I consider it a great honour to have this opportunity of explaining to you today the outline of the budget for the 1941-42 fiscal year and recent trends in our economic circles.
Our country is now engaged in a gigantic task of ensuring a permanent peace and stability of East Asia in accordance with the high and broad principles on which the Empire was founded. In undertaking this task we shall certainly be confronted with many difficulties, which can only be overcome, needless to say, by the perfect unity of the entire nation. Particularly, in the current complex and intricate international situation it is urgently and vitally necessary for our country to speedily complete the highly organized national defence structure, and be prepared to meet any serious development. Accordingly, in the operation of our financial and economic policy the basic principles must be adopted along the lines of repleting armaments, expanding productive capacity, and safeguarding and stabilizing the people's wartime livelihood by means of full and coordinated utilization of the entire economic resources.
With regard to economic circles, their general trend during the first half of the past year was, on the whole, favourable. However, in the latter half there was a growing tension in international relations which naturally affected our economic circles to a certain extent. Fortunately due to the appropriate measures taken by the Government and through the cooperation of the people, the year-end passed off uneventfully.
In financial circles, quietness prevailed, and in the money market the accumulation of funds and their operation were carried out satisfactorily. Only in the latter part of the year, a slight tightness was temporarily experienced. It can be accounted for by the facts that the bank deposits did not increase in proportion to the growing demands for funds required for the expansion of productive capacity and for other purposes, and that the amount remaining unabsorbed of the Government funds distributed at large were comparatively small. Nor can it be denied that an increasing tension in the international situation has created an over-cautious attitude in a section of economic circles. Therefore, many measures were taken to ease the market, such as the acceleration of government disbursements, the emission of the Treasury Deposit Bureau funds, and the rationalization of the issuance and absorption of Government bonds and corporation debentures. Moreover, toward the end of the year there were heavy payments by the Government. Thus trends in financial circles were normal in the year-end and have remained so to date.
As for the accumulation of funds satisfactory progress is being made. Much credit is due to the people who cooperated fully with the national movement for promotion of thrift and savings. During the past year postal savings increased by 1,720,000,000 yen1 while in bank deposits, there was a temporary slack in the mounting tendency. After all, however, an increase of 6,098,000,000 yen was seen as compared with the preceding year.
Bond issues during last year totaled 6,667,000,000 yen. Despite a brisk demand for funds for the expansion of productive capacity, 5,240,000,000 yen worth of bonds were absorbed. This shows an increase of 531,000,000 yen when compared with the amount of bonds absorbed during the preceding year. Incidentally, new debentures issued in 1940 amounted to a total of 2,829,000,000 yen. Sales of savings and patriotic bonds amounted to 350,000,000 yen.
The note issue last year averaged 3,336,000,000 yen, representing an increase of 960,000,000 yen over the preceding year. At the year-end the issue amounted to 4,930,000,000 yen. However, its
contraction after the new year is reassuring. An increase, to a certain extent, of the note issue is unavoidable at a time when national economy is expanding year after year, and when the methods of business transactions are undergoing changes. The Government are nevertheless making efforts to prevent any excessive increase of note issue by carrying out various measures, such as the encouragement of savings and thrift, and the adjustment of supply and demand for funds and materials. In this regard, we wish to assure you of our further efforts.
Next I want to call your attention to foreign trade. Exports for the past year amounted to 3,972,000,000 yen and imports to 3,709,000,000 yen, leaving a favourable balance of 263,000,000 yen; that is to say, an increase of 1 per cent and 1.9 per cent in exports and imports, respectively, over last year. Trade with Manchoukuo and China showed a sound growth. As for trade with other countries, the situation was almost the same as in the preceding year. Since the outbreak of the European conflict, there has been a growing trend among nations toward the intensification of exchange and trade control, while dangers and perils to shipping are increasing. It is certainly a matter for congratulation that, under these circumstances, we have been able to realize the aforementioned results. The prevailing international situation, however, will not warrant optimism as to the future of our foreign trade. Efforts must be redoubled to increase the export trade with countries outside the yen-bloc area, so that the nation's capacity for importing necessary materials may be expanded. At the same time, steps must be immediately taken to replenish and utilize the exchange fund to the fullest extent. In this connection, the Government intend to work out every possible measure deemed necessary. The Government are also giving serious attention to the increased production and purchase of gold, with a view to augmenting our importing capacity.
The exchange rate of the yen has remained stable since the outbreak of the China Affair. Even since the change in the exchange basis from the pound sterling to the dollar, was effected in 1939, stability has not been disturbed. The Government intend to maintain the present rate. Our exchange-fund operations have heretofore been centred in London and New York, but the practice has recently been shifted to direct settlements with the countries concerned. In future the Government are contemplating to extend the area in which the yen is to be used in the settlement of international accounts. Such an extension will go a long way toward increasing Japan's foreign trade and raising our position in international economy.
