rRETURN 'To REPORTS DESKI WITHIN RE STR ICTE D Report No. FE-za This report was prepared for use within the Bank. It may not be published nor may it be quoted as representina the Bank"s views. The Bank accents no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE RECENT ECONOMIC SITUATION IN JAP'AN A,nril 13- 19Q61 Department of Operations Far East CURRENCY EQUIVALENTS $1.00 = 360 .*1 $0. 0028 *IV 000. 000 = $2. 777. 78 TABLE OF CONTENTS Page No. Basic Data........ . ... ....... ................. Summary and Conclusions .... .... ........ . ...... i-ii I. Introduction.............................................. 1 II. Recent Economic Developments.............................. 2 Recent Output Trends,......... ................... 2 The National A'ccounts. ..................... 2 Factors for Expansion................................... 3 SavLngs and Monetary Stability....... ............. 4 Exports................ I ........................ 6 Balance of Payments ......7............. 7 The Exchange Position.................... ....... 8 Public Finance....................... ....... ....... 9 III. Prospects.................................................. 10 Short-Run Äims and Prospects........................... 10 Longer-Run Prospects............................... 11 Statistical Appendix Table 1: JAPAN EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEIBER 31, 1960 UTTH MJO REPORTED ADTTTOMS JANITARY 1 1961 TO iARCH 17, 1961 Tnble 2: JAPA- ESTTMATETD CTTRU.TTTAT ERVCE PAVMERNTS RJ EYTERNAT, PUBLIC DEBT OUTSTANDING INCLUDING UTIDISBURSED AS OF DECE.BER 31, 1960 MITH MAJQR RPR~TED A'DDITIONS JANUARY 1, 1961 TO MARCH 17, 1961 Table 3 : JAPANI -.1R'TTH M PTPUATT MTN,T1: 194-1959n Table 4: JAPAN - RECENT PROJECTED TREND OF TOTAL POPULATION AND WCRKING Table 5: JAPAN GRC6S NATIONAL EXPENDITURE Table 6: JA PA, - INDEX-m M' RDUCTIN 1 7,TrF rTRED FT? RTRYMV ANTD FIS H-ERY Table 7:T[T« JAAN - TI1ME,'ES CV, INDUS= TLPRoDUCTI7ONTO, 195-196d,0 Table 8: JAPAN INDEXES OF INDUSTRIAL 1RODUCTION BY TYPE Table 9 n: TA1AM -ATNrATAT 0IN UD-VET (GI-NERAL ACCOUNT ) ýa _e 7 Url: _2 IYI'fJ. JAJjYfl.L UJJf . LL IAIJ. 41.14. \ -l ~ BY FISCAL YEARS M abl -1 0 : A ··A TIAT LA rTr- 7 A T GO nTTV-- -n iE NT L A* D TT 5 \T ' I rNE TI D R OAM , BY FISCAL YEARS Tn U llJAA ..T BAL T T EM V ARTYT RANSAC7fT'ATC , ITMlj PUnE% DTT)T BL IaU_LC jLj * - rkW~ - JIýJU VE~r~r 1r 111&Wa.UII-±iL iL)Q ) h 11 JA~ FY 1952-1960 m t< "1 --A l. ýTr AT, n t -TA T finxfirn ,tr-',Tm fm ni:1- n t _I N inrl -nO IabLe 12:JAPAN 141-iLUrJ, UUVNATIIONj GOIVRE JJNT IDI, FX -L95-L9)7 Table 13 :JAPAN - EXTERNAL FUNDS RAISED BY INDUSTRY, 1952-1960 Table 14 :JAPAN .FACTMS A-FrEACTIIING r FluNL SUPrriL, kiCiLN Yr 195- Table 15 :JAPAN - PRICE INDEXES Table !6 :JAPAN VALUE AND CUiiPOSiTION O r I9U55J' - 960y Table 17:JAPAN - INDEXES OF VOLUME3 AND VALUE OF TRADE AND TERS OF TRADE Table 18:JAPAN - BALANCE OF PAYMENTS 1955-1959 Table 19:JAPAN FOREIGN EXCHAäGE TRANSACTICNS,, 1959-60 Table 20 :JAPAN . GOLD AND FORflEIGN EXCIHANGE RESERVES Table 21:JAPAN,- OFFICIAL LONG RANGE ECONOMIC OBJECTIVES BASIC DATA Area 142,313 sq. miles Population (Estimate, October 1959) 92,970,000 Gross National Product FY 1959 (current prices) 12.522 billion Per Canita Income T300 Industrial Production (1960) (195 = 100) 227 National Government Budget Estimate General Account, (FY 1961) Revenue 1,102 hillirn Expenditure Y2,"58 " nlpf i nit Use of Cash and Bank Credit 90 " Balance of Treasury Cash Transactions (FY 1959) +Y18 Bank Credit (End of 1960) Commercial Blnnkr Loann ndA Dicont R6 I Bank of Japan Loans and Discounts M500 Money Supply (Sept., 1960) 93,681 " Price Indexes, (1960) Urban ConsImer Prices (195 = 100) 12303 Foreign Trade, (1960) Eports, 0.u4J0 Imports, ci,f. USh,492 " Dellici vo -)( .Vureign Eucange Transacti, uurrent LoLoULIunI, \ LAyJuV) Receipts USh,588 Payments U0p4,41 Surplus US$. 111 Official Foreign Exchange Reserves, (End of 1960) USl,824 " Summary and Conclusions In the past two years the economy of Japan has expanded on a scale which is surprisingly large even by Japanese standards. In the fiscal year running from April 1959 to Mqarch 1960 the growth of GNP in real terms reached the record-breaking level of almost 18%. Gross investment rose to 35% of the national output. Industrial production jumped by 30% from the first quarter of 1959 to the first quarter of 1960. And even ariculture registered a gain of 6% in 1959/60 despite the confines of Japan's limited farming area. Ilore recently the pace of expansion has been slower. but still at a high level by international standards'. For the fiscal year ending in M4arch 1961, the further gain in real outnut is exoected to be 10% or more - with advances again suread widely over the economy. Perhaps even more surprising than the size of the expansion is the fnnt, that an unswing of this mnanitud ws nossible without significant ronet- ary or balance of payments difficulties. And this occurred without significant moneary restriction. Peepnt for anite moderate restraints in Inte 1939_ A cominnAin of factrs. cotrbue to hez evepn keel of TJqn-nn I. financial situation during this period. In the first place the expansion started in 1n+, I QIFR in fn-%rn-rn1c nirniT(+.nro TJ.T ~.n+i ±1 v'~ in 1-ncq+:y.- n1 capacity and high inventories of imported materials. In the second place the +c.rc,ry'+",-~ A --- IF,-rv A c, nrA -E' I-,,,1 A,-J_q rr,1OL O -r 1 'CA() 7l,-+ -na-c more important were a rise in savings to a high level even for Japan. and a sharp spJurJ n expI 4j'.±ors .A GG -I d WoL Sj -0 -;-iui U10f r -_-4- +_ tJ ___ +I,--L -. U4--:4- _P UI- national output. This figure reflects not only a. large rise in undistributed cor u±d.U ~ 1 .. n UA a.-LSO 'lIM5 L,:LuL ictd. dt Vl:. y -LC.L-t: PCd U U_L U11%: -"I1Idn disposable income was saved - probably more than 40%, This counteracted the monetary effect of the greater part of bank< credit t.Jepanion.Il As a resfu_Llt' money supply has stayed about in stride with physical output and the rise in prices has beei small. About exports - the volume rose in 19 9 by 20;% aa by nearly another 10% in 1960. This export expansion, together with the improvement in terms of raue, kep hUe current balance of paymen f1or the tUwo years in the black, even though rapid expansion pushed import volume up by about 50%. Current exchange earnings fell slightly behind payments in the first nalf of 1960 but this was more than made up in the second half. There was a current payment surplus of '3" million in 19'9 and about 110 million in 1960. Net receipts of long term capital were small, but in addition to the current surplus there was a large net inflow of short-term capital. As a result official reserves increased .rom $860 million or about 30% of imports in 1958 to $l,825 million or about 40% of the import level in 1ou. About future prospects - official forecasts of growth in output in the coming fiscal year 1961/62 are nearly 10%. This would be about the same or not much less than in the year just closing. Recent signs, however, are of a further tapering of activity and economic policy has lately involved some prodding of the economy in the form of moderately expansionary monetary and - 11 - fiscal measures. It is the official view that the