New Japan

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7. Trade And Industry



It was in 1858 that the first European traders began to take up their residences at Yokohama, then a mere fishing village but the nearest available port to the Shogun's capital, and that Japan became open to the commerce of the world.

The story of the beginning of her commercial intercourse is not a pleasant one to recall. The earliest foreign traders, like the Dutch at Desima during the years of Japan's seclusion, acquired very large profits principally owing to the differences in the relative values of gold and silver in Japan and in the rest of the world. In Japan the ratio was as one to four, and in the rest of the world one to fifteen, and a silver dollar obtainable for is. 6d. in China, distant only a few days' steaming, could in Japan be exchanged into a gold token that was worth over eighteen shillings in all the rest of the world. Trade conducted under such conditions was in itself sufficiently profitable to dazzle the most extreme optimism, but still greater profits were to be obtained from dealings in the currency itself without even a pretence of trade. Gold was exported in such quantities as to threaten the country with the deimdation of its whole supply, and when the only possible remedy was taken in altering the relative values in Japan, all iuteraal finance and economy were completely dislocated. Prices rose to a degree hitherto undreamt of, and the only persons to profit by the rise were the producere of silk, tea and vegetable wax, the only commodities to appear among Japan's original exports, while the rest of the people suffered intense distress.

Ti-ade had always been despised, always regarded as the lowest in the scale of honour of all human vocations. It is not to be wondered at that their first modern experience of its conduct with the outward world should have tended not only to intensify the contempt previously felt for it by the Japanese, but to add hatred almost for its very name. It brought nothing to them that they wanted, except firearms, which were used during the succeeding years in slaughtering each other, while it enormously enhanced the cost of their own products that were in most general consumption.

Throughout the remaining years of the Shogunate, after the original difficulties of the currency had been overcome, trade continued to be hampered by vexatious difficulties and restrictions. That carried on with the Dutch had been always subject to the strictest Government control, and though the new treaties provided that it should be entii-ely free in this sense, old customs could not be eradicated in a day and it was still subject to constant official interference. The foreign merchants and the Japanese dealers were ignorant of each other's languages and customs, and of the values of what each had to sell. Both were full of mistrust, and, owing to the national odium which rested on all trade, only a very low class of Japanese, outcasts of their own people, without capital or sense of honour, at first entered upon that which was foreign. Their dishonesty and trickery brought upon their class an unsavoury reputation which still clings to their present-day representatives, some of whom, now millionaires, are the direct descendants of the early pioneers. On the other side, there were not wanting among the foreigners many who took advantage of their native clients' ignorance and inexperience to carry out ti-ansactions that could only be characterised as shameful frauds.

Notwithstanding all its difficulties, trade advanced even under the Shogunate, and in the first year of Meiji was estimated to have reached a value of about seven millions sterling. The Japanese had by this time learned to appreciate the quality and cheapness of English cottons and bought them largely, though firearms and old and obsolete steamers most appealed to them among all that Europeans could supply. The value of their exports was then very considerably in excess of that of the imports. During the sixties the silk husbandry of France and Italy was brought to the verge of ruin by an epidemic of pebrine plague in the silkworms. The worms died in multitudes, and the cocoons of those that survived furnished only a fraction of the normal quantity of silk. It was at this time that the raw silk of Japan became known in Europe, and its excellent quality immediately caused it to be in such demand that, in 1868, the value of its export was nearly three millions sterling. Japan might then have laid the foundation of a trade which would ultimately have given her the command of all the silk markets of the world. But French and Italian graineurs, while eager to buy her raw silk, were still more eager to buy the eggs of her healthy silkworms in order to replenish their own exhausted stock, and the prices which, during a few years, they were willing to pay for them tempted the native farmers, who were incapable of looking to the future, to devote themselves to the rearing of silkworms for the sake of their eggs rather than to the production of silk. The best eggs were sold and exported to Europe, where by their means the plaguestricken industry was soon recuperated, while that in Japan, where only inferior eggs with diminished productive power had been left, for a time declined. The Japanese farmer had killed the geese which laid the golden eggs. When a healthy race of worms could again be reared in Europe, he found that there was no further demand for his eggs ; his raw silk had lost much of its original excellence, and he had a long struggle before he was able to repair the damage which he suffered from his omti short-sighted greed. Tea was the export that was next in value to silk and silkworm's eggs. Its peculiar flavour commended it to the American taste and, from the first, it found a market there which it retains to the present. These three staples represented nine-tenths of the whole export trade of the year. Some copper and vegetable wax were also exported, but the only articles to which the term "manufactures" could possibly be extended were curios of porcelain, bronze or lacquer ware, and their whole value did not exceed £50,000.

