One of the most remarkable features of the economic evolution of Japan since 1868 has been the slow increase of her rural population as compared with the urban—a fact which at once indicates that the agriculture of Japan can offer little to compare with the phenomenal growth of her manufactures and commerce. Nor will a closer examination establish an optimistic view regarding the future status of the Japanese farmer. Although a sedimentary soil admirably suited for the culture of cereals abounds in the country, and often yields in warmer regions two, three, or even four different crops during the year, and although Japan is blessed with a copious rainfall, it must be remembered that the arable area is extremely limited, and can hardly be extended commensurately with the fast growth of the population. Of the 94.5 million acres of land of Japan exclusive of Formosa, only 12.4 million acres, or thirteen per cent., are under cultivation, while, as is well known, there exists little or no pasture land in Japan. Even if all sorts of land under fifteen degrees of the angle of inclination were arbitrarily considered as reclaimable, they could not add to the arable area more than 10.5 million acres. The actual reclamation outside of the colony of Hokkaidō amounts annually to only twenty thousand acres more or less. It seems evident that the future increase of the agricultural resources of the country may be effected less by extensive breaking of the soil than by intensive improvement. This is well illustrated by the rice culture, the area of which has scarcely been increased during the last twenty years but the actual product of which has in the meantime risen nearly eighty per cent. The production of other cereals, beans, and potatoes has grown even more appreciably, while the area of the cotton, indigo, and sugar culture has, for commercial reasons, remarkably declined. No illustration, however, of the limited agricultural resources of the country is more impressive than the ratio which her arable area bears to her population. The per capita distribution would fall below half an acre. Under these circumstances it is natural that the cultivated lots are diminutive, more than half of the rice fields of the country being each less than one-eighth of an acre. The farmer is obliged to exercise the utmost care in utilizing every scrap of his land and every grain of its yield. A great majority of the tenants, moreover, lack a sufficient fund, after the high rents and interest are paid, even to buy manure, much less to make any improvement on the land. The implements are as meager and primitive—the outfit for the cultivation of an acre of field costing probably less than eight and a half dollars in gold—as their wages are low, seldom rising above thirty-five cents per day for the male and twenty cents for the female. The government is making efforts to develop the agriculture of the country by all possible means of education and encouragement, not the least important of which has been the creation of the central and local Hypothec Banks and the Credit Guilds. How much, however, these methods will really reach the needy villagers is yet to be seen. On the other hand, Japan cannot help realizing that her agriculture, while it still constitutes the staple industry of the nation, has already ceased either to supply her with all the necessary raw products for the manufactures or to support the new population, which is growing annually at the rate of more than half a million. Probably this serious problem lies behind many an event of recent years that characterizes the activities at home and abroad of the Japanese people.

The difference between the condition of agriculture and that of manufactures and trade not only is clear, but also becomes increasingly decisive as time advances. Until we realize this significant difference we fail to grasp the most fundamental cause, excepting perhaps her growing ambition as a nation, that impels Japan onward with an irresistible force into a controlling position in the Far East. In proceeding to explain the situation, manufactures and trade will be considered together, as their influence is in a large measure mutual.

It must be noted, in the first place, that when the country was thrown open to the world's trade, her industrial conditions were altogether inadequate to meet the marvelously rapid increase of the consumption of new goods. The original five per cent. import duty, which peculiar circumstances made almost equal to no duty, accelerated the impetuous advance of imports over exports. Thus the first decade and more of the new régime found the nation in a state of almost complete economic dependence upon foreign countries. Old industries were largely paralyzed, while capital and labor were not forthcoming for the new. It was at this juncture that the government began to extend a helping hand, by subsidies and by example, to the more important economic enterprises, and not until then could the people begin to take an active interest in railroads, industries, and export trade. The fact that the low import tariff had been forced by the powers upon the Japanese government, whose right of tariff autonomy they had thus ignored, was galling to the nation in its ardent desire to regain its economic independence, and tended powerfully to confirm its determination to effect a revision of the treaties. These were revised in 1894, and the new treaties which emancipated Japan from the consular jurisdiction of the foreign residents and gave her a partial tariff autonomy came into force in 1899. It is unnecessary to examine the process of this revision, but it suffices here to repeat that while consumption had advanced marvelously under a virtual free trade, production began to grow only after the government was compelled to aid it. From this point on trade and industry have helped each other's progress by mutual reaction. The tremendous expansion of economic resources thus rapidly opened in the two great fields, manufactures and commerce, was clearly measured by the enormous increase of population, which numbered less than thirty millions in 1830, thirty-four millions in 1875, forty-two and a quarter in 1895, and more than forty-seven to-day. At the same time, foreign trade itself has grown from 40 million yen in 1871 to 690 million yen in 1904, the per capita share of the people in the growth rising more than twelvefold. During the first half of 1905 the total foreign trade in merchandise amounted to over 429 million yen, as compared with 320 millions during the corresponding period in 1904. In other words, Japan is changing from an agricultural to an increasingly industrial and commercial nation, and her commerce is expanding mainly abroad, as her domestic market has well-nigh reached its "saturation point." This fact is strikingly illustrated by the rapid growth of the exportation of manufactured goods, as well as the importation of raw material, as compared with the relatively slow increase in the importation of foreign manufactures. The exports of manufactured goods in 1890 amounted to 10 million yen of the total export trade of 55.7 millions, while ten years later the corresponding rate changed to 74.7 out of 193.8 millions. If raw silk, straw-plaits, and the like were classed under agricultural, instead of manufactured, goods, the rate of increase between 1890 and 1900 of different kinds of exports would run as follows:

