of peace. On the contrary, the consumption and traffic taxes diminished in revenues during the war and increased after the war. This result was caused, in the case of the former, by the high prices, as well as the practice of thrift, which were induced by the war-time increase of taxation, etc., and which prevented the increase of the purchasing power of the people, while in the case of the latter general transactions were restricted on account of the war. PERCENTAGE OF INCREASE AND DECREASE OF CONSUMPTION AND TRAFFIC TAXES, I903-1908 Kinds of taxes I903-4 I904-5 1905-6 I906-7 I907-8 Taxes on receipts............ 36. 37.2 38.7 36.7 34.6 Taxes on consumption........ 55.6 55.2 53.9 55.3 56.6 Taxes on traffic............. 8.3 7.6 7.4 8.0 8.8 Total................. 00. I00.0 I00.0 I00.0. INFLATION OF THE NATIONAL DEBT Public loans The public loans raised to finance the war with Russia reached the aggregate of 1,584,000,000 yen. Besides, there was no small amount of floating debt, such as temporary borrowings, Treasury bills, and war tickets, made or issued from time to time to fill up temporary deficits in the expenses. 150 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR The total amount of public debt, excluding Treasury bills and temporary borrowings, was only 530,000,000 yen before the war (at the end of the fiscal year I902-3). Of this amount, the war loans floated for armament expansion and war purposes were 200,000,000 yen, the industrial loans for railway construction and other purposes II3,000,000 yen, the loans for the consolidation of national debt and other financial readjustment 176,000,000 yen, while other loans for altering the administrative system and for the administration, and development of new colonial possessions were 41,000,000 yen. But the issue of large war-time loans during the RussoJapanese War wrought a complete change in the conditions of our public loans. After the war the debt rose to a total of 2,420,000,000 yen (at the end of I906-7 fiscal year), which was much more than four times the figure before the war. Of this sum, the war loans represented 1,588,000,000 yen, the industrial loans 134,000,000 yen, the finance readjustment loans 660,000,000 yen, and other loans 38,000,000 yen. The war loans occupied only about two-fifths of the total public debt in the pre-war time, while after the war they came to represent some two-thirds of the whole amount. The finance-readjustment loans also increased to the amount above PUBLIC DEBT, I902-1908 a Amount of public debt Annual amount of Average at fiscal year end interest annual amount of interest on Population Fiscal Amount Amount public a Total per Total per debt per year capita capita Ioo yen Yen Yen Yen Yen Yen I902-3 530,I80,8II I0.854 25,324,259 0.518 4.814 48,837,823 I903-4 635,939,87I I2.825 30,623,185 o.6i6 4.846 49,585,337 1904-5 1,436,949,177 28.689 72,365,938 I.445 5.049 50,087,918 I905-6 2,242,001,372 44.262 I09,323,845 2.158 4.884 50,653,478 I906-7 2,420,265,082 47.308 II6,779,482 2.283 4.832 51,160,039 I907-8 2,254,346,452 43.49I I06,338,374 2.052 4.723 51,835,096 a This table is based on the Annual Report for Io99-IO of Statistics of National Debt. Treasury bills and temporary borrowings are not included. EFFECTS ON PUBLIC FINANCE I5I mentioned as a result of the conversion and consolidation of war-time loans. With this rapid increase of public debt, the annual amount of interest to be paid advanced greatly, aggregating over II6,000,000 yen against 25,000,000 yen before the war. It may easily be seen from the foregoing table how great was the influence exerted on the conditions of our public debt by the issue of war loans during the Russo-Japanese War. The average per capita amounts of the total debt and of the annual interest therefore were about 10.854 yen and 0.519 yen, respectively, before the war, which increased to 47.308 yen and 2.283 yen, respectively, after the war. The war loans issued at a high interest rate (6 per cent) caused a rise in the average rate of interest on public loans, the payment per Ioo yen coming up to the maximum of 5.049 yen against 4.814 yen before the war. These figures are based on the Statistics of National Debt, compiled in 1907-8. Inquiring into the details of public debt, we note that the domestic loans, which amounted before the war to 432,000,000 yen, advanced to 1,049,000,000 yen after the war. Of the latter figure, the bonds represented 584,000,000 yen, or over half the amount. The foreign loans, which were only 98,000,000 yen, now increased to 1,370,000,000 yen, including war loans of 1,269,000,000 yen. Thus, the war loans took up practically the whole of the foreign loans. The total amount of public debt, which was only 530,000,000 yen before the war, increased to 2,420,000,000 yen, of which 1,628,000,000 yen, or by far the greater part of the total debt, was represented by war loans. See Table D at end of this chapter.l Thus, about four-fifths of the public debt before the war came under domestic loans, while, with the inflation of national debt after the war, foreign loans increased to one and one-half times the former figures. Consequently, more than half of the interest on public loans was paid to foreign countries. Our financial and economic conditions thus became very closely connected with those of the creditor countries, so that 1Post, p. I59. 152 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR they began to be immediately affected by the changes in the economic situation in Europe and America. Treasury bills and temporary borrowings The national debt raised to maintain the balance of our revenues against expenditures for the Russo-Japanese War consisted of temporary borrowings and Treasury bills. Besides these, there were war tickets, which may be regarded as a sort of national debt but which it is proper to treat as circulating bills. Therefore, we shall here discuss temporary borrowings and Treasury bills only, leaving war tickets out of consideration. As was already noticed, the temporary borrowings made for purposes of the war-time military expenditures varied in amounts from 12,000,000 yen to 92,000,000 yen in 1904, from 8,000,000 yen to 505,000,000 yen in 1905, while the amount was 77,500,000 yen in I906. But what changes did these temporary borrowings for war purposes produce in the total amount of the government's borrowings? The aggregate borrowings for the year preceding the war totaled from 35,ooo,ooo yen to 56,800,000 yen, but after the outbreak of war the amount rapidly increased, reaching 54,000,000 yen to II9,800,000 yen in I904, 54,800,000 yen to 82,200,000 yen in 1905, 32,800,000 yen to 144,200,000 yen in I906, which, however, declined by degrees after the war. The Treasury bills issued for purposes of the war-time military expenditures reached Io,000,ooo yen to Ioo,ooo,ooo yen in 1905, and 452,000,000 yen to I,I52,000,000 yen in I906 and 33,000,000 yen in 1907. Thus, the issues for war purposes greatly swelled the aggregates, which came to range from 35,000,000 yen to I04,ooo,ooo yen in 1905, from 66,700,000 yen to 120,700,000 yen in I906, and from 48,600,000 yen to 98,400,000 yen in 1907, as compared with I0,000,000 yen to 20,000,000 yen in I903 and 35,000,000 yen in I904, the two years immediately before the war. Thus, the temporary borrowings and Treasury bills, so far as they were made or issued to supply deficits of wartime military expenditures, totaled 12,000,000 yen to 92,000, EFFECTS ON PUBLIC FINANCE 153 ooo yen in 1904, 35,000,000 yen to I34,000,000 yen in 1905, 452,000,000 yen to 1,725,000,000 yen in I906, and 33,000,000 yen in I907. Consequently, these two kinds of national debt showed an extraordinary increase during the war, aggregating 64,800,000 yen to I54,800,000 yen in I904, 908,000,000 yen to 1,786,000,000 yen in I905, 1,042,000,000 yen to 243,000,000 yen in I906, and 77,100,000 yen to I33,300,000 yen in I907, as against only 45,800,000 yen to 76,800,ooo yen for the year previous to the war. We may now consider the conditions of these two kinds of public debt by the figures at the year end. As is indicated below, the amount raised for supplying deficits of the wartime military expenditures came up to 1,548,000,000 yen (1904) and 1,786,000,000 yen (1905), as against 568,000,000 yen for the year preceding the war. The per capita amount of this debt rose to about twice the sum, that is, 3.092 yen or 3.526 yen, as against I.I47 yen, the amount before the war. AMOUNTS RAISED FOR SUPPLYING DEFICITS, I903-I907 a 1903 I904 1905 I906 1907 Raised for supplying deficits of war ex- Yen Yen Yen Yen Yen penditures 7,000,000 92,000,000 134,000,000 48,200,000.... Others..... 49,849,200 62,849,000 44,624,200 86,495,333 77,I46,614 Total.. 56,849,200 154,849,200 178,624,200 134,695,333 77,I46,614 Per capita amount... I.147 3.092 3.526 3.527 1.488 a The per capita amount in the above table is based on the Statistics of National Debt, compiled in I907-8. But the figures for I907 are the results of the author's own investigations. TABLE A.-INCREASE IN REVENUE FROM TAXES ON RECEIPTS, 1903-1908 a 1903-4 I904-5 I905-6 1906-7 1907-8 Details Ppr P] r P[ r Per P[r Amount Per Amount Per Amount Per Amount Per Amount Per cent cent cent cent cent Land tax: Principal... Additional... Total..... Percentage of increase.. Business tax: Principal.... Additional... Total..... Percentage of increase.. Income tax: Principal.... Additional... Total..... Percentage of increase. Yen 46,873,086 I00 Yen 37,046,636 23,893,I45 61 39 Yen 34,223,821 46,249,201 43 57 Yen 34,716,516 49,920,982 41 59 Yen.. 46,873,o86 ioo 60,939,78I IOO 80,473,022 Ioo 84,637,498 100 84,973,927........ 130.... 171.6.... I80.2.... 181.2 7,981,398 I00 8,526,348 6I 8,570,392 4I 9,241,956 42.......... 5,24I,093 39 12,104,229 59 12,661,135 58.... 7,981,398 I00 I3,767,44I I00 20,674,620 I00 21,903,091 I1O 22,771,518.... 100....o. I72-4.... 259.... 274.4.... 285.3 8,247,177 Ioo 8,709,804 6I 9,868,560 42 IO,901,589 41..... 5,660,129 39 13,409,817 58 I5,447,I50 59.. 8,247,177 I00 I4,369,933 I00 23,278,377 I00 26,348,739 100 27,29I,8i71 100 174.~ ~ ~~~~~~~~~27,29182.219. 33.9 CA 0 z 0 C-) H m H CJ) 0 M rd z ci U) wn C) Mt xn ti IOO I74.2 282.2 319.3 330.9 Summary: Yen Yen Yen Yen Yen Principal.... 63,101,66I I00 54,282,788 6i 52,662,773 42 54,86o0,06 41.... Additional......... 34,794,367 39 71,763,246 58 78,029,267 59...... Grand total 63,IOI,66I IOO 89,077,I53 Ioo 124,426,0I9 i0 I132,889,328 io0 I35,037,316.. Percentage of 0 increase...... oo.... 41.1.... I97 I.... 2 2I0.4.... 213.8 Taxes on receipts per capita: Principal.... 1.303.. 35.. i.o68.. 1.093.... Additional....... 714.. 1.454.. 555.... Total..... I.303 i.. 849.. 2.522.. 2.648.. 2.649 a The figures indicating yields from the additional rates of the taxes are taken from the Reports on the War Finance. The yields from the principal rates Q of different taxes are obtained by subtracting from the total revenues of the respective taxes the amounts of the increased parts for the fiscal year I906-7. - The population used in calculating the per capita amount is that at the end of each year. The same conditions apply to Tables B and C, post, pp. 156 and I58. Cn CA TABLE B.-INCREASE IN REVENUE FROM CONSUMPTION TAXES, 1903-1908a 1903-4 i904-5 1905-6 1906-7 1907-8 Details - Amount Per Amount Pet Amount Per Amount Per Amount Per cent cent cent cent cent I....... Tax on Sake: Principal............ Additional.......... Total............ Tax on soy: Principal............ Additional.......... Total............ Consumption tax on sugar: Principal........... Additional.......... Total............ Consumption taxes on textiles.......... Consumption taxes on petroleum....... Profit from tobacco monopoly: Principal............ Additional.......... Yen 53,128,084 I00 Yen 58,569,397 182,205 100 Yen 53,094,997 6,481,145 89 II Yen 62,823,740 8,276,264 88 12 Yen,o.. *... 53,I28,084 100 58,751,602 I00 59,576,142 I00 7I,100,004 I00 78,406,323 3,544,528 o00 3,725,0o8 73 3,556,12I 67 3,883,499 69......... 1,383,8II 27 1,716,753 33 1,717,959 31.. 3,544,528 o00 5,108,829 I00 5,272,874 I00 5,60I,458 I00 5,474,691 6,942,969 I,4,642,969 6,425,53 77 4,642,86 4I 6,59,353 38 _.... _.. I 1,936,763 23 6,706,13I 59 9,997,35I 62.... 6,942,969 i00 8,362,294 I00 11,348,3I7 I00 I6,156,704 I00 16,178,234 5,499,348.. I17,806,29.. I,830,464.. I9,I I9,635 1,882,983.............. 53,078 I4,898,29I I00 18,532,214 67 I8,444,170 55 I7,894,690 55........ _.. 8,929,793 33 I5,157,888 45 14,679,794 45.... Total..4,898,291 100 7460..3 7 Cn n o o t C) n H 0 m 0 I Total. I..... 14,898,29i IOO 27,462,007 IOO 33,602,058 IOO 32,574,484 IOO 35,607,902 *Profit, salt monopoly... *Profit, camphor " *Tax on patent medicines Tax on playing-cards... Tax on hunting licenses: Principal.......... Additional.......... Total............. Customs duties: Principal........... Additional.......... Total............ Summary: Principal............ Additional.......... Grand total....... Increase in receipts.. Taxes per capita: Principal........... Additional.......... Total............. Yen 273,513 1,235,184 83,605 250,260 Yen 712,609 1,189,449 108,323 136,554 72,399 Yen 7,204,451 743,579 1,355,053 I26,019 70,608 163,435 Yen I2,339,247 1,163,826 1,454,667 143,130 93,o64 215,435 Yen 13,297,846 898,165 1,704,792 I80,955 105,944 245,400 250,260.. 208,953.. 234,043.. 308,499.. 351,344 17,378,303 I00 20,745,732 90 24,582,998 67 24,07,820 58.......... 2,413,999 Io 12,174,384 33 17,781,713 42.... 17,378,303 I00 23,159,731 IOO 36,757,382 Ioo 41,853,533 IOO 50,027,305 97,734,737 I00 IIO,144,827 83 106,615,73I 62 117,687,789 59.... 22,30I,30I 17 67,410,468.. 83,838,227 42. 97,734,737 I00 I32,446,I28 I00 I74,026,209 I00 20I,526,016 I00 22I,300,270.... I00.... 135.5.... I78.0.... 206.1.... 226.4 2.019.. 2.261.. 2.161.. 2.344.......... 0.458.. 1.366.. I.670.... M 0 z 'd C) t) al 2.019 2.719-I 3.527 4.014 4-341 a The asterisk (*) indicates the taxes which were not increased. The revenue from the consumption tax on sugar does not include the part collected in stamps. Of the consumption taxes on textiles, all except the charge on woolen fabrics was paid in stamps down to 1906-7; that is to say, the item for consumption taxes on textiles in regular tax revenues consisted solely of the revenue from the tax on woolen fabrics, which represented, of course, only part of the receipts from the levies on textiles. However, as the consumption taxes on textiles other than woolen fabrics amount to an important part of the receipts, we include among the consumption taxes on textiles all these taxes, taking the figures for each tax from the table of consumption taxes on textiles in the Thirty-fourth Annual Report of Statistics, page 704, issued by the Taxation Bureau. The item for consumption taxes on textiles for I907-8 also includes the amount collected in stamps. The profits from the tobacco and salt monopolies are based upon the Reports on the Finances of the RussoJapanese War, and the Reports on the Finances after the Russo-Japanese War. The amounts of stamp duties on patent medicines and the hunting-license tax are taken from the table of the patent-medicine tax, page 33, and the table of the hunting-license tax, page 35, of the annual reference tables in the Thirty-sixth Annual Report of Statistics, issued by the Taxation Bureau. The profit from the salt monopoly for 1905-6 includes the revenue from the salt tax. Cn Ir TABLE C.-INCREASE IN REVENUE FROM TAXES ON TRANSACTIONS, I903-I908a 1903-4 I904-5 1905-6 I906-7 1907-8 Details Amount Amount Per Amount Amount Per Amount Per cent cent cent cent cent.........~I 1 ~ - Stock-exchange tax: Principal............. Additional............ Total.............. Transit duties............ Inheritance tax........... Stamp duties and revenues: Principal.............. Additional............ Total............... Tax on issue of bank notes. Tonnage duties........... Summary: Principal.............. Additional............ Grand total.......... Percentage of increase in receipts........... Traffic taxes per capita: Principal............. Additional............. Total............... Yen 811,580 Yen 647,595 232,682 Yen 1,120,550 1,120,548 Yen 2,339,916 2,339,915 Yen ~ o 811,580.. 880,277.. 2,241,098.. 4,679,831I. 3,154,929...... 344,305.. 2,211,869.. 2,463,801.. 2,773,550............ __629,684.. 1,405,425.. I,822,297 12,600,43I.. I,718,765.. I0,385,139.. I2,741,650.....2,925,368.. 5,681,112.. 5,819,553... I2,600,43I.. I4,644,133.. I6,066,25I.. 8,561,203.. 22,914,170 823,603.. 1,906,234.. 2,472,089.. 1,692,285.. 3,329,916 430,530.. 465,066.. 538,435. 580,58I.. 610,458 I4,666,144 I00 I4,737,660 8I I4,516,213 60 I7,354,432 59.......... 3,502,355 19 9,643,213 40 I2,028,694 4.... I4,666,I44 I00 18,240,0I5 I00 24,I59,426 I00 29,383,I26 I00 34,605,320.... oo.... I24.3.... I64.7.... 200.3.... 235.9 0.303.. 0.284.. 0.293.. 0.347.......... 0.072.. 0.196.. 0.240.... _......... C) 0 z 0 f-4 C-) U)I 0 tI) t U) 0 t H z U) CD 0 It xm U) m1 ]:,I IM 0.303 0.356 0.489 0.587 0.676 a The item in this table comprising the registration tax, stamp duties, and other stamp revenues represents principally the so-called stamp revenues, with the exclusion, however, of the taxes collected in stamps, i.e., stamp duties on patent medicines, the playing-card tax, and the hunting-license tax. While the greater part of the item consists of the registration tax and stamp duties, the revenue from various sorts of fees, as well as a small amount of revenue from the sugar-consumption tax collected in stamps, is added. An asterisk indicates the taxes which were not increased. TABLE D.-INCREASE IN REVENUE FROM FOREIGN AND DOMESTIC LOANS, I902-I908a Loans I902-3 1903-4 I904-5 1905-6 I906-7 1907-8 Domestic: Loans connected with Russo- Yen Yen Yen Yen Yen Yen Japanese War........... 96,977,350 373,125,275 632,749,375 583,729,250 574,001,350 Others............... 432,550,811 441,332,521 458,517,902 466,980,997 465,817,253 514,643,878 Total................. 432,550,811 538,309,87I 831,643,177 I,099,730,372 I,049,546,035 1,088,645,228 Foreign: Loans connected with RussoJapanese War................. 507,676,000 I,044,64I,000 1,269,174,379 I,054,403,024 Others.................. 97,630,000 97,630,000 97,630,000 97,630,000 101,535,200 111,298,200 Total................. 97,630,000 97,630,000 605,306,000 1,142,271,000 I,370,709,579, I65,70I,224 Grand total............. 530, 80o,8i 635,939,87I I,436,949,I77 2,242,001,372 2,420,256,082 2,254,346,452 Total foreign and domestic loans connected with RussoJapanese War.............. 96,977,350 880,801,275 1,677,390,375 I,852,903,629 I,628,404,374 Total of other loans......... 530, I80,8 I 538,962,521 556,147,902 808,685,997 1,035,976,453 I,094,566,078 a This table is based upon the Annual Report for 1907-8 of Statistics of National Debt. The second 4 per cent sterling bonds of 244,075,000 yen (I905-8) and 5 per cent sterling bonds of 224,549,000 yen (9o06-8) were both consolidated loans in reality, but the former having been issued for the conversion of the first and second issues of our exchequer bonds, and the latter for the conversion of the first and second 6 per cent sterling bonds, they are included among war loans in this table. t3 M Cr2 0 C1 -n C) Cn Ul \o CHAPTER III EFFECTS ON MONETARY CIRCULATION GENERAL REMARKS Through the outbreak of the Russo-Japanese War, a large sum of foreign capital suddenly flowed into our country, while an amazing amount of funds was also raised from various sources at home. These funds were redistributed at home and abroad through the channel of military and administrative expenditures. This stupendous movement of capital caused from time to time changes of varying importance in the money market. Taking a general view of this movement of capital due to the war, the fund for the war-time military expenditures, amounting to 1,721000,000O yen, and the fund for the war-time administrative expenditures, amounting to 22I,000,ooo yen, with the aggregate of 1,942,000,000 yen, were raised to meet the requirements of the war. Of this sum, 1,730,000,ooo yen was actually disbursed as war expenditures, namely, 1,509,000,000 yen as war-time military expenditures and 22I,ooo,ooo yen as war-time administrative expenditures. The period of time during which the movement of capital continued was, roughly speaking, from October, 1903, to July, 1907, though, of course, it was most active during the war time. Before entering upon the main subject, we must study the dynamic condition of the capital absorbed as war funds from the money market, directly or indirectly. The chief sources of revenue for the war funds, as we have seen before, were the revenues from public loans and tax increases, and the transfer from the general accounts. Other sources were the specialaccounts funds, the contributions to the war funds, the income from the sale of government properties, the receipts from transportation, and special and miscellaneous revenues. In addition, there was the surplus and increase of revenue in the general accounts. Besides, the deficits of these funds were made I60 EFFECTS ON MONETARY CIRCULATION I6I up by the issue of the Treasury bills, temporary borrowings from the Bank of Japan, accommodation from one item to another in the Treasury finance, and the issue of war tickets. These items of revenue wrought diverse effects on the money market, according to their nature. The special-accounts funds, the accommodation from one item to another in the Treasury finance, and the surplus and increase of revenue in the general accounts, however, had no direct effect on the money market, as they did not draw funds from it. The revenues from the issue of public loans, the tax increases, the issue of the Treasury bills and temporary borrowings from the Bank of Japan exerted the greatest influence on the monetary condition. There was a difference in the effects on the money market of Japan between the importation of foreign capital and the absorption of domestic funds for supplying the war needs. The latter naturally caused a scarcity of capital and more or less stringency in the money market by suddenly diverting a huge amount of funds from industrial circles. If there had been no other circumstance to relieve the situation, a blow would have been dealt to all new enterprises, at least for a time, and also a stiffening of monetary circulation would have resulted from an abrupt change in the demand for goods, which must cause the collapse of a part of the country's industry. Fortunately, however, the foreign loans counterbalanced the above-mentioned tendency, and when the funds raised at home began to be scattered among the people as war expenditures the blow to the domestic industry proved comparatively slight. The imported capital lightened the pressure on domestic funds and prevented the outflow of specie for the purchase of military supplies from abroad. Moreover, the amount of currency circulating in the country was augmented, which not only made the circulation of capital easy, but also inspired the general industrial world with a new spirit of activity and stimulated a fresh demand for capital. The receipts from foreign loans and their monthly amounts were as follows: 12 1 62 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR STERLING BONDS, JUNE, 1904-JANUARY, 1906 Issue Date ~~~British American German Joapaines I ssue Date currency currency currency currneny Pounds Dollars Marks Yen First.......June, I904 4,1I50,000..... 40,040, 201I July, 1904 2,500,000... 24,120,603 Aug., I1904 2,350,000... 22,673,367 Total. 9,000,00ooo.. 86,834,1I71I Second. Dec., I904 I1,275,000 2,875,691 i.. 8,ooi,588 Jan., 1905 1,500,000 22,472,659... 59,016,781 Feb., 1 905 1,500,000 I.... 4,472,362 Mar., 1905 930,000..... 8,972,864 Total.. ---5,205,000 25,348,350.... 100,463,595 Third.... Apr., 1905 2,51I2,500 3,614,583... 31,405,890 May, 1905 3,000,000 3,614,583...I6,09,408 June, 1 905 3,000,000 56,141,709 I.. 40,226,603 July, 1905 2,250,000... 21,708,543 Aug., 1905 2,250,000... 21, 708,543 Total.1. 3,012,500 63,370,875... 251,I58,987 Fourth....Aug., 1905 1,675,000 4,81I9,444 47,035,000 47,904,671 Sept., 1905 1,000,000..... 9,648,241 Oct., 1905 1,000,000... 43,456,250 30,1I50,754 Nov., 1905 1,000,000 37,427,806... 83,836,16i Dec., 1 905 2,000,000... 86,912,500 60,301,508 Jan., 1906 2,000,000..... 19,296,482 Total. 8,675,000 42,247,250 177,403,750 251,I37,817 The above four foreign loans were the ones newly issued for the war, their combined face value totaling 8oo,ooo,ooo yen. In addition, portions of the exchequer bonds of the fourth and fifth issues were sold abroad, and the foreign capital, amounting to 1 20,000,000 yen, flowed into the country. These exchequer bonds were redeemed with the fifth foreign loan Of 250,000,000 yen, issued for consolidation in December, 1905, and paid up by the end of May, 1906. About ioo,ooo,ooo yen of this sum probably fell into the hands of our countrymen. The foreign capital imported by private concerns since 1905 amounted to somewhere between EFFECTS ON MONETARY CIRCULATION 163 50,000,000 yen and 6o,ooo,ooo yen. Altogether, the foreign capital utilized by our country during the war-time period reached to upward of i,ooo,ooo,ooo yen. As for the internal funds, the public loans must first be examined. The proceeds from the first issue of exchequer bonds were received at the Treasury from April, 1904, to July, 1905; from the second issue, from July, 1 904, to July, 1905; from the third issue, from December, 1904, to October, 1905; from the fourth issue, from April, 1905, to November, 1905; and from the fifth issue, from June, 1905, to February, 1906. These receipts aggregated over 434,000,000 yen. As already stated the exchequer bonds of the fourth and fifth issues were partly sold abroad and were redeemed by the issue of the consolidation foreign loan, thus converting an internal loan into a foreign loan soon after its issue. EXCHEQUER BONDS AND MONTHLY RECEIPTS a Date First Second Third Fourth Fifth Total I904 Yen Yen Yen Yen Yen Yen April.......,747,786......... *...... I,747,786 May....... 6,037,530................ 6,037,530 June....... 12,470,i6g................ I2,470,169 July.......13,811,I03 673,819............ I4,484,922 August......6,843,I3I 8,6i5,850............ I5,458,98i September..... 9,427,03I I2,018,327............ 21,445,358 Octoher...... 8,950,495 9,635,55I............ 28,586,046 Novemher.... io,8o,o58 8,244,020............ 18,424,078 Decemher..... 8,879,786 7,075,209 1,507,044........ I7,462,039 1905 January...... 3,393,575 6,731,877 4,385,883........ 14,51I,335 Fehruary..... 265,279 8,352,670 6,74I,148........ I5,359,097 March...... 496,932 I5,998,204 I5,873,1i82........ 32,368,3i8 April....... 20,192 I0,575,800 11,041,356 2,778,295.... 2 4,41I5,643 May....... 5,494 2,590,475 8,590,945 15,845,535.... 27,032,449 June....... 2,295 435,791 14,767,392 56,614,085 4,175,102 75,994,665 July..1..... 12 23,931 5,327,279 3,775,355 7,442,078 i6,568,755 August.............. 2,889,883 5,770,185 41,460,587 50,120,655 Septemher............. 147,754 4,083,871 18,198,190 22,429,815 Octoher.............. 2 5,941 1,201,114 9,494,899 10,721,954 Novemher........*........ 171,069 6,267,548 6,43 8,61I7 Decemher..1.. 3,638............ 2,81I2,71I5 2,826,353 1906 January...................... 30,176 30,176 Fehruary......... 57,865 21.... 85,693 143,579 March.......... *168,481 *47,592 59,354........ *I56,7I9 April............... *68,506 31,580.... *36,926 May................. *... 16,126 22,085 5,959 June....................... *4,991 *4,991 Total.....92,376,I25 90,981,797 71,288,676 90,254,963 89,984,082 434,885,643 a The receipts hearing the mark * were transferred to the miscellaneous incomes in the special accounts of the extraordinary military expenditures, as they came into the Treasury too late, Other figures represent the receipts paid in on time. 164 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR Besides the exchequer bonds, the extraordinary-affairs loans were issued after the war as a part of the funds for the war-time military expenditures. The receipts from these loans came to the Treasury from March, 1906, to March, 1907. They amounted to over 294,000,000 yen, of which over I89,ooo,ooo yen were spent as military funds and over 105,000,000 yen for rewards and pensions. MONTHLY RECEIPTS FROM EXTRAORDINARY-AFFAIRS LOANS a Issued for Issued as Datem uds rewards and Total pensions 1906 Yen Yen Yen March.................. 