expansion forecast is feasible within a balanced current Dayments nosition. This would require. however, an- other 10% increase in exports to meet import requirements. Such an increase is not an unusual one for Janan. But it may be difficult if the world trade situa- tion continues to be slack. As to the longer run - it seems reasonable to expect relatively high rans of arnrt.h tn cont.inni on the avprnap fn-r qmn tim- Offfi nil qi_hts hvP been set on the target of doubling the national income by 1970. This objective may not be unrealisti, idaing h nat nrformanne and the remonstrated forces and capacities within Japan for economic expansion. Its accomplishment would, 'howevrrequoomi-re an avrageo" increase! in exorts+. of nea-1rl 10q a yean" toe nMet import requirements and keep the import coverage of reserves at about the present QS c - 4 n ----- 4- r.,nr 4c ,c, v-yr 4-- ho n.rrcvfk-c~kA+4..,a + r 11U. CUI L11%-LUC;LOt-, -LIA K,_&PW.LUQ 11LC.Jy H jj UV Uk.. U C"I. *JV ..j s-.a .,. in the event of slower growth in world trade in the 1960's than in the 1950's, the case, the balance of payments situation would undoubtedly impose a somewhat aowen pA.e uJ uwon ujie ecovuumy uan Uat covUcived iU offiial UvojJuecv Still, from past experience in inaccurate crystal gazing about the Japanese economy, one becomes wary vIUuere ULtug one furce cunu kaUau.utOo -I uctpan for rapid economic expansion. Official commitments to these high growth objectives may at times delay correvotve monetary mea-sures when expansion tenus to outrun re6ources. The consequent possibility of exchange losses from time to time should not, however, be a significant qualification to the conclusion that Japan's credit- worthiness is large, in view of the country's moderate debt burden and its record and capacity for restoring financial and balance of payments stability through restrictive monetary action when necessary. THE RECENT ECONOMIC SITUAT ION IN JAPAN I. Introduction The Bank's last economic report on Japan (FE 13a, October 1959) dealt with developments of the economy un to nbout mid-19q9_ qnd disonssPd Japan's economic prospects as they appeared at that time. The main conclu- sinm of' thp rpnort uprP. P_ 'Mnt -rnni i a-rm.T1 nf thes Pconnernxr e-milrl 'hn PYnr+.Pr1 +.n~ continue for some time, albeit in a probable pattern of c'vrl-i t'±l annyt+ * b. ha in ihn colir-se oof c.ronti n,u,ed growrth soe relative reallocation of investment would be needed in favor of +he ublic scor Wnd +ha+ +hris could hea Pil44+i+at byr foreign borrowing for public improvements; c. That Japan is amply creditworthy for additional foreign 'k ___~ a- - -V~~- C..Cwao) W C X V_iiiU vlii u1 Uiz vcjjcU1t0%_ t-'LoulIvil1,y wl urclkil U 11~ post-war course of rapid economic expansion, following a brief period of economic .LI _L7)ueJ- 1± LO Uend 11as cont in.~~ u e d -3Ud yeart - April 1959 - March 1960 real GNP increased by a record breaking 18%, with gross investjMentup to 3UU of Ute natioalUU Uut. Th0isL year- te rate ofL growth is somewhat off the 1959 pace but GNP is still expected to be up by about another 1U or more. The surprisng tng i Uau Unese unusua± advances in the economy were made while maintaining a surplus balance of payments position and without significant internal financiaL instability. This is quite a different story from previous sharp upswings of the economy during the l9c's which culminated in heavy exchange losses in 1953-1954 and again in 1957. It raises some question about, the validity of views in the last report on the inherent tendencyof the economy to expand at a rate in excess of its capacities (or, as the Japanese put it, to become "overheated"). As for other main conclusions of the last report, subsequent developments do not suggest major modification. It appears likely that rates of growth will continue to be high on the average for several years at least. And there is no reason to qualify the favorable conclusions about Japants creditworthiness. The external position is now, if anything, stronger than it was in mid-1959 as a result of a substantial increase in the export level and a further rise in foreign assets. The financing of public investment appears now, however, to be considerably less of a problem than it did two years ago. Government investment requirements are still large. But with the swell in government income associated with the recent expansion of the economy it has been pos- sible to raise the level of investment directly undertaken by the Central Government and government enterprises by nearly 60% in the last three years while at the same time increasing the transfer of funds from the public sector to private investment. - 2 - 3. The purpose of this paper is to review the developments of the economy in 1959 and 1960, with special attention to the factors which con- tributed to and facilitated rapid growth without monetary or balance of pay- ments difficulties, and to consider again Japan's longer run economic pros- pects. II. Recent Economic Developments The ranid. thoueh fluctuatine. nost-war expansion of the Japanese economy has been frequently noted. During the period 1951-1958 real GNP in-- creased at an averqpe annual rate of 7_q1L Growth in industrial nroduction and export volume averaged 12% and 16% respectively, and in import value about 13V Even agricultural ntnut rosp at ann average of ahout, a a var despite the confines of Japan's limited arable land area. And with population increas- ino at. abant v 1 m n " +ahcio.ino -f t c %n-%mhn-vraron+.vr enhatantial additions to per capita income - now around the $300 level, 5. Year-to-year growth in GNP during the 1951-58 period fluctuated bet ee ab u 1 nnlIn; A o n^+rl+A ~. na in +1 - ,-,n, --.v -f~ +}via nnfo. i7ri 1952-53 and in 1956-57 led to large balance of payments deficits - the last 50%. Tight monetary measures were taken, however, to reduce economic activity at a growth rate for the economy of 10. Despite this slow-down, there was L-L U U_L U.O .in± L±I UL. -LC:LL _LLIJVU U11=1I I) U J _Li-.7) VJ& MILL -"A UlL _ A.C.IVVU-± iic"L UJ.L l year the economy began to pick up momentum again - starting with a substantial margin of1 excessUindustialUcaacity, W-LI_t L.' recod ivenUt:o ofL imporV1ted materials and with a reduced wholesale and export price level. It may be noted that the balance of payments troubles o.f 197 were not entirely attriut- able to an excessive rate of expansion in output but were due in part to heavy speculative- purchiases: ofL imported matial UU-tauikJXU.LatUd b)y the u U L;1Lii6. 