Treaties, Laws and Speeches

RESOURCES OF THE TREASURY DEPOSIT BUREAU RE-EXAMINED

Treasury Deposit Bureau

IN the January, 1938, number of TOKYO GAZETTE there appeared a brief article regarding the resources of the Treasury Deposit Bureau. Since then, these resources have increased considerably in amount and significance and the whole system has functioned most effectively as a State institution of banking under the current emergency. In this review, therefore, a fuller explanation is offered, showing the sources of the funds and the manner in which they are used.

In September, 1937, the total amount of the funds at the disposal of the Bureau passed the 5,000,000,000 yen mark. They increased by 1,000,000,000 yen in 16 more months, by the end of January, 1939, and passed the 7,000,000,000 yen figure last August 21.

This amount indeed is greater than the aggregate deposits in the big five banks of Japan—the Mitsui, the Mitsubishi, the First, the Yasuda and the Sumitomo banks—and represents approximately 40 per cent of the total amount of deposits in all the other banks in the country, making the Bureau the foremost financial institution in Japan.

It is a only natural that such a powerful financial institution as the Treasury Deposit Bureau should have an intimate bearing on the economic life of the people, although there may be not a few who are unaware of the benefits they are receiving in many respects through the operation of the funds at its disposal.

Most of the 7,000,000,000 yen in the stewardship of the Bureau comes from the Postal Savings deposits, fruits of the toil of the entire nation, and from the purses of those who have purchased governmental savings-debentures. It may be of interest to know the way in which the funds are operated, and the contributions they are making toward the smooth progress of the national economic and financial policies.

Sources of the Funds

The bulk of the resources of the Deposit Bureau consists of the Postal Savings deposits or—5,200,000,000 yen to be exact—as well as the proceeds from the sale of the savings-debentures. Detailed

figures, as of August 21, 1939, classified according to different sources, are given as follows:

1. Postal Savings Deposits—5,206,800,000 yen or 73.4 per cent of the total amount of the Funds

All the money paid in by individuals at the cashiers' windows of the post offices as Postal Savings goes to the Treasury Deposit Bureau. Interest is paid regularly by the Bureau through the post offices, while the principal is invested in State and public-welfare enterprises. The depositors, therefore, are at once saving money for the assurance of their own economic security in conformity with the national principles of savings campaigns and contributing, however indirectly it may be, to the promotion of the State and public-welfare enterprises, through the efficient operation of the Deposit Bureau.

2. Postal Savings Transfer—168,520,000 yen (2.4 per cent)

3. Proceeds from the sale of Savings-Debentures and Reconstruction Savings Certificates—232,110,000 yen (3.3 per cent)

For the purpose of raising funds for the military operations in China, on the one hand, and to encourage national savings on the other, the Government has issued on several occasions since December, 1937, savings-debentures through the Hypothec Bank of Japan, the proceeds of which are in the custody of the Deposit Bureau. In view of the nature of such debentures, this money is set aside principally for the purchase of national bonds. Similar savings-debentures were issued at the time of the Russo-Japanese War of 1904-1905.

The Reconstruction Savings Certificates were issued to raise funds for reconstruction of devastated areas immediately following the Great Earthquake of 1923, and for the promotion of local industrial enterprises. The proceeds of the sale also have been kept in the custody of the Bureau and there is a balance on hand of about 70,000,000 yen.

4. Money transferred from the Special Accounts—663,080,000 yen (9.3 per cent)

Of all the sources of the deposit funds, the money transferred from various special accounts is next in importance to the Postal Savings deposits. Under the accounts system of the Imperial Treasury, all the cash held by different special accounts as funds or reserves is to be put at the disposal of the Deposit Bureau, to be managed for public purposes, provided such money is in no immediate need in the respective special accounts. Some of these transferred accounts, for instance, are the surplus funds or reserves of the National Debt Readjustment Fund, the State Property Readjustment Fund, the Gold Fund, Health Insurance, Communications Enterprises,

Post Office Life Insurance and the Chosen Post Office Life Insurance. The amount of deposits from these sources fluctuates, but it is in general on the increase and averages 500,000,000 yen a year, occasionally totalling as much as 700,000,000 yen. The present total of 663,080,000 yen comes from the following sources:

5. Deposits of the special banks......46,680,000 yen (0.7 per cent)

These deposits represent the funds of both the Central and prefectural governments, including the fund of the Military Relief Board (formerly known as the Wounded Soldier's Protection Board), the poor and emergency relief funds of local governments, and the semi-official special banks.