3,020,450.... 3,020,450 April................... 35,616,414.... 35,616,414 May................... 52,452,676.... 52,452,676 June.................... 27,888,072.... 27,888,072 July................... 31,805,621 95,000,000 126,805,621 August................. 32,701,749 3,975,418 36,677,167 September.............. 5,347,20I.... 5,347,20I October................. 77,642 194,275 371,917 November............... 37,867 561,450 599,317 December............... 35,650 40,375 76,025 1907 January................. *I,9 I I.... 1*,9II February................ *7,213 663,765 646,552 March...................... 4,751,52 4,751,520 Total............... I89,o64,218 I05,I86,803 294,251,021 aThe receipts bearing the mark * were transferred to the miscellaneous incomes in the special accounts of the extraordinary military expenditures, as they came into the Treasury too late. Other figures represent the receipts paid in on time. The loans for military funds were issued in accordance with the usual method, but those for rewards and pensions were issued in the form of grants. The latter, therefore, did not absorb any capital actually from the money market, but they are included in the totals of the war-time military expenditures for the sake of convenience. After domestic loans already described, the next important channel through which home capital was absorbed for war purposes was the increase of taxes. Taxation means a compulsory and universal contribution of part of the people's incomes, which would otherwise add to their capital; in this respect, taxation differs in its effect on the money market from the issue of a loan, by which only floating capital is absorbed. The funds, therefore, which are received as taxes include many fragmentary sums which cannot form a part of the capital at EFFECTS ON MONETARY CIRCULATION I65 disposal in the money market, so that the effect of tax increases on the money market must only be indirect. In other words, the tax increases operate no more than as a cause contributing to prevent an 'increase of capital in the market. From the tax increases, ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~as already stated, 260,000,000 ynwr bandi the fiscal year of I904-5 and I48,000,000 yen in the following fiscal year. Their monthly receipts can be tabulated as follows: ESTIMATED MONTHLY RECEIPTS FROM TAX INCREASES a Date First increase Second increase Total 1904 Yen Yen Yen April.....1,388,924...,388,924 May....1,388,924...I,388,924 June..3,931I,240...3,931,240 July.1.,388,924...I,388,924 August....3,3 46,61... 3,3 46,611 September....1,470,444...1,470,444 October..7,713,943....7I73,943 November..1,784,I23...1,784,123 December....8,61i5,71I3...8,615,713 1905 January......... 6,127,732...6,127,732 February......... 3,292,256...3,292,256 March...7,292,I02...7,292,102 April.10. I,293,665 1,752,5I9 I12,046,1i84 *1,839,007 May..4,1I10,203 2,005,593 6,11 I5,796 *2,060,203 June.~~~~~~~~~11,404,060 6,891,537 i18,295,597 *10 6 1,1I94,06 July...5,800,719 4,526,997 I0,327,716 August.....4,876,908 7,390,783 12,267,691 September........ 3,069,658 4,737,862 7,807,520 October..7,783,304 7,929,048 15,7I2,352 November......... 3,581,432 3,661, y839 7,243,271 December.1..I1,028,936 I1II,180,050 22,208,986 1906 January.......... 6,94I,909 6,426,886 13,368,795 February......... 5,170,960 6,197,597 1 1,368,557 March. 8,086,449 6,994,812 i5,08i,261 April......7,572,873 4,433,276 I2,006,149 May..1,282,091...1,282,091 Total. 138,744,103 74,128,799 212,872,90:2 *76,542,224 I 50,671,023 a The receipts of the fiscal year 1904-5 were estimated to be paid in between April, i904, and July, 1905; and the receipts of the following fiscal year were expected to be paid in between April, ipo5, and May, i906. The side figures marked with the asterisk (*) in the above table were expected to be paid in the fiscal year i9o5-6. The table is based on the Government Report on the Finance of the Russo-Japanese War. i66 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR Other revenues, though less important than the incomes from public loans and tax increases, were absorbed from the domestic money market between February, 1907. They amounted to a total of over The details are as follows: 1904, and July, 50,000,000 yen. MONTHLY RECEIPTS FROM OTHER SOURCES OF REVENUE, FEBRUARY, I904-JULY, 1907 Contibutons Sale of Revenue Spca Mielnou Ttl Date Contaributinds' government from trans- Speciale Miscellnueou oa to warfunds properties portation renu rvne I2904 February.... Marcb.. April..... May...... June...... July...... August..... September. October.... November. December. I905 January.... February.... Marcb... April..... May...... June...... July...... August..... September. October.... November. December. 2906 January.... February.... March..... April..... May...... June...... July...... August..... September. October.... November. December... 1907 January.... February.... Marcb... April..... May...... June...... July. Total. Yen 58,23I 778,848 267,260 184,506 93,292 77,945 75,4I5 39,474 5 5,788 i9,016 22I8,43 8 23,256 10,503 252,56i 223,382 8,242 10,901 9,482 32,986 3,2I3 2,057 34,99'I 22,845 2,409 6,96 i 4,342 5,o88 5,i08 975 2,449 229 627 65 7 2,573 205 23,550 886 iS8 Yen 9 3,2I7 7 6,6 io I3,295 52,068 40,150 30,389 32,653 20,477 33,022 44,658 69,066 58,698 66,066 68,6io 55,973 73,087 92,8,32 87,032 82,393 242,065 238,699 365,896 929,364 909,275 2,609,922 2,422,086 1,648,454 2,259,483 2,054,460 800,836 2, 299,22 I9 2,259,046 2,202,428 537,385 727,665 362,000 2,373,305 20,282 I22 Yen........................................ Yen 4,000 2 29 7,757 87,935 70,898 203,432I io,815 229,606 35,557 202,997 40,225 8,304 74,486 22,597 2,409,2921 267,580 358,226 22,362 37,862 327,322 56,296 80,825 39,323 63,872 75,842 2,207 Yen 45 4,322 2,352 9,492 5,075 ioo,66o 7,257 22,389 I25,52i6 37,825 44,339 21,250 2,004,093 37,332 44,502I 89,667 250,890 253,998 io6,igo 202,770 56,527 93,993 408,525 357,I88 382,620 269,029 2,405,987 225,538 2,829,245 293,006 222,092 252,877 383,750 2,989,228 200,326 i,665,364 3,007,625 2,057 65I 225,582 74' i6,207,520 Yen 58,285 786,346 276,222 207,293 2 49,43 5 222,755 223,062 82,5I8 92,782 89,843 i82,207 236,662 90,3 5 2,222,820 229,342 289,239 258,830 324,522 353,943 231,384 477,654 332,840 696,877 2,429,455 2,532,684 3,227,027 2,484,107 6,097,396 2,665,478 3,236,280 2,197,203 2,665,I54 2,895,049 2,050,464 4,206,838 937,327 3,593,665 5,925,445 27,738 29,424 226,236 742 28,596 253,878 2,053,049 778,054 628,576 27,769 3,484 79,550 226,853 2,266,297 507,087 2,598,753 67,440 2,503,224 2,445,234 2,406 28,733 2,332,273 28,875,I26 9,278,783 I 3,52i6,326~ 50,208,908 The grand total of the war f unds, including the revenues from domestic and foreign loans, the incomes from the issue EFFECTS ON MONETARY CIRCULATION I67 of exchequer bonds, the transfer from the general accounts based upon the revenues from tax increases, the transfer from the special-accounts funds, as well as the contributions to war funds, the proceeds from the sale of government properties, the incomes from transportation, special and miscellaneous incomes amounted to 1,721,212,256 yen. Of this figure, 983,845,592 yen were receipts from public loans; 434,885,638 yen, receipts from the exchequer bonds; 182,430,I29 yen, transfer from the general accounts; 69,311,977 yen, accommodation from the special-accounts funds; 2,331,176 yen, contributions to the war funds; I8,875,115 yen, sale of government properties; 9,908,784 yen, income from transportation; 3,516,325 yen, special revenue; I6,107,52I yen, miscellaneous revenue. In addition to these revenues, there were 221,000,000 yen of the war-time administrative funds (received into the general accounts), which must be included in the war-expenditure funds. Setting aside this item for the present, we shall see in the table on page 168 the monthly receipts for the war funds as a whole and the monthly disbursements of the war-time military expenditures. SUPPLY AND DEMAND OF CAPITAL General survey The absorption of an enormous amount of funds at home for war expenditures naturally tended to cause a dearth of capital among the people. The slump in the general economic activity due to the war, however, accompanied a fall in the demands for capital, at least at the beginning of the hostilities, which saved the money market from becoming stringent. While the national capital was increasing as the war progressed, through the encouraging of the habit of thrift, the great inflow of foreign money began in May, 1904, to swell the funds at the disposal of the country. Moreover, the issue of the exchequer bonds could be repeated without any serious effect on the market, because precautions were taken to lend sparingly and thus to increase the available funds. Simultaneously, de i68 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR MONTHLY INCOME AND DISBURSEMENT FOR WAR, 1903-1907 Date Income Disbursement I903 Yen Yen October....I,762 November.... 2,876 December...i 6,006,682 1904 January....4,399,295 February. 58,285 20,1I30,454 MN'arch. 2,i91,847 25,832,II7 April. 27,326,424 29,663,261 May.1i8,309,01I9 30,984,656 June....47,306,477 33,04I,423 July.53,387,830 42,3 80,691i August. 48,256,529 71I,479,419 September.1.I7,09 7,0 59 53,099,431I October. 21,160,283 56,973,688 November. 31,236,024 49,398,312 December..59,966,809 65,761,480 1905 January..73,91i6,385 46,378,275 February. 47,350,894 62,291I,455 March.41,251,028 67,135,817 April. 68,510,948 66,956,623 May.1. 02,373,020 85,323,524 June.1.. 92,872,145 80,441,491 July. 104,768,592 68,912,350 August. 118,522,725 57,465,491 September.1i8,001,559 46,385,545 October. 47,I29,874 47,879,228 November. ii8,119,268 30,607,439 December. 61,230,262 44,450,603 1906 January..56,367,1I50 15,429,361i February. 1,547,487 1 5,804,09 7 March.1.. 3,998,743 26,540,041 April. 38,032,335 20,558,022 May....58,533,656 13,626,184 June....30,548,559 14,547,045 July....35,041,901 5,626,821I August.1I33,504,368 107,585,638 September. 7,007,064 7,215,434 October. 3,228,379 11i,860,836 November. 2,649,7 81 7,675,426 December.4,263,693 I11,982,352 1907 January..937,327 7,015,349 February..4,257,431 11,0l83,065 March.10..i,676,965 13,698,961 April. 17,738 4,703,086 May. 29,414 2,432,155 June....226,237 7,700,252 July.......741 Total.......1,721,212,256 1,508,472,538 EFFECTS ON MONETARY CIRCULATION I69 posits were constantly increasing. In the meantime, activity was gradually resumed in the general industrial circles, owing to the rousing of the popular mind by the repeated triumphs of our forces, to the increase of demands for munitions and other war supplies, and to the rise in purchasing power among the people through the inflow of foreign capital. From the spring of 1905 to July or August of the same year business was prosperous, prices soared high, convertible notes were issued abundantly, loans at banks increased, encouraging brisk investment, and the money interest showed some tendency to rise. Due to our successes in war, our financial credit in the world was enhanced, so that the exchequer bonds and other negotiable instruments were purchased abroad in large amounts, thus greatly adding to the inflow of foreign capital. In the latter half of I905, however, the disappointing peace terms were reported from America and the prospects of the rice crop were unsatisfactory, so that the demand for capital was on the decline, and there was a general depression of trade and a slackness in the money market. After November, I905, the rate of interest fell markedly, and in I906, though post bellum enterprises were put on foot in rapid succession, the conditions of monetary circulation did not improve to any appreciable degree. In I907 the economic circles were calm at first, but due to there being no further importation of foreign capital, and to a number of bank failures after March, through a reaction to the former boom, the stringency of money reached its climax in May and June, although the newly organized corporations had been able to begin business before that. Such general conditions of the money market resulted in changes in the rate of interest, in increase or decrease in the lending of deposit money, and affected the system of conversion. These economic phenomena will be briefly discussed. Changes in the rate of interest Under the circumstances mentioned above, there were fluctuations in the rate of interest, but the waves were not 170 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR very high. At the outset of the war capital at home was accumulated, though much of it was absorbed in military expenditures, and the economic stagnation encouraged no fresh investment; so the rate of interest was almost stationary, or even fell slightly on the fixed deposits throughout the country. However, as the war situation progressed, more funds were required by reviving activities of the general industrial world and by the flotation of national loans, etc. Though an enormous amount of foreign capital made its way into our country, the rate of interest had an upward tendency from June or July, I904, to the latter half of I905, when it reached the highest. A downward tendency was manifest in February or March, I906, and the gradual fall continued until the first half of I907. To cite concrete figures, the Bank of Japan raised the rate of interest for the first time in July, 1904, after the war had been declared, next in December of the same year, and lastly in June, I905. The combined rate increase was only 6 rin per diem per Ioo yen as compared with the rate before the war. Then the rate began to fall, and it was reduced by 4 rin in the two changes, in March and May, I906, as compared with the highest rate in the war time. Discount rate Bank of JaDate of revision pan interest on call loan Bank of O Other banks Japan Sen Sen Sen March 18, 903................. I.7 1.6 1.9 July 2, 1904................. I 9 1.8 2. I December 19, I904................. I 2.0 2.3 June I6, I905................. 2.3 2.2 2.5 March 12, I906................. 2. 2. 2 2.3 M ay I, I906................. I.9 I.8 2.I The rate of interest on deposit money throughout the country fell by.ooI in and after November, I903, so that it stood at.059 for a long time. But it rose again to.06 in April, I904, which continued to July, 1905, when the rate EFFECTS ON MONETARY CIRCULATION 17 I FLUCTUATION OF INTEREST, 1904-1907 At the Throughout the country Tokyo Banks Syndicate Date Interest on Discount rate Interest on fixed deposit per diem fixed deposit 1904 Per cent Sen Per cent January.................... 0.59 2.84 0.547 February...................2.92 0.553 March.................... 2.9I 0.552 April.................... 0.6o 2.92 0.550 May...................... 2.93 0.549 June...................... itt0.554 July.................. " 2.97 0.558 August..................2.98 0.556 September................ 2.97 0.561 October................. " 2.96 o.560 November............. 2.94 0.562 December................. i 2.99 0.563 1905 January.................... ". 3 00 0.563 February..................., 2.97 0.565 March..................... 294 o.56I April............... 2.96 0.563 May..................... 2.95 0.562 June....................... 3.00 o.56I July....................... o.6 304 0.575 August.................. 3.08 0.589 September..................62 3.07 0.590 October................. 3.05 0.57I November.................. o.6 304 0.586 December................. o. 62 3.02 0.588 I906 January................... 3-0I 0.566 February................... o.6 2.96 0.588 March....................2.89 0.57I April.0.....................60 2.84 0.562 May................... 3.82 0.557 June...................., 2.79 0.554 July....................... 59 2.74 0.548 August................ o0.58 2.69 0.549 September............... 2.67 0.546 October.................... "2.65 ( November................ o. 57 2.62 December...........2....... 261 1907 January.................... 2.62 February................... 2.59 March.................... 2.58 April..............2.60 May..............2.62( June........................ 2.67 172 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR began to show a steady upward tendency. Once, in November of that year, it fell to.06I, but in the following month the interest rose again to.062. Once more the rate became.06I, in March, I906, after which the money market gradually slackened so that the rate became.06 in April and.059 in July, finally to come down to.058 in and after August. A further fall to.057 occurred in November of the same year. The changes in the daily rate on discount went almost parallel with the figures indicated in the table on page I71. Bank deposits and loans First let us consider bank deposits alone. These and postal savings markedly increased despite the outbreak of hostilities, due partly to the greater thrift and diligence of the people and partly to the prosperity of those engaged in the industries which absorbed a huge amount of outlay for military supplies. The ordinary deposits at the Bank of Japan in 1903 had been 2,000,000 yen to I I,ooo,ooo yen at every month end. After the war began they rapidly increased, so that their total at every month end was 6,000,000 yen to 13,000,000 yen in 1904; 6,000,000 yen to 14,000,000 yen in 1905; and 5,000,ooo yen to 26,000,000 yen in I906. This was partly due to the fact that large sums of war expenditures were scattered in the market and the amount returning to the Treasury was much smaller, so that the business boom could not absorb all the available capital, which was inflated through the importation of foreign money and other causes, and the monetary circulation generally slackened. The monthly amounts of bank deposits are shown in the subjoined table. These monthly amounts were subjected to abrupt changes through demands of capital for settling accounts for new enterprises. This point, however, is not important enough to be discussed here. The deposits at banks throughout the country were also on the increase. While they totaled 435,000,000 yen in October, 1903, 449,000,000 yen were attained in June, 1904; 465,000,ooo yen in December of the same year; more than 500,000,000 yen in and after April, I905; and 599,000,000 yen in March, EFFECTS ON MONETARY CIRCULATION '73 MONTHLY BANK DEPOSITS AND POSTAL SAVINGS, OCTOBER, 1903-JUNE, 1907 Date ~~Ordinary Deposits at other Postal Date ~~deposits at banks in imporBank of Japan tant centers savings 1903 I904 January.......... February......... March.. April... July. August.. September. October. November.. December. 1905 January.......... February......... March.. April. May........... July. August. September. October. November... December.. 1906 January.......... February......... March. April.. May.. June........... July. August. September..... October. November........ December.. 1907 January.......... February......... March.. April.. May.. Yen 8,069,51i8 6,050,769 1 2,980, 5I11 9,387,482 9,795,889 13,808,476 9,988,235 12,578,872 7,615,972 8,932,965 9,036,556 9,281,158 12,424,704 6,677,266 11,221,210 I11,749,376 I13,664,2 82 I4,-848,3'09 11I,549,778 4,670,11 I9 6,923,822 6,265,645 7,554,851 6,278,493 14,025,267 8,499,739 16,242,298 26,369,631 22,291,907 20,425,204 15,411I,593 14,710,172 10,462,133 20,537,676 25,985,127 13,1I04,766 6,287,726 11I,264,288 9,690,724 6,546,250 10,523,928 1 4,967,91I9 11i,341,062 Yen Yen 435,569,832 31,709,261 432,866,500 43 7,991I, 114 439,164,210 435,288,716 444,043,487 449.073,237 461,876,765 449,586,427 459,264,827 453,602,851I 457,067,753 465,656,014 467,017,987 483,045,10 6 488,912,749 500,641,524 501,342,091 517,408,209 504,481,545 502,686,434 504,435,608 514,337,420 518,657,873 534,354,445 540,040,620 56i,053,705 599,108,931 605,062,757 624,502,774 669,251,372 643,223,338 647,508,486 687,901,916 1,248,940,917 777,334,887 810,484,536 880,953,387 760,192,825 750,11 I4,682 718,357,758 7I7,841,809 724,422,731 31,270,029 -30,760,032 31,011,014 31l,096,826 31,532,617 33,309,089 34,495,260 35,260,059 36,447,4-79 37,224,1I15 37,776,593 3 8,11 I7,526 38,959,686 39,862,112 40,889,578 41,346,310 42,705,490 43,727,391 46,526,844 48,058,370 50,037,588 50,532,645 52,227,946 52,150,352 52,001,658 53,008,323 53,432,918 53,31I2,095 54,149,255 55,325,892 58,233,800 59,698,734 6i,271,680 62,958,I50 65,417,335 67,I70,263 74,412,555 75,197,287 78,088,993 77,662,584 77,877,395 80,783,195 174 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR I906. Stimulated by the rise in post bellum enterprises, subscriptions to stocks were deposited at banks in large amounts. The deposits at banks, therefore, increased to 687,000,000 yen in September, I906, an increase of 250,000,000 yen as compared with the returns for October, 1903. Postal savings also increased to a noteworthy extent. The details are tabulated on page I73. Bank credits experienced a general fall at the outset of the Russo-Japanese War, as stated before, owing to the business depression and precaution in the money market. But they gradually increased later on account of larger demands for war supplies and repeated victories of our forces on land and sea, which naturally caused business activity. The amount of ordinary lending by the Bank of Japan decreased at the outbreak of the war, and the figures showed no noticeable change until November, I904. This was due to the general wariness in the money market and to a decrease in demand for fresh capital as the war weakened the spirit of enterprise. But in December, I904, capital was suddenly called for to purchase war supplies and to pay for anticipatory imports. From this time on an upward tendency continued more or less in the demand for capital on account of business activity. While the capital required was no more than twenty-four or twenty-five million yen in the beginning of the war, the amount in July, I905, exceeded Ioo,ooo,ooo yen. But after the following August the capital was gradually brought back to the bank, and at the year-end settlement of I905 the bank's loans, if the amount of discounts of Treasury bills be subtracted, amounted to only 53,000,000 yen, a decrease of 15,000,000 yen as compared with the end of 1904. The recovery of capital by the Treasury was rapid in I906, but in and after April of the same year the bank's loans slightly increased, owing to a rise in various industries. After ups and downs through I906 the increased amount represented more than II5,000,000 yen at the December settlement. Although activity still prevailed in business during I907, no remarkable increase was recorded in the amount of the EFFECTS ON MONETARY CIRCULATION '75 bank's credits, as it assumed an attitude of great wariness in lending. The increase or decrease of the loans. of private banks, as compared with those of the Bank of Japan, far better reflected the changing economic conditions. Soon after the outbreak of the War, that is, in March and April, 1904, private bank loans declined somewhat; but after this they steadily increased, for the reasons stated above, until they reached the climax in December of the same year. In I1905, again, the restoration of capital by these banks was slow and their loans attained the highest amount in August, when they reached the total figure Of 510,000,000 yen at aggregate MONTHLY FLUCTUATION IN AMOUNTS OF LOANS, OCTOBER, 1903-JUNE, I907 Ordinary Loans by Ordinary Loans by Dae loans by other banks Dae loans by other banks Dae the Bank at impor- Dae the Bank at imporof Japan a tant centers of Japan a tant centers I1903 October...... I1904 January...... February..... March...... April....... May....... June....... July....... August...... September..... October...... November..... December..... I905 January...... February..... March.... April....... May...... June....... July....... August...... September..... October...... November.. Yen 24,194,384 (5,345,000) 38,640,965 (5,345,000) 39,809,995 30,i38,850 25,851,I0,3 24,807,754 42,840,565 32,066,275 44,075,602 35,255,370 (3,ooo) 40,554,992 46,i01,794 (5oo,ooo) 79,3I7,I78 (I I,13 9,5 00) 71,457,696 (i6,665,500) 52,504,206 (10,058,500) 69,285,15I (7,64I pop) 7 2,81I7,404 (22,648,000) 74,853,901 (14,664,000) 85,663,537 (I3,226,000) 100,357,361 (21,430,000) 96,57I,I99 (23,821I,ooo) 68,25I,136 (11I,956,000) 92,49I,193 (41,870,000) 80,224,430 (30,838,000) Yen 449,702,594 460,410,088 449,473,748 445,342,923 446,532,403 450,667,685 465,912,980 470,696,569 475,066,867 465,619,918 457,204,876 455,758,556 47i,069,530 460,843,245 460,843,245 484,067,579 488,011I,023 493,065,173 512,304,382 509,256,77I 513,319,740 501,411,205 513,032,510 50I,608,368 I 1 905 December..... 1906 January...... February.. March...... April....... May....... June....... July....... August...... September..... October,.......... November..... December..... I907 January.. February..... March...... April....... May....... June....... Yen II9,233,187 (65,894,000) 80,378,963 (36,769,000) 5 8,993,31I5 (33,304,000) 22,275,884 (2,757,000) 56,125,462 (28,367,000) 59,652,705 (40,387,000) 70,45I,145 (46,630,000) 44,246,433 (24,I93,ooo) 54,702,441 (2i,814,000) 25,543,68i (596,000) 38,367,440 (50oono) 45,498,422 (1,485,000) 11I5,5 75,26 5 (48,262,000) I113,0o61i,10o8 (44,897,000) 94,243,176 (44,901,ooo) 111, 594,836 (52,667,000) I4,893,343 (55,706,000) 72,158,317 (2 2,21I7,000) 96,077,70I (23,394,000) Yen 509,142,265 509,I42,265 493,462,554 504,285,321 511I,302,595 523,067,924 546,252,984 558,615,349 583,723,122 583,500,675 996,657,691 697,904,639 720,125,314 829,708,959,. 696,932 576 704,934,985 696,495,304 685,589,774 713,273,648 a The figures in parentheses show the discounted values of Treasury bills. 