18901900
Per Cent. Per Cent.
Manufactured 18.038.0
Agricultural51.637.8
Fishing6.63.5
Mining20.014.2
Miscellaneous3.86.5

If the enumerated goods were transferred from the agricultural to the manufactured list, the rate would be thus:

189818991900
Per Cent. Per Cent. Per Cent.
Manufactured 70.969.466.0
Agricultural11.911.910.5
Others17.218.723.5

While the rate of the manufactured exports seems to have fallen between 1898 and 1900, their absolute figures show that some new items appeared in the list during the interval and that the total volume enormously advanced. On the other hand, the imports, which increased together with the purchasing power of the people, show more rapid growth in raw goods and machinery than in manufactured articles. These changes have been pointed out here in order to indicate the general nature of the economic transition of the Japanese people. They will be found to possess a far greater significance than we have seen when we come to examine further the character of the trade tendencies of Japan.

Let us for a moment consider the qualifications of the Japanese as a manufacturing nation, for upon them must ultimately depend their economic as well as general national success. It would be impossible to conceal from our view certain serious disadvantages which confront industrial Japan, particularly in her want of the new form of labor and experience and lack of certain raw materials and of capital. Regarding labor, the old manual dexterity and individual apprenticeship have hardly had time to be sufficiently converted into an organized and specialized mechanical training, so that the foreign visitors report continually the apparent inefficiency and ill discipline of the Japanese mill-hand. On the other hand, Japan cannot forever count on the cheapness of her labor, whose cost is still low, the average daily wage of twenty-six principal classes of laborers being not more than one-quarter of an American dollar, but it has risen more than twice within the last fifteen years, and will continue to rise along with the cost of living. The shortage of capital is natural when it is remembered that Japan is just passing from an agricultural to a manufacturing stage, but none the less constitutes the most serious drawback to her industrial growth. Ingenuity and enterprise are not wanting, but owing to the scarcity of capital Japan's exploitation of resources, both at home and in Korea and China, is handicapped to an extent which is exasperating. Latterly, however, particularly after the war, foreign capitalists have been seeking investment in Japan, and they may be expected to aid Japanese enterprise on the mainland. The lack of proper business experience of the Japanese manufacturers is natural from their comparatively recent appearance. They have been accused of over-eagerness to rid themselves of foreign advisers and middlemen, who could have supplied them with a better understanding and control of the outside market than they themselves could command. The native maker, however, will learn deeper by blundering more. A graver charge has continually been made of the slack commercial veracity of the Japanese, which is admitted by themselves to be real, but which has for certain reasons been unduly magnified, while it is naturally being remedied by experience. Another grave disadvantage of the Japanese manufacturer consists in his want of such important raw materials as cotton, wool, and iron. The growth of cotton in Japan is insignificant, while its importation from India, China, and the United States amounts to more than seventy million yen annually. Wool has to be entirely supplied from abroad, as pastures for sheep do not exist in Japan, while the total annual output of iron is less than eighty thousand short tons.

Reflection will show, as experience has proven, that the enumerated disadvantages are neither permanent nor irremediable. Labor and practical wisdom will gain by time, and capital and raw material will come in with greater ease and in larger quantities. Over against these diminishing disadvantages Japan possesses an unrivaled geographical position between the great Pacific on the one hand and the teeming millions of the East Asiatic population on the other, the commercial importance of both of which must grow wonderfully with the development of canals and railroads in various parts of the world and the opening of new markets in the yet slightly explored East. This superb Phœnicia-like situation of Japan toward the outside world is supported internally by a richly endowed soil and an eager and ambitious race. The soil possesses an abundant water supply and extensive coal beds, the latter already yielding well-nigh ten million tons, and produces tea and silk the peculiar quality of which is hardly matched by the product of another land. The ambition and docility of the people would seem to be well exemplified by the phenomenal growth of silk and cotton textile industries, which have risen twenty-fold in value during the last two decades, and by the creation of certain new, prosperous industries, particularly in matting, lucifer matches, straw braids, and cotton yarns. The exportation of the six principal branches of manufactures above enumerated amounted in 1888 to less than 31 million yen, and nearly 195 millions in 1904. It should be remembered that none of these articles have won their position without encountering embarrassing difficulties at home and a sharp competition abroad, and that with a relaxation of effort they would at once sink into insignificance.

Considering the foreign trade of Japan apart from her manufactures, it is seen that its growth during the last eleven years has been rapid and on the whole regular. During this space of time the exports in 1904 reached 319¼ million yen, which means a gain of 256 per cent. over 1893, and the imports 371¼ millions, or a gain of 320 per cent., while the total volume of trade amounted to 690-3/5 millions, that is, nearly three times as much as it was a decade ago. The figures for 1905 will possibly exceed the 850-million mark. This remarkable growth of trade has advanced hand in hand with an even more striking development of Japan's shipping industry. At the end of 1891 she owned 607 steam vessels with a total tonnage of 95,588, while in 1903 her vessels numbered 1088 and their capacity totaled 657,269 tons, so that Japan stood in 1902 in the ninth place in tonnage in the world's merchant marine, and the speed and general improvement of her ships were behind only those of the four greatest shipping nations on the globe. The gross income from freight and passengers in 1902 amounted to 12-3/5 million yen. Japanese steamboats now ply regularly between her shores and the ports in Siberia, Australia, India, Europe, and on the Pacific coast of America, and, in Korea and China, they play an active part in the coasting and inland navigation.