Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economic Development of Japan No.5 Meiji 4 Opening of New Tokyo Stock Exchange, 1897 Macroeconomy of Late Meiji (1890s-1900s) Trade, Budget & Finance, Saving Mobilization • Aggressive public spending continued for militarization and industrialization, causing budget deficit and gold reserve loss. • Cotton industry succeeded in import substitution. Trade exhibited dual structure—exporting light industry goods to Asia and importing machinery from the West. • Yen initially floated down, but was fixed at $1=2 yen after joining the gold standard in 1897. • Banks and stock exchanges were set up, but main source of saving remained self-finance and joint stock companies within the private business sector. • Japan relied relatively little on FDI. But foreign bonds were issued to execute the Japan-Russia War, local public investments and budget financing. Government was relatively small Meiji Composition of Domestic Demand 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1988 1980 1970 1960 1954 1938 1930 1920 1910 1900 1888 Gov invt Priv invt Gov cons Priv cons Source: Ryoshin Minami, The Economic Development of Japan, 1986. Tax Revenue Structure Meiji 100% Other 80% Sugar tax In dir e c t t axe s 60% Customs duties Liquor tax 40% Other Corp. tax 20% Income tax Land tax Dir e c t t axe s 1925 1920 1915 1910 1905 1900 1895 1890 1885 1880 1875 0% Source: Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.268-269. Meiji PP.60-61 Exports by Commodity (%) 100 80 Other Manufactured Textile (incl. silk) Food Primary com. 60 40 20 1980s 1970s 1960s 1950s 1940s 1930s 1920s 1910s 1900s 1890s 1880s 1870s 0 Imports by Commodity (%) 100 Shifts in Trade Structure 80 Other Manufactured Light industry Primary com. 60 40 20 1980s 1970s 1960s 1950s 1930s 1920s 1910s 1900s 1890s 1880s 1870s 1940s NA 0 Source: Ryoshin Minami, The Economic Development of Japan, 1986. Trade Structure in Meiji (incl. colonies) • Exports to West--silk to US (60-70%) dominated • Imports from West--machinery, steel, US raw cotton • Exports to other areas--cotton products, light industry goods (matches, umbrellas, clocks, glass products, lamp, knitted goods) • Imports from other areas--foodstuff, Indian raw cotton Trade content with developing areas & with colonies were similar Export 100% Import 100% 80% 80% Taiwan, Korea, occupied China 60% 60% Developing areas 40% 40% 20% 20% 0% 0% 1892 1902 1912 Europe, US 1892 1902 1912 Source: Y.Yamamoto & K.Oku, “Trade,” JEH vol.5, 1990. Japan’s Trade Pattern Early Meiji Late Meiji Europe, US Europe, US Machinery, textile products Tea, silk Tea, silk Japan Machinery, raw cotton (US) Japan Raw cotton (India), food Textile & light manufacturing Rest of Asia Average Tariff Rate Calculated as (tariff revenue)/(import value) 25 % Meiji 20 1899 Restoration of tariff rights 15 10 5 All commodities Average of non-zero tariff commodities 1990 1980 1970 1960 1950 1940 1930 1920 1910 1900 1890 1880 1870 0 P.90 Exchange Rate Regime Silver standard (float): until 1897 – Depreciation against Western currencies; East Asia (Shanghai forex market) used silver Gold standard (fix): 1897-1917 and 1930-31 – Adopting global standard with reparation gold from China (at the initiative of Finance Minister Matsukata) Merits of gold standard Exchange Rate (Dollar/Yen) 1.2 -Pride of joining the firstclass country club -No exchange risk -Ease in issuing foreign bonds 1.0 0.8 0.6 0.4 Demerit? Meiji 0.2 1940 1935 1930 1925 1920 1915 1910 1905 1900 1895 1890 1885 1880 1875 0.0 -No more depreciation P.103 G old R eserves (In m illions of yen) --Due to active public spending, Japan faced BOP pressure. 