176 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR for the important centers of the country. A slight decrease was the next tendency, so that by March, I906, the amount dwindled to 504,000,000 yen. But in the latter half of that year a sudden rise in industrial enterprise absorbed an amount of capital, in October, twice as large as that before the war. The monthly changes in the amounts of loans by the Bank of Japan and private banks at important centers of the country were as shown in the table on page I75. INFLATION OF CONVERTIBLE NOTES AND SPECIE RESERVE The issue of convertible bank notes was constantly on the increase during and after the war. This was partly due to the fact that bank lending for private enterprises increased as activity set in again in the business world as the war developed. The greatest causes, however, were an increase in government debts, an increase of demands for circulating capital in consequence of the issue of the exchequer bonds, and an increase in the amount of issue of the Treasury bills. The causes of the increase of convertible notes, therefore, can all be traced to the war. To cite the concrete figures showing this general trend of affairs, the issue amount of convertible notes, which averaged 200,000,000 yen during 1903, fell to I99,000,000 yen in April and May of the following year. However, after that the figure was steadily on the increase, through more borrowing by the government and the swelling of circulating capital resulting from the issue of Treasury bills. Setting aside as exceptional the amount of 286,000,000 yen attained at the settlement season of December, I904, the figure was never short of two hundred and thirty or two hundred and forty million yen. But the amount of convertible notes circulated in Korea and Manchuria between the outbreak of the war and the end of April, 1905, is estimated to have reached 30,000,000 yen; therefore, those circulating in Japan did not greatly exceed the usual total. At the end of December, I905, the issue amounted to 312,000,000 yen; at other month ends, however, the figures always remained between two hundred and sixty and two hundred and seventy EFFECTS ON MONETARY CIRCULATION I77 million yen. It was an increase in lending for private enterprises and in the issue of Treasury bills that kept up a steady inflation of capital among the people, which attained the total of 340,000,000 yen at the end of I906 and of 318,000,000 yen at the end of March, I907. Thus, there was constant inflation of convertible notes and a steady increase in the import of military supplies, naturally tending to an outflow of specie abroad. This, of course, exposed our conversion system to increasing danger. It was placed on a more steady basis subsequently by the importation of foreign capital and by other means calculated to check the outflow of specie and to absorb more specie reserve into the Treasury. Facts confirm the statement that the outflow of specie was most marked in the early stages of the war. The reserve, which stood at I17,000,000 yen in December, 1903, decreased to 68,000,000 yen in May, I904, so that in only five months there was an outflow of specie to the amount of 49,000,000 yen. If no proper measures had been taken and specie had continued to go out of the country, the foundation of our currency system would have been shaken, or at least monetary troubles would have resulted from a reduction of currency. But the danger was duly averted by the various efforts of the government, such as the importation of foreign capital, the curtailment in the amount of credit to foreign countries, and skilful use of foreign exchange. The money raised by foreign loans was used as funds for foreign exchange in the payment of credit abroad and for payment of interest on bonds in foreign countries. Besides these and other negative methods to prevent the outflow of specie, a positive measure was also adopted of buying gold bullion abroad and sending it to Japan in large amounts; silver bullion, too, was imported as material for minting yen silver coins and subsidiary silver pieces. The amounts of gold and silver thus imported from June 2I, 1904, to March 25, 1907, were as follows: Fund for purchase of gold bullion, ~I,I,957,267; foreign coins, $5,370,366; total in Japanese money, 29,539,310 yen. 13 178 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR Fund for purchase of silver bullion, ~1,368,I29; foreign coins, $676,265; total in Japanese money, I4,546,055 yen. Fund for purchase of Mexican silver bullion, ~596,075; total in Japanese money, 5,761,540 yen. The government, moreover, tried its best to curtail the expenses to be defrayed in foreign countries, in order to economize the payment in specie as much as possible. General expenditures were curtailed of course, but those to be paid abroad, excepting the items absolutely and urgently necessary, were postponed. To attain this end the monthly amount payable abroad by each department of the government was fixed in March, 1904. In the following year, 1905, the same policy was maintained; and again in I906, although the war had come to an end, the industrial boom, the payment of principal and interest of national loans, and post bellum military expenditures all still demanded an outflow of specie. As a matter of fact, the actual payment abroad always exceeded the prescribed amount. In 1904, for instance, I36,I80,000 yen was paid, against 79,850,000 yen in the estimate; in I905, 203,350,000 yen was paid up to the end of the year, against 94,670,000 yen of the first estimate, though later the revised estimate allowed 236,510,00o yen to be paid abroad. However, there is no doubt that such a measure of precaution resulted in restricting payment to foreign countries. In regard to the utilization of foreign exchange for the same object, the government directed the Bank of Japan, as war became inevitable, to let the Yokohama Specie Bank buy up outgoing bills of exchange as much as possible at its offices in Japan, eventually allowing them to buy such bills even at a premium to compete with foreign banks in the country. These were placed at the disposal of the government in payment to foreign countries. Restriction was also put on the incoming bills of exchange, and thus efforts were made to accumulate funds for payment in foreign countries. In this way the government employed every possible means for the maintenance of specie reserve. The following table shows that the foundation of our conversion system was not shaken at all. EFFECTS ON MONETARY CIRCULATION I79 FLUCTUATION OF AMOUNTS OF CONVERTIBLE NOTES AND SPECIE RESERVE, OCTOBER, 1903-JUNE, I907 - Date Convertible notes Specie reserve for of Bank of Japan convertible bank notes 1903 Yen Yen October.....209,202,336 11I6,491I,949 I1904 January....2I4,597,368 105,931,908 February............ 221,890,400 I00,93I,307 March. 2I3,49,15 92,127,709 April.199ig,019,965 80,82I,273 May.1. 99,977,306 68,087,262 June.....232,072,757 92,793,834 July...232,766,644 109,5I2,477 August. 240,366,435 11I7,292,602 September. 239,964,28i1 1I0,002,09 5 October. 240,937,503 99,I57,356 November. 248,069,903 84,924,654 December. 286,625,752 83,581,226 I905 January..274,855,451 119,672,141 February. 263,484,047 11I9,560, 195 March. 251,202,479 I02,i63,093 April..238,196,171 100,274,298 May.....259,733,684 127,165,929 June.~~~~~~~~~265,5I4,474 107,733,010 July. 277,300,837 I112,604,902 August. 263,286,209 104,443,970 September. 262,690,683 104,049,17 October...268,995,347 103,985,301 November...273,557,429 102,538,840 December..312,790,8i9 I115,595,026 1906 January......278,999,364 124,289,999 February. 262,569,040 124,574,375 March. 269,091,983 122,732,662 April..259,876,022 123,7:23,563 May.....253,618,323 144,930,983 June.~~~~~~~~~274,576,279 143,621,797 July......262,545,329 143,05.7,585 August..293,676,425 148,335,457 September..277,502,732 146,11 I7,31I6 October..285,344,857 146,411I,339 November. 290,525,470 145,284,369 December. 341,766,164 147,202,125 I907 January.~~~~~~~~326,806,706 148,386,606 February. 3I9,027,012 146,10 8,692 March.....31I8,732,159 144,921,302 April. 299,355,568 104,222,726 May....294,202,480 139,681,024 June............. 332,855,906 148,081,936 CHAPTER IV EFFECTS ON COMMERCE GENERAL REMARKS The Russo-Japanese War had various effects on our commerce. Trade in general and domestic commerce in particular became extremely inactive immediately after the outbreak of the war. But when the first shock of war passed and as the conflict progressed, both economic conditions and the popular mind recovered their normal equanimity. Purchasing power was stimulated and increased by various circumstances, which gradually revived the home market, while foreign trade grew apace through the importation of war supplies and through the thrift and industry of the people, who were determined to bring the national struggle to a successful issue. Thus, the blow to commerce dealt by the war was not severe. The home market began to improve toward the end of the war, and rapidly developed with the recovery of peaceful demands after the war. Our foreign trade, too, though it experienced adverse fortune for a time, made marked progress throughout the war. What features of war, then, produced such commercial prosperity? This is the subject of our study in this chapter, and we shall begin with the internal trade. DOMESTIC COMMERCE General view of the effects Available statistics being incomplete, it is hardly possible to show in accurate figures the effects of the Russo-Japanese War on our home trade; but it is not difficult to state and explain the general trend of these effects without numerical evidence. In a word, the domestic commerce was injured to some extent by the war, from the following causes: (I) The RussoJapanese War was the greatest war Japan ever waged, and 180 EFFECTS ON COMMERCE Russia was a most formidable enemy for Japan at the time. The people, therefore, bent all their energies to finance the war fully, which made them exercise strict economy. Out of sympathy for their brethren at the front, they took to saving as much as possible to supply the fighters with their needs. (2) The government issued exchequer bonds and absorbed capital into the Treasury, while it put in force the extraordinary special tax law, thus adding to the people's burden directly or indirectly. (3) The government also carried out a policy of postponement or abandonment in the civil engineering and building programs already formulated. Curtailment of expenditure was effected in private concerns also, in view of the gloomy economic prospects. The natural outcome of this was that the number of persons thrown out of employment increased and a general depression of industry ensued. (4) A large part of the transportation system was turned to war purposes, the closing up of land transportation in particular greatly impeding business transactions. It was inevitable, therefore, that the internal commerce of Japan should have been more or less injured by these conditions, which are perhaps common to all wars. These injurious effects on commerce, however, were not felt uniformly throughout the period of war. The worst features of the business market lasted only a few months immediately after the opening of the war. This first shock over, various circumstances gradually mitigated the evil results and substantially helped to restore the activity of the market: (I) Popular anxiety and commercial panic gradually lessened with victory after victory of our forces on land and sea, in the wake of a signal success at Kiuliencheng on May I, 1904. (2) The rice crop of I904 amounted to 5I,ooo,ooo koku (one koku being equal to 4.9629 bushels), the largest harvest that was ever recorded in Japan. Nevertheless, the price of rice maintained the high average of about 13 yen per koku, so that the popular spirit and market activity began to rise by August or September of that year. In 1905 an exceptionally bad crop of rice-only 38,000,000 koku of actual harvest-produced the contrary effects on the market. 182 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR (3) As the war situation developed, the demand for war supplies suddenly increased, and a part of the large amount of foreign capital circulated among the people and added to their purchasing power. Owing to these causes, the domestic trade gradually approached its normal condition, and the blow dealt to it was not so keenly felt as might otherwise have been the case. The returns of the opening and closing of shops are the only available symptoms of this general condition of commerce; so we shall turn our attention to this subject now. Though these returns can not be taken as an accurate index, we believe they indicate the essential points of the problem. Irrespective of the class of business, large shops were seldom opened and consequently seldom experienced the sadness of closing. Businesses that could be conducted without experience and with small capital, which would quickly revert to the investors, were opened most frequently. They included dealing in grains, kitchenware, confectionery, tobacco, liquors, vegetables, fruits, footgear, fish, toilet articles, cast-off clothes, and keepSHOPS OPENED AND CLOSED, I902-1904 Increase or decrease Names of I902 I903 1904 in I904 compared with revenue su- 19o3 perintending __ offices a Opened Closed Opened Closed Opened Closed Opened Closed Sapporo...... 4,971 4,102 5,929 4,474 5,928 6,020 - I + 1,546 Tokyo....... 2,436 4,075 2,177 4,480 1,924 6,322 - 253 + 1,842 Kyoto....... Io,396 I0,071 I0,429 IO,539 0I,I94 14,222 - 235 + 3,683 Osaka....... 2,123 1,956 I,938 2,475 2,830 4,400 + 892 +-,925 Yokohama.... 64 694 314 739 329 846 + 5 + I07 Kobe........ 15,670 12,280 14,833 13,657 15,702 18,388 + 869 + 4,73 Nagasaki..... 245 26 138 307 254 454 + 1 6 + 147 Nagano...... 4,I07 3,422 4,574 3,676 4,466 5,436 - Io8 + 1,760 Utsunomiya.. 4,251 3,456 4,790 6,203 4,I30 6,873 - 660 + 670 Nagoya...... 3,625 3,Io8 4,139 4,IOI 3,230 5,790 - 909 + 1,689 Sendai....... IoI 165 96 I69 134 228 + 38 + 59 Akita........ 676 826 950 824 558 I,070 - 392 + 246 Kanagawa... 2,253 1,501 3,873 2,105 2,924 4,746 - 949 + 2,641 Matsuye..... 314 309 245 279 113 208 - 132 - 71 Hiroshima.... 5,159 6,206 6,2ii 5,694 4,816 6,238 -1,395 + 544 Marugame.... 7,656 6,254 7,937 7,247 6,982 I2,000 - 955 + 4,753 Kumamoto... 1,254 1,313 1,223 I,395 826 2,378 - 397 + 983 Kagoshima...,611 1,671 863 1,359 882 2,078 + 19 + 719 Total.... 67,03 64,670 70,659 69,713 66,222 97,697 4,437 +27,984 ~Some revenue superintending offices reported only on those tradesmen who paid national taxes, while others included in their statistics both those who paid national taxes and those who paid local taxes. EFFECTS ON COMMERCE 183 ing cheap eating houses. Such small tradesmen being apt to become bankrupt through slight hitches, the closings of their businesses were most frequent. In fact, these men could open or close their shops in quick response to the ups and downs of trade, so that the statistics of their activity and inactivity might be expected to run almost parallel with those indicating the general conditions of the market. Previously to the war a large number of the farming population used to pour into the cities year after year and swell the business population of the cities, but the number of new shops began to fall far below that of closed shops after the outbreak of the war began to tell upon these tradesmen. (See table on the preceding page.) Similar data for 1905 and later are lacking; so we must now limit our observations to the tradesmen who paid national taxes, according to the annual reports of the Revenue Bureau, in the Treasury department. TRADESMEN PAYING NATIONAL TAXES, I903-I907 Proceeds Amount Number Number Rental Number of taxes Year of trades- of estab- value of of em- at fixed men lishments Wholesale Retail buildings ployees rates Yen Yen Yen Yen I903..... 318,312 319,401 1,183,722,280 535,140,125 26,791,351 629,914 3,096,347 1904..... 324,918 325,473 1,344,326,948 565,364,850 28,569,421 65I,453 3,263,965 I905..... 312,091 312,613 1,234,107,617 577,456,020 28,I20,564 627,252 3,235,595 I906..... 316,385 316,822 I,358,605,372 616,547,504 28,954,023 635,134 3,397,610 I907...... 328,972 j 329,609 1,507,154,290 622,527,347 30,819,993 657,108 3,576,512 Although the depression in 1904 as a result of the war is not visible in the above table (it must be noted that in I904 the rental value of buildings was revised, and that, owing to the exigencies of war, the statistics for that year were carefully compiled), considerable decrease is seen in the number of tradesmen for 1905, as well as in the amount of taxes at fixed rates. But all the causes of depression above described disappeared with the restoration of peace, and the peace-time demand for ordinary commodities, which was minimized to the extreme through war, reasserted itself with marked rapid 184 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR ity. These facts are amply attested by the figures for I906 and 1907 in the foregoing table. The general effects of the war on domestic commerce having thus been outlined, it now remains for us to note that these effects showed widely divergent aspects according to classes and places of business, and that these differences in effects can all be explained by the war. Observations according to classes of business The blow was particularly heavy on some classes of business and not at all heavy on others, and there were a few businesses that became more active through the war. Roughly speaking, the demand for luxuries greatly diminished, while that for war supplies and daily necessaries suddenly increased, so that a fresh turn was made in the relations of demand and supply. This can be ascertained by a comparative study of the prices of various commodities, but the statistics of what happened in 1904 compiled by the Revenue Bureau more directly prove this point. (a) Mercantile businesses which suffered from the war were mainly the following: (I) Cloths of all kinds. There was more or less demand for cotton fabrics and other cheap goods, some of which even rose in price to a small extent, but the demand for silk fabrics suddenly fell off and the proceeds from their sale decreased by 24 per cent. (2) Old clothes. The proceeds decreased by some 12 per cent. (3) Miscellaneous goods and groceries. Although the proceeds in Osaka increased by 20 per cent under special circumstances, the sale in these goods throughout the country decreased by 14 per cent. (4) Cotton yarn. The proceeds decreased by I6 per cent on the average. (5) Second-hand goods. According to the only available reports made by the Marugame Revenue Superintending Office, the proceeds decreased approximately by 30 per cent in the localities under its jurisdiction. (6) Drugs and chemicals. Though the condition of EFFECTS ON COMMERCE I85 trade in military medical supplies was prosperous, the sale of chemicals used in industry fell 12 per cent. (7) Hardware. The proceeds fell nearly 26 per cent through decrease in the making of machinery and tools. (8) Sugar. As a result of the increase of taxation and more economical living on the part of the people, the proceeds from the sale of sugar decreased about 10 per cent. (9) Fertilizers. Decrease of proceeds was I8 per cent, owing to the weakening of the purchasing power of farmers. (io) Timber. Decrease in sale was I4 per cent through postponement or suspension of engineering and building work. (I ) Contract work. Decrease in the amount of contracts was 43 per cent. (12) Sake. Decrease in sale was 21 per cent, because parting banquets connected with the war could not counterbalance the stringent economy of the people. (13) Pawnbrokers. Their business declined as the economic depression made the life of the poor still harder. In consequence, pawning increased Io per cent, but redemption decreased 20 per cent. Unredeemed goods also increased, while their sale did not make good the principal and interest. (14) Inns. Decrease of income about 15 per cent. (15) Restaurants. Decrease of income 32 per cent, the blow to these being most severe. (I6) The decrease in proceeds in other businesses included 23 per cent in footgear, 24 per cent in confectionery, 26 per cent in kitchenware, 29 per cent in earthenware, 37 per cent in lacquer-ware, and 17 per cent in paper. (b) Businesses which were least affected by the war or which even became more prosperous were: (I) Leathers and hides. In Osaka, the center of this trade, the sale increased nearly 63 per cent, due to large demands by the Army. (2) Marine products. These also were largely demanded by the Army, so that in the city of Osaka alone their sale increased 67 per cent. (3) Horses and cattle, meat, rice-straw mats and bags, 186 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR dried vegetables, and fodder sold well through the war, but the percentage of increase in their sale is not recorded. (4) Coal. No decrease in consumption because the military use of coal was much increased. (5) Grains. Kobe at one time became an important center for supplying the Army with food grains. The grain market there became very active and the sale increased by 43 per cent. The consumption of rice and barley by the general public was not much affected. (6) Fuel and charcoal. No decrease in the demand for these. (7) Kerosene oil. The proceeds from the sale of kerosene oil increased 7 per cent, owing to the imposition of consumption tax. (8) Raw silk. Owing to a brisk market abroad, the proceeds from the export increased by 13 per cent. This general trend of affairs underwent little change in 1905, the second year of the war. The restoration of peace produced effects exactly opposite to those mentioned above; that is to say, peace-time demands for commodities gave a new impetus to the economic world and emancipated it from the former pressure. The demands for war supplies declined rapidly, and the trade in luxuries and daily necessaries became active. Observations according to localities Just as the general bad effect of war upon commerce was not equally shared by different classes of business, so the effect was diversified according to differences in locality. The regions of the country, for instance, where troops were rendezvoused, war supplies accumulated, or commissariat lines passed through, greatly prospered commercially through the distribution of war funds. In marked contrast the trade in other places generally fell into a state of stagnation. During the campaign, it is true, the military authorities kept to the policy of not disturbing the equilibrium of the market throughout the country, avoiding the abnormal rise and fall of prices, by taking special care to buy the large amount of war supplies required by the stupendous national struggle from as many EFFECTS ON COMMERCE I87 centers of commerce as possible. However, this measure not being easy to put into practice, its results were perforce unsatisfactory, so that the localities not intimately connected with the supply and distribution of war supplies could not, after all, escape the fate of becoming sacrifices on the altar of war. INCREASE AND DECREASE IN NUMBER OF TRADESMEN AND AMOUNT OF TAXES IN VARIOUS BUSINESS CENTERS, 1903-1905 1903 1904 I905 Names of revenue superintending Number mountNumber Amount umber Amount ie oftrades- o of trades- o of trades-es- of t of taxes of taxes of taxes men men men Yen Yen Yen Sapporo....... 6,812 87,539 7,656 121,525 8,330 139,885 Tokyo........ 55,I9I 674,154 54,353 740,893 54,794 784,680 Kyoto........ 18,479 i88,i60 17,073 170,273 18,179 I97,249 Osaka......... 32,827 403,286 31,972 400,717 34,756 475,337 Yokohama..... 16,658 182,43I 16,410 192,060 17,723 210,514 Kobe.......... 19,825 199,917 18,792 200,329 20,164 223,927 Nagasaki...... 6,523 67,259 6,796 77,014 7,569 78,751 Nagano........ 20,512 I39,660 19,188 129,428 I8,659 133,618 Utsunomiya.... 20,773 152,907 19,854 I6o,o66 19,874 I73,706 Nagoya........ 34,524 319,199 33,062 302,818 34,908 341,970 Sendai......... II,I29 92,293 10,905 95,507 11,022 97,IO1 Akita......... 7,349 63,27I 7,138 62,015 7,404 65,137 Kanazawa..... 14,166 116,926 I4,433 130,821 15,421 I40,963 Matsue........ 4,521 30,166 4,480 30,I83 4,854 33,892 Hiroshima..... 15,822 124,711I 6,386 153,008 17,562 153,308 Marugame..... 13,524 I00,734 12,972 99,146 14,273 120,191 Kumamoto.... 15,445 119,697 15,775 134,656 18,612 167,452 Kagoshima..... 4,232 34,028 4,306 35,127 4,368 38,823 In 1905, as compared with I903, there was a sharp increase both in the number of tradesmen and in the amount of taxes in the two jurisdictions of Hiroshima and Nagasaki, besides Sapporo, where exceptional circumstances obtained. This happened because these two districts comprised such land and sea forces or bases of operation as Kure, Sasebo, and Hiroshima. In contrast with this, both the number of tradesmen and amount of taxes decreased in the Sendai and Akita districts; and some increase in the amount of taxes for the Sendai district in I905 is explained, in the Accountants' 188 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR Bureau reports, as solely due to the special minuteness in the taking of the census in that district alone for that year. This particular depression in trade in these northern regions was mainly due to the undeniable fact that war expenditures were light in these places. Turning to I907, we find that the commerce of the districts which had suddenly expanded by reasons of war was becoming retarded, while that of the places which had more or less suffered during the war began to display signs of rapid progress. This latter phase was particularly the case with Osaka and Kobe. Sendai and Akita alone had no power to recuperate and showed no increase in the number of tradesmen or in the amount of business taxes. FOREIGN TRADE General view of the effects War is generally accompanied by "unfavorable balance of trade." In our country this tendency was intensified by the fact that since I896 imports had continuously exceeded exports and no small amount of foreign capital had been imported. But it is quite worthy of notice that during the war our exports as well increased somewhat. Movements of gold and silver were also greatly affected by the war. Loans raised abroad served to check the exodus to a certain extent, but the margin between the inflow and outflow was by no means small. This is primarily attributable to the reckless export of specie previous to the flotation of foreign loans. Trade relations during and immediately after the war can be tabulated as follows: TRADE RELATIONS, I903-7 Year Exports Imports Total Excess of imports over exports Yen Yen Yen Yen I903........... 289,502,442 317,I35,517 606,637,960 27,633,075 1904........... 319,260,895 371,360,738 690,621,634 52,099,842 I905........... 321,533,610 488,538,016 810,071,627 167,004,406 1906............ 423,754,892 418,784,108 742,539,000 -4,970,784 1907............ 432,412,873 494,467,346 926,880,219 62,054,473 EFFECTS ON COMMERCE I89 MOVEMENTS OF GOLD AND SILVER, 1903-7 Gold and Gold and Excess of Excess of Year silver exports silver imports imports exports Yen Yen Yen Yen 903................ 19,00I,198 27,807,469 8,806,270.... 1904............... 107,795,858 33,946,655.... 73,849,202 1905......... 6,354,756 31,506,972 15,152,216.... 906............... 25,784,436 47,211,197 21,426,76.... 1907. 