Treaties, Laws and Speeches

Growth of Japan's Finances

Bureau of Statistics

Keeping pace with the remarkable development of her national prosperity during recent years, Japan's finances have achieved an extraordinary growth which has gone through two stages of expansion. The first stage of this expansion coincided with the duration of the World War (see figure 1). The annual, general account expenditure had remained below the level of one thousand million yen until 1918, when this amount was exceeded. Fluctuations were recorded after that date, but the upward tendency

[Chart: This chart shows the fluctuations in National Expenditure, Wealth and Income during the past 25 years, with the year 1912 taken as the basis for the indices of National Expenditure and Income, and with 1913 as the basis for the index of National Wealth. Lines: National Expenditure, National Income, National Wealth; years 1912-1936.]

was steadily maintained, and expenditure reached the level of 1.8 milliard yen in 1928.

A policy of retrenchment, inaugurated by the Government in 1929, and continued for three years caused a setback in this expansion; however, with the outbreak of the Manchurian incident in September, 1931, the second stage of expansion began. Thus, expenditure under general account in 1932 totalled about two milliard yen, or to be exact, 1,950,000,000 yen.

The level of two milliard yen has since been maintained; the revised budget submitted to the 70th session of the Imperial Diet provided for an expenditure of about 2.8 milliard yen under the general account.

[Chart: How General Account Expenditure has been met during the past 25 years is shown by the following chart. Bars for 1936, 1932, 1927, 1922, 1917, 1912; shading: Tax Revenue, Bond Issues, Other Revenue; vertical scale 0-22.]

Meanwhile, a serious devaluation of the yen has taken place. Unless adequate consideration be given to this point, the true facts concerning the expansion in Japan's finances cannot be known. Yet, having considered this point, the fact that Japan's finances have recently expanded both nominally and substantially cannot be denied (see figures 1 and 2). Additionally, the increase in national expenditure per capita has been greater than the increase in population. Yet it must be recognized that the expansion of national expenditure has followed the remarkable increase in national wealth and income.

Japan's national wealth, income and expenditure per capita of the population have increased materially. Taking the year 1912 as the basis, the index of national wealth registered 290.2 in 1930, that of national income, 289.7 in 1934, and that of national expenditure, 293.3 in 1936. Thus it will be seen that all three have practically trebled in the past 25 years, with an almost equal rate of increase.

As may be seen, increase in the issuing of bonds to meet deficits in the budgets has been remarkable. Unredeemed bonds totalled some 2,570,000,000 yen in 1912, but the figure jumped to over

9,850,000,000 yen in 1935. In other words, the national indebtedness per capita of the population in Japan Proper totalled about 50 yen, and that per capita in the Japanese Empire about 37 yen in 1912, while this indebtedness increased to some 145 yen per capita in Japan Proper and about 102 yen per capita in the Japanese Empire in 1935.

It may be recorded, in this connection, that the percentage of national indebtedness to national income was 80.83 in Japan in 1934, 202.16 in Great Britain in 1935, 54.19 in the United States in 1935, 233.55 in France in 1932, and 617.93 in Italy in 1933. A sweeping conclusion in this matter is impossible because all countries face their own peculiar circumstances, and the method of calculation of national income differs in the various countries. However, on the basis of the above figures, it may be seen that the percentage of national indebtedness to national income is notably higher in European countries burdened with war debts than that in the United States and Japan.

With regard to revenue from taxation in Japan, the actual revenue has recently increased, but its percentage to total national revenue has decreased, while the burden of taxation per capita has, lately, decreased in comparison with that during the period from 1912 to 1926 (see figure 2).

The percentage of tax revenue to national income represents 7.5 in Japan, 1934; 18.9 in Great Britain, 1935; 7.98 in the United States, 1935; 10.72 in Germany, 1934; and 21.06 in France, 1934. As in the case of national indebtedness, any sweeping conclusion is inadmissible, but the above figures show the percentage in Japan to be the lowest.

What has been mentioned here refers to the finances of the Central Government of Japan. The finances of prefectures, municipalities, towns and villages have shown a still more phenomenal expansion, as demonstrated by the comparative indices of annual expenditure with 1912 as the basis. The index of annual expenditure by the Central Government stood at 371.71 in 1935, while that of local governments was 555.65.

Figure I. Revenue and Expenditure under General Account, Unredeemed National Indebtedness, National Wealth and Income.

Column groups as printed: Total Amount of Expenditure under General Account (Actual Amount; Adjusted Amount²); Total Amount of Revenue under General Account (Total Revenue; Tax Revenue: Actual Amount, Percentage to Total Revenue; Bond Issues: Actual Amount, Percentage to Total Revenue; Other Revenue: Actual Amount, Percentage to Total Revenue); Unredeemed National Indebtedness; National Wealth; National Income. Units: thousand ¥ (expenditure, revenue, indebtedness), % (percentages), million ¥ (wealth, income).

N.B. The revenue and expenditure for 1936 are based on the budget, those for 1935 on the working budget and those for the preceding years on the actual, established figures.

¹ The Japanese fiscal year begins on April 1 and ends on March 31 of the following year.

² To show the devaluation of the yen, this adjusted amount has been determined by dividing the actual amount by the index of wholesale commodity prices as established by the Bank of Japan.

Figure II. Expenditure, Direct Tax Revenue, Unredeemed National Indebtedness, National Wealth and Income per Capita of the Population

N.B. The expenditure and the direct tax revenue for 1936 are based on the budget, those for 1935 on the working budget, and those for the preceding years on the actual, established figures.

Figure III. Expenditures and Revenues of Governments of Prefectures, Municipalities, Towns and Villages

N.B. The revenues and expenditures for 1935 and 1934 are based on the budgets and those for the preceding years on the actual, established figures.

¹ To show the devaluation of the yen, this adjusted amount has been determined by dividing the actual amount by the index of wholesale commodity prices as established by the Bank of Japan.