6. Private bonds and other money entrusted to the special custody of the Deposit Bureau......47,510,000 yen (0.7 per cent)

(a) Lost money which remains unclaimed after being held by police stations the prescribed length of time eventually finds its way to the Deposit Bureau.

Any person or company making a contract with the Government must furnish a bond guaranteeing satisfactory performance of his obligations thereunder, and this bond also is deposited with the Bureau.

(b) Security bond money paid to the Government by candidates for the House of Representatives to the amount of 2,000 yen each, as guarantee of fidelity, or by debtors in accordance with the provisions of the Code of Civil Procedure, is kept in the custody of the Bureau.

7. Reserve funds of the Deposit Bureau......727,150,000 yen (10.2 per cent)

The annual surplus in the Bureau's own special account is kept in reserve, just as in the case of ordinary banking corporations, to refund the natural depreciation in the value of its assets or to make good losses. The only difference is that the Bureau pays no dividends as do the commercial corporations, with the result that the entire surplus is kept in reserve.

When the Bureau came into being in 1885, the reserve from surplus amounted to only 39,000 yen, but it has increased steadily,

particularly during the period following the World War, until an annual average of 60 or 70 million yen of surplus has been attained in recent years.

This pyramiding of the reserve fund to the vast amount of more than 700,000,000 yen makes for greater security and stability in the operation of the combined funds of the Bureau and works as a factor for lowering the interest rates on its investments.

Operation of the Funds from Postal Savings Deposits, Savings-Debentures and Reconstruction Savings Certificates

Entrusted with the operation of the huge sum of the deposits, which mainly consist of the pennies saved by the people, the working of the Deposit Bureau, a State institution of banking, must be most appropriate, just and fair.

For this reason, it is laid down by law that "the Deposit Funds are to be operated solely for the benefit of the State and the good of the public, in a profitable and safe manner, and such operation is to be made only on recommendation by the Commission for the Operation of the Funds of the Treasury Deposit Bureau."

Long term and short term investments may be said to constitute the method of operation. The former includes subscription to national loans to local governments, municipalities, cooperatives and other organizations, as well as to special companies and banks; the latter includes the emission of funds when the general condition of the money market and other factors deem it advisable. It must be specially noted that the investments of the funds of the Bureau under the current emergency are so made as to place emphasis on the absorption of national bonds, the promotion and expansion of productive power and the stabilization of the economic life of the home-front population.

Long Term Investment

1. Investment in National Bonds

The largest investment of the funds at the disposal of the Deposit Bureau are made in national bonds. The average investment in this category in the past usually has amounted to 200,000,000 yen or more per annum, but since the outbreak of the China Affair, the subscription to national bonds has made a remarkable advance, reaching 1,000,000,000 yen during the 1938-39 fiscal year and exceeding the sum total of the increase of the Postal Savings deposits for the same period, which amounted to more than 860,000,000 yen, as well

as the proceeds from the sale of savings-debentures which amounted to 80,000,000 yen. The total amount of the investment in national loans from the beginning of July, 1937, to the end of July, 1939, reached the staggering sum of 2,100,000,000 yen, or more than a quarter of the total national bond issue during the same period, which amounted to approximately 8,200,000,000 yen. It is indeed rather amazing that the accumulation of petty sums from individual deposits is playing such an important rôle in national finance.

At the end of July, 1939, the total amount of national bonds (at face value) held by the Treasury Deposit Bureau was in excess of 4,280,000,000 yen. It nearly matches the aggregate amount held by all the private banks in Japan Proper, and represents approximately 22 per cent of the national debt, which comes to some 18,800,000,000 yen.

The large-scale absorption of national bonds by the Deposit Bureau on the other hand lightens the burden of other banking establishments, which are able to make their funds available to those private corporations which are endeavouring for the expansion of the nation's productive capacity, urgently called for by the current emergency.

The post offices, at the option of individual bondholders, redeem the national bonds floated in connection with the China Affair and those given as special allowances for meritorious services at the front. The money for such redemptions, of course, is supplied from the funds of the Bureau.

2. Loans for Local Public Enterprises

Loans are made, in the name of "local funds," directly by the Bureau in the case of public enterprises operated by prefectural and municipal governments, and local irrigation associations, and through the special banks such as the Hypothec Bank of Japan or the Industrial Bank of Japan, the Central Chest for Cooperatives and the Central Chest for Commercial and Industrial Associations in enterprises operated by other organizations and individual merchants, manufacturers and farmers. The latest available figure for the loans in local funds amounts to more than 2,020,000,000 yen.