6, Recent Output Trends. The recent expansion of the economy was pacea by manufacturing output which began to increase at an accelerating rate in -the later months of 1958 and jumped by 30% between the first quarter of 1959 and the first quarter of 1960. The trend thereafter in 1960 was slower with a further increase during the remainder of the year oi about 127, The expansion took place over the whole range of manufactured output although the largest gains were in the capital goods and durable consumer fields which about doubled from late 1958 to late 1960. The rise was slower in construction materials and non-durable consumer goods, the latter industries reaching a peak in early 1960 and leveling off thereafter. There was also substantial expansion in the utility and construction fields, and agricultural output was up by 6% in 1959/60 and will probably show a further rise for 1960/61 as a result of record crops. Mining was the only major sector where the rate of expansion was slow. 7. The National Accounts. These trends in production, together with a 14% increase in service activities, boosted the gross national product in 1959/60 (April - March) over that in 1958/59 by 20.6% in current prices and by 17.7% in constant prices. A breakdown of the national accounts in curre:nt prices in these two fiscal years is as follows: - 3 - Gross National Expenditure, 1958/59 and 1959/60 (billion yen) Percent, 1958/59 1959/60 Increase Consumption 7,379 8,014 8 Private 029 Government 1,081 1,177 Gross Capital Formation 2,806 4,399 57 Private Plant and niinPment 1 6-~T9Y Residential construction 228 276 Government 923 1,105 Surplus on Current Foreign Account 195 110 -44 Total 10,380 12,522 21 Gross Investment/GNP 27% 35% Gross Savings/GNP 29% 36% Private Disposable Income 7,539 8,526 13 Private Consumption 6,298 6,037 9 Private Consumption/Private Disposable income 84% 80% 8. Factors for Expansion. The numerous forces conducive to Japan's rapid economic growth have been discussed in earlier economic reports. Perhpas most basic is the skill, vigor and drive of the Japanese people and their in2enuity and flexibility in finding and capitalizing on foreign and domestic economic opportunities. Natural increase in the labor force at a rate about twice that of total nonulation growth. toeth.r with sub- stantial movement of workers from sectors of underemployment (agriculture and small enterprise) to those of ri.ina Pmn1rment ha ncilitated rqnir industrial expansion without severe labor bottlenecks. And the trend of real wnwas ha.q 1me b hbind 1labor nrnAn1tivityr with rcan a~mnnon h-i h rrfAit rppl~ incentives for investment and expansion. Investment has also been stimu- lnte hv mainr structnl changcs in nrduction and -onumntion rwhich on still in progress. The changing structural pattern is of a three-fold on investment in industrial rationalization to overcome a long accumulated tive shiftin tehooilosoeapnce i s tor havy bee ct ric __an tive shift in the composition of Japanese industry totxiard heavy,, electrical and e- ca J d-s -ic adJLL awady from LUl le ss ca Ud.L4La.L _LU.5110_II Vt:; U'Z. U..L_L'u ul WI L _L manufacturing industries. Finally, and more recently, there has been a rapid eypanslon in thi nt.nnnbile. anplipnce and other consumer. durable fields and in the more expensive synthetic textiles under the stimulus of rising incomes and consequent nn ino nntprns of consumer exnenditure. o All of t7hp . m+.i1nants were oneratinE in full force behind the 1959/60 upswing of the economy. Manufacturing employment increased by 110, but de+spite t1ic rie, reol shortae.s of ihr- were renorted only in textiles and some of the medium and small-scale industries and among commercial and serc ener es nWg ates in mYnufati.nvina rn.q by 99 hut the value of output was up by nearly 30% and corporate profits jumped to an all-time peak, 4n~c! I.,-: 1-e .4-- O/ ltno/ 1ni-Nerra +hp nrtrPuJm- cn~-pnk in 1c)7/q8. LJ,J/O2 L1_Lg,I1 L A.ACLLI L. l ~ "-fJ . _J _. --/ - - - -- - - The emphasis on heavy industry, especially steel, machinery and chemicals, con- A- .&-_ . J . . 1, '-P -4..-,A 4, -4-1- ~ ~ + 4~m~ Tw.hn-n^ ngri e'nl inp-roernets~ ULLIUZU UU Lit: I t:LWZ%,C "~ LIL U.~ - S~ - reportedly continued to be a major stimulant to investment, especially in the ir1on and stee-L, petrocheml-,Os thetic- -ier _lectrical and electronin machinery and automobile industries. And the influence of sharply rising demand for consumer durabes is reflected in Output expansion in '-- - than 100% between 1958 and 1960. The importance of durable consumer goods in total industrial output has increased from avou e n ,, vu i 1 t aound 10 in 1960. A large part of the increase in machinery production in 1959/60 was for the manufacture of electrical appliances (mainly television alu uU 0ets and refrigerators) and motor vehicles. Motor car output increased from about 200,000 units in 1950 to 3uU,Uuu in 1959 and was expected to be over 4O,ulV in 1960, and about h0% of this increase was in passenger cars. 10. Two other factors have facilitated Japants high growth rates. The first is the unusually large proportion of the national income which is saved and this provides a wide margin for expansion of the economy before running; into monetary difficulties. The second is the rapid pace of export increase which not only covers the cost of the large import requirements associated with rapid expansion, but also helps to maintain demand for a rising final output despite the wage lag previously discussed and the large part of dis- posable income which is saved. Both saving and export expansion were especially important in the wide upswing of the last two years. 11. Savings and Monetary Stability. In the 1955-1958 period gross savings averaged about 26% of GNP and net saving was about 25% of national income. In 1959/60 these rates jumped still higher to 36% and probably about 30%, respec- tively. 12. This high saving propensity provided the financial means for the marked expansion of the economy without serious strain on the monetary system. In the first place, corporate dependence on outside financing was not proportion- ate to the rise in corporate investment because of a very large increase in undistributed corporate profits. These were twice as large in 1959/60 as in 1958/59 and 35% more than the previous peak during the boom of 1956/57. In these circumstances, flow of funds data show a smaller dependence of corpora- tions on outside financing in 1959/60 than in 1956/57 even though the level of total corporate investment was much higher. 13. In the second place, the financial surpluses of individuals and uninnrnorated businesses (the so-onlled "household sector") was well above tht 4 tc Q~!/E71,-- -4~ +Ile ,net +V-r_n e, monetary financial assets was equivalent to over 70% of the deficit in the ~ ~Jhl.U~U ~ L'! LUIIjJ u. -L UL UliL. WACLJ UUut L 4Vc _LL 7J 1 . VV.L U11 WIit UU_Lr U.L non-monetary financial investments in the form of savings deposits in the UC/Ia'111 _ )' j- LALL ,UU U _ ±k UU~U 111Uk;11 U. Wit: Ii1UiiVUcU-, ull ou' 01 Ulu -L11 t increase in bank credit to the private sector. Net Financial Balances of Household and Corporate Sectors and renus ±L11 Dank Urtu±u aUu J-In r1o1Uy 'Dupp_-y 1956/57 - 1959/60 (billion yen) 1956/57 1957/58 1958/59 1959/60 Household Sector 1/ Net financiai surplus 1,01 768 716 1,110 Less net investment in monetary assets 477 62 30 292 Net investrent in non-monetary assets 533 706 686 818 Corporate sector - net deficit 1,305 1,008 1,11 Ratio of household non-monetary investment to corporate deficit 41c 70% 117% 73% Net increase in private bank credit 1,472 1,181 1,368 1,927 Net increase in savings deposits in banks 795 947 1,169 1,386 Ratio of increase in savings deposits to private bank credits 5h% 80% 85% 72'Z Percentage increase in money supply L 2/ 16% 20% Percentage increase in GNP 9/; 7% 4; 18o 1/ Includes individuals and unincorporated businesses. 7/ No change. 