I deem it a great honour to have been afforded this opportunity to explain the main features of the estimated revenue and expenditure for the 17th fiscal year of Syowa (1942-43) and express my views on the present situation of our national finance and economy. At the outset, I desire to give a brief sketch of the 1942-43 budget and of Supplementary Budget No. 1, which has been introduced to the Diet separately of the former.
In the first place, the estimated expenditure amounts to ¥6,235,000,0001 in the main budget and to ¥2,462,000,000 in the supplementary budget, or ¥8,698,000,000 in all. As compared with the total budgetary estimates for the current fiscal year, which comprise the appropriations already authorized by the Diet and the supplementary budget estimates for the year-end which are to be introduced during this session of the Legislature, the main budget for the coming fiscal year represents an increase of ¥40,000,000.
In compiling the main budget for the 1942-43 fiscal year, we have duly taken into consideration the delicate situation with which we have been confronted, and have made provisions for such expenditures as are absolutely unavoidable for the execution of our national policy and for those which, regardless of changes in the situation, are required for the continuation of the projects already under way. Therefore, with the outbreak of hostilities with the United States and the British Empire, we have had to introduce a supplementary budget to meet the expenditures needed for the execution of urgent wartime measures. This supplementary budget has been prepared on priority basis whereby the Government's demands for materials, funds and services can be concentrated on the sole purpose of achieving the objective of the war. Consequently the amounts earmarked are not only absolutely necessary but also perfectly feasible with every possibility of speedily producing results.
Foremost among the items of new estimates on which special emphasis has been laid in drafting the main and supplementary figures for the 1942-43 fiscal year, are those connected with the projected expansion of productive capacity and maintenance of the low price policy. For instance, such estimates include a sum of ¥383,000,000 to cover anticipated increases in
1 All budget figures herein are given in round numbers.
expenses needed for operating the measures aimed at stimulating coal production, the subsidies to be paid in respect of purchases of pig iron and other expenses. An estimated outlay of ¥274,000,000 is also included to cover investments to be made in other enterprises connected with the productive capacity of the nation.
Next come estimated expenses relating to the reorganization of agriculture, involving the organization of the Farm Equipment Corporation. Then there are those required for the reorganization of medium- and small-scale commerce and industry, those needed for assisting persons who change or discontinue their businesses, the estimated subsidies to be paid to make good the losses that may be incurred by the Chest for the People's Economic Regeneration and other expenses. These several items total ¥102,000,000.
Third, there are estimated expenses for measures pertaining to health and daily life of the people and the population problem. These items include the estimated subsidies and other expenses for encouraging increased production of rice and other staple foodstuffs and those required for the people's health insurance system and the organization of the Japan Medical Association, in addition to appropriations for medical supplies, execution of the housing policy, enforcing the People's Physical Strength Law and other expenses, aggregating ¥381,000,000.
In this connection mention must also be made of the special attention we have paid to the promotion of the people's health and the sustenance and stabilization of their daily life. Thus, in addition to the measures for which necessary expenses have been estimated as just stated, we are proposing revisions of the Taxation Law so as to double or triple the amounts of allowances to be made for family members needing support in assessing the income tax, while enlarging the scope of and increasing the amounts of temporary family allowances to be paid to government and public officials, with the object of protecting large families and contributing to the population policy as best as possible.
In the fourth place, as the estimated expenditure for the preservation of important materials, a sum of ¥50,000,000 is included to provide for the expenses required in facilitating the preservation of staple foodstuffs, those needed for the control of important supplies and other relevant defrayments.
In the fifth place, there comes the expenditure required for the military relief, for which a total of ¥135,000,000 is allotted in order to cover the expenses for increased assistance to soldiers' families, those for protecting wounded soldiers and their families, and financial aids to be given to the other activities for the military relief.
In the sixth place, there are estimated expenses for promotion of sciences and technical arts. They include those relating to the Board of Technical Administration and those required for the renovation and promotion of
sciences and technical arts, subsidizing researches and experiments, establishing a Government school for wireless telegraphy, training aircraft crews and other expenses, totalling ¥56,000,000.