Recent developments in the international situation have affected our economic circles, particularly in connection with the supply of materials. The repletion of armaments and the expansion of productive power cannot be neglected even for a day. The supply for these purposes must be assured by all means. Consequently supply and demand of general commodities will become somewhat unbalanced. In order to cope with this state of affairs, it is necessary to increase the supplying capacity by rearrangement of importation from other countries in such a manner as to establish a system of self-sufficiency within the Greater East Asian sphere of common prosperity, with Japan, Manchoukuo and China as its nucleus, and at the same time by exercising every possible economy in the use and reclaiming of materials available within the country. In the meantime, there will be a temporary decrease in the supply for governmental and private demands, which may, in turn, affect the supply of necessaries of life, thus creating a certain amount of inconvenience to the consuming public. The Government intend to maintain the low price policy and ensure the minimum amount of supply, so that the stability of the livelihood of the home-front population may be fully ensured.
In order to successfully conduct our finance and economy under the prevailing conditions, it is necessary to formulate a comprehensive plan embracing materials, funds and labour. For this purpose, various measures for economic control will have to be strengthened. I am fully convinced, however, that temporary privations consequent upon such control will be overcome, provided the nation faces the situation with unflinching will and in perfect unison. It is imperative that we should dispel any misgivings toward our future and never permit ourselves to assume any retrogressive, faltering attitude. The Government have formulated the budget for the 1941-42 fiscal year under these circumstances. A careful consideration was given, therefore, to the trends and developments in economic circles, while guarding against the danger of falling into conservatism.
Now I shall explain the contents of the 1941-42 budget which is before the House. The self-balanced, estimated revenue and expenditures for the coming fiscal year total 6,863,000,000 yen, representing an increase of 765,000,000 yen over the preceding year.
Explanation will be given first of the estimates for expenditures. In formulating the budget, the policy was followed to bring all the State measures into conformity with the wartime national structure, with a view to meeting any new development in the international situation, to successfully settling the China Affair and to strengthening the nation's wartime finance and economy. Accordingly the
Government have tried to provide for the carrying out of all measures essential for the perfection of the highly organized national defence structure, while giving close attention to the ensuring of harmony between money and materials, and to the adjustment of essential materials provided for in the budget to the programme relating to supply and demand of materials. With regard to other measures, therefore, only those of actually urgent nature are taken care of. Also in respect to expenditures already authorized, economy has been carried out to the fullest extent.
As has been pointed out, the total estimates show a net increase of 765,000,000 yen over the preceding year, after the balancing of the amount economized in authorized expenditures and of the increases covering new expenditures.
The particulars of the increase may be accounted for as follows: expenditures relating to public loans 152,000,000 yen; annuities and pensions 53,000,000 yen; the expenditures for the War and Navy Departments 324,000,000 yen; transfer from the General Account to the Special Account for Emergency Military Expenditures 70,000,000 yen; transfer to the Special Account for Taxes and Grants to be Allocated to Local Governments 42,000,000 yen; and others 122,000,000 yen.
With regard to economizing on authorized Expenditures, the Government have deemed it imperative to take such a step in order to make the most of all financial resources at our command for the successful operation of wartime economy. After a close scrutiny, certain items of expenditure were either curtailed or postponed. There are some expenditures for the War and Navy Departments included in the General Account which can be saved due to the dispatch of their forces to the China front. The result is a decrease in authorized expenditures to the extent of 926,000,000 yen.
On the other hand, the following expenditures are included in the estimates as new appropriations: those for the repletion of armaments 402,000,000 yen; those for the aid and protection of soldiers and sailors 104,000,000 yen; those for the promotion of scientific researches 10,000,000 yen; those for the expansion of productive power 217,000,000 yen; those for carrying out economic control 39,000,000 yen; those for the promotion of foreign trade 16,000,000 yen; those for the promotion of shipping 12,000,000 yen; and those for the promotion of civilian aviation 20,000,000 yen. Provision is also made for the improvement of air defence, planting of settlers in Manchoukuo, and prevention of tuberculosis. In passing, I want to call your attention to the increased revenue from tax receipts on the basis of the taxation reform carried out since the
1938-39 fiscal year and from the profits of the Monopoly Bureau consequent upon the raising of the price of tobacco since January, 1938, the total of which amounted to 670,000,000 yen. This amount was transferred to the Special Account for Emergency Military Expenditures.
I now pass on to the estimated revenue. It is itemized as: normal revenue, such as taxes, etc, 4,903,000,000 yen; surplus brought forward from the preceding fiscal year 80,000,000 yen; receipts from the issues of public bonds 1,879,000,000 yen.
The estimated normal revenue, including taxes and other items, was estimated on the basis of the past actual results, while making allowance for possible developments in economic circles which may be caused by the introduction of various economic and financial measures. The normal revenue shows an increase of 792,000,000 yen over the current fiscal year, which is due primarily to the increase of receipts from taxes. The estimated revenue from both ordinary and extraordinary taxes totals 3,690,000,000 yen, representing an increase of 526,000,000 yen over the preceding year. It comprises: an increase on account of the taxation reform of the preceding year 91,000,000 yen and a natural increase of 434,000,000 yen.