14. The excess of private bank credit over increased savings deposits was the main source of monetary expansion in 1959/60. The increase in foreign assets was also a factor although of much less significance than bank credit, Fiscal operations were more or less neutral as subsequently discussed. As a result of the large savings offset to bank credit, the increase of 20% in the money supply in 1959/60 was only slightly more than the rise in total output. Consequently pressure on the price level was small. 15. Data for the first half of the 1960/61 fiscal year (April - September 1960) indicate a somewhat less favorable monetary situation than in 1959,160. The rate of financial saving has not kept up with the further increase In corporate requirements for outside financing and the ratio of increase in savings deposits to the expansion of private bank credit has declined. This development was compensated, however, by a larger government cash surplus in April - September 1960 than in the same period of 1959 and the proportionate increase in the money supply was about the same. The trend of prices continued to be only slightly upward throughout 1960. - 6 - 16. Janants large saving propensities. and especially the high marginal propensity in 1959/60 are difficult to explain. The bulk of private saving is. of course. by cornorAtions. unincornorated businesses, and upper salary and professional groups. But the saving habit also appears to be widespread among urban wnrkers and farmers excent in the lowest income categories. And even among the latter marginal saving propensities appear to be high. Among factorn ondncive to high sving rates. offiia4l exPlanations emnhasize the uncertainties characteristic of life in Japan because of the frequency of na+ual disasters, shortags of hnusing and ,iPnrnqed asnirations for better housing conditions, and high interest rates. A high traditional value on saving as an ethical vrirtuep is alson stress,ZaA Thepre isZ p-roblyN anlsoz thp factorn~ pecially with regard to marginal saving propensities, that traditional consump- in consumption toward a more varied and expensive pattern have tended to lag viously discussed, suggests, however, that major changes in consumption patterns es].id9 D JL U 11 L~ ±e1 e UJ. iv±ii L11VLJt U4J I V L4L Jd.1,Ut::1 1) I. ILUt::1 t; rates is also high as a result of heavy investment and the large demand for c ap±a. Ln the period si11±u f) _ d_ I u P1retxiU1aU_±vu ±eIluLugt 1-aLub 01 UlIu C011- mercial banks have ranged on the average between about 8% and 8.5% with- a. siight downward trend. Prime private corporate debenture rates have been fairly steady since 1957 at about 7.9%. Savings deposits in banks pay from arouna 47b to o7 depending on the term. 10. Exports. Although Japan's dependence on imports relative to l\l is substantially less than pre-war as a result of structural changes in industry and increased agricultural output, the fact remains that rapid expansion of the Japanese economy depends on a high and usually more than proportionate in- crease in import volume. Consequently, a condition of rapid expansion is a high rate of export growth to pay for mounting import requirements if balance of payments stability is to be maintained. And in this respect, also, Japan has set an unusual record with export expansion at rates far in excess of other industrial countries and of world trade generally. In the five years 1953-1958 export volume increased by 140%. And in the two years since 1958 the volume jumped by another third. Import volume rose even more in the last two years - by over 50%. But despite this rise, the increase in exports, together with improvements in the terms of trade and in net invisible accounts, was sufficient to keep Japan's current foreign exchange transactions in the black. The current surplus dropped, however, from $460 million in 1958 to 360 million in 1959 and to about $110 million in 1960. 19. Rapid export growth as a key factor in Japan's economic expansion can be attributed to aggressive and flexible organization and promotion of export sales and to a favorable international competitive position among various lines of industrial output. Japan's main competitive strength lies in industries which combine the advantages of low wages with an advanced technology and large scale operation. These include natural and synthetic textiles and clothing, plywood, pottery, toys, ordinary steel, cement, optical goods, ships and rail- way rolling stock, and various kinds of machinery and vehicles. Among the latter are sewing machines, textile machinery, most electronic equipment, light agricultural and construction machinery, trucks and busses, and two and three- wheeled vehicles. Other fields are handicap-ped by exDensive material imDorts, and there is a large segment of industry which has difficulty in foreign - 7 - competition because of techniques which are still backiard or of scales of operation which are below optimum efficiency. This latter segment includes some machine tools and other heavy equipment, automobiles, petrochemicals, and some types of synthetic fibers, electronic equipment and durable consumer goods., A relative improvement in these fields should be expected, however, with further investment in rationalization and expansion fostered by the expand- ing domestic market. 20s The sharp rise in 1959 exports by destination was nearly worldwide. In 1960 the rising trend continued to European, Southeast Asian and Latin American markets but was considerably slower in exports to the U.S. And with this latter slow-down, the rate of increase in total export volume fell far behind that of import volume in 1960 - about 11) and 24% respectively. The difference in the rates of increase in export and import value was. however, much less because of improving terms of trade. 21, Balance of Payments. Japan's foreign payments pattern during most of the 1950ts (until 197) was a. deficit on trade accounts and a surplus on other accounts due mainly to large "special receipts" from foreign military procurement and disbursements for foreign military personnel, The latter more than counter-balanced the former except in 1953 and 1955-56 when imports wEre swollen in the course of shar unsiings of the economv. In 1948 nnd 19"9. however, the trade account (on an f.o.b. basis) shifted to a favorable balance and there were consernently lqr'fe surnlses in the current foreign acounts despite declining special receipts. In summary, the current balance of payments during 1955-1959 was as follows: Jnannts Current Balan e of Pnyents, 195-59 (million dollars) 10Q < 10C QrA Iot 10 IC)CKA loo 1~-~'± (P r - I~ 4S CTC , s YCI o I -1 ,~ L- - _ IrDorts (f.o.b.) 2,061 2,613 3,256 2,501 3,o46 Met invisible accounts - 245 -4 26 - 637 - 314 - 384 Special receipts 505f 1 O , 498 49 404 38A1 cc o anu v anu vipameu Lgra:u mLo aeu yet avaliableou data on foreign exchange accounts indicate the nature of the position. As nuueu impurt votuue rose miuchn faster Ulan e)qport vOu-luel aiwnougi Une aUbe o. import increase was higher in the first half of the year and declined sharply iu tne 6unu Inal"O Ue pace of export growh, though slower tnan ThaT of imports, was also steadier over the year. As a result of this pattern, the UraUe accouI, and Lne CuiriU balance as a Whole, felL into a deficiT in the first half of -the --ear but- swit3hed again to a surplus in the last half. And lor 19u as a whole there was a Surplus, though, as previously noted, much - 8 - smaller than in 1959. A summary of current exchange transactions in 1960 (not entirely comparable with the previous balance of payments figures) is as follows: Current Foreign Exchange Transactions, 1960 (million dollars) First Half Second Half Total Exprts 1_7P0 ?.09q 387L Imports 1 855 1,872 3,727 Net invisibles --199 - 229 -28 Spcil ecips17)j 915 3(9 Total --00_ 211 111 last half of 1960 coincided with some slackening in the rate of growth of the economy and sign ofluthrlel;- T -4-- A- + -;- +_ -1 .AiL .