In the seventh place, for expenditure connected with air defence, we have estimated a sum of ¥36,000,000 to cover the subsidies to be granted in providing various air defence facilities and necessary materials, and other expenses needed in enforcing air defence measures. Thus we have incorporated in the budget only those estimates which are of vital necessity.
Further, as for the reserve funds of the Treasury, their amounts have been increased to meet the possible excess of the actual expenditure over their budgetary allotments and the probable increase in the expenditure outside of the budget. That is why the first reserve funds are estimated to reach ¥50,000,000 and the second reserve funds to ¥800,000,000 in the main budget and the supplementary budget, inclusive of the amounts already authorized.
The amounts to be transferred to the Special Account for the Emergency Military Expenditures from the General Account in the main and supplementary budgets are to total ¥2,525,000,000, while similar amounts to be transferred from the various special accounts in the main and supplementary budgets amounting to aggregate more than ¥514,000,000, thereby bringing up the grand total of such transfers to ¥3,040,000,000 or an increase of ¥1,918,000,000 over the corresponding figure for the current fiscal year.
We have also re-examined with utmost care the expenses worked out under various heads so as to enforce the greatest possible retrenchment on them. For that reason, the expense allocations of the various Government Departments for civil administration have been reduced by ¥308,000,000. As for the expenditures coming under the jurisdiction of the War and the Navy Departments, it has been arranged that most of such defrayals are to be made from the Emergency Military Expenditure Account in accordance with the actual requirements of the fighting services and their warships and other vessels as well as of the other branches of services under the said two departments. Therefore, their ordinary expenditures have decreased by ¥5,668,000.
Next I shall pass on to the budgetary estimates for revenue, which total ¥6,248,000,000 in the main budget and ¥2,450,000,000 in the supplementary budget, amounting to ¥8,698,000,000, in all, in the estimated revenue for the General Account. This figure includes ¥7,247,000,000 in the tax and other ordinary revenue, ¥54,000,000 in loan proceeds and ¥1,396,000,000 in public debt proceeds in the main and additional budgets.
The tax receipts, which form the primary source of ordinary revenue, are estimated to yield ¥5,760,000,000 inclusive of all the revenue in the ordinary and extraordinary departments. This amount shows an increase
of ¥1,897,000,000 over the similar budget for the current financial year, and it includes a sum of ¥461,000,000 representing a revenue increase due to the raising of the indirect tax rates during the current fiscal year, ¥967,000,000, representing an increase estimated in the tax revenue during the coming fiscal year, due to the revisions of the direct tax rates and other levies to be proposed in the present Diet and ¥468,000,000 representing natural increases estimated in the tax revenue.
The estimated tax revenue for the coming fiscal year is six times the tax revenue budgeted for the 11th fiscal year of Syowa (1936-37), which stood at ¥965,000,000. Among the various items of estimated increases in ordinary revenue other than the tax revenue, the most notable are a sum of ¥17,000,000 representing an estimated increase in revenue stamp proceeds inclusive of those due to the tax increases, ¥20,000,000 representing an estimated increase in the revenue from forests, ¥134,000,000 representing an estimated increase in the profit to be realized by the Monopoly Bureau ¥51,000,000 representing an estimated increase in the payments from the Bank of Japan, etc.
In the estimated loan proceeds are included a sum of ¥35,000,000 as the revenue resource for temporarily supplementing the funds of the Military Aeronautical Arsenal, besides ¥10,000,000 for temporarily supplementing the funds of the Naval arsenals and ¥9,000,000 for temporarily supplementing the operating funds to be deposited with the Special Account for Regulating the Supply of Charcoal.
The receipts from the public bond issue are estimated to total ¥1,396,000,000 including ¥1,000,000 from the Earthquake Reconstruction Bonds, ¥17,000,000 from the Highway Bonds and ¥1,378,000,000 from the Deficit Bonds, thereby showing a net decrease of ¥1,606,000,000 as compared with the current fiscal year.
The public debts to be incurred during the next financial year as a means of revenue resources to meet the required expenditure are estimated, exclusive of those for the Emergency Military Expenditures, to total ¥2,228,000,000 including the estimated amounts for public debts to be borne on the General Account just mentioned, as well as a sum of ¥831,000,000 to be raised by floating loans for the Special Accounts for the Tyosen Government-General, the Taiwan Government-General, the Imperial Government Railways, the Communications and other enterprises financed by the Government.
