I wish to speak on the outlines of the Budget for extraordinary military and naval expenditures as well as on the supplementary budget for the twelfth year of Showa (1937), both of which have been submitted to the Diet, and on the financial and economic policy of the Government vis-à-vis the aggravation of the China affair.
As to the expenditures connected with the present affair, your approval was given to the necessary outlay at the 71st Session of the Diet. However, in view of the subsequent developments of the situation, the appropriations that are required to cover the expenditures of necessary measures are now as follows:
Extraordinary military and naval expenditures ...... approximately 2,022,000,000 yen.
General Accounts for various Departments ... approximately 42,000,000 yen.
Of the above-mentioned items, the extraordinary military and naval expenditures are required for the conduct of hostilities. Because they involve large sums, and because it is deemed necessary to treat them specially and to deal with the entire period in which they are expended—from now until the termination of the affair—as a single fiscal year, it has been decided to submit a Bill relative to the establishment of a "Special Account for the Extraordinary Military and Naval Expenditures." Their treatment apart from general budgetary items is required by the very nature of these expenditures.
As regards the General Accounts for other Departments, these appropriations are submitted, in consideration of the present situation,
as necessary for expenditures required for the conduct of foreign affairs, for an increase of the fund for the relief of soldiers' families, for the encouragement of activities giving assistance to soldiers, for the general mobilization of the national spirit, for the enforcement of the law on air defence, for emergency measures for rural and fishing villages, and for compensation for the loss in importation of ammonium sulphate.
As for the sources of revenue for the above-mentioned expenditures, we plan to employ funds raised by loans for all extraordinary military and naval expenditures, and, for the items in the General Accounts, to employ the unused portion of this year's authorized appropriations as well as the increased amount of ordinary annual revenue resulting from the expenditures.
Aside from these, supplementary appropriations have been provided in each Special Account in the overseas possessions for necessary expenditures in respect to the present situation.
Furthermore, it has been decided to present a Bill for the purpose of affording the officers and men on the front an exemption or reduction of taxes and postponement of their collection.
As has been explained, the expenditures pertaining to the present China affair amount to a large sum; but they are deemed essential for the purpose of chastising the outrageous Chinese forces and to cause prompt reconsideration on the part of the Chinese Government. And in order fully to accomplish these purposes, I believe it necessary to readjust our financial and economic structure to meet this emergency; that is to say, various measures must be taken primarily with a view to supplying necessary materials as plentifully as possible. These materials include capital and labour to essential industries, such as those connected with national defence requirements. While a liberal flow of capital must positively be promoted in order to cause concentration of materials and labour in those directions, the limited supply of capital, materials, and labour necessitates the discouraging, for the time being, of inaugurating or expanding enterprises for which there is no pressing necessity at this time.
Moreover, I deem it important to limit the exportation of materials required due to the present situation and simultaneously to restrict the importation of materials that are relatively unessential, thereby augmenting the capacity to import essential materials and taking measures to meet deficiencies in commodity supply at home arising from such import restriction. In conformity with these aims, therefore, it is necessary to make suitable adjustments in finance, industries, trade, capital and foreign exchange.
The Government, accordingly, has submitted a Bill designed to effect proper adjustment of capital according to the above-mentioned aims with reference to the establishment of corporations or to capital increases in them, as well as to the underwriting of corporate debentures by financial institutions and also loans for financing the establishment or expansion of industrial facilities. The Bill is also designed to enable the Industrial Bank of Japan to raise the issue limit of industrial debentures or to take other measures in order to supply necessary capital for enterprises demanded by the present exigencies.
For similar purposes, the Government, in order to insure an ample supply of materials which will be particularly necessary, has decided to present a Bill to forestall impediments in the proper functioning of national economy with a view to restricting import and export of certain items of materials, and regulating the supply and demand of goods manufactured from them. As for the regulation of such capital and materials, it is the policy of the Government to leave the matter to the voluntary adjustment of the business interests concerned.
As I have already stated, the Government will endeavour as far as possible to bring about the adjustment of supply and demand relating to goods and capital. Especially as regards the adjustment between supply and demand of articles manufactured from imported raw materials, the success of our efforts depends largely upon curtailment of consumption by the people, and I earnestly hope that such curtailment will be practised along all lines so that through the voluntary cooperation of the people the needs of the nation, as a whole, will be satisfied. Then, since it is possible that the sudden increase of demands due to the present affair may bring about an exorbitant rise in prices, the Government will take appropriate steps adequately to meet such a situation through proper enforcement of the Anti-Profiteering Ordinance. Again, as to the adjustment between goods and capital, the Government is giving careful consideration to the fields of finance, and has adopted a policy of omitting as much as possible from the 1938 Budget appropriations items other than those connected with the present affair. This same policy of retrenchment is being pursued in regard to disbursements for 1937. Local governments will be instructed to administer their finances according to the same policy.
With the increase in the amount of the Government's bond issue, greater care is required in the execution of the bond policy. The Government is planning to devise measures suited to the circumstances by means of the above-mentioned adjustment of capital by law, the utilization of the funds of the Bureau of Deposits and other governmental funds, and the sale of Government bonds through post
offices. But, after all, what is most needed is that the general public, to say nothing of financial organs, will extend both cooperation and support from the national standpoint in the matter of bond assimilation. Of course, the assimilation of bonds has much to do with the actual condition of the financial world. The Government will see to it that the supply of capital is ample and that financial channels are kept clear and unobstructed. The interest rate for Government bonds will be maintained at the present level, and the exchange rate will also be kept at the level of one shilling two pence on London, as the firm maintenance of this level is believed essential for insuring sufficiency of military supplies and the stability of the nation's standard of living.
I am greatly encouraged by the demonstrations of national unity in all quarters of society shown since the beginning of the present affair. The Government will, on its part, do its best to deal with the current situation, and expects to carry out all necessary measures. However, the desired end cannot be achieved without the united efforts of both Government and people, and I appeal to you for the whole-hearted support and cooperation of the entire nation.
In conclusion, let me hope that you will give speedy approval to the Budget which is being submitted to you.