2500 H eld abroad A t hom e 2000 1500 --Foreign bond issue can be regarded as a financing measure to avoid fiscal belt-tightening. 1000 500 Meiji 1941 1939 1937 1935 1933 1931 1929 1927 1925 1923 1921 1919 1917 1915 1913 1911 1909 1907 1905 1903 0 WW1 --Meanwhile, Japan’s gold reserves were on a declining trend in late Meiji. Reserves in Import Months 10 9 8 7 6 5 4 3 2 1 0 1941 1939 1937 1935 1933 1931 1929 1927 1925 1923 1921 1919 1917 1915 1913 1911 1909 1907 1905 1903 --Japan eventually solved the BOP crisis not by tight budget but through WW1 export boom. Japan-China War Reparation • Japan fought and won a war against Qing Dynasty of China over the control of Korea (1894-95). • After the war, Japan received from China: – Taiwan and Penghu Islands – Liaodong Peninsula (immediately forced to return to China under the pressure of Russia, Germany, France) – Reparation of 365 million yen (4 times the annual budget) • China borrowed from other countries and paid reparation in sterling-denominated checks in London • Japan held this amount in London as gold reserves • This balance was used to issue convertible paper money in Japan (establishment of gold exchange standard, 1897). Special Account for Japan-China War Reparation (Balance at end 1902) Million yen Revenue Reparation from China 311.07 Compensation for return of LP 44.91 Interest etc. 8.53 TOTAL 364.51 Expenditure Japan-China War expenditure (past) 78.96 Army buildup 56.80 Navy buildup 139.26 Yahata Steel Mill 0.58 Budget finance for 1897 (infra.) 3.21 Additional money for navy 30.00 Budget finance for 1898 (Taiwan) 12.00 Imperial family expense 20.00 Education 10.00 Natural disaster fund 10.00 Remaining balance 3.70 TOTAL 364.51 Percent 85.3% 12.3% 2.3% 100.0% 21.7% 15.6% 38.2% 0.2% 0.9% 8.2% 3.3% 5.5% 2.7% 2.7% 1.0% 100.0% For military 83.7% Japan-Russia War (1904-1905) Cause: influence over Korea and Manchuria (Northeast China). Russia gained territorial & economic concessions and kept large troops in Manchuria. Japan signed Japan-UK Alliance to deter Russia. When the war started, few thought Japan would win. To cover the war cost, Japan issued government bonds in London and New York. At first there were no takers, but finally the deal was done. Battles were fought on land and at sea. The fall of Russia’s Lushun Fortress and the defeat of Russia’s Baltic Fleet were decisive. Many were surprised that a nonWestern latecomer beat Whites. Russia paid no war reparation. This was accepted because the Japanese government needed to end the war asap to avoid fiscal crisis. Saving Ratios Estimated Saving Ratios 40% 35% 30% Gross saving (% of GNP) 25% Net saving (% of GNP) 20% 15% Personal saving (% of disp inc) 10% 5% 1980 1987 1900s 1970 1880s-90s Meiji 1960 1950 1940 1930 1920 1910 1900 1890 0% Dependence on Foreign saving Dependence Investment on Foreign =(Imports-Exports)/Gross Saving =(Imports-Exports)/Gross Investment 20% 15% 10% 5% 0% -5% 1980s 1970s 1960s 1950s 1940s 1930s 1920s Source: Ryoshin Minami, The Economic Development of Japan, 1986. 