We have also done our utmost to effect retrenchment in the various Special Account estimates both in the main and the supplementary budget in pursuance of the policy followed in compiling the budget for the General Account. Therefore, the estimated expenses represent those which are really most urgently needed in view of the prevailing situation.
As for the military expenses required for the War of Greater East Asia,
we expect shortly to introduce a supplementary budget for the Emergency Military Expenditures for your approval.
No sooner had the war been declared, the Government lost no time in implementing urgent financial and other measures and codifying the Law for Temporary Measures for Wartime Insurance, these steps being found necessary to prevent the rise of confusion in economic circles in wartime and to stabilize and maintain the daily life of the people.
During the month and a half since the declaration of the war, the Imperial Forces have obtained brilliant results and the people's morale continue to run high, while our economic circles have remained extremely quiet, inasmuch as the turn of the second year of the war has unrolled before us in such conditions as to make it practically unnecessary to enforce the various emergency measures recently adopted—a gratifying situation which deserves our hearty congratulation. We owe all this entirely to the august virtues of His Imperial Majesty and the strenuous and persevering fighting carried on by the loyal and valliant officers and men of our Army and Navy, and we cannot but be moved to tears with a sense of gratitude welling up from the bottom of our hearts. I take this opportunity to pray for a lasting martial luck for the army and naval officers and men who are fighting hard at the front, and at the same time to express my respects and condolences for the spirits of our most esteemed war dead.
During the last year the conditions of our financial circles continued to progress in peace without showing any sign of disturbances in spite of the outbreak of the War of Greater East Asia. Thus, although the Government funds have continued to be distributed to reach an enormous amount during the last few years, the back flow of these funds has on the whole been realized advantageously and the note issue at the end of last year stood at ¥6,231,000,000, which, though representing an increase of ¥1,301,000,000 as compared with ¥4,930,000,000 at the end of the year before last, has favourably decreased after the turn of the new year. In the interim, the bank deposits increased by ¥6,611,000,000 during the last twelve months, the postal savings mounting by ¥1,6500,000,000 [sic] during the same period. The capital market also made favourable progress with the new issues of corporation bonds amounting to a huge total of ¥2,649,000,000.
The flotation of public bonds reached the figure of ¥8,782,000,000 last year, but during the same period as much as ¥7,366,000,000, or 83.9 per cent of the whole amount, had been absorbed.
As for the public bonds floated since the outbreak of the China Affair, these have totalled ¥26,361,000,000, of which ¥21,827,000,000, or 82.8 per cent of the total, has been digested. This is quite a commendable result. However, their flotation is expected to continue to climb during and after the 17th fiscal year of Syowa (1942-1943), and it will have become increasingly imperative for us to endeavour for the satisfactory digestion
of public bonds.
In the operation of wartime finance, the importance of taxation is too obvious to need any comment, and the people on the home front have demonstrated their patriotism by paying their tax dues in a most satisfactory manner. Hence, in spite of their added tax burden due to the tax increases enforced recently, the payment of taxes has shown extremely satisfactory results to our genuine gratification. Meanwhile the Government, after careful deliberation on the requirements of finances and their bearing on the daily life of the people as well as on national economy as a whole, have formulated a project of tax increases affecting the whole system of taxation, and we have already put into practice with your consent a series of increases in the rates of the brewery tax and other levies, most of which are indirect taxes. Further, we have decided to increase the rates of a number of taxes, most of which are direct levies, and have introduced into the present Diet a bill calling for necessary revisions in the Taxation Law, with the object of providing for the expected increases in the Extraordinary Military Expenditures.