The Imperial Government was in its early years too absorbed in both domestic and foreign politics to be able to give much attention to the direct encouragement of trade and industry, and Japanese traders were too deficient in enterprise and selfreliance, to venture, unled and unaided, into new spheres except in the most timorous and tentative fashion. The national finances, too, were in a state of utter disorganisation. A mint, under the management of English experts of high standing, was founded and the coins which issued from it were unimpeachable in quality and appearance, but from 1869 onwards till 1881 the balance of foreign trade was steadily against Japan with the exception only of 1876, when exceptional circumstances for once turned it the other way. The coins issued from the mint went abroad to pay for the balance, and the only currency in domestic circulation was paper.

The new Government was, from the first, hampered by serious financial embarrassments. It succeeded to an empty treasury and while, in its early years, its expenditure was large, its revenue was collected slowly and with difficulty, and the only method that could be found of discharging its liabilities was by the issue of inconvertible paper notes. Recurring annual deficits in the budgets necessitated continuous increases in these issues, and an equally continuous depreciation in their exchange value for specie naturally followed, until the climax was reached shortly after the suppression of the Satsuma rebellion, the cost of which had been defrayed by a further large issue of paper, when the inconvertible notes fell to a discount of over 80 per cent. Specie continued to flow out of the country. Within it, there was an abnormal appreciation of prices and rates of interest, and the most competent European authorities believed it was on the verge of national bankruptcy. In such circumstances, the wonder is rather that trade showed any increase at all - its value nearly doubled in the period of twelve years - than that it did not develop with the leaps and bounds that we grew accustomed, in later years, to associate with Japan's commercial progress. For the progress which it did make at that time Japan is entirely indebted to the resident European merchants, among whom those of British nationality were far predominant, whose honesty, capacity and enterprise remedied, vis-a-vis buyers and consumers in Europe, the deficiencies that were universally characteristic of the native tradei-s. In 1882, the Government woke up to the necessity of drastic financial reform. European expert advisers had suggested various remedies, including foreign loans and national lotteries. But a foreign loan could only have been obtained at very high interest and some reliable item of the revenue must have been earmarked to meet it, while gambling, in any shape or form, has in all ages been forbidden by Japanese law. The Government had to rely on its own eflbrts to get Japan out of the financial morass into which she had been driven by her early necessities.

Sweeping economies were effected in the public expenditure and simultaneously a substantial increase was made in taxation. Industrial and agricultural undertakings which had been established during the preceding decade, with the double purpose of affording educational models to the people and bringing some revenue to the Government, were sold. By these means a large surplus was obtained in the annual budget which was applied to the redemption of the paper currency in circulation. Then the Government itself practically became a trader. Two Banks were established under its auspices, the Bank of Japan, to act as the agent of the Government in its domestic finances, and the Yokohama Specie Bank, to serve in a similar capacity in its foreign financial affairs. Native produce was bought through the first and paid for with paper and sold abroad through the second for specie which was collected and stored in the Treasury. The balance of trade now turned in favour of Japan, and during the three years 1882 - 1884 there was a surplus of exports over imports of more than 20 million yen, so that the Government measures were considerably facilitated. Their result was that soon after the close of the year last mentioned, the paper currency in circulation was reduced by 80 million yen, and the Government had at its disposal a specie reserve of 42 million yen. Confidence was restored. The currency, which, in 1882, was at a discount of eighty per cent, was early in 1885 almost at par, and in the autumn of the same year the Government was able to announce, that the hitherto purely fiduciary paper would be exchanged at the Bank of Japan for its face value in specie.