18,759,285 8,256,503.... IO,502,782 -I The war acted upon the export trade in two obvious ways. In some respects it tended to hinder the growth of our foreign commerce, while in others it contributed to its development. The shortage of capital and labor must first be pointed out as among the effects under the first category. The capital in the country was largely absorbed by the government or else transferred to the manufacture of war supplies, thus dealing a more or less severe blow to the production of ordinary goods through paucity of capital. The labor market was in no better condition, some one million men being called to the colors and huge numbers of workmen being employed by munition factories. In the second place, it should not be overlooked that the war itself directly impeded the export trade by the ceaseless consumption of munitions. The last but not the least important factor was the rise in prices of various commodities through the war. High prices were brought about (I) by the increased issue of notes attendant upon the domestic loan policy, which enabled an increased issue of convertible notes, and the inflow of specie resulting from the flotation of foreign loans; (2) by the imposition of special war-time taxation; (3) by the commandeering of capital and labor for military purposes; (4) by the shortage of transportation facilities due to the military use of the means of communication; and (5) by other war demands. Consequently prices rose steadily, especially those of foodstuffs. These circumstances obstructed the growth of the export trade, it is true, but it must be remembered that there were three important neutralizing factors. In the first place, the 190 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR firm determination of the nation to fight the war to a finish favorably influenced the export trade by making good a deficiency of labor by means of various labor-saving inventions and through a more concentrated application of energy, as will be noted hereafter, and by encouraging a habit of thrift and economy. In the second place, Korea and China absorbed a considerable portion of our war funds, and the purchasing power of the people of these countries naturally increased. The rise in the price of silver must also have greatly stimulated our exports to these countries. Again, when the command of the sea passed to the hands of Japan early in the development of the war, Japan's comparative freedom in foreign trade must have been a strong aid to her trade expansion. In the third place, there is no denying that the world-wide boom which culminated in I906 favorably affected our trade in the preceding two years. These are the reasons why our exports saw some increase during the war, despite many adverse factors. It is easy to imagine, moreover, that the popular tendency to thrift and economy inclined to check the growth of imports, but the increase in the importation of war supplies was inevitable. There were, besides, imports made in anticipation of higher tariff, while the high prices mainly due to inflation of currency also tended to encourage general imports. In consequence, the imports increased from less than 320,000,000 yen in I903 to more than 370,000,000 yen in I904. In I905 the figure bounded up to no less than 490,000,000 yen. The total value of the foreign trade, therefore, increased year after year, as exports somewhat increased instead of decreasing, while imports advanced by leaps and bounds. The foreign trade stood at 600,000,000 yen in 1903, but in I904 it increased to 690,000,000 yen, and in 1905 to 8Io,ooo,ooo yen, an increase of 35 per cent as compared with the year previous to the war. In this connection it should be noted that the war with Russia marked a turning-point in Japan's foreign trade. During the war the volume of trade markedly increased, and this tendency was unchanged after the war. Indeed, it EFFECTS ON COMMERCE I9I increased annually with the rapid growth of export trade, reaching 930,000,000 yen in I907. Leaving the increased population out of consideration for the moment, the development of our export trade is due to three causes: (I) Japan obtained an ideal port in Dalny, and the hundreds of miles of the South Manchuria Railway, besides the southern half of Saghalien, which may not be of much use. Some markets in Manchuria and Korea came within Japan's sphere of influence, while other oriental nations also began to appreciate Japanese goods through their appreciation of our victory in war. (2) The victory over Russia proved a fine opportunity for Japanese articles to find new markets in the West, where our successes in war became good advertisements and the people vied with each other to buy our merchandise and know its manufacturers. (3) The war, moreover, trained the people in a valuable habit of industry and saving, while our victory strengthened the national spirit of self-reliance, which must have indirectly contributed to the expansion of export trade. As export always stimulates imports, the causes of the progress of our export trade worked at the same time as indirect causes of increasing our import trade. As regards the increase in imports, however, special attention should be paid to two things-the continuance of high prices and the increased import of raw materials. With the close of the war, the capital and labor which had been commandeered were released, the paralyzed means of communication were restored, and the demand for goods for military use ceased. Though these three causes of high prices were removed, the inflation of currency still continued from inertia, the most potent cause of high prices, and it was decided to extend the special war-time taxation to a post bellum period. This accounts for the failure of prices to fall appreciably after the restoration of peace, which, in turn, must have encouraged the import trade. On the other hand, the increase in exports was mainly in the finished or partly finished articles, which naturally led to an increase in the import of raw materials. But this tendency was particularly pronounced after the war, because the pro 192 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR motion or extension of enterprises which had been thwarted by the war greatly added to the import of raw materials. Thus, the foreign trade after the war continued to grow in volume, but the balance of trade was still very unfavorable to Japan. The root of the whole evil was in the war itself. It is true that in I906 the exports exceeded the imports by some 5,000,000 yen, but this proved wholly exceptional. The unfavorable balance of trade amounted to some 62,000,000 yen in I907 and to some 58,000,000 yen in I908. This state of things continued until the outbreak of the World War, the excess of imports over exports totaling a little short of Ioo,ooo,ooo yen in I913. The exceptional conditions prevailing in I906 may be roughly analyzed as follows: The increase in exports was primarily due to the world-wide commercial boom, as can be proved by the phenomenal demand for raw silk in that year. The cessation of the importation of war supplies had much to do with the decided decrease in imports, but the slight falling off of prices from the restoration of peace until the first half of I906 also made the importers careful of new orders in anticipation of bad times. Again, during the war and until the first half of I906, new enterprises were stopped and such items as iron, machinery, rails, rolling stock, and the like were imported much less. Thus, the excess of exports was limited to I906, and after that year the currency continued to be inflated and prices continued to soar. The excess of imports for several years led to the heavy exodus of specie, which, combined with the annual payments of huge sums of interest on foreign bonds, threatened to shake the foundation of Japan's conversion systems. The RussoJapanese War was solely responsible for these conditions. From the general observations above outlined, we now turn to examine our foreign trade according to merchandise and countries. Observations according to merchandise The changes in our export and import trade outlined in the preceding pages may be made clearer by a glance at the EFFECTS ON COMMERCE I93 articles of merchandise. The exports during the war, divided into foodstuffs, finished goods, and raw materials, are shown in the table at the end of this chapter.' It is to be noted that of the exports raw materials suffered most from the war, but their decrease was more than made good by the increase in the finished articles. That the decrease in export of raw materials was specially great was due to the fact that they were needed for war purposes. Copper, leather and hides, cotton yarn, coal, etc., showed a decrease or comparatively little increase in their export, because they were largely employed for the manufacture of war supplies. The following table comprises the most important of the articles diverted to war uses: IMPORTANT EXPORTS DIVERTED TO WAR PURPOSES, 1903-I905 Articles 1903 1904 1905 Yen Yen Yen Refined copper................ 14,717,029 12,771,497 I6,008,333 Cotton yarn................ 31,418,613 29,268,445 33,246,461 Cotton blankets............... 404,188 292,794 508,036 Cotton fabrics........ 6,875,309 7,743,432 11,492,085 Coal (lump).. 7,605,216 I3,374,428 12,679,271 Railway sleepers.............. 923,829 976,780 I,I 8,590 Total................... 7,944,I86 64,427,386 75,052,776 The remarkable decrease in these exports for I904 was brought about by the fact that, in the early stage of the war, Japan had to resort chiefly to those war supplies found in the country, and by the further fact that the transportation facilities, both at home and abroad, were probably too disturbed to allow of their export. These hindrances were mitigated in 1905, and therefore, in spite of a greater demand for war supplies as the situation developed, the export of these articles was increased. Moreover, these exports went chiefly to Korea and Manchuria, and the people of these countries had a larger purchasing power, silver having gone up in price and our war funds being scattered among them. In regard Post, p. 203. 14 194 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR to manufactured goods, in spite of the existence of numerous unfavorable circumstances, such as the rise in general prices and the paucity of capital and labor, their exportation increased as compared with the period before the war. This unexpected tendency must have been due to special effort on the part of the people to exercise thrift and economy. It was most noticeable in the exportation of matches, figured mats, porcelain, earthernware, and lacquer-ware. Increase in export was also marked in cotton fabrics and other cotton goods, which are included in war supplies in this study. Let us now turn to our import trade during the war as tabulated below. As mentioned elsewhere, the increase in imports during the war was due in the main to the importation of war supplies, the importation made in anticipation of a higher tariff schedule, and the inflation of currency. It is to be noted in the following table that there was no great change in the foodIMPORTS, 1903-I905 Articles 1903 1904 1905 Foodstuffs: Yen Yen Yen Rice.......................... 51,960,272 59,791,910 47,981,265 Wheat and flour............... 15,092,258 11,162,170 13,963,459 Soy-beans..................... 6,369,081 7,116,266 9,830,255 Other cereals................ 4,016,253 4,648,281 4,749,392 Eggs......................... 815,337 493,0 I 953,357 Condensed milk................ 997,990 1,178,099 1,608,379 Other foods and drinks.......... 3,038,215 3,636,120 2,831,834 Total....................... 82,271,406 88,025,856 81,917,941 Manufactured goods: Timepieces and accessories....... 897,440 721,871 1,793,933 Clothes and accessories......... 1,374,489 1,261,029 1,840,744 Glass and glassware............ 1,423,884 946,637 1,762,437 Paper and stationery........... 3,864,392 2,999,237 6,027,549 Refined sugar.................. 6,48,905 5,0 1,o84 659,415 Cotton fabrics................. 10,761,479 9,178,233 18,433,158 Blankets...................... 9,343,093 6,443,653 21,734,458 Cotton and silk goods........... 1,827,555 8,603,362 IO,I27,239 Tobacco...................... 1,117,858 1,509,653 2,217,571 Alcoholic liquors............... 769,236 770,418 1,037,118 Total........................ 37,528,331 37,445,117 65,633,622 EFFECTS ON COMMERCE ' 95 IMPORTS, I903-I905-Conltilnued Articles 1903 1904 1905 Ordinary raw materials: Drugs and medicines....... Dyestuffs, pigments, and paints... Hides, leather, ivories, shells, and horns. Iron and steel. Oils and wax. Sugar and syrup. Raw and whipped cotton.. Sheep and goat wrool.. Cocoons and ramie. Fertilizers. Total. Raw materials for manufacturing purposes: Machinery. Metal articles.. Kerosene and machine oil..... Printing 'paper. Cotton yarn. Woolen yarn.......... Tusser silk and hemp. Coal and coke. Railway rolling-stock and accessories Steamships. Total. Total of foodstuffs, manufactured goods and raw materials (as ahove)... Arms and scientific apparatus... Miscellaneous articles. Postal parcels.. Yen 6,712,050 7,728,656 3,27I,fiio 21,931,221 1,985,067 14,856,722 69,5i8,i09 4,828,907 2,685,083 13,1i61i,096 Yen 8,125,736 5,41i8,360 8,277,30I 24,927,639 2,492,259 i8,082,09I 73,420,385 9,986,578 2,663,573 i,085,471I Yen 1 0, 909,1I04 7,3 84,811 i18,095,203 41,387,237 2,360,974 13,051,469 i1i0,623,1i82 8,364,883 3,889,512 22,347,51i8 146,678,521 i63,479,393 238,413,898 10,398,327 12,174,065 23,389,904 5,81i6,422 7,845,471 1 6,583,145 11I,943,977 i18,624,095 I12,81I5,302 991,274 975,977 i,886,I52 1,091,642 81i9,964 2,330,569 1,144,073 2,91I2,711 5,150,399 704,051I 457,792 1,347,268 2,052,059 12,392,423 6,1I93,004 505,338 914,091 1,910,345 1,732,426 939,693 760,292 36,379,589 66,436,282 79,266,380 302,857,847 355,386,648 465,231,841 1,91I7,305 1,861,948 2,770,385 10,386,813 13,041,889 1 8,465,302 465,601 51I7,233 I,205,032 Grand total.... 315,627,566 I370,807,7i8 487,672,560 stuff imports, but the finished articles increased from 37,000,000 yen to 65,000,000 yen, partly owing to military requirements but largely due to the inflated currency. But it was in raw materials, especially of the ordinary class, that the heaviest increase was recorded through military demands. The increase through anticipatory imports was spread over the three classes, and it is not possible to point out in what particular items the increase occurred. It is therefore necessary to ref er to the following tables to see how the three 196 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR causes severally operated upon the import trade. These tables will suffice to make it clear that military needs were the greatest cause and anticipatory importation was the next in importance, in swelling our imports through the war. As already noted, Japan's foreign trade made rapid strides after the war as a result of our national struggle. And when we examine the increase or decrease in the export or import of each kind of merchandise, we see that clear progress in industry was made in the midst of the constant excess of IMPORTS, I903-1905 Important military imports Articles I903 I904 1905 I Yen Yen Yen Electromotors................... 836,652 1,266,186 2,455,423 Lathes.......................... I78,I09 827,614 3,349,6I7 Cotton spinning machinery......... 535,00 633,883 1,228,233 Boilers and steam engines.......... 989,873 I,7Io,9I3 2,633,033 Timepieces and accessories........ 897,440 721,871 1,793,933 Wheat and flour.................. 5,092,258 II,I62,I69 I3,963,458 Furs............................. 53,997 915,078 1,165,438 Cow and buffalo hides, and boot-sole leather...................... 1,437,180 4,931,316 10,446,168 Other leathers................... 920,90I 1,752,875 5,682,198 Steel billets and plates............. 6,342,483 7,341,487 14,577,009 Steel rods and tubes.............. 5,040,190 5,613,261 9,344,664 Iron nails........................ 1,509,993 1,960,055 2,609,431 Tin and steel plates.............. 972,620 2,706,768 4,698,063 Electric wires... 733,269 I,044,766 I,206,o68 Steel (not including soft steel)...... 777,818 664,785 2,339,188 Aluminium...................... 143,429 539,869 1,096,398 Unrefined copper.................. 80,009 49,798 I,900,475 Lead........................... 703,390 992,876 1,726,003 Tin.............................. 544,376 I,302,530 1,628,149 Zinc......................... 1,350,40I 1,489,829 3,93I,886 Raw cotton................... 68,206,724 71,466,843 I09,260,156 Cotton drills...................... 08,644 1,221,701 I,OI2,292 Canvas.......................... 74,298 1,oo005,969 1,708,212 Calico, bleached and unbleached.... 4,254,368 2,973,263 7,952,947 Wool and woolen yarn............. 5,955,883 12,883,766 13,497,966 Woolen cloths and blankets........ 3,731,513 9,003,35I 20,I36,831 Hemp and hemp-thread............ 1,865,391 2,282,967 3,382,348 Coal and coke...... 2,052,059 12,392,423 6,193,004 Teak and other timber............ 674,564 507,805 1,281,374 Railway rolling-stock............. 505,339 914,091 1,910,345 Cables, submarine and underground. 332,167 I,036,960 2,569,173 Steamships...................... 1,733,426 9,319,693 7,660,292 Total 128632,65 12,636761 64,49,77 Total - -..................... I28,632,765 I72,636,76i.: 264,439,775 EFFECTS ON COMMERCE '97 IMPORTS, I903-I905-Cofltiflued Important anticipatory imports Articles I903 I1904 I905 Yen Yen Yen Farming; carpentry apparatus; cutlery 319,811 355,022 708,288 Musical and medical instruments.. 272,322 247,1i85 384,717 Electric lamps and fire engines. 694,087 6I4,202 1,21I5,472 Photographic cameras and accessories 498,754 424,I21 688,556 Wheat and flour..... 15,492,258 ii,i62,170 13,963,459 Carbolic acid and antipyrine..... 303,178 344,91I3 705,531 Rice..51,960,272 59,791,910 47,981,265 Cotton and sesame-seeds.1I,202,I30 I,254,660 i,84I,859 Cow and buffalo hides. 825,814 2,319,226 2,077,699 Brass tubes.1.I57,334 169,858 416,734 Copper tubes....245,957 284,774 571,818 Kerosene oil.11,455,696 18,201,489 12,061,261 Flax-seed and machine-oil. 683,542 572,755 970,703 Sugar.~~~~~~~~~~~14,817,125 i1803I,922 13,046,772 Cotton sewing threads. 325,356 476,674 628,703 Coke...79,136 192,529 728,283 Bicycles and accessories. 972,972 953,199 1,364,383 Gelatine. 154,083 21I7,080 340,179 Washing soap.. 85,051I 69,796 134,270 Total.100o,544,878 11i5,683,485 99,830,249 Imports cdue to the inflation of currency Boots and shoes, braces and buttons. 226,665 21I5,532 390,559 Hats. 361,669 284,232 345,958 Aniline dyestuffs. 1,430,042 1,046,469 1,679,891 Dried indigo leaves..4,3 50,81I5 2,1I17,677 2,829,737 Lacquer.~~~~~~~~ ~~230,541 151,215 282,140 Extract of logwood and pigment oil 437,687 322,708 653,252 Glass and glassware.1.......,423,884 949,637 1,762,437 Decoration; imitation Japanese paper 972,377 792,510 1,859,068 Cotton yarn for weaving. 766,286 343,290 1,701,866 Cotton flannel.....536,946 272,11 I5 481,532 Calico. 1,975,375 532,092 1,392,976 Satinet and velveteen.1,939,830 992,757 2,894,307 Figured and scarlet calico...... 439,083 48,574 285,688 Flannel and Italian cloths.... 969,592 464,411 I 1,415,127 Crepe camlet and serges....... 4,61i6,646 2,42 8,511 3,689,514 Cocoons and tusser silk.1........,523,743 838,398 1,754,432 Silk, cotton, satin and velvet.... 301,679 305,706 410,134 Bicycles and accessories..972,972 953,1I99 1,364,383 Toilet soap. 236,321 239,514 343,375 Rubber articles. 270,910 163,775 275,978 Total. 23,983,063 13,459,322 25,812,355 imports over exports. Though imports in general increased to a marked degree, the importation of articles of consump 198 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR VALUE OF EXPORTS, 1903-I907 Countries I1903 I904 I905 i906 I907 Asia: China and Kwantung Province.... Hongkong...... Korea........ British India...... British Straits Settlements...... French India..... Asiatic Russia..... Siam......... Total........ Europe: England....... France........ Germany.... Italy......... Belgium....... Switzerland...... Russia........ Austria-Hungary.... Netherlands...... Sweden and Norway.. Spain........ Turkey........ Denmark....... Portugal....... Total........ America: United States..... Canada........ Mexico........ Peru......... Chile......... Total........ Australasia....... Philippines....... Dutch East Indies.... Hawaii......... Egypt......... Other countries..... Grand total..... Yen 64,994,i80 29,724,694 11,761,494 8,086,798 7,108,701 I97,776 2,239,987 73,626 Yen 67,985,873 28,i60,103 20,389,728 9,404,954 5,270,802 374,948 27,814 I59,423 Yea 98,681,998 20,215,081 26,618,870 7,997,594 4,424,068 406,933 1,709,787 103,341 Yea " I7,779,533 27,061,326 25,209,796 10,351,836 4,033,679 149,838 20,494,077 235,365 Yen f85,6I9,233 20,400,683 24,384,762 32,792,476 13,088,089 5,767,563 250,I04 5,067,723 338,390 124,187,256 123,826,627 159,957,572 195,315,454 187,709,033 16,544,524 1 7,643,963 13,039,401 22,553,409 22,443,305 34,2 79,11 i6 36,320,101 27,227,473 40,288,876 42,532,655 5, i85,65 8 4,I04,I22 4,360,402 8,396,132 I11,255,619 11I,003,607 12,070,670 8,095,467 11i,807,567 13,770,735 487,173 310,887 665,520 1,307,605 2,054,397 264,738 588,699 11,554 23,351I 64,225 1,1I25,251I 53,625 10,584 7 7,901I 441,560 981,290 543,921I 414,106 1,225,779 1,148,716 224,043 432,732 161,834 225,82 7 266,805 2,246 8,918 11i,882 6,1I21 11I,763 67,594 169,220 77,742 82,430 200,853 105,959 68,960 5o,5i6 70,51i6 70,598 29,448 73,026 70,045 148,941 97,816 999 937 604 2,586 8,022 70,301,646 72,389,780 54,I97,129 86,217,041 94,367,069 82,723,986 101,250,773 94,009,072 125,964,408 131,101,015 2,923,540 3,211,675 3,240,0,36 3,953,05I 3,863,657 72,222 143,048 60,935 409,472 84I,299 1 2,01 2 4,683 10,408 49,691i 87,850................ I~~~~30,129 8 5,7 31, 7 59 104,610,179 97,320,450 130,376,395 136,023,950 3,352,466 4,438,589 4,072,936 4,225,662 4,793,903 1,675,519 1,675,847 1,363,673 1,375,437 1,795,726 9I2,419 1,082,322 1, 233,01 1,393,536 2,261,3I2 2,253,483 2,240,564 1,876,454 2,758,221I 3,468,677 322,664 4i8,529 283,801 378,734 386,300 764,929 63I,440 1,028,482 1,714,186 1,606,903 289,502,442 I319,260,896 321I,533,6i10 423,754,892 432,4I2,873 tion not only did not show any increase but decreased in some cases. A large increase in the import of unmanufactured goods, especially of foodstuffs and fertilizers, was an inevitable result of the limited area of our country and its teeming population. The rapid increase in the import of raw materials was a matter of congratulation, because it was an unmistakable sign of our industrial growth. In the export trade there were signs that the export of un~manufactured goods somewhat declined, which was quite natural to the industrial conditions of Japan. EFFECTS ON COMMERCE ' 99 VALUE OF IMPORTS, I903-I907 Countries 1903 I904 I905 1906 I907 Asia: China and Kwantung Province.... Hongkong...... Korea........ British India..... British Straits Settlements...... French India..... Asiatic Russia..... Siam......... Total........ Europe: England....... France.... Germany.... Italy......... Belgium....... Switzerland. Russia........ Austria-Hungary.. Netherlands...... Sweden and Norway.. Spain. Turkey........ Denmark....... Portugal....... Total....... America: United States..... Canada........ Mexico........ Peru......... Chile......... Total........ Australasia....... Philippines....... Dutch East Indies.... Hawaii......... Egypt......... Other countries..... Unknown........ Grand total...... Yen 45,458,057 1,739,727 8,9I2,I51 69,894,I97 1,323,441 15,579,627 8,267,652 3,726,280 Yen 54,8I0,336 2,495,410 6,400,777 68,011,997 2,725,989 17,399,667 4,527,746 5,785,714 Yen 5 2,61i8,40 8 i,128,597 6,150,541 90,226,830 3,397,086 10,147,957 2,726,564 4,586,555 Yen 57,396,737 684,743 8,205,942 60o,31I5,03 4 2,467,993 7,505,252 1,407,230j 3,191, 2 81I Yea 59,182,369 8,809,676 820,6i0 16,371,512 74,593,284 3,062,258 8,662,9I2 1,655,649 2,738,695 154,861,132 162,157,635 170,983,338 14I, 174,21 1 75,896,961 48,736,758 74,992,865 11I5,380,101 101IO,311,362 11i6,245,070 5,107,913 3,334,323 5,129,208 4,997,159 7,024,957 26,958,977 28,697,382 42,579,960 42,500,013 47,667,742 311,021 673,920 502,091 636,173 942,874 7,578,59I 6,104,474 I11,002,1i85 10,551,043 13,398,299 2,187,954 1,959,988 2,974,305 4,480,335 3,11 i6,866 291,559 I,995,720 29,049 40,941 174,887 3,676,995 1,374,658 2,256,I97 2,785,237 2,551i,852 814,706 499,688 873,528 1,233,184 1,204,396 310,502 661,035 2,271,189 1,323,959 2,171,243 101,191 102,816 249,083 197,647 3I4,190 2,045 29,422 36,964 I117,482 138,274 18,002 92,059 24,I95 64,981 234,964 I57,999 10,048 15,720 18,127 27,630 96,11 I4,21I3 120,528,397 1 83,3 23,7 73 170,237,644 195,213,244 46,273,871 5 8,11 6,344 104,286,528 69,948,681 80,697,362 499,040 837,443 732,022 1,002,320 1,217,140 i,639 9,643 166,873 4,414 960 18,089 2,078 3,608 51,676 483,525................ ~~~~358,6 17 46,792,638 58,965,507 105,189,031 7I,007,091 82,757,604 1,199,935 4,399,085 6,005,I97 4,1I28,051I 7,818,753 3,421,554 2,468,707 1,367,612 1, 143,11 6 2,159,178 i0,842,780 17,912,484 14,830,004 23,519,820 22,039,470 6,2I9 8,395 I13,691 1 4,070 19,320 2,401,599 2,476,258 2,999,133 1,669,589 3,457,204 1,455,447 2,444,269 3,830,236 5,890,51I5 4,009,365............ ~~~.... 1,006,244 317,135,518 I371,360,739 I488,538,017 I418,784,108 494,467,346 The tendency of crude manufactures, including raw silk and cotton yarn, to form the bulk of our export trade remained unchanged, while the amount of exportation in finished goods showed a steady increase. Observations according to countries Through what channels the war affected our import and export trade may be made clear by observing the conditions of our trade according to various foreign ports. 200 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR VALUE OF IMPORTS AND EXPORTS, I903-1907, BY CONTINENT Continents 1903 I904 I905 I906 1907 Yen Yen Yen Yen Yen Asia................... 269,048,388 285,984,262 33,093,591 336,489,655 363,605,994 Europe................ 166,415,869 192,918,267 235,434,859 256,454,685 289,580,313 America............... 132,524,397 163,575,686 199,509,48I 201,383,486 218,781,554 Other places........... 38,649,306................ Grand total........ 606,637,960 690,621,634 8I0,071,627 842,539,000 926,880,2I9 PERCENTAGE OF IMPORTS AND EXPORTS, I903-I907, BY CONTINENT Exports Continents 1903 1904 1905 1906 1907 Per cent Per cent Per cent Per cent Per cent Asia................... 43 39 50 46 43 Europe................ 24 23 17 20 22 America............... 29 33 30 31 32 Imports Asia................... 49 44 37 35 36 Europe................ 30 32 38 4I 40 America............... I5 6 22 7 17 It is worthy of notice that the war-time export trade gained with Asia alone and showed a decline with Europe. Our exports to Asia, which had been only two-fifths of the entire exports in I904, suddenly became more than one-half of the exports in I905, whereas the trade with Europe decreased from 72,000,000 yen in 1904 to 54,000,000 yen in 1905, that is, from 23 per cent to 17 per cent of the total export value. The increase was particularly great in the exports to China and Korea, while the trade with France showed the most decrease. The exports to China and Korea increased from nearly 76,000,000 yen in I903 to 125,000,000 yen in I905 and to 140,000,000 yen in I906, that is, from 26 per cent to between 34 and 39 per cent of the entire export trade. This was chiefly due to the war funds spent in China and Korea, the high price of silver, and the command of the sea in the hands of Japan, as already pointed out. When we consider this increase according to the kinds of EFFECTS ON COMMERCE 201 merchandise, the export of cotton yarn and goods, copper, matches, and coal greatly increased, but the market for other miscellaneous goods also prospered; and such commodities as refined sugar, beer, white cotton cloth, and the like, which had been exported little before the war, found new markets in the Far East. The marked decline in the exports to France may be explained by her taxation on habutaye and the uncertainty of trade routes with the European countries in general; this applies to the fall of our trade with England and Italy as well. The trade with America made smooth progress, there being little obstruction on the sea. That our exports to America decreased in Igo5 in spite of our success in war was due to the poor crops in that country and the consequent depression in the habutaye and tea market. The case was quite different with the import trade. The imports from the Asiatic countries were quite inactive, whereas those from Europe and America increased at a rapid rate. The general rise in prices in China and Korea, the two important exporting countries of Asia, served to check imports therefrom. The decrease in our import from Asia might have been greater had it not been for a large demand for Indian cotton on account of the extensive use of cotton for war supplies, combined with its high price in America. On the other hand, the phenomenal increase in imports in general from Europe and America was the result of a decided gain in the importation of such articles as iron and steel, copper, cotton blankets, hemp yarn, hides, leather, and machinery. Classified according to countries, England sold us in large quantities various machinery, iron and steel, cotton blankets, etc.; Germany, raw silk, zinc, dyestuffs, and machinery; and America, raw cotton, leather, hides, kerosene oil, metal articles, wheat and flour, etc. To sum up, the greater part of our import trade before the war was taken by British India and China, European countries catering to only one-third of our demand. In I905, however, Europe surpassed British India and China. Imports from America, too, nearly doubled in 1905 as compared 202 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR with I904. As stated above, the reverse of this change was the case with the export trade. The trade relations, though undergoing remarkable changes through the war, remained unchanged upon the whole after the cessation of hostilities, more particularly in regard to our imports, although slight reversions occurred in some cases. It is true that after the war the demand for war supplies suddenly fell off, but at the same time there arose a great demand for materials needed in the rehabilitation of peaceful pursuits and in the promotion of new enterprises. All this led to increased imports from Europe after the war, whereas the imports from Asia remained at their former level. The imports from America after the war, though smaller in amount than the maximum in I905, increased both in actual figures and in percentage to general trade from what they were before the war. The export trade with Asiatic countries after the war continued upon the whole as active as ever, but its tendency to increase was somewhat stayed by the slump in the silver market and the boycott movement prevailing in China. The export trade with Europe gradually rallied after the war, but it could not revert to the relative position before the war. The export trade with America showed some increase. These conditions prevailed until I908. EXPORTS, 1903-1905 Class and article 1903 1904 1905.