As for foreign trade, our economic relations with the United States, the British Empire, and the Netherlands East Indies were competely [sic] severed due to the freezing of Japanese assets by these countries in July of last year, followed by the start of the War of Greater East Asia. On the other hand, however, our trade with Manchoukuo and China is making a steady progress. We feel strongly encouraged, from the viewpoint of the projected Co-prosperity Sphere of Greater East Asia, to see that our trade with French Indo-China and Thailand is registering considerable increases both in imports and exports. Thus, as the result of our economic activities abroad having come to be concentrated on the areas within the Co-prosperity Sphere of Greater East Asia, it has devolved upon us to make efforts for the planned interflow of materials within the co-prosperity sphere as quickly as possible. In this connection we also recognise the urgent need at effecting a radical revision of our past policy in the field of international banking relations and enforce such a policy as will meet the new situation on the basis of a new plan.
The previous foreign exchange policy, which was aimed at preserving the balance of international payments between our country and the third Powers and also at stabilizing and maintaining the exchange rates based on the dollar and the sterling, has already lost the weight it used to carry when our economic relations with foreign countries depended to a considerable extent on the United States and Great Britain for operation. And now, having severed our relations with American and British economy, we ought to lay a primary emphasis on such financial measures as will facilitate the interflow of materials within the Co-prosperity Sphere and speedily expedite the development of natural resources, in order to meet the urgent
need to augment national defence economy for the Co-prosperity Sphere as a whole. From a viewpoint such as this, the Government abolished the old foreign exchange rates which were based on the dollar and the sterling at the end of last year, and officially fixed independent exchange rates with the yen as their standard. Moreover, in the future, we intend to liquidate all American and British financial influences from the southern regions and make the currencies in these regions gradullay [sic] adopt the yen as the basis in fixing their values, specifically for the purpose of introducing a procedure to effect settlement of accounts between these regions at Tokyo in the yen and thereby contribute to the establishment of the financial sphere of Greater East Asia with Japan as its centre.
Hitherto Japan has been engaged in expanding productive capacity in the general interest of the Japan-Manchoukuo-China bloc as a whole, and now it goes without saying that it is imperative for us to develop most effectively and utilize the rich natural resources in which the southern regions abound so as to facilitate the execution of the present war and at the same time hasten the establishment of a system of self-sufficiency within the Co-prosperity Sphere of Greater East Asia. In other words, we are confronted with the urgent necessity of frustrating the military strength of the enemies on the one hand and accelerate the development of natural resources on the other. In view of these necessities, the Government have decided to organize what is to be known as the Nampo Kaihatsu Kinko, or the Chest for Development of Southern Regions, to pave the way for satisfactory execution of the currency and credit policy for those regions, and have introduced into the present Diet a bill calculated to meet this need.
The recent revision of the foreign exchange rates with the yen as the standard, as well as the preparation on the part of the Bank of Japan to extend its financial activities abroad, is indicative of the forward step which is going to be taken in the field of banking within the Co-prosperity Sphere of Greater East Asia centring around Japan. In the southern regions, our military notes are now being warmly received by the inhabitants wherever they are introduced and their circulation is proving extremely satisfactory, and coupled with the proposed establishment of the Nampo Kaihatsu Kinko and the various measures to be taken in Tokyo and also on the spot, the situation just mentioned will enable us to take necessary steps to meet the requirements of the currency and banking problems in the southern regions.
In order to put into full motion the total strength of a nation in time of war, it is imperative to operate funds under proper control to its best possible advantage, while endeavouring to accumulate as much funds as possible at the same time. For this purpose, the various existing financial organs will have to be structurely [sic] readjusted. First of all, it is absolutely,
necessary to make the Bank of Japan, which is our central bank of issue cooperate most closely with the Government as the nucleus of our currency and banking system, and thus take charge of the regulation of currency, the readjustment of the money market, and the maintenance and development of the credit system along the lines of the national policy and otherwise fulfil its duties as the central financial organ of the Co-prosperity Sphere of Greater East Asia. Accordingly, the Government have now made it known that the organization of the Bank of Japan is to be radically reformed, the system of conversion for the Bank of Japan notes abolished and a system of controlled currency completely independent of gold adopted to keep pace with the march of time. This reform, however, merely means the confirmation of a fait accompli, and will not affect the importance of gold in any way.