As the receipts from taxes are estimated to amount, at the end of the current fiscal year, to 3,550,000,000 yen, it will be seen that in the 1941-42 estimates for the same item, amounting to 3,690,000,000 yen, the natural increase is not included. It is gratifying to observe, in this connection, that the tax revenue was quite normal, despite increasing annual financial burdens imposed upon the people since the outbreak of the China Affair. Such a happy state of things is to be attributed to the ardent patriotic spirit of the Japanese people.
The following increases will also be noted in the normal revenue: stamp receipts 35,000,000 yen; receipts from Government-owned forests 42,000,000 yen; receipts from the Government enterprises 11,000,000 yen; contributions from the Bank of Japan 24,000,000 yen; and transfer from special accounts for Government funds for special projects 140,000,000 yen.
With regard to the bond issues they are itemized as: Earthquake Reconstruction Bonds 3,000,000 yen, Highway Bonds 16,000,000 yen, and Deficits Bonds 1,859,000,000 yen, totalling 1,879,000,000 yen.
In the compilation of the estimates for various special accounts, a policy of economy and retrenchment was followed as in the General Account. However, the estimates for various overseas governments such as Tyōsen, Taiwan, the Kwantung Leased Territory, Karahuto, and the South Sea islands show increases as compared with the
current budget. The increases are only commensurate with the growing importance of these regions in the face of new developments in the world situation. Some new undertakings have to be carried out in view of the prevailing circumstances.
The estimated amounts to be transferred from the various special accounts to the Emergency Military Expenditures are: from the Special Account of the Government-General of Tyōsen 84,000,000 yen, from that of the Government-General of Taiwan 24,000,000 yen, from that of the Bureau of the Kwantung Leased Territory 23,000,000 yen, from that of the Government of Karahuto 10,000,000 yen, from that of the Imperial Railways 60,000,000 yen, and from that of Communications Services 20,000,000 yen, totalling 223,000,000 yen.
In this amount an increase of 62,000,000 yen over the preceding year is also shown. Estimated receipts from the issues of public bonds as included in the revenues for special accounts are: for the Special Account of the Government-General of Tyōsen 160,000,000 yen, for that of the Government-General of Taiwan 9,000,000 yen, for that of the Imperial Railways 45,000,000 yen, for that of Communication Services 17,000,000 yen, and for that of the Government Investments 285,000,000 yen, totalling 517,000,000 yen.
Thus, when this amount of the bond issues for the Special Accounts is taken together with that for the General Account, representing 1,879,000,000 yen, the total bond issue for the next fiscal year will amount to 2,396,000,000 yen.
With regard to the Emergency Military budget relating to the China Affair, it will presently be submitted for your deliberation and approval.
In view of the far-reaching consequences the execution of the budget will have on our economic circles, the authorities concerned are required to exercise the utmost care. As has been mentioned, the estimated bond issues will reach 2,396,000,000 yen. Further issues will be forthcoming in connection with the Emergency Military Expenditures, making the total no small figure. Consequently the absorption of the bonds as well as the repletion of funds for industries will become matters of vital importance. For this purpose, the Government will endeavour to accumulate funds by promoting savings among the people, and at the same time guide and direct them to invest such savings in bonds and other appropriate enterprises through the operation of the Banking Control and related ordinances. The Government intend to work out further measures for properly absorbing and distributing the funds, so that they may be evenly and smoothly distributed.
In its relations to the supply of materials, the execution of the
budget must be made by taking into consideration price and other factors affecting all phases of the people's economic life and in accordance with the country's capacity to supply materials. And these financial and economic measures cannot be carried out successfully without the combined efforts of the Government and the people. Taking this occasion, let me call upon every member of the nation for his or her full cooperation with the Government for this purpose.
Japan has already embarked upon the tremendous task of establishing the Greater East Asian sphere of common prosperity. The programme for the development of resources in Manchoukuo and China has been successfully carried out, and the economic relations between Japan, Manchoukuo and China are becoming increasingly closer. As is widely known, the healthy growth of Manchoukuo continues, while the National Government of China have been steadily consolidating their foundation since their return to Nanking last spring.
The conclusion of the Basic Treaty between Japan and China in November last year, which was followed by the Joint Declaration by Manchoukuo and China formally recognizing each other, marked a definite step forward in the establishment of the new order in East Asia. But a mere realization of economic cooperation between the three countries is not sufficient for this purpose. Further extension of this economic sphere must be envisioned. This will never be an easy task. But by our indomitable spirit and unfailing economic strength, I am fully convinced, we can carve out a glorious national destiny.
In closing, I earnestly request that you will give your approval to this budgetary measure after due deliberations.
1 These figures are in round numbers.