Investment in local public enterprises is made in consideration of the fact that the main source of the funds lies in the Postal Savings deposits of the people all over the country, wherefore part of them must revert, as it were, to provincial communities, the constituents of which are none other than the Post Office Savings depositors.

Investment in the local funds embraces more than 100 items of accommodation, but the principle ones may be divided into the following 17 categories, in which are shown the amounts of loans from the Deposit Bureau as of the end of July 1939:

Brief explanation of the more important of the 17 items is given below.

Loans to public enterprises are advanced for the building of schools; the construction of medical and sanitary facilities; the institution of various economic and industrial facilities; rehabilitation works following natural calamities, the construction of cultural establishments such as libraries, public halls, zoological and botanical gardens; communications and transportation enterprises, and irrigation, drainage, land development and reclamation projects—all carried out by local governments such as prefectures, municipalities, townships and villages, as well as irrigation associations. Even when these enterprises are carried on under the direct control of the central or prefectural governments, the disbursements allotted to individual prefectures, municipalities, townships and villages concerned are advanced frequently from the funds of the Bureau. The funds for the construction and repair of public schools, roads and waterways in recent years have been furnished almost entirely by the Bureau. Loans for the construction, repair and extension of school buildings alone have amounted to approximately 100,000,000 yen.

In addition to loans for the above-mentioned public enterprises, the Deposit Bureau funds are invested in producers' cooperatives for the construction of village warehouses; in land readjustment associations for their undertakings in the development of land and the construction of waterways and drainage systems; in forestry associations for constructing roads through woods and the laying of light railways in the mountains, in fishery associations for their floating capital and the construction of fishing ports, sand banks and canal bays; in livestock breeding associations for the purchase of cattle, in manufacturers' associations for their floating capital and the construction of dormitories for workers; in commercial associations and foreign trade associations for their floating capital and the construction of warehouses, and lastly in saké brewers' associations for the purchase and installation of tanks for the storage of rice wine.

Of all these associations, producers' cooperatives have the greatest access to the funds of the Deposit Bureau, having borrowed a total of 130,000,000 yen in ordinary and special funds for their enterprises. In addition, all debentures floated by the Central Chest for Cooperatives are subscribed by the Deposit Bureau. It may be readily seen that the progress of the cooperatives owes much to the strong support of the Bureau.

Loans advanced to land readjustment associations amount to approximately 100,000,000 yen. Most of the neatly arranged, modernized farms with their capillary irrigation and drainage ditches seen everywhere have been made possible by the financial aid of the Bureau.

Funds for social welfare enterprises are advanced to prefectures, municipalities, townships and villages, housing associations and cooperatives. For instance, 13,000,000 yen has been advanced to small loan associations; 20,000,000 yen to low-cost housing enterprises, and another 20,000,000 yen for the building of dwelling houses under the auspices of municipalities. Loans also are made for the establishment and maintenance of public markets, inns, day-nurseries and other public accommodations.

Not long ago, the Deposit Bureau set aside 3,700,000 yen for the establishment of apartment buildings and small private houses for the operatives in munitions factories, who have flocked to the urban districts in great numbers in recent months. The Bureau also decided to advance 6,000,000 yen for the relief of merchants and manufacturers engaged in enterprises on a moderate scale, who have been obliged to curtail or change their occupations as the result of State economic control requirements.

When natural calamities occur, such as the visitations of typhoons, floods, droughts, earthquakes and fire, the Deposit Bureau stands by as a reassuring haven for the afflicted. At the time of the Great Earthquake of 1923, reconstruction funds to the amount of 230,000,000 yen immediately were made available by the Bureau. In 1934 and 1935, when the Kwansai district was smitten successively by a typhoon and an equally disastrous flood, the Bureau disbursed 250,000,000 yen for relief and rehabilitation. Again in 1938, when another typhoon and flood inflicted heavy damage in the Kwanto and Kwansai districts, the Bureau came to the immediate aid of the sufferers.

Since private banks have shown reluctance to make loans to small-scale manufacturers and merchants, because of their general inability to put up adequate security, the Deposit Bureau recently took their plight into consideration and decided to extend a helping hand. The Bureau thereupon set aside 20,000,000 yen for the assistance of those able to remain in business with some extra help. Additional loans amounting to 6,000,000 yen have been made for the relief of the less fortunate, who have had to give up their businesses or change their occupations under the emergency situation.