~I 0.1 U V1 U±L UFI W U V V V- u in the second half of 1960 but at only about half the rate of increase of the U UJ±o .1.1U~ .± du t i V inve AI1menu mintaU i n t _L.L1 U O 1.U U1,CAJV) UI.JYUV. U .LJ4ILM ' ±UJ for new equipment leveled off and inventories of imported raw materials were ±t~ULUUU . .1 I -A.-UL l _I X. X± 4.1 yed ___ __dJ Au jo _4 - 1 4~ -l~U 1 leveled off in the second quarter of 1960 and declined from mid-year. 24. This tapering of rates of economic expansion and leveling of imports in lyou was a departure from previous post-war cycical patuerns in Japan. in the boom phases of rapid expansion in 1953 and 1957, levels of activity and the accompanying import demand continued to mount beyond the Limits of balance of payments stability. And in the latter phases of the boom the adverse payments developments were aggravated by a rapid speculative increase in imported mater- ial inventories. Stability was only restored by severe monetary restrictions which reduced activity and imports to supportable levels. 25. This time the boom appears to have tapered off without restrictive action by the monetary authorities and before the current foreign accounts moved much beyond the edge of a balanced position. Just what the factors were which brought about this adjustment before strong monetary brakes became neces- sary is rather difficult to establish. Perhaps the answer lies in the lag in expansion of consumption behind that of output, and the effect this may have had in dampening incentives once the export boom began to lose force. 26. In any case it is evident that the large upsurge in exports, especially in 1959, was an essential condition for an expansion of the size which took place in 1959/60 without balance of payments difficulties. 27. The Exchange Position. Japan's current foreign exchange earnings in 1959 and 1960 were augmented by large inflows of capital. As a result the increase in official reserves over the two year period was about twice the current account surplus, rising from 861 million at the end of 1958 to $1,824 million at the end of 1960. 28. The inflow of long-term capital was nearly balanced by outflows in payment on debt and in foreign credits and investments. But there was a very large inflow of short term capital, which reached "400 million in 1960. 29. Much of this increase in short-term liabilities may be attributed to a succession of r.easures to liberalize exchange, culminating in the establish- ment of non--resident convertibility and the authorization of transferable yen accounts in mid-1960. With these reasures some short-term money was attracted to Japan by the high interest rate Pattern. But the bulk of the inflow of short-term capital has reportedly been in the form of commercial import credits. Regulations governing such credits have been Dro-ressivelv eased since early 1959 by expanding the list of eligible import items and by lengthening the Permissible credit nerinds- Authnritv was also arnnt.d in mid-1960 for foreimn short-term borrowing of operating capital for periods of more than six mcnths but less thrn one vqr- There has probab also b nr ome acnnimution cf foreign short-term balances due on exports to Japan as a result of yen con- vertibility andl the autorzaio of ye nii curency% fo)r stl enf international transactions. 30. With the large increase in foreign assets from current surpluses andl caital i-no 4- +1,. 1-~+ -n- +Ins theleel of of4_" - --rsrvsa the end of 1960 was equivalent to over 40% of 1960 imports (c.i.f.) compared to about 30% in relation to 1 mpor+s a+ +I, --A atteOR ; Tl -4A, - -4 -- -- 4- 10 C) _- -nir - - .11- __ "PowLii, U11 0I0lU _L1 -L/,; 7 u1'- produced a proportionately even larger increase in government revenues. Conse- quenty th 1l e o oermn J..LIUIIUII ilu" increased coniuulu.Ly, I Ieveues and expenditures were larger in fiscal 1960/61 than in 1958/59 by 40' and 33% respeuively. L1u in one ±7Ufo Uuageb Uris a LUUner Icreas 01 o in revenue and 12%0 in expenditure. A summary of the finances of the central governmrent sinLCed0 195 is as follow----: Central Government Finances, Fiscal Years 1958-1961 (in billion yen) 1958 1959 1260 1961 krev.Est.) (Est.) Revenue 1 1 A$ 1 Expenditure I7 -)96- 2,264 2,556 Ordinary 1,332 1,495 1,765 1,953 Loan & investment program 46b 519 60C Deficit 486 486 536 656 Deficit financing Postal savings & annuities 184 252 277 295 Other deposits, insurance, loan & trust accounts 205 226 255 326 Other net transactions & adjustments to cash basis 39 26 -133 - 55 Use of cash & Bank of Japan credit 58 -18 137 90 Total 486 486 536 656 - 10 - 32. Among the largest items in the increase in central government expenditure have been outlays on the social services and public works in the general accounts budget and contributions to capital expansion of public enter- prises under the public loan and investment program. The latter program has also included an increase in transfers to the private sector for private invest- ment, Government Investment Expenditures, 1958-1961 (billion yen) 1958 1959 1960 1961. - (Rev.st, EtT.) Investment in Public Sector 5h8 629 726 863 Transfers to Private Investment 162 230 245 282 Total 710 859 971 1.115 __ The sharp increase in public sector investment reflects an effort by the Government to improve the facilities in transportation, communication and other nublic services. the develonment of which has lag-ed behind the exansion of the private sector. Continued expansion of public investment along these lines is among the stated aims of government economic nolicv which will reouire still further substantial increases in public investment expenditure over the next everql rears, 3h. Thep mnontar Pf n. rf fi.qr-n1 nnPrnt.inn.q rf tl)p~~'nin exld ing foreign exchange accounts) during the past two years have been more or less neutral asrv- ous noted-. In the fsayear-90+b c income of the Government from revenues and other receipts, including the various savings and +ath +vn+ tu A Wnd miicelWn4e nna n+ac ot, vas s4sli+1,r nncye nex o +o+al n,Cd outlays. Revised estimates for fiscal 1960 indicate a small cash deficit, but what larger than that in 1959/60., TTT -ronsn+e 6JJI U-LIL M1.LAILO uIA, w. .1. Jt L _L. _L u-LIi 11. U ~ I jJ.~ d ' of levels of economic activity for the fiscal year 1961/62 beginning in April. 