Coincident with the State-aiding of steamship companies was the granting of liberal postal subvention. Next followed the institution of a general subsidy system, frankly designed to stimulate domestic shipbuilding and to further navigation by Japanese ships.
This system was embodied in two acts promulgated in 1896, the year after the finish of the Japan-China War (1894-95), when the merchant marine was growing pretty rapidly, but not rapidly enough for the aspiring nation. These were, a Shipbuilding Encouragement Law, the aim of which was to stimulate the building of vessels above 700 tons; and a Navigation Encouragement Law, to foster open-sea navigation. Their model was the French system.
These laws offered construction and navigation subsidies, and also made provision for a widely extended postal service with increased postal subventions. The construction bounties were available for "any company composed of Japanese subjects exclusively as members and shareholders which shall establish a ship-yard conforming to the requirements of the Minister of State for Communications, and shall build ships." The rates were fixed as follows: for ships of over 1000 tons, twenty yen ($9.96) per gross ton; of over 700 and under 1000 tons, twelve yen; for engines built with ships, or in any other domestic dock-yard, with the consent of the Minister of Communications, five yen per horsepower. Japanese materials only were to be used, unless the Minister of Communications should give permission to use foreign materials. The navigation bounties were granted only for iron and steel ships owned exclusively by Japanese subjects, and plying between Japan and foreign ports. The rates in this class were: twenty-five sen (about 12-1/2 cents) per gross ton per thousand miles run for ships of 1000 tons steaming at ten knots an hour; ten per cent added for every additional 500 tons up to 6000 tons, and twenty per cent for every additional knot up to seventeen. Foreign-built ships less than five years old, owned by Japanese, were admitted to these bounties. The postal routes established were fifteen in number, calling for an annual expenditure of 4,964,404 yen (about $2,482,202) when in full operation. The payments for postal service were to be computed at the mileage rate given for navigation. Previous to this act the postal subventions had amounted annually to nine hundred and forty-five thousand yen in 1890 and 1891, and nine hundred and thirty thousand yen in the subsequent years.[[FD]]
The effect of these laws was to stimulate overproduction. The Nippon Yusen Kaisha ordered eighteen large freight steamers aggregating 88,000 tons. Other companies doubled and trebled their fleets.[[FD]] One result of the overproduction was the forcing down of freights. This, together with the business depression of 1898-99, brought losses to the shipping companies despite the large subsidies. The rapidly increasing amounts of the subsidies, too, were giving the Government concern. From a total of 1,027,275 yen in 1896 the sum expended annually had grown by 1899 to 5,846,956 yen. The total paid between 1896 and 1899 had amounted to 13,133,440 yen, about $6,566,720.[[FD]]
Accordingly, in 1899 (March), a law was enacted modifying the system. The navigation bounties on foreign-built ships were reduced by half, while the subventions to the postal lines were fixed at certain yearly sums. A law of 1900 (February 23) extended the postal services. Under these laws the postal subventions reached a total of about 5,647,811 yen ($2,823,905) a year. Of this total the Nippon Yusen Kaisha's was the lion's share,—4,299,861 yen, about $2,149,930.[[FD]]
After the passage of these laws the various companies further increased their tonnage, but the merchant marine grew more wholesomely for a while. In 1902 the total tonnage had reached 934,000 tons, and the Japanese mercantile fleet had risen to the position of eighth in the world in point of tonnage, whereas in 1892 it was only thirteenth.[[FE]] In 1907 the United States consul at Yokohama wrote: "The building of ships of over ten thousand tons in Japanese yards is now quite common.... The war [with Russia] has given a great impetus to the shipbuilding and dock-yard industry which has made remarkable progress during the last few years."[[FF]]
That year (1907) the Government brought forward several ship-subsidy bills making provision for further Japan sea services.[[FG]] In 1908 the amount of State aid to the merchant marine had increased to an equivalent of $6,170,566 and additional amounts were asked for, one for the line to South America.[[FH]] The budget for 1908-09 carried the largest amounts yet devoted by Japan to ship subsidizing. At the end of 1908 official statistics placed the number of steamers at 1618, with a gross tonnage of 1,153,340.42. Of these, one hundred and one were steamers of more than three thousand tons.[[FH]]
In 1909 a new subsidy system was adopted (the laws of 1896 revised), to go into effect January 1 1910. The fixed navigation bounties granted by the old system on specified routes were abolished, and a general subsidy offered open to all steamships conforming to the provisions of the new law. The subsidized open-sea routes, however, were limited to four—the European, the North American, South American, and Australian;[[FI]] and coasting services in the Far East were not affected. Among other conditions imposed on the beneficiaries were the requirements that steamers must carry more than one-half their maximum load; that each must have a wireless telegraph outfit, this, however, instituted at the Government's expense; that the Department of Communications be furnished with information as to freights and passenger rates; and that proper terminal facilities, as piers, warehouses, lighters, be provided by the subsidized companies.[[FJ]] The steamers receiving the full subsidy must be home-built, of steel, of over 3000 tons gross, and showing a speed of at least twelve knots per hour. The rate was fixed at fifty sen per gross ton for every thousand nautical miles, and ten per cent of this sum added per additional speed of one nautical mile an hour, according to the conditions of the route. Upon a vessel the age of which exceeds five years the subsidy decreases five per cent each year till the age of fifteen is reached, when it ceases. Foreign-built steamers under five years of age, which may be put in service with the sanction of the Government authorities, are entitled to half of the subsidy. The construction subsidies were arranged in two classes, and each class in four grades.[[FK]] The rates were slightly increased over those of the law of 1896, and their benefits were limited to steel vessels of over 1000 tons instead of 700 tons.
The total appropriations for ship subsidies in the budget for 1911-12 amounted, in American money, to $6,845,995, of which $6,294,020 were for navigation, and $551,975 for construction subsidies: an increase of $478,387 in the former class over the appropriation of the previous year, and a decrease in the latter class of $6,835.[[FL]]
The total Japanese tonnage in 1910 stood at 1,149,200 tons.[[FM]] The Nippon Yusen Kaisha practically owns nine-tenths of the ocean-going steamships flying the Japanese flag.[[FN]]