Further, in order to perfect the control on credit and the operation of capital, it has been considered appropriate to readjust the organic structure of financial institutions on a legal basis and induce them to exercise self-discipline, insuring their positive cooperation with the Government in banking control. Accordingly, the Government are now making necessary preparations with a view to inaugurating an organization aimed at controlling financial undertakings under the provisions of the National General Mobilization Law.
It is the primary objective of wartime economy to provide for a smooth supply of funds to the munitions industry, those industries in which productive capacity is to be expanded, and other urgent industries. Therefore, all kinds of financial establishments in our country ought to render concerted efforts to this end. The functions of the banks which have hitherto been chiefly concerned with commercial banking are now being so changed as to take care of wartime industrial banking, with the result that all the financial organs are gradually assuming the character of wartime financial institutions.
However, some of the strategic wartime industries apparently are in the nature of things not in a position to receive a sufficient supply of funds, were they to depend entirely on the ordinary processes employed by the existing financial organs. In view of the tendency of such industries growing further in scope in the future, the need has been seen of establishing a special financial machinery in order to assure them the supply of necessary funds. It is for this reason that we have introduced into the present Diet a legislative measure concerning the Chest for Wartime Banking. It may be said that the reorganization of the Bank of Japan, the establishment of an organization for the control of banking and the inauguration of the Chest as al ready mentioned, may, coupled with the creation of the Chest for Development of the Southern Regions and with the cooperation of the existing financial organs, will go a long way in perfecting the banking system
in charge of our wartime economy.
It is also quite imperative to make the prices of securities appropriate and stable with a view to making smooth the circulation of funds for expanding productive capacity and other industrial purposes and protecting the people's savings. From this viewpoint, the Government have taken various measures to stabilize the prices of securities and corporation stocks, and are further desirous of checking unreasonbale [sic] rise or fall in prices to avoid all untoward fluctuations ascribable to excessive speculations. As regards the insurance companies, the Government intend to direct them in such a way as to enable them to cultivate new fields and amplify their functions, in view of the fact that they have hitherto contributed greatly to the maintenance and stabilization of the people's daily life and also to the accumulation of necessary funds.
Our country has been carrying on a large-scale war in Greater East Asia for the past four and a half years, and during the interval the economic resources essential for our national defence have continued to grow considerably year after year, and if the rich natural resources in which the southern regions abound are developed and utilized satisfactorily, the future of our economic circles may be said to be exceedingly hopeful. However, in order to develop these natural resources and further to strengthen our national defence economy on the basis of such development, enormous materials, labour, technical knowledge and transport capacity will be needed, and the funds necessary for the projected expansion of productive capacity and for meeting the mounting war expenditures will reach staggering figures. In the meanwhile, it will become increasingly obligatory to withdraw necessary portions of the funds which are flooding the general public as the huge war expenditures continue to be paid out, such withdrawals of funds being calculated to safeguard a satisfactory operation of national economy. The success of absorption and accumulation of funds for this purpose will depend in large measure upon the augmentation and consolidation of the people's savings. Therefore, it is absolutely necessary for all members of the nation to assist in increasing the sinews of war and other necessary funds of our country through the payment of their respective shares of the tax burden, and at the same time to redouble their efforts in performing their daily duties, practise thrift in their life as consumers and convert whatever they might be able to spare into their savings. Only by virtue of such savings on the part of the people will the collection of war funds, amplification of productive capacity and supply of necessary funds become possible. Furthermore, a favourable growth of the people's savings will at the same time serve as an indication of the satisfactory operation of the wartime financial and economic policy and of the comprehensive results it may achieve.
We are prepared for the resistance to be persistently continued over a
long period on the part of the United States and the British Empire, whose Governments will in all likelihood concentrate the enormous resources of their nations to that end in spite of their miserable failure at the outset of the war, and being firmly determined to carry on the war to the bitter end until we win a complete victory and thereby establish the Co-prosperity Sphere of Greater East Asia, we are convinced of our ability to work out various financial and economic measures formulated on a comprehensive and grand scale and attain our objective through infallible efforts and inexhaustible endurance born of our fiery love for our fatherland of 100 million souls, a nation unparralled [sic] in the whole world.
In conclusion, let me express my hope that you will give your speedy consent to the Bill of Budgetary Estimates introduced by the Government.