10%. This gain is expected to be compatible with a stable price level and with an approximate balance in foreign paymenu ourrent account, import require- ments are estimated about 12% higher than in 1960/61 but this increase would Ue L mos"y courterva'anceYL U ±11 UL Zn etmaUUj vy a 1-it- V neU-Ly ±U/o LIn eXjJU1rUO. jo iInese projections ior tne coming year appear reasonaole Irom tne standpoint of expansionary forces from within the economy and of inter-relation- ships among the different variales. The real question is one of prospects for exports and whether the estimated export growth required to maintain a current exchange balance at the projected rate of expansion wili be realized. As noted - 11 - earlier, the rate of increase in exports in 1960 slowed down to about 10%, or almost to the rate prcjected for 1961/62. And the expansion rate of new export contracts was reported sagging at year end for reasons attributed to the U.Se recession, slackening demand from Western Europe, adverse terms-of-trade and exchange movements in Southeast Asia, and the leveling off of world trade generally which took place in the latter half of 1960. Another adverse pros- Dect for Japanese exorts in 1961/62 may be from U.S. dollar saving measures involving reductions in U.S. procurement in Japan for ICA and military purposes outside Janan. The maior uncertainty in Iudging Japanese exrort prosnects in 1961/62 is, of course, the level of economic activity during the year in the United States and IJqtPrn Rinron Assuine recovery, and an eP.ansion of wonrld trade generally, the projected 10% increase in exports from Japan does not seem nnrahsonable. Enort volnmp has -risn at leat that mnh and nnaly nonsifder- ably more in every year since 1953, except during the worldwide slump in 1958 when there un a ain of 3K even thnog world trade relined On the other hand, if world trade remains sluggish and Japan's slackening export trend con- tnues itmyb ecessar to set- the ecnoi siht somwha loe for' 1961/62- - --- f- if the current balance of payments is to be kept from falling into the red. This inr n n ^ Ss t ,, - e oI n. n -, r e C {, +h I 1 e-'ibn- ni , m _ri-et+ '-,n d fl - a . or -, a rr, ' , - adopted in late 1960 to give a mild boost to economic activity in response to adopted in late 1960 as an official aim of government policy with the objective spelled out by the Economic Planning Agency in terms of specific targets for 4l.11 - 4 - _ £Uc -I PLIc U 4 U1 -0li Ltk 1 -.I -~d±' 4-1 -ii - - 0- - - -- - --I_P _- - _ activity0 These targets do not, however, reflect a policy of centralized pLanning and direction of the econoriy. Rather, they are presented,as goal5 wic are believed to be reasonable through primary reliance on private enterprise, stereud by appropriate gCvernment policie anu a subtaniUal expaEuon of government investment in overhead facilities - roads and other transport, com- iunications, factory sites, munici-pal services, etc. 380. Achievement of the aims would involve an average annual rate of growth in GNF during the 1960's of about 7%, compared with about 8.5% in the last decade. Specific targets for 1970 and their relation to a base year period (the average for 1956-58) are shown in Appendix Table 21. 39. The targets are indeed ambitious. They do not, however, aim at higher rates of expansion than were achieved in the last decade, and one hesitates to inject a skeptical view, considering the past performance of the Japanese economy and the frequency of past errors of underestimation in asses- sing Japan's capacity for economic expansion. LO. Growth in the labor force through natural increase and movements from sectors of underemployment should be adequate, in combination with the large opportunities for further expansion in labor productivity, to satisfy the labor requirements. The labor supply situation should also continue for several years at least to be conducive to the favorable wage-profit relationship which has, as noted, been an important stimulant to investment. And investment incentives should be further bolstered by the likely continuation of changes in consumption - 12 - toward a more varied pattern involving especially a further substantial exPansion in the relative imnortance of exoenditures on durables and housing. 0-. The mior noint of reservation about the official tarLets durine the 1960's is whether or not Japan will continue to be able to afford growth rntes as high as those nostifted- To do so and to sustain the 121 investment rate relative to GNP within a balanced foreign account implies a continuation of the rate of saving ata levAl nerlv n hich as in 19q4/60l an slichtiv higher than in the preceding years. This appears an uncertain prospect, es- Pcially,x in vtiew o%f +Jithqchaning connsupioTin pattePrns, whaicnh suges aposs.qble decline in saving rates. Perhaps this might be feasible with a relative shift and wages. But this seems hardly likely and a more probable trend would be to4ar a -; I,bo incme towax th _Iae par of' the dead as the growth rate of the labor force begins to taper off and as the underemployed this would tend also to have an adverse effect on investment incentives, 42. There is perhaps further reason for reservations about the balance of payments implicatius of the targes0 A rate of export growth 0f nearly y0% a year is estimated as necessary to cover import requirements and keep the ratio of reserves to imports at about the present figure, 43. 'Whether such export expansion should be considered unrealistically high is difficult to say, considering past performance and further possibilities for extending the range of Japanese products which are competitive in world markets. On the other hand, the relative rate of technological improvement in Japanis competitive position seems likely to be slower in the 160's than in the 1950's just because of the backward state of technology from which Japan started in the last decade and the widespread technological progress that has already been achieved. There is also the uncertainty of trends in world trade as a whole which, if slower in the 1960's than in the 1950's may add to Japan's difficulty in maintaining the target export rates. 44. Such developments should tend in time to bring Japants growth rates more into line with those of other industrial countries. But it is not pos- sible to forecast the extent of such a tendency during the 1960's or to predict with any assurance that it will preclude the realization of the official alm to double the national output by 1970. As noted earlier, one learns from ex- perience to be wary of underestimating the powers and capacities of the Ja:oanese economy for expansion. 