~3I04I0 Foodstuffs: T ea.................................... Peas, rice and other cereals............... M arine products........................ Various foods and drinks.................. Manufactured goods: Clothes and accessories............... Paper and paper wares................... Metal goods............................. Habutaye and silk handkerchiefs........... Other silk articles........................ Cotton fabrics and other cotton goods....... Other cloths............................. Tobacco................................ Matches................................. Figured mats............................. Porcelain and lacquer-work................ Straw goods.............................. Umbrellas and accessories................. Chip-braids.............................. Raw materials: Silk and waste silk....................... Dyestuffs, pigments, and paints............ Copper, refined and otherwise.............. Oils and wax............................ Hides, leather, ivories, shell, and horns...... Whipped cotton and cotton yarn........... Coal.................................... Railway sleepers, boards, and timber........ Machinery and similar articles............ Yen 13,935,252 5,170,066 7,073,821 6,253,884 3,480,873 1,993,o69 3,142,103 30,448,897 1,820,382 8,270,551 1,496,542 2,127,580 8,473,071 4,651,465 4,021,690 3,832,109 1,497,599 1,246,590 81,386,225 7,323,392 14,906,033 2,387,970 1,645,231 31,654,210 19,260,502 2,615,I45 715,079 Yen 32,433,023 76,502,521 Yen 12,833,836 5,077,339 7,865,627 8,880,057 4,615,679 2,795,039 3,471,053 42,245,691 1,723,682 9,454,270 1,508,642 2,695,019 9,763,860 4,917,357 4,896,312 5,192,992 1,551,355 1,336,825 Yen 34,656,859 96,172,776 167,750,224 16,708,479 446,247 315,734,585 Yen 10,584,322 3,729,449 7,937,604 17,424,009 5,576,849 3,003,226 2,890,441 32,950,590 2,433,407 13,684,284 2,321,862 3,523,084 10,360,762 5,086,986 6,558,364 3,836,785 1,735,372 1,626,872 78,076,908 7,313,398 16,048,452 1,750,316 1,319,993 33,876,694 14,267,867 5,197,226 808,697 Yen 39,675,384 U) 0 95,588,884 t Qo 94,331,430 7,880,019 12,907,775 2,813,551 1,565,684 29,610,117 14,828,092 3,248,898 564,658 161,893,787 14,768,241 373,044 285,970,616 Miscellaneous articles...................... Postal parcels............................. Total................................. 158,659,551 23,284,261 1,081,536 318,289,615 0) C^ CHAPTER V EFFECTS ON INDUSTRY GENERAL REMARKS Industry always goes hand in hand with trade; rarely does one prosper without the other. In the early stage of the war, trade, especially home trade, was hit hard, but with the progress of the war it somewhat rallied. On the whole, trade suffered comparatively little, considering the magnitude of the war. This statement applies to industry with equal force. To be more precise, trade was affected chiefly in the lines of luxuries for home consumption, but suffered little or no damage in lines of daily necessaries, while the trade in war supplies as well as the foreign trade in general increased. We have said that industry was most seriously affected in the early stage of the war, but the statement is in danger of being challenged when examined from a certain point of view. For instance, a cursory survey of the statistics regarding the numbers of factories and workmen would clearly tend to misconception. AVERAGE NUMBER OF WORKERS PER DIEM IN FACTORIES, 1902-1906 Workers 1902 1903 1904 1905 I906 Male................. 185,622 182,404 207,95I 240,288 242,944 Female............... 313,269 301,435 318,264 347,563 369,233 Total.. 498,891 483,839 526,215 587,851 612,177 These figures show the steady increase in the number of workers in the first and second years of the war. It might be concluded from this that the war exerted a favorable influence upon industry from its beginning; but nothing is farther from the truth. The industry of Japan being mostly hand-work and more than half the articles turned out being by-products, 204 EFFECTS ON INDUSTRY 205 the statistics of workers employed in factories with at least ten hands can not be taken as an index to the whole or even the greater part of the manufactures of the country. The effects of the war on industry, therefore, must be deduced from other indications. Indeed, in industry, as in trade, a more accurate barometer of activity can be found in the numbers of people opening or closing factories. The figures for 1905 are unavailable, but those for 1904 as cited below are unmistakable signs of the depression of industry. FACTORIES OPENED AND CLOSED, I902-I904 1902 1903 1904 Increase or decrease in 1904 as cornTax Administra- pared with 1903 tion Offices Opened Closed Opened Closed Opened Closed Opened Closed Sapporo......... 469 305 47I 370 634 602 + 163 + 232 Tokyo........... 596 929 542 1,149 534 1,630 - 8 + 481 Kyoto......... 2,987 3,105 2,728 4,095 2,620 7,078 - Io8 +2,983 Osaka.......... 408 271 630 408 I96 774 - 434 + 366 Yokohama...... 32 43 39 43 48 74 + 9 + 3I Kobe........... 1,359 I,741 i,o8I 2,275 869 1,689 - 212 - 586 Nagasaki........ 22 35 I3 21 I4 40 + I + I9 Nagano.......... 65 2I6 122 262 148 354 + 26 + 92 Utsunomiya..... 761 1,201 594 1,415 521 979 - 73 - 436 Nagoya......... I,902 2,153 1,984 2,632 1,408 4,270 - 576 +1,638 Sendai......... 250 72 216 149 i86 I62 - 30 + 13 Akita........... I98 I33 262 I99 200 270 - 62 + 7I Kanazawa....... 633 428 831 783 I,090 816 + 259 + 33 Matsue......... 57 214 97 I87 58 85 - 39 - 102 Hiroshima....... 2,083 2,626 2,508 3,3I7 2,506 2,888 - 2 - 429 Marugame....... 1,604 3,306 2,301 2,651 1,521 2,903 - 780 + 251 Kumamoto..... 26 59 130 I71 96 172 - 34 + Kagoshima...... 2,055 I,4i8 1,655 1,776 742 3,084 - 913 +I,308 Total....... I5,707 I8,355 I6,204 21,903 I3,391 27,870 -2,813 +5,967 That the number of cases of closing exceeded that of opening year after year may be regarded either as a result of industrial activity or as indicating a tendency of large enterprises to supersede small ones, but the decided decrease of openings and the alarming increase of closings in I904 unmistakably point to the severe blow to industry dealt by the war in its first year. With the continuance of war, however, these conditions somewhat improved, because the manufacture of war supplies became more and more active, the demand for daily necessaries increased, and the export trade also began to prosper. In this connection, special attention 206 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR should be paid to a strong tendency toward concentration in industry. The following table from the annual reports of the Revenue Bureau will make this point clear to the reader: MANUFACTURERS PAYING NATIONAL TAXES AND AMOUNTS PAID, 1903-I907 1903 I904 I905 Io96 1907 Manufacturers 86,301 86,8i6 81,586 79,914 80,673 Places of business....... 87,224 87,647 82,314 79,750 81,541 Employees... 133,I94 135,346 123,358 126,303 130,374 Factory hands 722,998 745,519 736,635 74I,226 785,694 Amount of fixed rate taxes 1,425,271,480 1,479,542,290 1,445,179,440 1,446,492,480 I,557,218,360 It should be remembered that these figures represent the conditions which prevailed in the previous year. Judging by the number of factory hands and the amount of taxes, industry was most severely affected by the war in 904 and slightly recovered in I905, while in I906 a decided improvement set in. These general tendencies may be ascertained also by a statistical study of the industrial output, as will be explained in the next section. But the places of business and the number of employees continued to decrease until I905, when even a revival of industry failed to improve these conditions. What conclusion should we draw from this if not that the tendency toward concentration became specially pronounced during the war? The fact already stated that the factory hands increased in number during the war confirms this conclusion. It is not difficult to imagine how the war stimulated post bellum industry, which prospered just as trade did. The general effects of the war on industry having thus been outlined, let us now study these effects from the three different angles of industrial capital, industrial workers, and industrial output. CONDITIONS OF INDUSTRIAL CAPITAL The conditions of industry during the war may be made clear by studying the movements of the industrial population and the statistics of the industrial investments in the same EFFECTS ON INDUSTRY 207 period of time. But in regard to the latter the only available statistics are those of the capitals of corporation enterprises, since the statistics even of those manufacturers who paid national taxes fail to throw sufficient light upon the conditions of the industry throughout the country, as already indicated. Still less would the figures regarding the company capitals alone prove useful as an index to the whole situation. However, they may not be entirely valueless for reference purposes. So we shall proceed with our investigation with the scant material at our disposal. The war absorbed large proportions of private capital and consequently crippled the people's industry, at least for a time. Even if it did not reduce the capital already invested, it must necessarily have absorbed a large share of the new capital available for investment. The depression of general industry continuing from an ante bellum year must have accentuated the industrial inactivity caused by the war. INDUSTRIES INCREASED OR DECREASED, DECEMBER, I90I-JUNE, 1905 Increase or decrease compared with previous term Month end Number of Aggregated Month end companies capital N No. of Cos. Aggr. cap. December, I90I...... I2,960 1,440,682,261...... June, I902........... I2,8I O 1,521,790,089........ December, 1902...... 12,845 1,584,495,550 + 35 + 62,705,461 June, I903........... 12,915 1,814,00I,355 + 70 + 229,505,805 December, I903...... 13,226 1,448,112,192 +3 I -365,889,163 June, 1904........... 13,273 1,467,683,463 + 47 + I9,571,27I December, I904...... 13,377 1,475,558,378 +IO4 + 7,874,915 June, 1905........... 13,422 1,495,255,III + 45 + I9,696,733 Looking into the details, this blow to popular investmenta blow which through anticipation of war made its appearance as early as the end of 1903-bore the hardest upon manufactures, while in agriculture and commerce, and especially in transportation, there was more or less increase in the paidup capital; but in manufactures both paid-up capital and reserve funds decreased considerably. 208 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR MANUFACTURING INDUSTRY, I903-I907 Year Number of companies Paid-up capital Reserve fund Yen Yen 1903........2,441 I170,346,340 29,966,661 I904........2,384 162,836,203 27,873,181 1905........2,449 189,414,059 45,626,962 1906........2,546 267,11 I8,424 64,521, 81I9 I907........2,847 381,815,109 64,564,944 COMMERCE, I903-I907 Year Number of companies Paid-up capital Reserve fund Yen Yen 1903........5,955 451,680,028 110o,872,204 1904........5,609 455,822,613 143,070,528 1905........5,630 466,404,498 147,276,299 1906........5,840 500,588,598 i67,i96,286 1 907........ 6,197 569,486,328 197,558,374 TRANSPORTATION, I903-I907 Year Number of companies Paid-up capital Reserve f und Yen Yen 1903........702 262,382,936 24,004,444 I904........682 309,412,473 28,11I0,246 I905........696 316,649,008 31,402,272 1906........684 31I7,378,704 25,910,892 1907........734 150,891,189 24,774,265 AGRICULTURE, I903-I907 Year Number of companies Paid-up capital Reserve fund Yen Yen I903........249 3,1i96,886 223,494 1904........238 3,220,857 I174,073 I905........23I 3,688,990 403,368 1906........250 4,870,357 317,941 I907........309 I12035,192 387,I25 The decrease of capital must have been primarily in the manufacture of goods for home consumption, especially in those branches of industry which turned out articles other EFFECTS ON INDUSTRY 209 than daily necessaries or war supplies. The amount of actual decrease in these branches must have been far greater than that cited in the above table, because the manufacture of war supplies must have drawn a larger sum of outlay. In this connection it is to be regretted that details about the movements of capital in the various branches of industry are not available. But some indirect light may be thrown on the general trend of capital movement in industry by the subjoined statistics of the number of workers in various industries. WORKERS IN VARIOUS INDUSTRIES, I903-1907 a No. of Workers Industries 1903 1904 1905 1906 1907 Fiber industry......... 270,974 278,890 302,723 325,047 354,667 (Textile industry)......... (59,278) (70,245) (75,756).... Machine and iron industry.. 34,223 45,886 49,863 58,977 62,045 (Machinery).............. (7,849) (11,628) (I,397)..... (Shipbuilding)............ (12,384) (21,026) (21,775).. Chemical industry........ 49,988 53,338 55,430 62,708 65,415 (Tanning)............ (471) (2,521) (997) Foods and drinks......... 35,920 49,324 51,497 49,260 48,192 (Canned goods)........... (1,438) (2,311) (4,283).... Miscellaneous............. 34,222 42,074 46,699 50,176 52,971 (Leather goods)........... (1,438) (2,311) (4,283).... Others.................. 58,512 56,703 81,629 66,009 60,002 Total............... 483,839 526,215 587,851 6I2,I77 643,292 a Figures within parentheses are not included in totals. If this labor movement indicates capital movement with a fair degree of accuracy, it may be observed that capital was doubtless concentrated in the manufacture of war supplies such as machinery, iron goods, drinks and foods (especially canned goods), leather goods (including tanning), and cotton textiles. In other directions there must have been a marked decrease of capital, since the aggregate of invested capital decreased. But all this is what happened in I904, the first year of war. The case was quite modified in I905. As already seen in a previous table, the industrial capital increased in I905 by 27,000,000 yen in paid-up capital and I8,15 210 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR ooo,ooo yen in reserve fund. This was no doubt due to a revival of home demand and a boom in foreign trade, and also to a general increase of private wealth. Taxes and national bonds constantly absorbed private capital, yet the people not only exercised rigid economy but also reaped the fruits of war in the form of large amounts of interest on the war funds drawn from their pockets. Borrowed foreign money also enriched the people. The national wealth thus increased was reflected in the bank deposits. The following are the deposits and loans of the associated banks in the six large cities for I904, I905, and I906: DEPOSITS AND LOANS, I904-I906 Date Deposits Loans 1904 Yen Yen September............................ 351,480,027 353,642,376 October.......................... 351,799, 62 333,740,767 November......................... 351,819,974 330,7I,670 December................... 360,042,712 344,228,489 1905 January............................ 36I,094,493 348,341,451 February......................... 368,811,230 343,837,533 March............................ 376,245,788 352,301,480 April................................ 391, 138,509 367,220,411 May.............................. 391,865,410 371,903,549 June................................ 400,I88,909 398,909,128 July................................ 390,213,056 404,356,512 August............................. 385,486,704 392,I 8,o I September........................... 391,716,706 386,504,534 October.............................. 397,178,339 385,567,230 November............................ 399,I77,II3 389,651,405 December........................... 407,970,973 385,823,197 1906 January...... 420,907,275 388,468,918 February............................. 438,583,134 386,048,466 March............................... 466,545,280 391,120,423 April............................... 475,359,923 403,197, 63 May............................. 491,737,597 405,980,942 June................................. 499,094,824 438,740,761 July............................... 498,859,899 454,177,926 August.......................... 516,620,873 471,227,087 This increase of popular wealth, together with the disappearance of demand for war funds on the conclusion of the war, suddenly added to the abundance of capital and conse EFFECTS ON INDUSTRY 211 quently led to slackness in the money market. The spirit of enterprise was naturally aroused among the people, while the revival of their peace-time demands created an atmosphere favorable to the feverish promotion of new enterprises. Even in 1905, the second year of the war, it is true that there was some increase in investment, but the rate of increase was greatly accelerated with the restoration of peace. Increase as compared with previous term Date Number of Capital SDate cmais Capital companies Number of Capital companies Yen Yen June, 1904........ 13,272 1,467,683,463 47 19-571,271 December, 1904........ 13,377 1,475,558,378 { I04 78,6964, 45 I8,696,733 June, 1905........ I3,422 1,494,255,III I87 56,412,245 December, 1905........ I3,609 1,550,667,356 273 35,031,509 June, 1906........ 13,882 1,585,698,865....... It is to be noted that the number of companies increased by 460 and the capital by some ninety-one million yen in one year immediately after the close of the war, that is, between June, 1905, and June, I906. But the springing up of new enterprises was most active in the latter half of 1906, so much so, indeed, that the subscriptions to the shares of the Dai Nippon Suisan Kaisha (the Japan Marine Products Co.) amounted to Ioo times those placed in the market, while the shares of the South Manchuria Railway Company offered for subscription were subscribed I,070 times over. The new enterprises promoted with such avidity up to November, I906, after the conclusion of peace, are said to have amounted to no less than 900,000,000 yen in capital. It is hardly necessary to point out that the manufacturing industry formed an important branch of this wild investment. The following classification of those newly promoted enterprises will show how the capital for manufacture increased after the war: 212 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR DEVELOPMENT OF NEW AND OLD COMPANIES AFTER THE WAR New Extended Total companies companies companies Classified industries No. Capital No. Capital No. Capital..~~~~~~ Banks............... Railway............. Insurance............ Mining............. Marine products...... Electricity and gas.... Silk and cotton spinning and weaving...... Wool spinning and weaving......... Silk spinning and weaving.............. Total........... Steamship.......... Docks.............. Total........... Iron smelting........ Iron industry........ Machinery.......... Total........... Sugar manufacture.... Milling............. Fertilizer manufacture. Paper manufacture.... Brick manufacture.... Tea manufacture..... Cement manufacture.. Celluloid manufacture. Brewing............ Others.............. Total........... Transportation and warehousing...... Book printing........ Lumber industry...... Commerce.......... Miscellaneous........ 18 37 7 I7 17 37 13 2 4 Yen 30,715,000 282,220,000 28,000,000 38,870,000 I,325,000 I04,600,000 20,033,000 4,000,000 520,000 81 i6 5 6 I 12 35 3 I Yen 23,616,250 91,274,800 8, 00,000 3,550,000 950,000 23,430,000 23,853,000 200,000 25,000 99 53 12 23 19 49 48 5 5 Yen 54,331,250 373,494,800 36,100,000 42,420,000 12,275,000 128,030,000 43,600,000 6,ooo0,000 545,000 19 24,553,ooo 39 25,878,000 58 50,431,080 5 1,950,000 5 I6,539,oo00 I I8,489,00o 4 15,04I,000 3 8,052,000 7 23,093,ooo 9 16,991,000 9 24,59I,000 17 41,582,000 2 30,390,000..... 2 30,390,000 I 500,000..... I 500,000 3 575,000 5 2,360,000 5 2,935,000 6 31,465,000 5 2,360,000 8 33,825,000 5 I,050,000 5 13,000,000 IO 23,500,000 4 5,500,000 2 I1,40,ooo 6 6,640,000 13 15,800,000 6 4,200,000 I9 20,000,000 15 2,050,000 3 10,550,000 7 12,350,000 4 3,750,000 3 I,000,000 7 4,750,000 2 700,000 I 500,000 3 1,200,000 3 1,050,000 2 1,500,000 5 2,550,000 5 6,400,000...... 5 6,400,000 3 2,300,000 2 I,OIO,OOO 5 3,3Io,ooo 12 4,266,000 IO 1,940,000 22 6,206,000 56 52,3I6,000 34 34,840,000 90 87,156,000 8 7 9 17 17 8,290,000 2,290,000 9,150,000 5,455,000 5,275,000 3 4 2 7 II 600,000 137,000 350,000 1,664,000 7,535,000 II II 21 23 28 9,840,000 2,427,000 9,500,000 6,919,000 12,810,000 The above figures unmistakably point to the prominence of manufactures among the various enterprises newly pro EFFECTS ON INDUSTRY 213 moted. The manufacturing industries promoted or extended after the war can be divided into three classes. The first class includes those undertakings which catered to the increased demand at home. The second are those which supplied foreign demands, not only of China, Korea, and other oriental countries, but of Europe and America. Most important of these were the extension or creation of the cotton spinning and weaving companies, while the less conspicuous included cement manufacturing, habutaye finishing, and the like. Under the third class come those enterprises established or extended in anticipation of the stoppage of importation due to a higher tariff schedule after the war. For example, sugar manufacture, milling, kerosene industry, and paper manufacturing were greatly encouraged by the prospect of higher prices of imports. This is the outline of the movement of manufacturing capital. Let us next investigate the effects of the war upon the manufacturing workers. CONDITIONS OF MANUFACTURING WORKERS The war took away some one million one hundred thousand young men from productive enterprises. In consequence, a shortage of labor was in evidence everywhere, and the labor market was overwhelmed with demands, leading, it is generally believed, to an appreciable rise in wages. On the whole, this observation is correct, but it is wide of the mark when applied to conditions prevailing in I904, the first year of war. In the early stage of the campaign the movement of labor, especially factory labor, took a direction opposite to the movement of manufacturing capital. The latter decreased suddenly in the early stages of the war, but gradually increased with its successful progress, whereas the former showed an excessive supply early in the war, but revealed a scarcity as the campaign progressed. This, needless to say, was due to the facts (I) that the large number of young men were not called to the colors all at once but gradually, as the progress of war required; and (2) that business depression 214 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR was most marked in the early stage of the war, but improved with its development. Immediately after the outbreak of the war in 1904 industrial circles suffered no shortage of labor. On the other hand, workmen found it difficult to secure employment, owing to the retrenchment of enterprises and the consequent decrease in the demand for labor, which led to the lowering of wages. With the progress of the war, however, the general market recovered its activity, the demand for labor began to increase, and the number of men in active service gradually grew greater. This was particularly noticeable in and after the beginning of 1905. All this explains the shortage of labor and consequent rise in wages in the later stages of the war. Though we have no monthly statistics of wages to prove it, we believe the above statement is not erroneous. The following table indicates the changes in wages according to kinds of labor: 1902 1903 1904 1905 1906 I907 1908 Workers connected with clothing and outfits: Dyers..10........II5 105.0 IOO~p-) ioo.6(-) i11.6 131.8 136.i Tailors. 114.0 II2.5 II2.0(-) I2o.6(-) I26.5 I34.7 I37.9 Foot-gear makers. 111II.2 110.0 i io.8(- I I3.2(- 17 I 267 13. Average..1..... 07.8 io8.6 io6.8(-) II2.5(-) I2I.5 I31.5 I36.6 Workers connected with foods and drinks.....iofi.6 111.2 io8.6(-) III.2(-) I13.4 I25.8 133.0 Workers connected with building: Carpenters and plasterers. 110.7 111.9 I09.2(-) II2.5(- 122.3 144.3 156.7 Mat and fitting makers.. 0i8.i 110.1 I04.7(-) 109.4(-) i18.2 138.6 152.8 Average........ 110o.0 111.5 io8.o(-) iii.8(-) 121.3 142.9 155.7 Workers connected with manufacture of furniture: joiners.109........8 110.3 Io6.o(-) 12.3(-) I19.1 131.9 139.6 Metaliworkers.11..... 4.0 112.7 II4.0(-) i8. (-) I25.9 136.9 144.3 Average.111..... I7 111.3 I09.5(-) 14.9(- 122.1 I34.1 148.6 Miscellaneous..10..... 8.4 109.5 io8. i(-) 12.4(- ii6.7 138.0 148.7 Average........107.7 109.5 I07.5 (-) 12.1 (- 118.4 I34.I 143.0 Wages in almost all kinds of labor went down in 1904. The only exceptions were the wages of foot-gear makers and of metal workers. This was due, how~ever, to a large demand for labor of shoe-makers and blacksmiths, who were wanted for the manufacture of war supplies. This general fall in wages was more discouraging to workers when its practical EFFECTS ON INDUSTRY 215 bearing is realized, because general prices rose somewhat despite the decrease in money wages. But wages markedly rose in nearly all kinds of work in I905. This rise was not only in comparison with the previous year, but also as compared with wages before the outbreak of the war, the only exception being the wages of mat and fitting makers. In spite of the shortage of labor, however, the year I905 saw a decided increase in manufactured goods, as will be explained in the next section. This general increase was the case not only in comparison with 1904 but with 1903 also. It is evident that the I,IOo,ooo men requisitioned in the war caused a hurtful scarcity of labor. How, then, account for the great increase in production? It may be explained in this way: (I) Our population was increasing every year by over half a million. Each year, therefore, had tens of thousands of new labor recruits. (2) As a result of over-population and low wages, all factories had previously been using labor lavishly. They therefore had ample room to effect an economy in hands by means of better organization and more careful use of mechanical power, and the war forced them to resort to this economy. (3) The war proved a powerful impetus to mechanical invention as a result of scarcity of labor. APPLICATIONS FOR PATENTS AND PATENTEES, I90I-I908 Number of applications Patentees, nativ Year ___Patentees, native Year for patents, native and foreign and foreign 1901......................... 2,142 (255)a 474 (I32)a 1902......................... 2,781 (314) 668 (203) 1903......................... 2,923 (330) 720 (304) 1904........ 2,274 (344) 88i (372) 1905........................ 2,340 (557) I,JI5 (539) I906........................ 3,384 (72I) I,107 (487) I907......................... 3,979 (779) 1,341 (648) I908......................... 4,57I (667) 1,431 (582) a The parentheses enclose the number of foreign applications for patents, and the number of foreign patentees. 216 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR It is to be noted that the number of patentees increased during the war, especially in I905. The manufacturing industry in this country suffered much from shortage of labor, but succeeded in its efforts to increase output by improvement in organization and a better use of machinery. When one million fighters were released from military service after the war, they were employed for the extension of industry. Indeed, the rapid strides in manufacture were largely due to the abundance of capital and to the employment, in the newly promoted enterprises, of labor released from the war. The established industries, through an economy in labor, could be conducted by workers who were never called to the colors. AMOUNT OF MANUFACTURED GOODS In this section we propose to see how the output of factories was affected by the war. Although the statistics at our disposal concern only a portion of our manufacturing industry, yet they will serve to indicate the general trend of the increase or decrease in production. FLUCTUATIONS IN MANUFACTURES, I902-1907 Spur cotton (Amount of Textile Porcelain LacquerYear ginned fabrics Sake Soy and earthen- ware cotton) ware Kanme Yen Koku Komu Yen Yen 902............. 