It was in 1885 that Japan, in the confidence engendered by the restoration of her financial stability, began to furnish omens of her coming commercial and industrial progress. The value of her foreign trade in 1874, when her customs service had been thoroughly organised and its statistics had become unimpeachable, was 42 million yen. In 1884, the value had only grown to 53 million yen. Ten years later it was 230 million yen, and in yet another decade (1904) it had reached 690 million yen. Its movement was still onwards, and in 1912 its value amounted to 1145 million yen. The population of the Empire also largely increased. In 1884, it \ras 37| million, and in 1912 it was estimated at 52| million, exclusive of Formosa and Korea. In 1884, the ratio of the value of her foreign trade to the population was 1*67 yen per head ; in 1894, 5'52 yen; in 1904, 14-63 yen, and in 1911, 1865 yen.

In 1884, Japan's exports were still confined to agricultural, mining and marine products - silk, tea. coal, copper and dried fish. The only manufactured articles included amongst them, to any substantial extent, were matches, an industry acquired from the West, and such indigenous products as porcelain, lacquer and bronze ware, and plaited straw ware. The cotton spinning industry had been initiated and raw cotton was imported for its requirements, but with that exception almost all the imports were highly finished manufactures. It was already recognised, however, by her statesmen that her future industrial prosperity depended rather on the development of her manufacturing than of her agricultural industry. The capacity of the latter had its limits, and while it would no doubt remain, as it had always been, the greatest of all national industries, there was no hope, even with the intensive system of culture that was universally followed throughout the whole country, of its being able to provide for the future support of a population increasing with such rapidity as was that of Japan, where it was foreseen that the time was within measurable view when 100 million people would have to be supported, and that too in a land which in the past had on many occasions in years of dearth been unable to provide the absolute necessaries of life for less than a third of that number. The intelligence, docility and deftness, which the people possessed in an eminent degree, must be directed into new channels of industrial skill and activity, and Japan made in the progress of time the workshop of the Far East, just as Great Britain was of the West.

Every natural advantage existed to aid in the attainment of this end. Japan not only possessed, like Great Britain, an ample supply of coal, but had also at her disposal what Great Britain had not, an immense water-power in her lakes at high altitudes and her rapidly-flowing rivers. Her coasts were everywhere indented by capacious harbours, and close to her was the great Empire of China, with whose people she had many common ties, whose tastes and requirements she had opportunities and means of studying that were wholly lacking in European competitors for her great markets. To acquire a control, in the first instance, of the foreign trade of China and subsequently to extend her commercial activity even as far as India was an ambition that presented itself to Japanese statesmen as one that was not beyond the capacity of their people to realise in the process of time.

No measure that could train and stimulate the people to that end was neglected. A department of Agriculture and Commerce was organised in the Government and the best officials and experts were employed in it. Commercial and technical training schools were established throughout the Empire. Liberal subsidies were granted to infant industries, and the press and the platform were freely used both for teaching and encouragement. Banks, both for general and specific business, were founded so that credit facilities at moderate interest could be obtained, and they have had careers of almost unbroken success. The two great wars in which Japan was engaged and the Anglo-Japanese alliance had each their effect in promoting commercial prosperity. The indemnity that was obtained from the war with China was in part used to foster commercial activity and to establish her currency, hitherto of silver, on a gold standard. The enhanced national prestige which^he acquired as the result of the war with Russia and of the alliance with Great Britain enabled her to become a borrower on moderate terms in the money markets of Europe, so that the heavy burthen thrown upon the nation by the cost of the war with Russia was met without a particle of financial disorganisation or distress.

One great obstacle to ultimate success was the insufficiency of internal transport facilities. This was overcome by the steady advance of railway construction until every district in the country was within easy reach of a line, and it became possible to travel from the extreme north to the extreme south of the Empire without leaving a station, except to cross the straits that separate Hokkaido, the northern, from Hondo, the main island, and Hondo from Kiusiu. It was in 1873 that the first railway was opened to the public, a line of less than 20 miles between Yokohama and Tokio. In 1911, there were no less than 5355 miles in operation, all the property of the state. A great mercantile marine was also fostered by large subsidies both for the construction and navigation of ocean-going steamers of the highest class, not only for service in Eastern waters, but to carry the mercantile flag to the west coast of America, to India, Australia and England, and liners, managed with no less efficiency than those of the best known steamship companies of Great Britain, now regularly ply between the ports of those countries and of Japan and successfully carry on a large passenger and cargo trade.