45. Whether or not expansion rates are up to the official targets, it is probably safe to assume that they will be relatively high on the average. There is the question, however, of what government policy will be in the event of lag in actual growth behind the expansion objectives to which the Government is committed. With this commitment, there may be a reluctance to apply the monet- ary and fiscal brakes on an excessive pace of activity in time to prevent an upset in the balance of payments and a drain on reserves. But once such an upset happens, it is reasonable in the light of Japan's effective record of monetary management to expect corrective action to be taken. - 13 - 6 Hence, swings in the balance of payments are not likely to be of a magnitude or duration to be of concern from the standpoint of Japan's credit- worthiness. Service on external debt should not exceed 6% of Japants 1960 exchange earnings at the peak next year vhen substantial repayment of pre-wa2 debt falls due. Thereafter it will decline on existing debt (including allow- ance for settlement of post-war aid obligations) to about 3.5% by 1965 and less than 3% by 1970. Considering this and the strong position of Japants exchange reserves, the service of external debt represents a moderate burden. It should be easily manageable even with adverse balance of payments swings as large as in 1957 when the unfavorable effects of an excessive boom were further aggra- vated by the speculative accumulation of import inventories associated with the Suez crisis, Table 1: JAPAN - EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEIBER 31, 1960 WITH MAJOR REPORTED ADDITIONS JANUARY 1, 1961 TO MARCH 17, 1961 (In thousands of U.S. dollar equivalents) Debt outstandinL Maior renorted Item December 31, 1960 additions Ntt of Tnnliilina Jnnirv 1 to undisbursed undisbursed March 17, 1961 TOTAL EXTERNAL PUBLIC DEBT 1,458,519 1,561,807 12,000 Publicly-issued bonds 246,982 /a 246,982 /a - Privately-placed debt 75,387 76,229 - IERD loans 270,754 337,561 12,000 U.S. Government loans 1tjJ.LciUJ T____4 '1-47 -i rL1n U Q Exchange rates: The following exchange rates were used: E 1 = $2,80; /a Includes arrears. B-DU - Economic Staff March 17, 1961 Table 2: JAPAN - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1960 WITH MAJOR REPORTED ADDITIONS JANURARY 1, 1961 - MARCH 17, 1961 /a (in thousands of U.S. dollar equivalents) Debt out- nParmeno duing year standing __ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ Year plus un- Amorti- In- disbursed zation terest Total January 1 Total debt 1961 1,561.807 174.508 38.199 212.707 1962 1399,299 200,557 36,263 236,820 1963 1 198742 155,718 32,233 187051 1960 1,043,024 132,790 27,722 160,512 1965 910,23 101,859 2h ,02 1261 A 1966 808,375 88,867 22,455 111,322 1967 710 8n AA 73 2n 2o0 n8,9 1968 630,775 93,507 17,739 111,246 1969 537,268 83,375 15,18 98, 70 1970 453,893 70,085 13,458 83,943 1972 325,560 54,668 10,054 64,722 1973 270592 5,14 8,5414 63,70U 1974 215,728 46,239 7,106 53,345 Iy,Ou,u I u,-xay- , uy r-,opuor,- 7a Includes service on all debt listed in Table 1 prepared on March 17, 1961. IBRD - Economic Staff March 17, 1961 Table 3: JAPAN - GROWTH OF POPULATION, 1945-9 (thousand persons) Natural Change Net Change due to Total Net Percentage Year Population /a Livebirths Deaths Increase Migration Change Increase 1945 72,200 1,576 1,369 207 3,470 3,600 h.99 1946 75,800 2,623 1,164 1,46o 1,001 2,352 3.10 1947 78,101 2,718 986 1,732 318 1,905 2.44 1948 80,010 2,711 943 1,768 149 1,773 2.22 1949 81,780 2,h47 915 1,532 31 1,419 1.74 1950 83,200 2,229 872 1,356 2 1,343 1.61 1951 84,500 2,058 786 1,273 6 1;265 1.50 1952 85,800 1,921 772 1,149 37 1,172 1.37 1953 87,000 1,785 728 1,057 8 1,0 1.21 1954 88,200 1,761 708 1,053 - 4 1,038 1.18 1955 89,276 1,690 705 985 - 7 977 1.09 1956 90,300 1,596 761 835 - 10 825 0.91 1957 91,100 1,624 699 925 - 7 918 1.01 1958 92,000 1,660 690 970 - 10 960 1.04 1959 92,970 - - -- Za Estimate as of October 1 of the years indicated. Source: Government of Japan, Prime Minister's Office. Table 4: JAPAN - RECENT AND PROJECTED TREND OF TOTAL POPULATION AND WORKING AGE GROUP Year Total Population Working Age Group (1-59) T00 prsons) (000 persons 1950 83,200 47,354 1955 89,275 52,073 1960 93,371 57,529 1965 96,398 64,033 1970 99,579 68,331 1975 102,729 70,205 1980 104,592 70,992 Average Annual Increase (000 nersons) 1951-55 1214 944 1956-60 819 1,091 1-65 605 1,301 1966-70 636 860 1971-75 630 374 1976-80 373 157 Average Annual Increase 1951-55 105 1.9 1956.6o 0.9 2.1 1961-65 0.6 2.3 196070r 0. 7 1.3 1971-75 06 0.5 19768o.4 04 .2 Note: Recent information on official economic forecasts to 1970 indicates that the above projections have been revised upward somewhat with a figure for the 1970 population of 102 million. Details of these more recent projections are not, however, available. Source: Ministry of Finance. Table 5: JAPAN - GROSS NATIONAL EXPENDITURE (In billions of ven) Fiscal Years 1951 195. -956 n 197 195i 715 Total at Current Prices 5,hhh 8203 9,250 10,025 10,380 12,522 Tndex at, 1951 Prices 1nn 135 16 157 16 193 Oonsumnption 3,571 5,951 6,398 6,85 7, 7( ni) Private 3,018 5,085 5,53 5,898 6,298 6,837 GOVer ent 4- nI89 9n ,7 i ,81 1, 17'7 Private 1,252 1,373 2,243 2,365 1,883 3,294 Government 412 738 710 830 923 1,105 Surplus on Current International Account 209 141 - 101 - 54 195 110 Gross Investment: Percent of GNýP 31 26 32 32 27 35 Table 6: JAYAN - INDEXES OF PRODUCTION OF AGRICULTURE. FORESTRY AND FISHERY (1950-52 = 100) 1995 1956 1957 1958 1959 Agriculture 124,5 117,4 122.1 127.3 131.6 Rice 124,5 109.8 115.4 120,7 125.9 Wheat & barlev 1n9J4 10N, 98-, 9P ) 1 9)9 Pulses 118.2 103.3 119 4 119.6 128.6 PotntnPR I119._,4 110 -, 111-j Ib C 11 43 121 -r Vegetables 110.9 109.6 116.4 11409 121.0 Frni i 122.0 1i8g- 181.7 18AA 19), -I Miscellaneous cereals 103.0 92.0 100.5 109.8 99.5 TLives+tock R& liveocnk products 173.3 178.3 189,3 216.9 224., Forestry 110.5 11-5. 120.8 109,4 n.a. Fishery 137.3 137.6 161,1 1633 n.a. JULUj~ iiJ114- UJI-LUU-LUULe ank- L'- --t 4.-- Table 7: JAPAN - INDEXES OF INDUST"TAL PRODUCTION, 95i-6o (1955- 100) Manufacturing Production Year Ferrous Won-ferrous (Av.) Industrial Production Total Metal ietal nachinery Chemicals Textiles 1951 65.5 63.1 70.5 72.0 67.5 55.6 60.3 1955 100.0 100.0 100.0 100.0 1c0.0 100.0 100.0 1956 122.4 123.5 121,8 120.0 15.2 120.8 118.8 1957 144,5 146.4 138.7 134.0 202.1 142.0 131.2 1958 144.8 147.0 130.2 130.9 216.4 147.3 1175 1959 179.9 185.2 171.8 171.2 310.1 168.1- 137.9 1960 227.2 235.5 220.6 221.5 443.6 196.2 162.4 Source: Ministry of International Trade and Industry. Table 8: JAPAN - INDEXES OF INDUSTRIAL PRODUCTION BY TYPE (1955 = 100) Non-Durable Durable Capital Construction Consumer Consumer Producer Year Goods Materials Goods Goods Goods 1951 74 81 57 0h 68 1955 100 100 100 100 100 1956 1hh4) 117 109 143 125 1957 198 132 120 205 139 1958 i96 129 126 266 134 -A959 25 0 3544 Table 9: JAPAN - NATIUNAL GUVENNT BUDUT (GE1EAL AUUUUNT), BY PiSUAL I.RKS (in billions of yen) 1955 1956 1957 19510 1959 1960 1961 (Est.) (Est.) (Est.) Revenue Taxes 796 950 1,050 1,032 1,179 1,488 1,665 Monopoly profits 11 115 122 126 123 136 150 Other 72 72 64 83 130 80 87 yuP 1,137 1,237 1,241 ,43 1 ,704, 1,902 Public works 141 142 165 182 249 307 345 De~fnse 133 41 i14i 146. 153 58 17 Education 119 124 139 148 165 203 229 Socl.. seuritL'y 99 110L 117 130 15 14 2..47 Pensions 90 100 104 111 123 130 132 Ntional debt seric 44. 