44,286,547 I47,I47,098 3,309,312 1,763,7IO 6,911,301 5,588,466 I903............ 45,521,389 134,006,795 3,615,046 1,859,165 6,975,542 5,371,424 I904............ 40,157,040 123,436,268 3,153,402 1,765,973 6,733,568 4,477,274 I905............. 50,516,514 I53,233,99I 3,792,56I 1,932,492 8,821,544 5,559,868 906............. 53,079,596 210,355,66I 4,167,721 2,074,008 13,385,982 6,809,605 I907............ 54,421,017 228,240,393 4,368,977 2,122,911 12,940,658 7,561,084 Year Japanese Foreign Figured Raw Bleached Oil paper paper mats wax wax Yen Yen Yen Yen Yen Yen 1902............. I4,159,670 7,I50,024 4,960,487 2,252,489 1,396,903 9,314,113 1903............. I2,413,231 7,171,835 5,262,974 4,301,247 2,722,799 8,078,547 I904............ I3,543,837 101,434,904 4,I35,097 3,166,617 1,810,523 7,266,I80 1905............. I3,722,228 II,059,089 4,079,509 4,635,210 2,728,763 8,899,512 1906............. 15,480,680 14,157,736 4,548,299 4,027,142 3,343,618 11,613,683 1907............. I9,506,013 12,477,230 4,726,165 3,I5I,570 1,357,977 I0,943,560 EFFECTS ON INDUSTRY 2I7 FLUCTUATIONS IN MANUFACTURES, I902-I 907-Continued I Straw Year Matches Indigo Leather hraids Yen Yen Yen Yen I902........8,608,571 4,343,919 2,255,281i 2,377,349............ I903........9,872,59I 3,539,967 3,92i,846 3,885,733 -.......... 1904....... I1, 745,646 2,179,312 18,879,337 4,807,994............ I905..1.....2,219,573 2,285,234 16,725,844 5,426,574............ 1906........5,516,980 2,609,220 10,882,984 4,730,156............ I907..1.....5,078,I32 2,055,791 8,968,946 4,224,939............ It may be noted that production decreased in I904, but suddenly increased in the following year, so that the factory output in 1905 was even greater in amount than in I903, p~revious to the outbreak of war. CHAPTER VI EFFECTS ON COMMUNICATIONS GENERAL REMARKS It was inevitable that the war should materially handicap the means of communication, as was frequently mentioned in the two preceding chapters. And the crippled communication facilities were responsible in turn for the rise in prices at home, the wide difference of prices in different places, and the depression of foreign trade, at least in the early stages of the war. This handicapped state of communications can be attributed to (I) the commandeering of all the important means of communication for the transportation of troops and war supplies; and (2) the restrictions placed on the free working of the means of transportation through danger and through precautions arising out of the action of enemy warships. The first acted in the form of requisitions of railways, ships, horses and wagons, while the second chiefly crippled the steamship service. Thus, ordinary communication and transportation in war time were disturbed in their various branches, but we shall limit our observations to the most important among them, i.e., the land or railway transportation and the sea or steamship service. LAND TRANSPORTATION It is hardly necessary to say that the general railway service was hindered by military transportation. In January, I904, a government order was issued, commandeering the railways throughout the country. In the following month a great movement of troops and war supplies was commenced; timetables were frequently revised not only for freight trains but also for passenger trains, and finally the number of daily trains was reduced, which led to the decrease in the ordinary passenger and freight traffic. But this decrease was not alone 218 EFFECTS ON COMMUNICATIONS 2I9 due to military transportation at home, but also to the fact that much of the rolling-stock was sent for the use of the field railway. The rolling-stock transferred for this purpose from the national and private railways (to the end of March, I905) comprised the following: ROLLING-STOCK TRANSFERRED FOR USE OF FIELD RAILWAY Railway CompLoco- Passenger Freight Total Railway Compan i es cars cars Government Railway Traffic Bureau 64 17 726 807 Japan Railway Co............... 23.. 360 383 Sanyo Railway Co............... 4 42 146 Kobu Railway Co................. 5 5 Io Kansai Railway Co.............. 4. 92 96 Sobu Railway Co................. 50 50 Boso Railway Co......... 5 5 Narita Railway Co................ 25 25 Kyoto Railway Co............... I Hankaku Railway Co............... Io 10 Hokuetsu Railway Co........... I.. I II Tokykawa Railway Co.......... 9 24 33 Nankai Railway Co............ I9 19 Nishibari Railway Co............ Io Chugoku Railway Co.............. 5 5 Tokushima Railway Co............ 20 20 Kyushu Railway Co............ 312 312 Hakatawan Railway Co.............. 10 I Hokkaido Tanko Railway Co I.... I Gan-etsu Railway Co.............. 5 Total................. 97 36 1,835 1,968 The statistics of all the railways in the country also point to the same fact: Mileage of lines Rolling- Increase of Decrease of open to traffic stock mileage rolling-stock 1903........ 4,495,47 29,380.... 904....... 4,693,93 29,I54 I98,69 226 Seeing that most of the rolling-stock commandeered belonged to the Government Railway Traffic Bureau, the Japan Railway Co. and the Sanyo Railway Co., whose railway lines formed the main arteries of communication in this country, 220 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR it is easy to imagine how hard the transportation service was hit. Although the general passenger and freight service was thus hindered, yet it must be remembered that these and other agencies of transportation did everything possible to minimize the congestion and used every available train for transportation of goods whenever there was a lull in their military service. They also strove hard to restore the peace-time number of daily passenger trains. In consequence the congestion of traffic did not reach the worst point feared by the general public. No details are available as to how much of the railway service was put to military use; we can infer, however, that its extent was very great. In the first place, the mileage of running, which had been increasing year after year before the war, was reduced by some Ioo,ooo miles as compared with the previous year. MILEAGE COVERED BY TRAINS, 1901-I905 Year ending March 31 State railways Private railways es Miles 1901................................. 8,270,286 22,163,214 1902................................. 8,768,171 23,297,908 I903................................. o,I68,979 24,125,379 1904.................... 9,649,450 24,479,190 I905................................. I0,710,264 25,666,437 The decrease was chiefly in those lines of the state railways which were on the main routes of military transportation. A slight increase took place in some private railways, but those which were charged with military transportation naturally lost their ordinary work, as will be seen from the subjoined table. Let us first study the effects of military transportation by the statistics of passengers and fares during the five years 190o to 1905. (See table at the top of the next page.) It is patent that there was a sudden fall both in the state and private railway traffic in I904. But it should be noted that this decrease must have been due partly to the habit of thrift which the people in general cultivated and to the handi EFFECTS ON COMMUNICATIONS 221 PASSENGERS AND FARES, 1901-1905 Number of Passengers Fares Year State Total Average per S.Private.for state passenger railways ra ilways railways state railway Yen Sen I90................ 32,527,339 79,136,954 10,887,870 30.4 1902............... 32,689,916 78,121,456 11,880,530 36.0 1903................ 35,006,753 79,861,798 13,040,252 37.2 1904.............. 30,026,355 75,225,481 1,240,251 41.3 1905............... 32,026,355 82,648,439 14,097,661 44.5 capped condition of railways. Unnecessary travel was avoided and trains were used as little as possible; nevertheless, the fares per passenger suddenly increased because the troops transported were included in the number of passengers. The effects of the war upon railway traffic will be seen more clearly if we limit our observation to the state-owned Tokaido, Nippon, and Sanyo lines, which were most frequently used for military purposes. NUMBER OF PASSENGERS, 1901-1905 Year Tokaido lines Nippon lines Sanyo lines 1901....................... 24,367,712 16,339,421 7,457,o00 1902...................... 23,573,716 15,551,565 7,370,264 1903....................... 24,015,154 14,378,355 8,132,783 I904...................... I19,001,062 13,081,635 8,716,325 I905..................... 20,582,846 I4,23I,020 12,464,864 A marked decrease in the number of passengers took place in all lines except the Sanyo. As compared with the previous year, the decrease was about 5,000,000 for the Tokaido lines and some 1,200,000 for the Nippon lines. The decrease of ordinary passengers was all the more remarkable when we consider that the figures cited were inclusive of troops transported, and it is worthy of notice that this tendency did not abate even in I905. That the troops formed a comparatively large portion of the passenger traffic may be demonstrated by the subjoined table: 222 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR AVERAGE MILEAGE AND FARES PER CAPITA, 1901-I904 Miles covered by passengers, Fares averaged per passenger average per capita per mile in MO a Y e a r - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ Tokaido Nippon Sanyo Tokaido Nippon Sanyo lines lines lines lines lines lines I901......23.42 20.58 27.40 I47 129 I20 1902......24.04 20.65 27.75 156 I47 I24 1903......25.62 21.66 31.51 I51 152 I14 I904......32.13 26.34 40.55 140 136 99 a1Ioo0mo =I sen. That the long-distance passengers suddenly increased on all lines in I904, and yet the average fares showed a decrease, is evidence of the transportation of troops. As regards the freight traffic, it showed more or less increase throughout the lines. FREIGHT TRAFFIC, I90I-I905 State railways Private railways Year Total Freight Total Tokaido Nippon Sanyo tonnage rates tonnage lines lines lines Tons Yen Tons Tons Tons Tons 1901... 2,787,11 I3 5,498,523 I11,773,7I9 1,973,377 2,143,222 750,874 1902... 3,317,45 7 5,646,586 I2,96i,053 2,251,450 2,385,305 869,435 1903... 3,745,652 6,465,092 14,290,942 2,320,031I 2,666,500 1,035,794 1904... 4,016,758 7,826,813 I15,603,008 2,340,322 2,693,097 1,326,849 1905... 4,782,505 9,091,322 I17,1I59,950 2,811,562 3,282,774 1,501,325 The increase in freight traffic must also have been due to the transportation of war supplies and not of ordinary goods. Average miles per ton Average rate per ton of goods of goods per mile Y e a r- _ _ _ _ - _ _ _ _ _ _ _ _ - _ _ _ _ - _ _ _ _ Tokaido Nippon Sanyo Tokaido Nippon Sanyo lines lines lines lines lines lines 190...... 86.68 I05.05 86.68 190 197 97 1902...... 84.58 103.28 112.20 186 199 79 1903..... 87.23 100.69 120.79 i8o 191 8 1904.1.... 09.01 107.77 112.72 177 184 I15 EFFECTS ON COMMUNICATIONS 223 That the latter must have decreased may be seen by the comparative study of the average miles per ton of goods and the average rate per ton per mile, with the total amount of goods transported on land. The fact that in 1904 the long-distance freight traffic suddenly increased and the average receipts per mile decreased unmistakably points to how greatly the general freight transportation was affected by military requirements. AMOUNT OF GOODS TRANSPORTED ON LAND a Increase or 1903 1904 Indecrease or Tons............... 34,o85,539 43,212,925 +- 9,I27,386 Kin................ 480,209,500 429,658,680 -50,550,820 Pieces.............. 20,901,809 I7,259,302 - 3,642,507 Kamme............. I,60I,697 87,731,530 -23,870, 167 a Investigations by the Revenue Bureau, Treasury Department. The above table shows the amount of goods transported by means of railway trains, electric cars, horse wagons, carts, and horses. The figures expressed in kin, pieces, and kamme show the amount of goods conveyed by horse wagons, carts, and horses. These suddenly fell off in I904. From this we gather that ordinary railway freight must also have decreased, because railway transportation alone can not increase when that by other means decreases in volume; for it must further be remembered that railway freight requires other means of transportation either in loading or delivery, so that a decline in one must be accompanied by a decline in the other. Thus the war exerted a great adverse influence upon railway traffic, and inconvenienced the public, especially in their commercial and industrial interests. But the railway business itself was benefited rather than injured by the war, as can be seen from the table of the earnings of the leading lines at the top of the next page. These results were obtained in spite of a practical rebate on 224 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR RAILWAY TRAFFIC EARNINGS, I90-I1904 Companies earnin I 90I I902 I903 I904 expenses, etc. Yen Yen Yen Yen Government Railway Earnings 16,277 17,649 I9,220 20,229 Traffic Bureau..... Expenses 7,882 8,307 8,922 8,314 Net profits 8,394 8,342 I0,297 11,895 Earnings IO,I87 I0,889 IO,986 11,406 Nippon Railway Co... Expenses 4,448 4,727 5,I79 5,291 Net profits 5,459 5,530 5,806 6,114 Earnings 5,598 3,889 4,905 6,039 Sanyo Railway Co.... Expenses 1,702 1,758 2,065 2,443 Net profits 1,896 2,131 2,840 3,595 military transportation, the primary cause of the success probably being an extremely economical use of rollingstock as compared with the railway conveyance of ordinary goods. During the year ending with March, I906, passenger traffic was almost restored to its normal level, while freight traffic showed a remarkable increase. In that year, too, there must have been military transportation back from the front, which interfered with ordinary traffic to some extent. But as there was no strategic need to press the work, it could be effected in such a way as to give ordinary traffic as little inconvenience as possible. The post bellum effects of the war on the railways were also reflected in another direction, that is, in the nationalization of the seventeen private railway companies by the government, which had come to realize the supreme importance of a unified railway service through the experience of war. The nationalization was effected in the six years from I906 to I9II, inclusive, during which time the railways throughout the country passed to state control. The Fusan-Seoul Railway was also purchased by the government in August, I906, while the South Manchuria Railway came under Japan's control as a result of the war. Thus, the government was enabled to unify the railways not only in Japan proper but in Korea and Manchuria. EFFECTS ON COMMUNICATIONS 225 EFFECTS ON SHIPPING General observations Shipping was affected by the war in a greater degree even than railway traffic. Setting aside for the present the hindrances caused by the alarm and danger on the sea, a huge amount of tonnage commandeered for military transportation literally paralyzed the shipping business of the country. In consequence, there was a serious shortage of bottoms for both coasting trade and foreign routes, which, however, could be made good by the purchase or chartering of steamers. It is impossible to ascertain exactly how many tons of ships were commandeered in the war; but we do know that during the campaign the mercantile marine of Japan, including sailing vessels, consisted of 4,602 in number, with an aggregate tonnage of 979,000 tons. However, those vessels capable of military transportation, that is, steamers above 500 tons, were only 214 in number, with an aggregate tonnage of 652,300 tons. If a large part of them were commandeered, some half a million tons would be the approximate figure. Of the Nippon Yusen Kaisha fleet, which was the most important in our shipping trade, no less than 112 vessels of various sizes, with a gross tonnage of 400,000 tons, were requisitioned during the war. The figure will exceed half a million if the tramp steamers commandeered be added. The effect of this on the shipping trade may be inferred from the following report of the Nippon Yusen Kaisha. NIPPON YUSEN KAISHA CO. REPORT, 1903-1905 Company boats foreg ts Total foreign boats Year No. of Miles No. of Miles No. of Miles voyages voyages voyages 1903 (2d half)... 1,043 1,586,767....... 1,043 1,586,767 1904 (Ist half). 800 1,235,050 29 31,229 829 1,266,279 (2d half)... 363 332,822 176 282,125 539 614,947 1905 (Ist half).. 395 319,910 I6i 263,693 556 583,603.....~~~~~~~~~~~~~ 226 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR This table concerns the ships controlled by the Nippon Yusen Kaisha and does not include those chartered by the government. It therefore indicates the entire work of the company in its home and foreign departments, both before and during the war. Thus, we see that during the war our power of sea transportation decreased almost by one-half in the number of voyages and to less than one-third in mileage. The arrivals at and sailings from our ports in 1904 as against 1903 showed a decrease of 2,611 steamships, with an aggregate tonnage of about 4,300,000 tons, and 485 sailing vessels, with a gross tonnage of some 65,000 tons; the decrease was most conspicuous for Japanese vessels. As compared with the previous year, our steamers decreased by 60 per cent in number and their aggregate tonnage by 78 per cent; our sailing vessels decreased by 12 per cent in number and their gross tonnage by 34 per cent. All the foreign vessels, except those of Austria-Hungary, Denmark, Russia, and France, showed a decided increase in Japanese bottoms. As there was comparatively little decrease in the number of passengers and the volume of freight, and especially in the sum of freight charges, we can understand to what extent the people suffered from the absorption of shipping service by the war. EFFECTS OF WAR ON SHIPPING, 1903-I907 Company Year Passengers Freight Passenger Freight Total fares charges revenue No. Tons Yen Yen Yen OsakaShosen 1903 1,898,602 I8,861,457 1,830,097 3,322,609 5,152,706 Kaisha 1.904 1,682,658 20,026,004 1,838,935 3,96I,075 5,800,010 1905 I,87I,I03 25,604,434 2,244,334 5,224,561 7,468,895 1906 1,942,972 24,954,355 2,703,445 5,448,843 8,I52,288 I907 1,993,520 29,584,669 3,082,965 5,738,283 8,821,248 Toyo Kisen I903 12,886 84,801 1,347,247 983,951 233,198 Kaisha I904 2,029 19,152 204,076 139,605 233,681 I905 I,o34 9,40i 91,337 III,Io8 202,445 1906 13,268 79,304 1,643,253 I,025,068 2,668,321 I907 16,858 124,964 1,539,949 1,815,391 3,355,340 This is an outline of the war's effects on shipping. Now let us investigate its effects on home and foreign routes separately. EFFECTS ON COMMUNICATIONS 227 Effects on home routes At the outset of the war, the Nippon Yusen Kaisha owned 81 vessels, with an aggregate tonnage of 260,000 tons, of which 60 vessels were commandeered by the Army and Navy at the time of opening hostilities. With the remaining 21 vessels, the company managed to maintain both its foreign and home services. Nine vessels were allotted to the foreign routes, while to the home service twelve vessels were given, the decrease in its transportation capacity being over twothirds as compared with the ante bellum year, when nearly one-half of the company's vessels were used for coasting service. The Osaka Shosen Kaisha, too, whose vessels mostly engaged in coastwise service, had some one-half of its ships in number and two-thirds in tonnage commandeered for the war; of the 117 vessels owned by the western branch of the league of shipowners, 64 were requisitioned by the middle of February, 1904. No small number of privately owned ships were also taken on account of the war. THE OSAKA SHOSEN KAISHA BOATS, 1903-1905 Boats owned Company boats by the company commandeered Year Number Tonnage Number Tonnage 1903 (ist half)............... 81 66,429 I 451 1904 (Ist half)............... 79 63,173 48 48,625 (2d half).... 84 69,040 39 40,014 1905 (2d half)................ 94 90,626 38 43,519 Had not the situation been relieved by purchasing and chartering foreign ships, our trade at home and abroad might have been entirely crippled owing to the scarcity of ships. But the authorities did not forget to take the necessary steps, and as early as February I, 1904, just before the outbreak of the war, a notice was given by the Department of Communications to the effect that a license would be granted, as a special arrangement for the time being, for chartering foreign 228 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR vessels with a view to running them in the coastwise service, or to call at ports not open to foreign trade to convey goods or passengers. The following are the number and tonnage of the foreign vessels which were under charter after the war broke out, in accordance with this notification. FOREIGN VESSELS CHARTERED, I904-1905 Date Number Tonnage 1904 February..................................... 7 18,790 March........................... 55 120,659 April......................................... 70 152,596 May........................................ 76 166,149 June........................................ 75 60,261 July......................................... 66 134,553 August....................................... 64 134,024 September................................. 72 142,338 October...................................... 65 127,026 November............................... 54 Io9,180 Decem ber................................... 50 92,819 1905 January.................................... 51 99,606 February..................................... 55 113,857 M arch...................................... 74 156,552 April....................................... 8 172,057 May........................................ 89 189,421 June......................................... 86 I84,489 July........................................ 84 179,864 August.................................... 75 163,718 September................................. 69 148,717 October................................... 62 137,749 On the other hand, new vessels were constructed and foreign vessels were purchased to fill up the shortage in ships. Such additions to our mercantile marine from January, I904, to October, 1905, were as tabulated at the top of the next page. Thus, I50,000 tons were chartered and 350,000 tons were either constructed or purchased, bringing up the total of the additions to half a million tons. It would appear from this that the shortage of vessels was made good, but the fact was not so simple. It must be remembered that those additions were spread over the entire period of the war and not made at one time, so that it was only in 1905 that the situation was somewhat relieved. During the first months after the out EFFECTS ON COMMUNICATIONS 229 ADDITIONS TO MERCHANT MARINE, I904-I905 New vessels Purchased vessels Total Class Number Tonnage Number Tonnage Number Tonnage Tons Under I,OOO... 193 27,352 29 19,488 222 46,840 I,000-2,000.... 7 II,IIO 45 68,III 52 79,221 2,000-3,000.... I 2,029 45 108,o32 46 110,06I 3,000-4,000........... 24 80,253 24 80,253 4,000-5,000............ 6 26,144 6 26,144 Above 5,000.. 2 12,53 I 5,248 3 17,779 Total..... 198 53,022 150 307,278 353 360,298 break of war in I904, many of the established routes were on the brink of suspending business, owing to the fact that most vessels were commandeered, while foreign ships were not yet chartered or purchased. Next to the shortage of vessels, the danger on the sea affected the shipping trade most severely. Not a few of our coastal lines were closed on account of the danger of the enemy warships making their appearance near our shores and capturing or attacking our merchant marine. Of the lines between Osaka, Kobe, Chugoku (on the Inland Sea), and Kyushu, the calling at the western ports of Kyushu was suspended for a time; while the Tosa coastal line had its service decreased from a daily to a once-in-three-days service. The Sea of Japan and Hokkaido lines were often suspended, much to the inconvenience of the public. In the Sea of Japan, the steamship service was discontinued for days or months at a time, after the steamships Nagoura Maru and Takashima Maru were sunk by the enemy cruisers, in February, 1904, one in the Sea of Japan and the other at the Straits of Tsugaru; and again in June, when the enemy fleet came out of Vladivostok, and in July, when the Vladivostok fleet raided the Pacific through the Tsugaru Straits; and yet again in I905, when the Baltic fleet entered the Sea of Japan. Even when the lines were not closed, the steamship service in the Sea of Japan was greatly handicapped through the danger of 230 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR the enemy warships, which caused no small congestion of freight. Under these circumstances it was but natural that the freight rates were raised. Upon the commandeering of vessels just before the actual outbreak of the war, the freight rates on coal between Moji and Yokohama rose by some 50 per cent, and the rates on other goods rose by 20 to 30 per cent, while the general coastal rates rose by 20 per cent, as a rule. This upward tendency was accentuated after the declaration of war, and in the middle of February the association of the owners of tramp steamers passed a resolution, which was promptly carried out, recommending the raising of freight rates by 50 per cent. And in the latter part of the same month, when the shortage of bottoms was felt most keenly, the freight rates between Osaka and Korea rose by 50 per cent; those between Osaka and Formosa, by 30 per cent; those between Osaka and Ujina or Kure, by 80 per cent; and those between Osaka and Kyushu or Shikoku, by 50 per cent. The freight rates on goods sent to Osaka from various parts of Japan also rose by 30 per cent. The situation somewhat improved in April, but the freight rates then prevailing were 30 per cent less than the highest ever attained, as by that time the deficiency was made good to some extent. Yet the rates were much higher than the peace-time schedule. Comparing the rates in May, 1904, with those in the same month of the previous year, those of the Hokkaido lines were higher by 40 to 50 per cent; the Hokuriku lines, by 40 per cent, and the Formosa lines, by 20 per cent. Though the rates on the various lines gradually lowered as more and more ships were added to our merchant marine in the first half of I905, they were still higher than the ante bellum rates, generally by 20 per cent, and 50 per cent in extreme cases. Effects on foreign routes The Nippon Yusen Kaisha, the Osaka Shosen Kaisha, and the Toyo Kisen Kaisha were the three main steamship companies that ran vessels on foreign lines during the war. Of EFFECTS ON COMMUNICATIONS 231 these, the Formosa-South China line, the Yangtze line, and a part of the North China-Korea line were maintained without break by the Osaka Shosen Kaisha, and the Yangtze line by the Nippon Yusen Kaisha, while all other lines were suspended for a shorter or longer period. IMPORTANT LINES SUSPENDED Steamers operated Steamship lines Number Tonnage European.................. 12 73,000 American................... 4 25,000 Australian................. 4 I8,ooo Bombay.^ r^' ************ 3 10,000 * Nippon Yusen Kaisha Bombay.................... 3 oooo Nippon Yusen Kaisha0,000 Korea-North China.......... 2 5,000 North China................ 3 5,600 Vladivostok................ 2 5,600 Shanghai.......... 3 8,500 American and Manila........ 