The people have responded to the efforts of their Government. From the time that they could rely on the stability of their currency, they have shown a spirit of enterprise that was previously, with every reason that was founded on experience, believed to be entirely wanting in them. Numerous joint-stock companies for industrial purposes have been founded vrith ample capital, and have contributed much to the development of the spinning, weaving, engineering and ship-building industries. The working classes, among whom, as in England, there has been a large influx from the country to the towns, have adapted themselves to the new conditions of organised labour in large establishments, - all industry in Japan in former days was entirely domestic, carried on in a small way in separate households by members of the same family - and the descendants of the samurai, M'hose fathers despised the very name of trade and thought the smallest association with it contamination, now eagerly seek for employment in banks, in merchant houses and in factories, where they often serve under the orders of and are paid by commoners, whom their fathers would scarcely have deigned to admit to their presence, and where their higher ideals of probity in some degree remedy the lack of integrity which is still a prominent characteristic among those who have been bom into the manufacturing and commercial classes.

Japan, which forty years ago could in one year only send abroad manufactured goods in the shape of a few articles de luxe to the value of less than £50,000, exported in eleven months of the year 1912, partly manufactured goods to the value of 23 1/2 millions sterling and wholly manufactured to the value of 14 1/4 millions. They included cotton yarn, cotton and silk piece goods and handkerchiefe, clothing, umbrellas, matches, refined sugar, paper, floor matting, carpets, straw plaiting and cigarettes, and, to a minor extent, macliinery, electric fittings, stoves, bicycles, boots, saddlery, truuks, cement, soap, tooth powder and brushes, chemicals, beer, mineml waters, clocks, lamps, stationery, glass ware and a hundred other miscellaneous articles, all of which she has learned to make from Europe and all of which find a ready market in China and in the Straits Settlements, where they are sold at prices with which even German makers cannot compete. The import of raw material and of machinery has kept pace with the development of manufacturing industry, and though a heavy protective tariff has now replaced the conventional tariflfs of her early days of commercial intercourse with foreign countries, under which only an average ad valorem duty of 5 per cent, was levied on all imports, she bought over twenty million pounds worth of goods from Europe in 1912, nine-tenths of which may be said to have been fully manufactured. Great Britain no longer enjoys her former monopoly of this trade, but the value of British products is still twofold that of the products of Germany, her greatest competitor, and if the purchases that Japan makes from the overseas dominions are added to those made from the parent country, the import trade of the British Empire to Japan represents more than 40 per cent, of the whole trade.

The present industrial position of Japan is, however, not all couleur de rose nor is its future so well defined as to place the realisation of the hopes of its founders beyond the realms of .doubt. One of her early advantages was the abundance of cheap and docile labour that was at her command. Labour is no longer either so cheap or so contented to take what it is offered as it was. The standards of life have risen and what the fathers of the present workmen regarded as luxuries are now demanded by their sons as common necessaries. Wages have, in thirty years, increased three-fold, and if the relative productive capacity of the Japanese workman is fairly compared with that of his English confrere, it may be doubted if there is now a very marked difference between the cost of labour in Japan and in England. It is still cheaper, probably less than half, but its quality is still far inferior and in factories the aggi-egate of employees is still fully three-fold of what would be considered necessary for the same work in England. The old docility is no longer a conspicuous element among the working classes. They are still unorganised and have no trades unions or combinations for the protection and advancement of their class interests, but the men have learned something of the rights of labour, and the craven humility which feudal oppression engendered in them has been replaced to no small extent by truculent and offensive aggressiveness and by an intolerance of any discipline other than that of the drill sergeant during the period of military service. No ideas of personal loyalty now bind them to their employers, and socialism is not without its apostles though as yet it has found few disciples. Wages have risen, but the cost of living following on more requirements, far higher prices even of the necessaries of life, and a heavy burthen of imperial and local taxation, has done so to a still greater degree. Workmen in Japan have not yet votes and have therefore no political influence. The benevolence of the legislature has as yet failed to benefit them either by factory acts regulating their hours of labour, or by Insurance or Compensation acts, and while feeling themselves the increasing strain of the struggle for life, they see very substantial dividends regularly paid by the companies they serve to rich and comfortable shareholders. The spirit already present and growing in them is not such as will induce them to submit indefinitely to this condition of aifairs and the day may not be very far distant when the conflict between capital, though supported by a sympathetic legislature, and labour, though politically powerless, may assume some of the aspects which it already presents in Europe.