Approaching Desperation

During the Korean war, U.S. money (in the form of war orders, servicemen's pay, etc.) poured into Japan at the rate of $800 million to $900 million a year. On a nation struggling up from the ashes of defeat and destruction in World War II. the effect was something like that of a lottery windfall on a poor and unstable clerk. It was fine, it was riotous, while it lasted; it was terrible when it stopped. The Japanese spent too much for luxuries, not enough on modernizing their industry and otherwise bracing their economy against the inevitable end of the Korean boom.

Now Japan, a sovereign nation, is poor, almost broke, worried, and professedly ready to reform. Her usable foreign exchange stands at $640 million, down from $800 million last December. Economists say that the "peril point" is $500 million. Below that figure, the effect will be like that of failure rumors on an uninsured bank.

Fruits of Folly. Inflation and other consequences of imprudence have caused Japan to spend too much for imports, much more than her high-priced exports can balance. (A Japanese refrigerator sells for around $500.) But not all of her troubles are the fruits of postwar folly. Before she lost her empire in the war, she got rice from Korea, wheat from Manchuria. Now she must import $400 million in food annually to feed her people. Her own rice crop last year was the poorest in 60 years. She has no coking coal of her own; her prewar source of supply, the Chinese mainland, is now shut off. So she imports this coal from the U.S. and elsewhere, at $11 to $17 a ton. She has similar trouble with salt, a staple of her chemical industry, on which the shipping costs alone are $12 a ton. Some of her prewar export markets are closed to her by the Bamboo Curtain, others by old hatreds, others by stiff free-world competition. Japanese silk, which used to be her biggest dollar earner, has been knocked out by modern synthetic fibers.

After getting repeated bulletins on Japan's worsening plight, the Eisenhower Administration decided to step in. Last week four departments--State, Defense, Treasury and Commerce--and two agencies--the Foreign Operations Administration and the President's Council of Economic Advisers--were set to looking for solutions. Present diagnosis: Japan is in no danger of imminent economic collapse, but collapse will surely come if the present trend goes on.

Premier Shigeru Yoshida's government, of course, would like to have a large loan to tide it over, but Washington feels that pouring in money will induce another period of Japanese inertia. Washington favors more belt-tightening, more austerity, and possibly devaluation. Japanese businessmen are screaming that the amount of austerity already decreed and enforced by Yoshida is producing deflation and unemployment.

The Red Bubble. Some alarmists in Washington fear that Japan may seek escape in a roaring trade with the Communist bloc. Before the war, Japan sent 43% of its exports to China; last year it sent 4%. So far the bright bubble of trade with Communists has always exploded in the face of him who blows it: the Japanese have already been swindled in several coal and ship deals with Russia and China. Moreover, the Japanese are doing a really thriving trade with Formosa--$123 million last year--which they might lose if they flirted too earnestly with the Reds. And finally, despite openly voiced misgivings about Western defeats in Asia, the Japanese know that the colossus across the Yellow Sea is their enemy, and that they need the colossus across the Pacific.

This file is automatically generated by a robot program, so reader's discretion is required.