7 34,000 Toyo Kisen Kaisha It was between the beginning of February and the first part of March in 1904 that those lines were most exposed to danger, so much so that not only the European, American, Indian, and Australian lines, but also the Korean and Chinese lines, almost suspended service. In the middle of March, however, the Korean and Chinese lines were reopened; early in April, the Hongkong-San Francisco line was resumed by the Toyo Kisen Kaisha steamer America Maru, followed by the Nippon Yusen Kaisha steamer Kanagawa Maru early in June; and in July, the Australian line was reopened by the Nippon Yusen Kaisha steamer Yawata Maru. Previously to this, the Nippon Yusen Kaisha chartered British steamships and reopened the European line with them in May. At first the service was monthly, but it was extended with an increased number of chartered boats. Throughout all lines, however, the service was greatly handicapped owing to the embarrassing shortage of vessels and the frequent danger from hostile warships. It is true that the decrease in our vessels on the foreign lines led to the temporary activity of 232 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR foreign steamers, which relieved the situation to a certain extent; but they did not care to come near our waters, being afraid of the Russian warships from Vladivostok and the Baltic Sea. Most of them placed restrictions on their cargoes and refused to convey any goods which might be suspected as contraband; others took a long circuitous route, rounding South America for safety. All this resulted in great inconvenience for Japan. The freight rates in the foreign service also soared at the beginning of the war, the rise ranging from 30 to Ioo per cent, according to the kinds of goods. But by the latter half of 1904 the rates settled down to a level of increase which was trifling as compared with the rates in the home service. Too many vessels after the war Upon the close of the war and the triumphal return of the troops, vessels of some half million tons which had been commandeered were released. These being restored to the mercantile marine, which now included vessels added during the war through new construction, purchase, and chartering, it is small wonder that there were too many vessels in the country INCREASE OF VESSELS, I903, 1905, I906 December, I903 October, I905 September, 1906 Class Number Number Number of vessels Tonnage of vessels Tonnage of vessels Tonnage Tons 20-50........ 303 9,764 399 I2,786 7 3892 50-I1oo....... I99 14,036 225 I5,943 100-300..... 228 37,926 246 41,460 257 43,560 300-500....... 84 33,I75 92 35,748 9I 35,15I 500-I,000..... 77 50,596 112 79,009 I34 96,107 1,000-2,000.... 86 126,234 121 181,454 I31 198,662 2,000-3,000... 66 165,334 96 232,678 io6 258,054 3,000-4,000oo.... 8 62,978 39 132,215 41 I39,54I 4,000-5,000.... 5 22,478 II 48,633 I 48,671 5,000-6,000oo.... 3 6,438 5 26,755 6 3I,972 6,000-7,000.... 1 118,305 I8 112,138 I9 I8,305 Above 7,000........ I 7,463 I 7,463 Total..... I,oo8 657,269 1,365 926,285 1,468 I,008,383 EFFECTS ON COMMUNICATIONS 233 for our use on a peace footing. The increase of vessels may be seen from the foregoing table. Before the war, our mercantile marine consisted of some 650,000 tons, but it swelled to 920,000 tons at the close of the war, an increase of no less than 270,000 tons. In addition to this, there was no small amount of chartered tonnage. The release of commandeered vessels thus gave birth to the problem of a superabundance of ships. A keen competition ensued among the steamship companies engaged in the coastal service, and the freight rates fell at one time by some 20 to 30 per cent as compared with I903, while the shipping traders found themselves in a trying circumstance because of the rise in the price of coal. At the same time, however, it must be remembered that the surplus of vessels led to the opening of many new lines and proved the cause of a great stride in our shipping trade. For example, the Osaka Shosen Kaisha organized the Hankow and Dalny lines; the Nippon Yusen Kaisha, the Hankow and Siam lines; the Toyo Kisen Kaisha, the South American line, besides an extension of its North American line. Up to October, I906, tramp steamers were also newly run on the South Sea, North and South American, Hongkong, and Vladivostok lines, in all I4 ships with a gross tonnage of 40,000 tons. Meanwhile, through the rapid economic growth of this country after the war, the surplus shipping was gradually absorbed, which marked a new epoch in the development of our shipping business. CHAPTER VII EFFECTS ON AGRICULTURE GENERAL REMARKS The greatest burdens of the Russo-Japanese War, as of all other wars, fell upon the shoulders of the farming class. The engine of destruction is operated by means of conscription or "blood tax," and by means of taxation and other pecuniary burdens on the nation. And the incidence of conscription fell most severely on the peasants, as will be explained later on. At the same time there is no ground for the assumption that the incidence of taxes and other pecuniary burdens was lighter on them than on other classes. The war threw great burdens on other classes, to be sure, but they were either benefited by the war or else able to seize the opportunity of promoting their own interests. For example, those pursuing trade or industry could increase their earnings either by the manufacture of, or transactions in, war supplies, by the manufacture of, or dealings in, articles for export, as our foreign trade increased through the war, or by meeting the new demands arising at home through revival of the home market. They thus added to their incomes according to the measure of their efforts. Though the war exacted heavy sacrifice from them, it gave no small amount of benefit to them. The case was quite different with the agricultural population. Their burdens were especially grievous, but they could derive nothing from the war, and there was almost no other way of earning money than by obtaining a determined amount of crop through tilling a definite area of land and selling the crop at an almost fixed price. No monetary profits were brought to them by the war, and there was no method of filling up the deficiency in labor created by the mobilization of workers. There was no way left them but 234 EFFECTS ON AGRICULTURE 235 to concentrate their efforts toward a rigid economy in both expenditure and labor. But it is impossible to maintain the status quo in domestic economy with thrift and industry alone if the deficiency be too great. The question arises, therefore, whether the economy of the peasants in the Russo-Japanese War was sufficient to keep up their standard of living before the war. This being a problem demanding careful examination on our part, let us first examine their burdens in the campaign; next, what sort of economy they exercised in order to be able to bear these burdens; and finally, whether or not this economy had the desired effect of fully maintaining the former standard of comfort. BURDENS OF THE FARMING CLASS It is needless to say that the greatest burden of war on the nation was the entry of the able-bodied men into the army. There must have been nearly two million people who engaged in unproductive work through the war with Russia, but those who were actually at the fighting line or who took up service at the rear totaled some I,I1OO,OO. Almost all of those men were taken away from the productive activity of the country; and it was farming that lost the largest proportion of labor by the war. The census taken in I904 showed that there were 8,413,688 families in Japan, of which 5,416,703, or some 64 per cent, were engaged in farming. It will be a conservative estimate, therefore, to say that the farming class sent 700,000 men to the front, especially when the fact is taken into consideration that the peasants are in possession of better physique than other classes, thus rendering the percentage passing the conscription examination much higher in the country than in cities. Such being the case, the agricultural population not only sent out the largest number of troops, but also their burden in this respect fell more heavily on their interests than on other trades and occupations. The following are the results of the conscription examination for a certain regimental district in 1904: 236 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR CONSCRIPTION EXAMINATION RESULTS, I904 Percentage passing as fit A Students........................................ 21.0 Trade........................................... 28.4 Industry......................................... 32.5 Fishery.......................................... 34.5 Farming...................................... 48.9 Miscellaneous................................. 23.5 Total....................................... 30.5 It was no light blow to 5,000,000 farming households to lose 700,000 workers and to have thousands of horses commandeered at the same time, the latter making a loss almost as great to agriculture as that of human labor. It is roughly estimated that some I50,000 horses were placed at the disposal of the military authorities. TOTAL NUMBER OF HORSES THROUGHOUT THE COUNTRY, I902-I906 1902.................................... I,515,IO8 903.................................................. 1,523,745 I904.................................................. 1,390,017 905.................................................. 1,360,7I5 906.................................................. 1,465,466 It is not known what proportion of those I50,000 horses belonged to the peasants. Some of them must have bought new horses to make up their losses, as the decrease in the number of horses used in farming is said to have been some 40,000. It should be noted in this connection, also, that numbers of cattle were butchered for military use, and it is estimated that the cattle for farming decreased by some 50,000, bringing up the total of the decrease in horses and cattle to some IOO,OOO. NUMBER OF CATTLE AND HORSES USED IN FARMING, I903-1907 Year Cattle Horses Total 903........................... 1, 6,662 1,189,683 2,206,345 I904............................ 953,848 1,152,462 2,106,310 1905........................... 979,099 I,149,545 2,128,644 906............................ I,022,037,I154,I43 2,176,180 I907......................... I,008,922 1,204,03I 2,212,953 EFFECTS ON AGRICULTURE 237 Thus, some 700,000 soldiers were recruited from among the peasants, and some Ioo,ooo head of their cattle and horses commandeered. More than that, their pecuniary burdens were heavy. The land taxes, excepting residential estates, were increased from 2.5 per cent of land value to from 5.5 to i. 8 per cent in the first increase of taxation and I. 2 per cent in the second increase-no light burdens compared with the business taxes, which were increased two and one-half times. The farming class paid land taxes to the amount of some 60,000,000 yen in 1904 and 80,000,000 yen in I905, against 12,000,000 yen in I904 and i8,ooo,ooo yen in I905 paid by the commercial and manufacturing people as their business taxes. The ratio was 5 to I, whereas the latter classes represented nearly one half of the number of peasants in point of population. The incidence of increased taxation can not be said to have been in favor of the farming class. This was also true of other taxes which were common to both. There is no denying that the peasants suffered heavily from the increased taxation, as may be proved by the subjoined statistics regarding the cases of land taxes in arrear: LAND TAXES IN ARREARS, 1902-I905 Collected after the Deficit in default process tax revenues Year No. of Amount of No. of Amount of payers taxes payers taxes Yen Yen 1902................ 4,i60 3,298 I,043 2,256 1903............... 5,375 3,263 1,117 2,274 I904............. 6,961 5,961 1,128 3,585 905................ 9,358 Io,427 1,584 7,889 Moreover the rural people were pressed to subscribe to the national bonds, the authorities appealing to their patriotism and adopting the policy of accepting the small applications of less than 200 yen. In consequence, the people, especially the country peasants, were forced to pay beyond their means. 238 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR This explains the failure of the national bonds of the first series, of which those subscribed but not paid up amounted to no less than 3,022,000 yen. In the issue of the later series, too, patriotic considerations are said to have induced the rural population to subscribe to the bonds beyond their resources. The farming class, therefore, suffered from increased taxation and from the paying up for national loans, so that their burdens of war were excessive both in blood and money. To what means, then, did they resort in order to meet the exactions of this twofold nature? GENERAL ECONOMY There was no option but to exercise rigid economy in all directions to tide over the difficulties, because the peasants had to shoulder heavy burdens with no possible way of increasing their earnings. It may occur to anyone that 700,000 young men withdrawn from agriculture would cause serious shortage of farm labor and ultimately lead to the desolation of the land under cultivation. But such was not the case; on the contrary, the area of land under cultivation increased during the war. AREA OF LAND UNDER CULTIVATION, 1903-1906 Year Paddy fields Other fields Total Cho Cho Cho I903............................ 2,831,697 2,438,474 5,270,171 1904............................. 2,818,276 2,476,584 5,294,860 I905.......................... 2,832,569 2,476,584 5,308,153 906............................ 2,840,308 2,497,40I 5,337,709 __~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ In spite of the enlistment of great numbers of peasants the number of farming households increased during the war, contrary to general expectation. It is to be noted that there was some decrease in 1905, but the figures even for that year showed an increase as compared with 1903. EFFECTS ON AGRICULTURE 239 HOUSEHOLDS FARMING ONLY AND THOSE WITH ADDITIONAL OCCUPATIONS, 1903-1906 Yarming Farming and Year Farming additional Total ronly occupations 1903............................ 3,731,383 1,627,682 5,359,065 I94............................. 3,776,798 1,639,905 5,416,703 I905............................. 3,759,I63 1,620,806 5,379,969 I906.................. 3,819,625 1,558,712 5,378,337 Thus, in spite of the fact that farming hands were enlisted and farming cattle and horses were commandeered, both the land under cultivation and the number of farming households increased. Why? The key to the question lies in the over-population of the farming class in the country. It is a well-known fact that our tillers of soil are far too numerous for the area of land under cultivation, and there is ample room for economizing labor. The war forced this necessary economy, and that was why the cultivated land saw no decrease or desolation. On the other hand, the juvenile, aged, and feminine labor, which was not fully utilized in peace time through over-population, found a new sphere of usefulness during the war, while the male adult labor was stimulated to do a larger share of work than usual. Thus, the gap produced by the war was filled almost entirely. There was also a new tendency in evidence to replace labor by other means. This was shown in the increased number of inventions in agricultural implements and in greater use of horses and cattle in farming. NUMBER OF PATENTED AGRICULTURAL INVENTIONS, I90I-I905 Class 190I 1902 I903 1904 1905 Scricultural apparatus.................. 6 I4 II II 32 Farming apparatus..................... 29 42 33 35 52 Husking machines...................... 6 6 I 5 15 Rice-cleaning machines................ 6 8 4 Io 25 It is to be noted that the number of patented inventions in farming apparatus increased remarkably during the war, 240 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR and this, as well as the greater use of animals, was a result of the efforts of the people to economize their labor. The fact that the number of farming animals decreased through the war and yet the area of cultivated land increased is proof positive of a better or intensified use of animals. FIELDS TILLED BY HORSES AND CATTLE, 1903-I906 Year Paddy fields Other fields Total Cho Cho Cho I903............................. 1,481,268 773,6I6 2,254,884 I904............................ 1,518,284 813,835 2,332,II9 1905............................ 1,522,926 803,777 2,326,703 I906............................ 1,543,378 805,039 2,348,617 In this connection, due attention should be paid to the cooperation among peasants which enabled them to make good the diminution in labor during the war. This liquidation of labor, so to speak, was carried out chiefly by the following three methods: (I) Cooperation between neighbors and relatives. (2) Aids extended by the patriotic league and other bodies organized to help the families of soldiers and sailors. (3) A convenient system by which arrangements were made to postpone paying for hired labor until the autumn harvest. This enabled the self-supporting families of soldiers and sailors to get necessary hands through recommendation of influential villagers. Thus, the peasants effected their economy of labor and managed to tide over the hard times. Mention has already been made of their pecuniary difficulties, and of the kind of economy exercised and how it operated to cause a general depression in the domestic market. Among the items of expenditure of a farmer, the most important is the purchase of fertilizers, and so his general thrift must be reflected in that purchase. Of the two chief fertilizers, bean cakes and herring, the export of the former from the port of Newchwang was stopped at one time during the war, so that the goods EFFECTS ON AGRICULTURE 241 were not found in the Japanese market; while the latter, from the bad catch of herring in the Hokkaido, decreased in supply. Both kinds of fertilizers rose in price considerably owing to these causes, as well as to shortage in shipping, and to the rise in insurance and freight rates due to dangers of the sea. In consequence, they began to use self-made manures instead. The use of green manure, accumulated manure, stable manure, rice bran, lime (the price of which did not rise), and night soils became more general than before. The increase of second crops by means of green manure, in particular, is shown by the following table: SECOND CROP INCREASE BY USE OF GREEN MANURE, 1903-1907 Year Second crop green Percentage to manure fields other fields Cho Per cent 903............................. 159,575 5.67 1904. 1 54,003 5.49 I905................ 179, 91 6.34 I906....................... 199,833 7.04 1907............... 232,327 8.17 CHANGES IN VARIOUS OTHER DIRECTIONS In spite of the rigorous economy exercised by the peasants, farming underwent changes in various directions through the war. Indeed, the burdens were too heavy and the deficiency too great for economy alone to make good. The following are the important indications of the poverty caused by the situation: (I) The decrease in the crop-producing land: Though the area of land under cultivation showed no decrease, the shortage of labor was reflected in the decrease of the crop-yielding land. The area of land yielding the eight main agricultural products for food (barley, peas, red beans, millet, grainbearing panic grass, sorghum, sweet potatoes, and potatoes) and the five kinds of special agricultural products (seed cotton, hemp, leaf indigo, leaf tobacco, and rape seed) can be tabulated as follows: I7 242 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR AREA YIELDING THE EIGHT MAIN AND FIVE SPECIAL AGRICULTURAL PRODUCTS, I90I-I907 Year Cho I90 1................................................ 6,333,340 1902................................................ 6,313,901 I903................................................ 6,334,416 1904................................................ 6,309,139 1905................................................ 6,262,1 68 1906................................................ 6,303,422 I90 7................................................ 6,321,404 This kind of cultivated land was thus reduced by six hundred to seven hundred thousand cho. (2) The decline of by-products: As a result of the labor shortage, home industry among the peasants was seriously affected. Although there are no statistics available regarding the matter, a report of the Osaka Prefecture may throw some light on it. It says in part that the peasants in that prefecture had many branches of home industry, because its capital, Osaka, is a great center of industry in Japan. The lower classes, especially, depended on home industries for their main income, but the war suddenly cut off their earnings from this source owing to the retrenchment of various industries and the shortage of labor. The old people, women, and children had to work on the farm and had little time to devote to home industry; hence their poverty went from bad to worse. Senpoku district had more labor to spare, and so its farming did not suffer from the war, but its home industries in various branches were greatly damaged. The farming population of Mishima district suffered more or less for a time through shortage in farm labor, but by stopping a part or the whole of the home industries, or by doing the work only at night, they saved their agricultural interests serious harm from the war. (3) Transference of land ownership. This transference had become increasingly frequent before the war, but the tendency was considerably strengthened by the war. It was due to (a) financial stringency among the peasants caused by the subscriptions to national bonds and other pecuniary EFFECTS ON AGRICULTURE24 243 burdens, which necessitated the sale of their land to meet pressing needs; (b) the sale of land as a result of the increased burdens on it, actual or anticipatory; and (c) the miserable conditions of the peasants in the northeastern provinces, caused by the bad crop failure in I1902 and intensified by the war. Thus, the frequency of transference of land ownership led to the corresponding depreciation of land value.' TRANSFERENCE OF LAND OWNERSHIP, I903-I904 No. of cases Value of land Tax administration -_____-_____ ______ bureaus I0 I94 Increase or 193 I0 1903 1904 ~decrease 193 90 Sapporo. 30,668:27,I70 - 3,498 55 50 Tokyo.....382,381 391,432 + 9,051 140 1 40 Kyoto..3,818,119 3,830,950 + 12,831 I 152 146 Osaka.....225,627 260,1I68 + 34,54I 159 I46 Yokohama.......1i61,402 1 67,402 + 5,535 159 I46 Kobe. 204,757 214,721 + 9,964 I50 140. Nagasaki. 251,836 253,326 + 1,500 141 130 Nagano..510,996 603,1I66 + 92,I70 147 I27 Utsunomiya....241,229 301,478 + 60,249 115 99 Nagoya...460,377 472,1I51 + 11,774 165 I45 Sendai. 580,185 719,994 +1I39,8o9 97 82 Akita.1i85,789 302,418 +ii6,629 129 115 Kanazawa. 505,009 599,828 + 94,819 I52 I39 Matsue.1I74,999 138,586 - 36,413 110 91I Hiroshima. 235,062 296,042 + 60,980 i65 I52 Marugame........491,857 537,990 + 46,043 125 III Kumamoto. 454,219 459,267 + 4,048 i8i I23 Kagoshima. 403,937 406,746 + 2,809 88 62 Total...9,318,8914 9,981,755 +662,84I Though there exists much material to prove the poverty 'or exhaustion of the agricultural population on account of the burdens of the war, the above are the most conspicuous facts, in our estimation, and will suffice to indicate the general trend of the effects of the war upon the agricultural people. 1 Reports by the Revenue Bureau of the Treasury Department on the war-time conditions of local finance and economy. CHAPTER VIII EFFECTS ON THE NATIONAL LIFE GENERAL REMARKS The effects of the war on the national life were touched upon in the preceding chapters. We now propose to systematize these fragmentary data, together with some added data, as a conclusion of our whole study. No war exercises a favorable influence on the national life. When a war is waged at the risk of the state, the nation is called on to bear direct heavy burdens on the one hand and indirect distresses caused by the derangement of economic organs on the other. We have seen already that these things happened during the Russo-Japanese War, but the extent of their afflictions must be made clearer in this chapter. More-,over, the effects of war on the national life are not limited to -the period of actual conflict, but extend over subsequent years, through the changes wrought in the distribution of wealth or in the income of the nation. WAGES AND PRICES We have already invited the attention of the reader to the fact that owing to the war there were many cases of closing shops and factories, and many cases, too, of taxes in arrear. These facts indicated in some degree the sufferings of the people during the war period. It is not difficult to imagine that the middle and upper classes also suffered somewhat seriously from the war; but it is the effects of the war on the life of the lower classes that we especially want to know, and for which we have statistical data. For this purpose it is necessary to refer to the comparative study of wages and prices. The movements of the prices may be seen from the index numbers for the seven years from I90o to I907. 244 EFFECTS ON THE NATIONAL LIFE 245 PRICE FLUCTUATIONS, 1901-I907 Item 1 01 1902 1903 1904 I905 1906 1907 Foodstuff: Rice and other grains... 91 IOO 125 132 128 118 128 Salt, sugar, etc.......... 99 98 IOI 120 147 145 142 Beverages.............. IOI IO9 io6 123 130 I24 131 Average............ 98 102 III 124 135 129 135 Clothing............ 99 98 I00 l09 120 122 129 Oil, fuel and charcoal..... 97 93 90 98 104 113 16 Raw materials.......... 95 92 92 95 IOO IOI 100 General average..... 97 97 IOO io8 116 114 122 This table points to the fact that prices suddenly advanced during the war. That this sudden rise had close connection with the war may be seen from the following: ADVANCE OF PRICES, 1903-1905a I903 Per cent January............................................. 13.35 June............................................ Io6.03 December......................................... 29 1904 January............................................. 111.68 March...................................... 113.45 June..........................05.7I September.......................................... 110.35 December.......................................... III.97 1905 January............................................ 111.42 March...................................... 112.32 June.........................117.00 September.. 119.48 a This table, compiled by the Bank of Japan, contains the average index numbers of 34 commodities chiefly consumed at home, inclusive of rice, barley, rye, wheat, miso, sake, soy, oils, charcoal, tiles, paper, flax, silk, etc., with the quotations for October, 900o, as ioo. Certainly there were some commodities which fell in price after the outbreak of the war, but almost all of these were luxuries. (See table at the top of page 246.) But all the daily necessaries, especially foodstuffs, went up in price. On the other hand, the movements of wages may be seen from the table on page 246 (with the wages in I9OI as Ioo). 246 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR DECREASE IN LUXURIES, 1903-I905 Date ~~Silk Silk Silk Plate- Mt Date ~linings fabrics wadding glass Mt I903 Per cent Per cent Per cent Per cent Per cent January....... 125.0 102.6 93.4 77.0 97.I June........ 120.0 103.5 92.8 76.9 8o.o December... ii6.6 115.5 100.0 69.0 8o.o I904 January..1.... 15.0 115.9 99.4 68.o 80.9 March.11I5.0 I 3. 98.2 72.8 8o.o June.1I15.0 112.4 97.0 7I.6 78.5 Septemnber.11.... 3.7 I12.4 94.0 94.3 85.7 December.1I07.3 107.1 91.6 98.0 98.1 1905 January. 115.0 102.2 92.8 94.5 100.0 March..ii6.o 110.2 91.1 92.9 100.0 June. 11~~~I5.0 133.3 92.2 109.3 100.0 September.1 03.3 142.2 98.8 105.4 111.3 WAGE FLUCTUATION, I90I-I907 Wages 1901 1902 I903 1904 1905 1906 1907 Farm.1I02.4 100.7 105.0 104.2 109.7 111.9 126.0 Clothing and accessories. 