1910s -10% PP.92-93 Foreign saving (bond issues) Gov’t Infrastructure Public spending Intra-sectoral financing --Self finance --Joint stock companies --Mobilizing rich merchants & producers Tax Agriculture Industry Banks Not very active Savings and Investment Balance by Sector (In millions of yen) 1899-1902 1903-1907 1908-1912 1913-1917 1918-1922 1923-1927 1928-1932 1933-1937 Private farms 1 13 4 43 207 23 -12 222 121 120 159 146 175 171 240 197 657 450 523 500 402 414 580 358 62 123 -87 175 81 -290 631 931 Savings Investment 180 118 310 187 212 299 752 577 1724 1643 858 1148 1498 867 2637 1706 Government -59 -233 15 120 -146 -112 -626 -1162 24 83 -142 91 205 190 317 197 441 587 801 913 251 877 -298 864 5 -97 -68 338 143 -380 -6 -10 Savings Investment Non-farm private sector Savings Investment External sector Memorandum item: Agricultural taxes (% of non-farm gross invt) 104 115 154 166 290 291 188 145 42.0% 38.4% 28.0% 24.2% 19.4% 13.8% 9.0% 11.3% Note: Prof. Juro Teranishi's estimates. Farms' S-I balance shows transfer of surpluses to the non-farm sector through the financial system while agricultural taxes are transfer of surpluses through government budget. Gross Savings (% of estimated GDP) 30% 25% 20% Government Non-farm private Private farms Prof. Teranishi’s savings & investment estimates expressed in percent of GDP 15% 10% 5% 0% -5% 1899-1902 1903-1907 1908-1912 1913-1917 1918-1922 1923-1927 1928-1932 1933-1937 Gross Investment (% of estimated GDP) 30% 25% 20% Government Non-farm private Private farms 15% 10% 5% 0% 1899-1902 1903-1907 1908-1912 1913-1917 1918-1922 1923-1927 1928-1932 1933-1937 Note: GDP estimate by Prof. Yamada, from Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.344-345. A Comparison with Vietnam Today (Nguyen Ngoc Son’s preliminary study) % of GDP 35.0 30.0 Saving/GDP 25.0 20.0 Business 15.0 Household --Saving & investment rates are higher than Meiji Japan (data problem?) Tỷ lệ tiết kiệm trong GDP --Business is a large saver & investor: internal Tỷ lệ tiết kiệm nhà nước saving trong GDP mobilization of business sector (same as Meiji Japan) Tỷ lệ tiết kiệm doanh nghiệp trong GDP 10.0 5.0 Government --Mobilization of foreign saving is large Tỷ lệ tiết kiệm hộ gia đình (nearly 10% of GDP) trong GDP trong GDP 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 15.0 45.0 35.0 Investment/GDP 5.0 30.0 25.0 20.0 15.0 10.0 5.0 Household 10.0 40.0 0.0 Business Government -5.0 Tỷ lệ đầu tư trong GDP Tỷ lệ đầu tư nhà nước trong GDP 1995 1996 1997 1998 1999 Tỷ lệ đầu tư DN trong GDP Tỷ lệ đầu tư HGĐ trong GDP Business 2000 2001 2002 2003 2004 (S-I)/GDP -10.0 Household Government -15.0 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 0.0 Chênh lệch S-I Chênh lệch S-I của NN Chênh lệch S -I của DN Chênh lệch S -I của HGD 2005 Japanese Economy and Foreign Capital, 1858-1939 Simon Bytheway, 2005 (in Japanese, PhD dissertation at Tohoku Gakuin Univ.) • After 1858, foreign trading firms came, but their activities were confined to foreign settlement areas. • Japan prohibited FDI until 1899 (revision of commercial law). Even after that, policy and popular opinion remained hostile to FDI. • During Meiji period, foreign debt issue was much larger than FDI Share in foreign saving mobilization--gov’t bonds 82.5%, municipal bonds 7.8%, corporate bonds 9.0%, FDI 0.7% • However, FDI played important roles in some industries (see below), esp. technology transfer through patents. Ex. light bulbs: bamboo filament tungsten filament Foreign Bond Issue of Meiji Government Year Location 1 2 3 4 5 6 7 8 1870 1873 1897 1899 1902 1904 1904 1905 9 1905 London London London London London LN & NY LN & NY LN & NY LN, NY, Berlin LN, NY, Berlin, Paris LN, Paris Paris London 10 1905 11 1907 12 1910 13 1910 Interest Maturity Amount Purpose rate (years) (mil yen) 9.0% 13 4.88 Railroad construction 7.0% 25 11.71 Redemption of samurai