Crisis in Japan

Over a Tokyo luncheon of pink macaroni and deviled quail's eggs, a group of top Japanese industrialists last week ticked off their country's economic woes to newsmen. The list was long. Since the end of the Korean war, U.S. Army special procurement orders for supplies have dropped 70% from the $32 million-a-month average in the first half of 1953. Japan's industry is burdened by crushing bank loans; labor and raw materials are skyhigh. With fewer dollars than before, Japan must still import a minimum of $400 million worth of basic foodstuffs each year, and her exports are falling behind imports by $240 million a year. The result is that Japan's economy seems on the road to collapse. In 14 months, her foreign-exchange reserves have sunk 18%, from $1.1 billion to $900 million.

Japan's businessmen are partly to blame for this state of affairs. Instead of using Korean war profits to retool their plants, pack new muscle on Japan's war-torn industry so it could compete better in the free world, they squandered much of the money on modern office buildings, long, black limousines, English tweeds and expensive parties. But the real crisis will not come, say some observers, until Japan's reserves drop to $600 million. Thoughtful businessmen, who long ago warned that the end of the Korean war would hit the economy hard (TIME, April 20, 1953), are determined not to let the problem get that far. They are looking for new export markets to bolster Japan's economy.

New Pact. The U.S. has agreed to help by funneling as much as $100 million for defense materials into Japanese industry this year. Japan can also count on about $240 million in special Army procurement orders over the next three years, another $350 million a year to be spent by U.S. security forces. But the Japanese look on U.S. aid as only a short-term proposition. The long-range solution, they say, lies in heavy trade with Asia, and they are looking longingly at Red China.

So far, exports to China, which amounted to $255 million a year before World War II, are still negligible. Though they climbed 750% in 1953. they totaled only $4,500.000 (mostly medicines and chemicals), a mere 2% of the total known free world exports to China (mainly from Hong Kong, West Germany and France).

New Trade? The Japanese should know that Communist trade rarely works out as advertised, and usually contains more propaganda than produce. Last year's barter deal with China for $170 million in raw materials such as iron ore and lumber in return for finished products from Japan has yet to produce its first delivery. Nevertheless, Japan's economy is so shaky that businessmen are clamoring for more business with China despite U.S. pressures. They think the fact that trade would strengthen China in the cold war is not as important as the fact that Sino-Japanese trade would also strengthen Japan. Said Kumaichi Yamamoto, a conservative ex-diplomat and now head of the Japan-Red China Trade Promotion Society: "We are moving inevitably towards increased trade with China. This cannot be prevented by the Americans with stopgap money grants or any other kind of economic aid. The U.S. should realize that she stands to gain more by supporting trade instead of thwarting it."

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