103.4 I07.8 io8.6 io6.8 112.5 121.5 131.5 Manufacture of foods and drinks 100.9 i06.6 I11.2 io8.6 I11.2 113.4 I25.8 Building......io8.i 110.1 111.5 io8.o iii.8 I21.3 142.9 Furniture making 107.5 111.7 111 I.3 109.5 114.9 I22.1 134.1 Miscellaneous. 102.8 108.4 109.5 io8.i II2.4 i16.7 138.0 Average. 1I04.7 107.7 109.5 I07.5 a II21ja 118.4 134.1 a War period. Taking the figures of 1901 as the base, the prices and wages of 1904 were as I o8 +107.-5 and those of 1905 as i 16+ 1 2. I, showing that living was more difficult in these two years than in 1901. The effects of the war on living, however, may be made clearer by comparing the conditions in 1904 and I905 with those in 1903, the year immediately before the outbreak of the war. Wages in 1904.Wages in 1903 -LI Prices in 1904 Prices in I903 Wages in 1905.Wages in 1903.L Prices in 1905 Prices in 1903 EFFECTS ON THE NATIONAL LIFE 247 It is patent that the smaller this L1 or L2, the more difficult was the living. If L1 and L2 were larger than I, it must be concluded that the war improved the standard of living of the people. o 7.5. I09.5 L I6. Io00. L2=II2I. =88. 2 II6.o I00.0 The index numbers of the actual wages for 1904 and I905 are 9I.I and 88.2, respectively, showing the difficulty of living on account of the war. The living of the lower classes must have been harder than indicated by those figures, especially when it is taken into consideration that the rise in the prices of daily necessaries, indicated by the figures quoted already, was far greater than that in the prices of general commodities. It should be remembered that this was the life of those people and their families who stayed at home and engaged in productive enterprises. The life of the families of the soldiers and sailors was still more difficult, deprived in most cases of their main labor reliance, and many of them without any means of living except by outside help. That they were not driven to starvation was entirely due to the finely reorganized relief work. The government issued an ordinance for the relief of the families of soldiers as early as April 4, 1904. It provided for the grant of the monthly sum of 1.20 yen or less per person above 20 and under 60 years old; I yen or less per person above 60 and under 70, or above 12 and under 20; and 0.80 yen or less per child above o1 and under 12, if they could not support themselves. In accordance with this ordinance, some 120 families or 390 persons in Osaka Prefecture received the monthly allowance of I96,056 yen, the total sum for relief being 1,737,080 yen. (Census taken in December, I905.) However, relief of this kind was given only to those families of soldiers and sailors who were in extreme distress. As regards the peasants' families who produced the bulk of the soldiers, their relatives, friends, and neighbors looked after 248 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR their inevitable shortage of labor with their own hands, or in many cases the town or village organizations supplied the necessary assistance at their own expense. In this connection, however, it is most worthy of notice that both public and private bodies extended efficient help to the families of the soldiers and sailors, either by giving them pecuniary assistance or by securing them employment. The following table shows the number of recipients of relief of this kind, and indicates the extent of distress among the families of the soldiers and sailors. RELIEF IN OSAKA PREFECTURE No. of soldiers and sailors enlisted......................... 31,041 No. of their houses....................................... 30,597 No. of members of their families........................... 128,875 No. of families which received relief........................ 6,265 No. of members of relieved families........................ 23,786 No. of recipients of relief.................................. 13,909 It is to be noted that some 20 per cent of the families of the soldiers and sailors in Osaka Prefecture needed relief. From this it may safely be inferred that a similar state of affairs prevailed in other parts of the country. Relief societies were organized by towns, villages or sections of villages, and cities. There were besides various other private bodies which extended succor freely. FUNDS FOR THE COMFORT OF THE ARMY AND NAVY AND RELIEF OF OSAKA PREFECTURE Revenue Expenditure Yen Yen Contributions............... 377,572 Relief..................... 251,836 Proceeds from work........ 51,124 Allowances................. 81,602 Others..................... I2,501 Comfort expenses........... 133,849 Consolation................ 15,298 Funeral expenses............ 19,692 Memorial services........... 10,742 Others..................... 5,262 Total.................. 550,197 Total................. 528,281 EFFECTS ON THE NATIONAL LIFE 249 THE DISTRIBUTION OF WEALTH Setting aside the effects of war after peace was restored, in the forms of the exaction of heavy taxes and a rise in general prices, we must next consider the effects of the war on the distribution of wealth. This is a question full of interest, but lacking sufficient data we must content ourselves with a cursory glance at the subject. The war affected both the richest and the poorest classes most conspicuously. The Army and Navy contractors profited enormously through the war, while the life of the families of disabled or killed fighters suffered the worst state of misery. At the end of I907 there were some 93,000 families of soldiers and sailors who were receiving allowances, of which 78,000 were due to the Russo-Japanese War, the rest belonging to previous campaigns. In addition, there were some 58,000 soldiers and sailors who were released with pensions. The majority of these pensions must be regarded as results of our conflict with Russia. It is easy to imagine that the families of the killed or disabled soldiers and sailors were reduced to extreme poverty, a large majority of them having no property to fall back upon. According to the investigations of the Women's Patriotic Association, there were in 1912 some 83,000 families of killed or disabled soldiers and sailors who were so destitute as to need relief. Thus the war gave rise to a new class of needy people, together with another class which enriched itself suddenly. It is said that the Army and Navy contractors did not get as great profits through the war with Russia as in the war with China, but the Mitsui Bussan Kaisha, the Mitsu Bishi Goshi Kaisha, the Fujita-Gumi, the Okura firm of canned goods contractors, and the Takata Shokai (supplying the Navy with goods) were reported to have headed the list of those who made stupendous fortunes through the war. Those engaged in coal-mining, shipping and sea transportation also amassed large sums of money. How was the constitution of classes affected by the war? 250 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR This is not known definitely, owing to lack of statistics, but the table of the number of payers of the third-class income tax may serve as an index of the general tendency. Of course, its value is lessened by the absence from the table of the incomes of juridical persons and the interest on public loans and company debentures. THIRD-CLASS INCOME TAXPAYERS, 1903 AND I906 Income I903 (I) 1906 (2) (2)-(I) )(I) Yen No. No. No. Per cent 300................... 390,88I 505,086 114,205 500................... 200, 73 264,916 64,743 i6 I,000................... 7I,I46 94,954 23,808 12 2,000.................. 18,456 25,178 6,722 09 3,000.................. 11,825 15,829 4,004 24 5,00o.................. 5,940 8,o66 2,126 18 I0,000.................. 1,223 1,782 559 09 15,00.................. 413 582 I69 14 20,000................... 278 374 96 23 30,000.................. 158 201 43 i6 50,000.................. 64 87 23 15 I00,000................. 19 24 5 o8 Total................ 700,576 917,079 a Result obtained by dividing the number of taxpayers for 90o6 minus the number for 1903 by the number for 1903 one grade below. The quotient obtained by this process shows the ratio of those taxpayers who were promoted to a higher class through increases in their incomes. It is to be noted that in the classes 300 yen and below the rate of increase in income was comparatively small, while in the other classes above 3,000 yen the rate of increase was far greater, as a rule. It is reassuring, however, that the rate of increase in income for the classes between 300 yen and 500 yen did not fall below the level indicated. CHAPTER IX CONCLUSION The war with Russia threw the greatest of burdens upon the nation. The climax of misfortune was suffered by those who fell in the field or left the service disabled forever; and the distress of the families of the killed or disabled soldiers will never be wholly relieved. Besides, the nation had to bear a debt of 1,700,000,000 yen of war expenditure and the consequent increase in taxation and in the burden of public loans, yoked with a painful decrease in productive capacity owing to the enlistment of no less than one million young men. The consequences of this burden were keenly felt in various branches of our economic activity. Demand contracted suddenly and all productive industries had to retrench their work, which threatened to produce economic depression. But the nation put forth every ounce of energy in order to overcome these difficulties, and efforts were concentrated upon diligence and economy. Having fully made up their minds to carry through the war to a successful issue, the people devoted themselves to the raising of war funds and to utilizing their spare labor to give full play to their productive capacity. With the favorable development of the war situation both on land and sea, they regained their lost spirits, and the foreign markets, also, were speedily cultivated. Moreover, as the war funds were gradually scattered through the various strata of society, their purchasing power enhanced, thereby stimulating industrial activity. In short, the second year of the war-190o-ushered in a renewed economic activity. This tendency continued even after the war, though there was more or less fluctuation due to various causes. The war marked a turning-point in every branch of our industrial and commercial growth, foreign trade and transportation service in particular having been completely reorganized through the war. If we may judge by superficial 251 252 ECONOMIC EFFECTS OF THE RUSSO-JAPANESE WAR observation, it may be safely said that as a result of the war industry in Japan progressed with leaps and bounds. Therefore, the question as to what were the economic effects of the war may be answered as follows: They were adverse at the beginning of the war, but favorable at its close and afterward. The war itself served to stimulate economic activity and progress. It is not to be supposed, however, that the war passed without leaving any signs of economic disadvantage. Nothing is farther from the truth. In the first place, the national indebtedness amazingly increased, because of the war, from 600,000,000 yen to no less than 2,400,000,000 yen, with the interest to be paid annually amounting to I IO,OOO,OO yen. In the second place, the national expenditure swelled to an enormous amount. More especially, the armament expenses suddenly increased; because the national defense works had to be extended after the war, four new divisions were added to the Army, and the Navy was also enlarged. In addition, there were many new enterprises promoted by the government, including the nationalization of railways. The ordinary expenditure alone for I906 doubled that for I903, and the total expenditure for I906 inclusive of extraordinary expenses amounted to 494,700,000 yen. In consequence, the government decided to issue new bonds and to continue the war-time special taxes indefinitely. These burdens were by no means a light price for a victorious war, but they were not so heavy as to thwart our economic progress, which received a sudden impetus from the war. But to say this does not mean that the recent progress of Japan in economic and other activities is due entirely to the war with Russia. The national progress is the development of the inherent power of the nation; the war served as an opportunity to develop it. Had there been no war at all the national development would have come, perhaps, without incurring any of the economic burdens from which we still suffer. In conclusion, we must remember the fact that nothing can comfort the sorrow and affliction of bereaved families caused by the loss of life through war. INDEX Administration expenses: 43, 47-8; ordinary (1903-7), 44; economic (I903-7), 45; financial (1903-8), 46-7. Agriculture: number of companies and capital invested in (1903-7), 208; effects of war on, 234 et seq; inventions for improvement of, 239. Akita, decrease of tradesmen and amount of taxes paid in, 187. Alexieff, Admiral: 6; Viceroy at Port Arthur, 12. Alcoholic drinks, increased tax on, 77 Anglo-Japanese Alliance, I. Antunghsien, opened to trade, 12 Arms and war supplies, expenditures for manufacture of, 128-9. Arsenals, expenditures for military and naval, 130-I Asia, export trade with, 200 Balance of trade, during war years, 188, 192 Bank deposits: monthly (1903-7), 172 et seq; of associated banks in six cities (1904-6), 2I0 Bank notes, issuance of convertible, 176, 179 Bank of Japan: 178; assistance in bond issues, 55, 6i, I6I; amounts of convertible notes issued by, 179 Beer brewing tax, 77-8. Blagovestchensk, 9. Boer War, I0. Boxer Rebellion, 9, 78 Brown, British adviser to Finance Minister in Korea, 6 Business tax: prohibitions of surtax on, 72; increase of, 73; increased revenue from, 143; details of, 144-5 By-products, 242 Cassini Treaty, 6 Casualties of Japanese army, 29-30 Chemulpo: 5; Japanese attack on, 16. Chosen, expenditures for affairs in, 136, 139 Clothing business, effect of war on, 184. Coal industry, effect of war on, I86 Colonial affairs, expenditures for (1900 -Io), 136, I39-40. Commerce, number of companies and capital invested in (1903-7), 208. Commissions: on Exchequer bonds, 57, 60; for flotation of Emergency bonds, 64; on Sterling bonds, 66, 68. Communication: effect of war on, 218 et seq; expenses for Army and Navy, 40; taxes, 84, 89 Conscription, effect on agriculture, 234 et seq. Credits (bank), increase of, 174 Customs tariff, raising of rates, 77. Dalny: 6; Russian lease of, 7; obtained by Japan, 191. Deficits: means of filling, in war funds, Io4; in 1903-7, I53. Developmental administration, expenditures for (1900-Io), 136 et seq Disbursements: military and naval (1903-7), 103; variation and revenue of war funds (1903-7), I04. Drugs and chemicals: effect of war on sales of, 184-5 Duties, import, 79 et seq, 147 Emergency bonds (long term): 54; details, 6I et seq, 68; commission paid for flotation of, 64 Equipment expenses: for Army, 39-40; for Navy, 40, 50; total, 41 Erhlungshan, capture by Japanese, 24. Exchange duties, 84-5, 148. Exchequer bonds (short time): I8I; details of, issued March, 1904-May, I905, 54 et seq, 68; to meet deficits, 104-5; revenue from, 107, I63. Expenditures: first estimate for war (1903-4), 34; second estimate for war (1904), 35; third estimate for war (1905), 36; summary of war, 37; ordinary, extraordinary and other, 93, 107, 116; expansion, 117-8; of the Army (I900-Io), I20; of the Navy (1900-Io), 121; military and naval (I900-Io), 122; for financial affairs (I900-Io), 124; for general and special accounts (I9o00-1), 127; annual (I900oo-), I40; disbursements for war (I903-7), I68. See also under individual headings. 253 254 INDEX Expenses: rewards and allowances to soldiers, 39; equipment for Army and Navy, 39 et seq, 50; human and material fighting-power of Army and Navy, 40; miscellaneous, Army and Navy, 41; war-time administration, 42 et seq, 107, 116, 119; Navy Department (1903-8), 43 et seq; War Department (1903-8), 43 et seq; Finance Department, 43; administration, 43 et seq.; incurred in Korea (1904-8), 46, 48, II7; in Manchuria (1904-8), 46, 48, II7; monopolies, 47; colonization of Hokkaido, 92; redemption of national loans, 125; communication for Army and Navy, 218 et seq Exports: increase, 191; used for war purposes (1903-5), I93, 203; value of (1903-7), 198, 200. Factories: number of workers (1902-6), 204; opened and closed (1902-4), 205; output of (1902-7), 216-7. Fakumen, Japanese capture of, 26 Feng-hwang-cheng, Japanese possession of, 20. Fertilizers, effect of war on sale of, 185, 240-I. Finance Department, expenses, 43. Foreign exchange, 178. Formosa; salt production, 82; subsidy granted to, 92. France: intervention in Liaotung Peninsula, 3, 6; Japanese export trade with, 201. Freight: traffic (I901-5), 222-3; rates on shipping, 230. Fuel, effect of war on sale of, i86. Fukien Province, 7. Fukuchiyama, 44. Funshuiling, Japanese capture of, 21. Germany: intervention in Liaotung Peninsula, 3, 6; occupation of Kiaochow Bay, 7; Japanese loans floated in, 65 et seq; imports from, 201. Gold: importation of bullion, 177; 1- movements of (1903-7), 189 Grain industry, effect of war on, I86 Great Britain: 9-jo; concessions obtained in China by, 6; treaty with Japan, II; Japanese loans floated in, 65; imports from, 201. Groceries, effect of war on sale of, 184. Habutaye, tax on, 201. Hardware, effect of war on sale of, I85. Haicheng, retreat of Russians to, 21. Heikautai, Japanese capture of, 25. Hiroshima: expenditures for mining operation office in, 132; increase of tradesmen and amount of taxes paid in, I87. Hokkaido: land surtaxes, 72; colonization expenses, 92; expenditures for railways in, I34. Horses and cattle: effect of war on sales of, 185-6; requisitioned by Army, 236-7; fields tilled by (I903 -6), 240. Hsiaokushan, Japanese capture of, 23. Hsingking, Japanese capture of, 26. Hsiungyocheng, 21. Human fighting-power expenses; for Army, 40; for Navy, 40. Imports: increase (I903-5), 190-I, 194 et seq; value (I903-7), 199-200. Income tax: prohibition of surtax, 72; raising of rate, 73-4; increased revenue from, 143; details, 145-6; number paying (I903 and 1906), 250. Industries: expenditures for government (I900-I0), 129, 132; increase and capitalization (1901-5), 207; number of workers (1903-7), 209; development of new and old companies, 212. Instalment plan, of paying for bonds, 56, 6I; commission on, 57. Interest: national loans, 47; rate on Exchequer bonds, 55; on Emergency bonds, 64; on Sterling bonds, 66; fluctuation of rate, 169 et seq. Iron foundry, government expenditures for, 131-2. Iron and steel industries, increase in expenditures for, 129, I33. Kaipinghsien, 21. Kaiyuan, Japanese capture of, 26. Kakimura, Vice Admiral, 17. Karafuto, expenditures for affairs in, 136, 139 Kawamura, Lieutenant General, 25. Kiaochow Bay: leased by Russia, 6; German occupation, 7 Kinchowcheng, Japanese attack on, 20, 23. Kiuliencheng, Japanese occupation, 20, i8i Kobe: grain market, 186; effect of war on commerce, 188. Koji Island, 8. Komura, Foreign Minister, 14. Korea: 3; Japanese policy in, 4; Russian domination of, 5, 8, 13-4; Japanese control of, 30; agreement INDEX 255 with Japan, 31-2; expenses incurred by Japan in (1904-8), 46, 48, II7; expansion of Japanese power in, 122; circulation of bank notes in, 176; Japanese exports to, 200 Kuantiencheng, Japanese possession of, 20. Kure, base of operations at, 187. Kuroki, Lieutenant General, I9 Kuropatkin, General, 12, 25. Kwantung Leased Territory, expenditures for affairs of, 136, 139 Land: area under cultivation (1903-6), 238; transference of ownership of (1903-4), 234. Land tax: increased, 72; details, 142-3; in arrears (1902-5), 237 Leather and hide industry, effect of war on, 185 Liaoyang, Japanese advance on, 20-I; battle of, 22. Loans: national, 34-5, I 6, 149-50; interest, 47; issued (1903-6), 51-2; benefits of, 53; for tobacco monopoly, 63; foreign, 65 et seq, 94, 151, I62; summary of foreign and domestic, 69; margin of issue of foreign and domestic, 69; foreign and domestic floated (1902-8), 159; for railway construction, 150; revenue from, 160; receipts from extraordinaryaffairs, 164; monthly fluctuations in amounts (1903-7), 175; of associated banks in six cities (1904-6), 2Io London, sterling loans floated in, 65 et seq. Maizuru, 44. Makaroff, Russian admiral, I8 Manchuria: 3; Russian influence over, 6, 9; withdrawal of Russian troops from, Io; restitution treaty concerning, 11; Russian occupation of, 12-3; restored to China, 31; expenses incurred in (1904-8), 46, 48; circulation of war tickets in, 0o6; expense of administration of, II7; expansion of national power in, 122; circulation of bank notes in, 176 Manufacturing, number of companies and capital invested (1903-7), 208. Marine products, effect of war on, 185. Masampo, Russian coaling station at, 8. Material fighting-power expenses: for Army, 40; for Navy, 40 Merchant marine, additions to (I904 -5), 229. Min, Queen, assassination of, 4-5. Mining tax, increased, 72, 74. Mint, increased expenditures for, 126-7. Miscellaneous expenses for Army and Navy, 4I. Mohatang, Japanese capture of, 20. Money market, influence of war finance on, I60 et seq Monopolies: 123; government, of tobacco and salt, 46, 77; expenses of, 47; extension and income from, 8I et seq, 107, 147; increased expenditures for government, 126. Motienling, Japanese capture of, 21. Mukden: 9, Russian occupation of, 12; campaign against, 25-6, 35. Nagasaki, increase in number of tradesmen and amount of taxes in, 187. Nan-shan, Japanese attack upon, 20 Naval forces, losses of Japanese, 29-30. Navy Department, expenses of (I903 -8), 43 et seq Newchwang, 105, 240. New York, sterling loans floated in, 65 et seq. Nogi, Lieutenant General, 23. Nozu, Lieutenant General, 21. Okinawa: land surtax in, 72; export duty on alcoholic drinks in, 77-8. Okinoshima, 27. Oku, Lieutenant General, 20 "Open door" in China, 9. Osaka: effect of war on commerce of, I88; relief work in, 248. Oyama, General, 25. Panlungshan, 24. Patent medicine tax, increased, 72, 75. Patents: application for (1901-8), 215; for agricultural implements, 239. Pawnbrokers, effect of war on business of, i85 Peace preservation, expenditures for (I900-10), 136-7. Peking Conference, Io. Penchihu, Japanese occupation of, 22. Pensions: 116-7, 249; expenditures for (1900-10), 123, 125. Personnel expenses, of Army and Navy, 39, 49; total, 41. Petrograd, 12-13. Petroleum tax, 77, 79, I46. Pitszewo, 20. Plantien, Japanese capture of, 20. Population, increase of, 215. Port Arthur: Russian capture of, 6-7; Russian fortification of, 12; as Russian fleet base, I6; Japanese attack on, I6 et seq.; leased to Japan, 30. Port Hamilton, 8. 256 INDEX Portsmouth (New Hampshire) RussoJapanese peace signed at, 28. Postal savings, monthly (1903-7), 172 et seg. Prices: rise of, 189 et seq.; fluctuations (1901-7), 245 Printing Bureau, expenditures for, I32. Public debt: expenditures for (I9ooIO), 125-6; amount (1902-8), 150; details, 15I. Railways: expenditures for government (I900-Io), 128-9, I33; expenditures for construction and improvement, 134-5; industrial loans for, 150; effect of war on, 218 et seq; number of passengers and amount of fares (1901-5), 221; traffic earnings (1901-4), 224; nationalization of, 224,252. Receipts, taxes on: 142-3; increase in revenue from, (1903-8), 154-5. Redemption: of Exchequer bonds, 55; of Emergency bonds, 61; of war tickets, 106; of national bonds, expenses, 125. Registration duties, 84 et seq, 90, 148. Relief work, for families of soldiers, 247; in Osaka, 248 Restaurants and inns, effect of war on business of, 185 Revenue: to defray war expenditures, 33 et seq., 107-8, I60; from Exchequer bonds, 59-60; from Emergency bonds, 63; from foreign loans, 68; from direct taxes, 76-7, 141 et seq.; from indirect taxes, 83-4, 90-I, 141 et seq; from various funds, 92; for fiscal year (1904-5), 98; (1906-7), Ioo; increased (I904-7), IOI; to meet extraordinary military expenses, 103; variation of, and disbursements of war funds (1903-7), 104; total for war expenditures, o08; increase in, from taxes on receipts (1903-8), 154-5; from consumption taxes, 156-7; from transaction taxes (1903-8), 158; miscellaneous monthly receipts (1904-7), 166 Reward and allowances expenses, 39. Rice crop (1904 and I905), i8i. Roosevelt, President, mediator between Japan and Russia, 28 Rosen, Russian Minister to Tokyo, 14. Saghalien (Karafuto); I91; expenditures for administration of, II7. Sake, tax on, 77-8, 146; effect of war on sales of, I85. Salt: government monopoly, 46-7, 71, 77; extension and income of monopoly, 82-3. Sasebo, Japanese fleet base, I6, I87. Sendai, decrease of tradesmen and amount of taxes in, 187 Senju Woolen Mills, 130-I. Seoul, 4; Japanese capture of, I6. Shahopao, Japanese capture of, 23. Shanhaikuan, 7. Shantung Province, 7; murder of German missionaries at, 6. Shengking Province, II. Shimonoseki Peace Treaty, 3. Shimucheng, 21. Shinmintun, 7; Japanese capture of, 26. Shipping: effect of war on (1903-7), 225 et seq; foreign vessels chartered for (1904-5), 228; increase of (I903 -5-6), 232-3 Shooting licenses, increased tax on, 72, 75, 146 Shops, opened and closed (1902-4), I82 Silk stuffs: consumption tax on, 79; effect of war on export of, 186. Silver: importation of bullion, 177-8; movements of (1903-7), 189. Sinkiang, Russian mining interests at, 9. Sinking fund, establishment of, 125 Sino-Japanese War, 3, 71, 85. Siuyen, 21. Sonobe, 44 Soy, increased tax on, 77, 79, 146-7 Special account fund to defray war expenditures, 33 et seq, 91. Specie reserve: maintenance of, 177; fluctuations of amount of (1903-7), 179. Spheres of influence, 8. Stamp duties, 84, 87, 148. Sterling loans: details, 65 et seq.; revenue from, 68, I62. St6ssel, General, 23. Subsidies, for construction of SeoulFusan Railway, 46; for Formosa, 92. Succession tax, 72, 75-6, 86, 148. Sugar, increased tax on consumption, 77-8, 146-7; effect of war on industry, 185. Surplus fund, to defray war expenditures, 33, 35; revenue from annual account, 9I. Surtaxes, restrictions on. 71-2. Tailien, leased to Japan, 30. Taitungkou, opened to trade, 12. Taiwan, expenditures for affairs of, 136, 39. INDEX 257 Takushan, Japanese capture of, 23 Tashihchiao, 21. Taxes: direct (details), 72 et seq.; (revenue), 76-7, io8, I60; (estimated and received), 95; indirect (details), 77, io8 et seq.; (revenue), 83-4; (estimated and received), 96-7; increase, 34-5, 141 et seq; increased expenditures for, 126; percentage of increase in revenue from, on receipts, 154-5; increased revenue from consumption (1903-8), 156-7; on transactions (1903-8), 158; monthly receipts from increases in, I64-5; paid by tradesmen (1903-7), 183; by manufacturers (1903-7), 206; in various cities, 187; war-time, 7I. Telissu, Japanese advance on, 21. Tiehling, o05; Japanese capture of, 26. Timber, effect of war on sales of, 185. Tobacco: government monopoly, 46-7, 71, 77; loan for, monopoly, 63; extension and income of, monopoly, 81-2. Togo, Admiral, Japanese naval commander, 16. Tokyo, 14 Trade relations: (1903-7), I88; effect of war on, 204. Tradesmen, increase and decrease in number in various cities (1903-5), 187. Traffic taxes, 148-9 Transit duties, 84, 88 Transportation: number of companies and capital invested in (1903-7), 208 Treasury bills, 152, I6I. Treasury surplus used for war expenditures, 33 et seq Tsushima, battle of, 28. United States: opening of ports of China by, 12; Japanese loans floated in, 65; export trade with Japan, 201. Uryu, Rear Admiral, I6 Vladivostok: as a Russian possession, 8, 12; activities of Russian squadron at, 16 et seq, 26. Wages: of laborers (1902-8), 214; fluctuations of (I90I-7), 246 War Department: expenses (1903-8), 43 et seq War tickets: issuance, I02, 105, I49, 152, i6I; redemption, Io6 War-time administrative expenses, 42 et seq, 107, II6, II9 War-time military expenditures, 119 Wiju, Japanese possession of, I9. Wonsan, I8. Woolen fabrics, consumption tax on, 77, 79, I47. Yanganpo, Russian lease of, I3. Yangtzuling, Japanese possession of, 22. Yingkow, 21. Yingpan, Japanese capture of, 26 Yokohama Specie Bank: 105-6; purchase of bills of exchange, 178 Is