salaries 5.0% 55 43.00 War 4.0% 55 97.63 RR, steel mill, telecom, war 5.0% 55 50.00 RR, steel mill, telecom, war 6.0% 7 97.63 War 6.0% 7 117.16 War 4.5% 20 292.89 War 4.5% 20 292.89 War, refinancing of domestic bonds 4.0% 25 244.08 Redemption of fiscal bonds 5.0% 4.0% 4.0% 40 60 60 224.55 Redemption of 6 & 7 174.15 Redemption of domestic bonds 107.39 Redemption of domestic bonds --Foreign bond issue was made easier by adoption of the gold standard. Other reasons were economic and legal maturity of Japan, and victories over China and Russia. --Borrowing in later period was mainly for war and deficit refinancing. Source: S.J.Bytheway (2005), pp.106-107 Central Government Bonds Outstanding Billion yen 7 Foreign 6 Domestic 5 4 3 2 1 1930 1925 1920 1915 1910 1905 1900 1895 1890 1885 1880 1875 1870 0 Source: Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.278-279. Central Government Bonds Outstanding (Including Domestic & Foreign Bonds) (% of Estimated GDP) 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 1945 1940 1935 1930 1925 1920 1915 1910 1905 1900 1895 1890 1885 1880 1875 1870 0% Note: GDP estimate by Prof. Yamada, from Management and Coordination Agency, Historical Statistics of Japan, vol.3, Japan Statistical Association, 1988, pp.344-345. Foreign Bond Issues of Municipalities Six cities borrowed abroad for building local infrastructure 1 2 3 4 5 6 7 8 9 10 11 12 Year Issuing city 1899 1902 1903 1906 1907 1909 1909 1909 1909 1909 1912 1912 Kobe Yokohama Osaka Tokyo Yokohama Yokohama Osaka Nagoya Kyoto Yokohama Kyoto Tokyo Interest Maturity Amount Purpose rate (years) (mil yen) 6.0% 36 0.25 Water works 6.0% 23 0.90 Water works 6.0% 78 3.09 Port facility 5.0% 30 14.58 Port facility and roads 6.0% 28 3.11 Port facility 6.0% 8 0.65 Gas factory 5.0% 29 30.22 Street trams, water works 5.0% 33 7.82 Water works 5.0% 29 17.55 Power supply, water works 5.0% 44 7.00 Water works 5.0% 20 1.95 Power supply, water works 5.0% 40 89.56 Street trams In addition, many public/utility companies issued corporate bonds: RR companies, banks, textile companies, power companies, etc. Source: S.J.Bytheway (2005), pp.138-139 Major FDI Firms in Meiji Period Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1893 1899 1900 1900 1901 1902 1903 1905 1906 1907 1907 1909 1910 1910 1910 1910 Foreign ownshp Standard Oil Standard Oil (US) 100% Nippon Electric (NEC) Western Electric (US) 54% Murai Brothers American Tobacco (US) 50% Rising Sun S. Samuel & Co. (UK) 100% Singer Mishin Singer Sewing Machine (US) 100% Osaka Gas Mr A.N. Brady (US) 50% Tokyo Electrical Train Mr Malcolm (UK) -Tokyo Electric General Electric (US) 38% Osaka Glass Manufacturing Private syndicate (UK, Bel, Fr) 56% Nippon Steel Armstrong & Vickers (UK) 50% Imperial Spinning J&P Coats (UK) 60% Dunlop Rubber Far East Dunlop (UK) 100% Shibaura Manufacturing General Electric (US) 24% Nippon Okijenu & Asechiresu L'air Liquide (FR) 100% Lever Brothers Amagasaki Lever & Brothers (UK) 100% Nippon Chikuonki Trading Mr. F.W. Hohn (US) -Japanese name Foreign partner Remark Later sold to Nippon Oil Later under Sumitomo State-owned in 1904 Oil business Brady capital exits 1925 Later Toshiba, 1939 Weapon manufacturing Later, 100% Japanese Later Toshiba, 1939 Phonograph FDI was relatively small (cf. China, India). However, it played leading roles in tobacco, oil refining, electrical and general machinery, weapons, automobiles, glass, (aluminum). Later, zaibatsu mostly took over FDI technology and production. Source: S.J.Bytheway (2005), pp.166-167