Debentures issued by the People's Bank are subscribed by the Deposit Bureau to alleviate the financial difficulties of the masses.

Of the various loans made by the Bureau, those advanced to agricultural communities in different ways and through various channels are understood to amount to approximately 900,000,000 yen. New plans for the investment of funds for the solution of important problems in rural communities have been adopted on recommendation of the Commission on the Operation of the Funds of the Treasury Deposit Bureau, including 17,200,000 yen for economic regeneration, 40,000,000 yen for the readjustment of debts and 27,000,000 yen for assisting independent farmers. In addition, emergency loans amounting to 10,000,000 yen have bolstered the Village Debt Readjustment Funds used for the economic regeneration and the readjustment of debts of those rural households which have lost important male members in the China hostilities.

The Bureau also makes it possible for debt-ridden public service associations to lighten their financial burdens by refinancing high-interest loans and liquidating long-term debts, by advancing them new funds at low interest rates. Emergency loans for unemployment relief and for the public rehabilitation projects related thereto, have been made extensively in times of depression. Such loans have fallen off to a marked degree, however, with the advent of the wartime industrial boom.

Among miscellaneous disbursements, there are the loans to overseas territories, which include 243,000,000 yen to Chosen, 24,000,000 yen to Taiwan, 5,000,000 yen to the Kwantung Leased Territory, 3,000,000 yen to Karafuto, and 340,000 yen to the South Sea Islands under Japanese mandate. Apart from these, there has been a loan of 20,000,000 yen for the economic rehabilitation of the Japanese residents in China.

Emergency loans for the cultivation of silk, the storage of rice and the purchase of fertilizers include funds for silk-cultivation associations for the purchase of cocoons, emergency loans for the seasonal delivery of rice, and loans to farm cooperatives and independent farmers for the purchase of chemical fertilizers. They are short-term loans, extended for a maximum period of 12 months. The annual aggregate of such loans averages 50,000,000 or 60,000,000 yen.

3. Other Long-Term Loans

In addition to those already mentioned, there are other long-term investments, such as loans to the General or Special Accounts of the Government, subscription to the debentures of such semi-official banks and corporations as the Hypothec Bank of Japan, the Industrial Bank of Japan and the South Manchuria Railway Company, loans to such special banks and corporations, and the purchase of foreign bonds, the outstanding total amounting to more than 700,000,000 yen.

In keeping with the development of wartime economy in Japan, the Deposit Bureau has become a cogent factor in the provision of funds for the expansion of the nation's productive power and to the capital market to make easier the flotation of debentures. When it is deemed necessary to assist the absorption of corporate debentures, floated in large amounts to raise funds for the expansion of industrial capacity for increased production, the Deposit Bureau steps in to purchase such debentures.

Loans to the special banks and corporations stood at 479,000,000 yen at the end of July, 1939, while the purchase of foreign bonds accounted for 85,000,000 yen, including 74,000,000 yen in bonds floated by the Manchoukuo Government for the expansion of productive power in that country.

Short-Term Investments

Funds of the Bureau otherwise standing idle are put into operation when necessary to stabilize the money market when emergency

conditions prevail. In such instances, short-term investments are made in the purchase of Rice Certificates or other national bonds, for holding active bonds for a limited period, in supplying call-money, as loans to special banks and corporations to tide over the periods when funds are being raised by the flotation of debentures, and as loans to contractors performing services for the Government who need operating funds to carry on until their services are completed, when full settlement customarily is made. Such short-time investments reached the all-time high of 490,000,000 yen on a certain past date.

With such a remarkable increase in its funds as has been mentioned, the Treasury Deposit Bureau has acquired the most important position in Japanese banking and has been able to accumulate a vast excess of funds for operation in short-term investment in the general money market. In the past two years particularly, it has made substantial contributions toward the smooth circulation of funds by making short-term loans in consonance with the general trend of the money market under the wartime system of national economy. During 1938, as much as 2,200,000,000 yen was operated by the Bureau in short-term investments and loans.

Because of the fact that the investment of the funds at the disposal of the Deposit Bureau goes through local governments, public corporations, and special banks, most of the beneficiaries are unaware of the indirect assistance they are receiving from the Bureau, but it may be safely said that the funds of the Bureau are functioning efficiently in all the rural communities, even in the remotest corners of the country. These people have been aided to the extent of 2,000,000,000 yen, in the form of 170,000 loans to 90,000 enterprises up to the end of July, 1939.