East of Suez / Ceylon, India, China and Japan

by Frederic Courtland Penfield

The ambitious and sturdy people of Japan are indisposed to regard the war debt as an excessive burden, and it is their determination to treat their bonded obligations as a spur to active industry. It must be confessed that Japan's debt is but a trifle less than that of the United States, and is carried at double the interest rates of the American debt; and further, that Japan's total area is smaller than that of our state of California. The portentous aspect of the national obligation of Japan is that it must absorb in interest charges fully a third of the empire's income for many years of peace and prosperity to come.

A large part of the debt incurred before the war was for public works, most of which are productive. Funds realized from early loans, both foreign and domestic, as well as a portion of the income from the indemnity earned by the war with China, were invested in commercial enterprises owned or fostered by the empire, and the government receives a considerable benefit from the public railways, tobacco monopoly, woolen mills, and a few other industrial ventures. The railways are extremely profitable, and the large sums spent in the creation of post-offices, telephone and telegraph lines, port facilities, etc., have proved wise investments.

Observers of national statistics have long known that a country without heavy indebtedness amounts to little in a worldly and industrial sense. Abundantly solvent, France has a debt averaging $151.70 per person, and the United Kingdom (Great Britain and Ireland), a pro rata debt of $91.80. Portugal owes $143.82 per subject, Holland $90.74, and Belgium $75.63. The heaviest governmental obligation is that of Australia, averaging $263.90 per inhabitant; and the lightest responsibility among important nations is that of the United States, gradually lessening, now standing at but $10.93. Our Cuban neighbors, owing $21.88 per capita, make little complaint of fiscal burden. Whether a debt be burdensome or otherwise depends as much upon the character of the people as upon natural resources. Decaying Portugal could not by industry liberate herself from pecuniary thraldom in a century, while the Japanese probably could liquidate every obligation in fifteen years, were they pressed to do so.

No country can present a better foundation for industrial and commercial development at this time than Japan, and the signing at Portsmouth of the peace agreement marked the beginning of an era of national growth that may challenge the admiration of the world as did the feats of arms of Oyama and Togo. The war cemented classes in Japan almost to a condition of homogeneity—practically every subject of the Mikado believed in the necessity for the conflict, and made sacrifices to contribute to the cost thereof. Distinctions of class are now seldom thought of, and it contributes mightily to the material improvement of a nation to have a single language. The descendants of the samurai class acknowledge now the need for trade on a grand scale, and they are only too ready to embark in manufacturing and trading enterprises. There are scarcely ten great fortunes in the realm, and the number of subjects removed from activity by even moderate affluence is remarkably small. Likewise, the number of persons reckoned in the non-producing class, through dissipation or infirmity, is insignificant. And, more potent than all these reasons uniting to assist in the expansion of Japanese industry and thrift, is the intense patriotism of the people, stimulated by glorious success in two wars against foreign nations of overwhelming populations, as well as the recognition from high and low that Japan's golden opportunity has arrived. Almost to a man the Japanese want to employ their sinews and intellect in elevating the Land of the Rising Sun to an honored place among progressive nations.

The Japanese exchequer is at present a long way from depletion, by reason of the $150,000,000 loan secured in America, England and Germany. Probably two thirds of this remained unexpended. Many Tokyo bankers believed the loan unnecessary, inasmuch as there were funds in hand sufficient to finance the war well into 1906, had peace not been agreed upon. But the flotation was deemed wise, not alone because of prevailing ease in the money market, but for the effect that an oversubscribed loan in America and Europe would have upon the Czar's government. The portion of the loan remaining unused for war was employed for giving effect to Japan's industrial propaganda, and presumably has been spent for the endless machinery demanded by the factories and shipyards that are transforming Japan into a vast workshop, for structural metal, and for steel rails, cars and locomotives for railways in Manchuria and Korea; and generally for the hundred and one purposes playing a part in the development of lands hitherto out of step in the march of enterprise, and where strife has until recently stifled the usual manifestations of man's desire to improve his surroundings. The Japanese government in 1906 purchased six railways, which were profit earners, paying for them $125,000,000 in five per cent. bonds that may be redeemed in five years. There is no likelihood of a reduction in Japan's debt for a long time, but its weight upon the people may be reduced by conversions. As the national credit strengthens, the interest on borrowings may be correspondingly decreased. Consequently, there may be frequent funding operations and new issues, until seven and six per cent. bonds have given place to obligations bearing five per cent. interest or less. To provide funds for early railway building, considerable capital was borrowed at as high a rate as ten per cent. When these obligations expire all necessary money can be found in the country at less than half the original rate. Japan is fortunate in having many sound financiers to invite to her official councils, and it is helpful to the country that Tokyo and Yokohama bankers are competent and progressive. These men pronounce Japan's present financial position sound, and claim that the country can easily carry the existing debt.

In natural resources Japan is not well to do, it must be frankly said. Examine the country in as friendly a spirit as one may, little is developed to support any statement that the country may become prosperous from the products of her own soil. In truth Japan is nearly as unproductive as Greece and Norway, for only sixteen per cent. of her soil is arable. The mountain ranges and peaks and terraced hills that make the country scenically attractive to the tourist come near to prohibiting agriculture. The lowlands, separating seacoast from the foothills, and the valleys generally, are given over to rice culture, and these contribute largely towards sustaining the people. Where valleys are narrow, and on hillside patches, cultivation is carried on wholly by hand. In recent years phosphates and artificial fertilizers have been encouraged by the government, and with the educational work now in hand science may give an increase of crops from the circumscribed tillable area. The country's forests cannot be sacrificed, and grazing lands for flocks and herds scarcely exist.

A recent magazine writer, holding a doleful view of Japan's agricultural condition, wholly overlooked the silk and tea crops in his search for native products, an error obviously fallen into through the fact that these are not raised on what governmental reports call "tillable ground,"—meaning that they are produced outside the sixteen per cent. arable area. Silk is Japan's important salable crop, two thirds of which is exported in its raw state. In the past few years the silk exports have averaged $55,000,000. Japan grows the tea consumed in the country, and sends annually $6,500,000 worth to market.

If the rice crop might be exported it would realize $200,000,000 each year. But no food may be sent abroad, for it is a sad fact that Japan is capable of feeding only two thirds of her own people. It is necessary to import foodstuffs to the extent of about $47,000,000 a year. The Japanese benefit by the compensating supply of fish secured from the seas washing the shores of the Island Empire. When it is realized that Japan's rapidly-growing population cannot be sustained by her soil and fisheries, the real reason for battling against Russia's aggression on the mainland is understood, for ten years hence, Japan's crowding millions, confined to her own islands, would experience the pangs of hunger. The Mikado and his councilors foresaw this.