39 36 67 5 2 41 Other 387 434 483 609 609 702 781 Total 1,013 1,090 1,187 1,333 1,512 1,721 1,953 Excess of Revenue (+) or Expenditure (-) - 31 + 47 + 4:2 - 92 - 80 - 17 - 51 /a The classification of e:nenditure in 1958 is based on budget estimates. Source: Ministry of Finance. Table 10: JAPAN - NATIONAL GOVERNMENT LOAN AND INVESTiENT PROGRAM, BY FISCAL YEARS (In billions of yen) 1955 1956 1957 1958 1959 1960 1961 Japan Development Bank 18 - 38 33 45 h3 47 Export-Import Bank of Japan 21 1.4 2 8 36 36 57 Agriculture, Forestry and Fishery Finance Corporation 18 16 16 20 29 33 >1 Small Business Finance' Corpraion~ 12 16 30 28 28 32 >43 Housing Loan Corporation 1R 20 23 27 33 36 ),0 Electric Power Development Co. 27 29 M, 3> 60 4) ), Japa TJighway PIDIJJc Corporatio -in 1 7 in J apan N,D at Jional RIlways 1-~~ - 12 12 230 27 3 7 ..4 .LelegrLap.hFIi & Telephone Cjor-poration - - 33 3 PICIase 0f Locaj47VClovelluiti IJULUO U7 u5 22 5 J33 £86 Others 26 43 79 00 97 79 9 urand TotUa-L 23L 3o34 37 43L 4u3 66 Source: Ministry of Finance, Table 11: JAPAN - BAIANCE OF TREASURY TRAi'ISACTIONS WITH THE PUBLIO, FY 1952-60 (In billions of yen) (-)= surplus of payments (+) = surplus of receipts Special Accounts, Total General Public Foreign excluding Fiscal Account Corporations Exchange Foreign Year Budget and Others Fund Total Exchange Fund 1952 +193.7 -172.7 - 18.6 + 2.h + 21.0 1953 +l1.5 .-176.h +129.8 + 9.9 - 3 .9 19, + 3.3R -i15 - 7),-1 -19n.2 1955 + 61.3 -168.0 -169.9 -2766 -106.7 196 +2n5.8 -105.7 ÷ 63.3 +163.h +100.1 1957 +166.9 - 20.6 ÷113. +259.7 +1h6.3 198 +125 7 -lR3.2 -193. -2 1. - 57 . 1959~~~~~7 ÷29. r2,. -1-3i332÷1. is ure - 8.7 - 1.6 -. ~ L7.3. - 72.6 - 2. 2nd quarter + 92.1 - 27.3 - 41.1 + 23.7 + 64.8 3rd quarter + 7.L U34. - 9.7 -34. -27. 4th quarter +138.7 +137.1 - 13.2 +262.6 +275.8 1960 lst quarter + 28.0 - 24.1 - 36.0 - 32.1 + 3.9 2nd quarter +173.6 - 49.8 - 80.1 + b.3.6 +123.8 3rd quarter + 56.4 -324.7 - 59.5 -327.8 -268.3 Source: Bank of Japan. Table 12: JAPAN - NATIONAL GOVERJNMENT DEBT, FY 1952-59-/a (In billions of yen) Type of Debt 1952 1953 1954 1955 1956 1957 1958 1959 Bonds Domestic 335.2 4h5.0 440.9 425.8 409.3 405.8 400,3 460.0 Foreign 102.3 98.5 94.6 88.8 84.4 80.7 87.5 82.3 Total 437.5 543.6 535.5 514.7 493.7 486.5 487.8 542.3 Short-term Bills voo bi1..l1ls 1.7.-1 19 .f-1 1O.1 3. 32.8 26.1 289.3 2) 8,2 Foreign Exchange Fun bil 132. 15.4 11 n 0- .0 6. n80r, pr 1 -100 n-1780 2 n .DcI uJL 49~, L~u -L4VJU -L4D OV UU-L .LUU,U -L tu OVe L. mj~~~~17 11 Z ,, n~ I K~. 2 1 -,' r ý, c r',?O 0 TotIa.L 27. '40,1 334j1 455. -0 409,9 363. -L 67U(3 ý)IU - Other Borrowing 110.1 674 63.1 87.4 96.6 120.7 121.1 509 Grand Total 826.7 851.1 932.7 1057.1 1000.2 970.3 1076.2 1171.- /a Amount outstanding end of fiscal year. Source: Bank of Japan. Table 13: JAPAN EXTERNAL FUNDS RAISED BY INDUSTRY, 1952-60 (Percentage by source) Sto'cks Other Private Government and Corporate Private Financial Financial Year Shares Debentures Banks Institutions Institutions Total 1952 12 4 57 21 6 100 1953 16 4 88 21 11 100 1954 23 3 35 32 8 100 1955 14 4 37 32 13 100 1956 13 4 58 19 7 100 1957 16 3 53 20 8 100 1958 14 4 47 26 10 100 1959 11 7 45 28 9 100 1960 (Jan.- 7 5 44 37 6 100 repua Source: Bank of Japan. Table 14: JAPAN - FACTORS AFFECTING THE MONEY SUPPLY, CALENDAR YEARS 1956-59 (In billions of yen) 1956 1957 1958 1959 Balance of Treasury Transactions with the public /a - 61 - 101 + 50 + 61 Balance of Foreign Exchange Accounts /b + 48 - 231 + 201 + 173 Credit of Financial Insitutions c +1,172 +1,371 +1,221 +1,679 Savings and time Deposits /d - 591 - 804 - 979 -1,162 Other Factors - 144 - 128 - 170 - 254 Total + 424 + 106 + 321 + 697 Money Supply, End of Year 2,573 2,679 3,000 3,497 Note: Plus items indicate factors for increase in the money supply and minus items indicate factors for decrease. Za Excluding foreign exchange transactions. Plus items indicate a Treasury deficit. and minus items indicate a Treasury surplus. /b A plus entry indicates net purchases of the Foreign Exchange Fund from the public (rising foreign exchange reserves), and a minus item indicates net sales of foreign exchange (declining foreign exchange reserves). /c A plus item indicates an increase in credit. Interbank transactions have been netted out. /d A minus item indicates a rise in savings and time deposits. Source: Bank of Japan. Table 15: JAPAN - PRICE INDEXES Wholesale Consumer Prices Prices (Tokyo) Year (1952 = 100) (1955 = 100) 1952 100.0 89.5 1953 100.h 96.2 1954 99.7 101.5 1955 97.9 100.0 1956 102.2 101.0 1957 105.3 103.9 1958 98.4 104.9 1959 99ý4 1063 1960 101.3 110.3 Source: Bank of Japan and Prime Ministeris office. Table 16: JAPAN - VALUE AND COMPSITION OF TRADE, 1955-60 Total Composition (u.s. mil.) (Percent) Crude Fabricated Finished Food Materials Materials Products Exports (f.o.b.) 1955 2,011 7 3 31 59 i956 2,501 7 4 21 68 1957 2,858 6 3 19 71 i958 2,877 8 3 20 6 1959 3,456 7 3 17 72 Inpcrts 195 ,L471 29 '74211 1956 3,230 20 59 11 11 L7) 4,28-U4 L6) 1958 3,033 20 54 9 18 1 96 ,'r) n- r- - 1960 4,492 - Table 17: JAPAN - INDEXES OF VOLUME AN4D VALUE OF TRADE AND TERMS OF TRADE (1953 = 100) Unit Export Unit Import Terms of Export Volume Value Import Volmie Value Trade 1954 133 96 10h 96 100 1955 174 91 109 94 97 1956 208 96 138 97 97 1957 232 97 172 103 94 1958 2L0 9L 1h2 89 106 1959 285 95 179 84 113 1960-/a 316 98 222 83 118 La Eleven Months, Table 18: JAPAN - BALANCE OF PAYMENTS 1955-59 (Millions of U.S. dollars) 1955 1956 1957 1958 1959 Goods and Services Merchandise Exports (f.o.b.) 2,006 2,482 2,854 2,871 3,413 Imports (f.o.b.) 2.061 2.613 3.256 2.501 3.006 Balance -55 -131 -h02 370 367 Transportation and Insurance -157 -316 -518 -176 -207 Investment Income -41 -39 -49 -40 -Q5 Snecial Govt. Receipts 05 h98 h49 404 381 Other -47 -71 -70 -98 -132 Total Goods and Services 205 -59 -590 460 364 Capital and Miscellaneous Private Donations 31 33 35 39 46 Private Capital 88 1 63 37 -39 Reparations -24 -20 -76 -64 -70 U.S. Grants and Loans 60 49 12 -2 -2 IBRD Loan Disbursements 23 8 24 72 65 Other Official -13 -20 -21 -22 8 Monetary Movements -269 -5 549 -592 -ho Errors and Cmissions -101 13 4 72 32 Total Capital and Miscellaneous -205 +59 +590 -460 -364 Table 19: JAPAN FOREIGN EXCHANGE TRANSACTIONS 1959-60 (Millions of U.S. dollars) 1959 1960 Receipts Payments Balance Receipts Payments Balance Merchandise 3,280 3,009 +171 3,874 3,727 +147 Special Govt. Receipt 353 +353 391 +391 Other Invisibles 283 566 -283 322 750 -h28 Total Current 3.915 3.575 339 h.588 L.76 111 Ijonig iTermwial 44 -4 Shr Tr Capital +40 Note: These figures differ from the official balance of payments primarily as a result of differences in classification. Data on capital transactions in 1959 are not available. The cepital figures exclude changes in foreign exchange reserves. Table 20: JAPAN - GOLD AND FOREIGN EXCHANGE RESERVES ja (In millions of U.S. dollars) End of Period 1952 979 1943 823 194h) 738 1 94 769 l9CA 9)1: /a7Includes gold and foreign exchange holdings of the Govern- ment ana Bank of Oapan only* EXcLUae5 golU and foreign exchange holdings of commercial banks and outstanding uaLances utul u.LLUa-_ paymei:nwU agr-iIIeemen1U0 Source: 5inistry of rinance. Table 21: JAPAN - OFFICIAL LONG-RANGE ECONOMIC OBJECTIVES Base Year Target Year Year Index 1956-58 Av. 1970 (Base Yr. -loo) Population (million) 91.1 102.2 112 Population over 15 Yrs, of Age (mil) 62.2 79.0 127 Gross Natl. Prod. (' mil. at 1958 prices) 9.7h 26,000 267 Natl. Income Par Canita (dollars) 2.h 580 238 Gross Canital Formation (r mil. 1958 prices) 2,947 8,283 281 Mining & Mfg. Production Index 100 432 432 Agriculture, Forest & Fishing Prod. Index 100 144 144 Export (8 million) 2,701 9,320 345 Import (5 million) 3,126 9,891 316