Economic Policy and Capitalist Groups (PROBLEMS ON THE ECONOMIC HISTORY AFTER THE WORLD WAR 1)

Abstract

One of the most urgent problems that Japan had to grapple with after the First World War was the high level of prices. Though prices fell considerably during the depression in 1920, they still maintained fairly high level compared with those abroad. And there developed the argument about the economic policy to deal with the price problem. The Seiyu-kai party insisted on the importance of national defence and industrial development, and so proposed to continue the inflationary finance. This, in the depression period, means a policy of relief for the capital, especially the industrial capital. The opposition party, the Kensei-kai, abvocated the necessity of a systematic price policy, including removal of the gold embargo and cut down of governmental expenditure. The policy of the Seiyu-kai can be described logically as follows: an inflationary financial policy is necessary for the recovery from the depression, but it necessarily brings a rise in prices, growth of unfavourable balance and decline in the exchange; nevertheless, the government can avoid economic confusion by means of control of the exchange value, keeping it a little but not too much under the parity by re-sale of foreign balance. According to the Kensei-kai's policy, on the other hand, the way out from the economic difficulties should primarily be found in lowering the prices to the level of those abroad, and for this purpose balanced financial policy and then recovery of the gold standard are essential. While these debates were going on, the Takahashi Cabient fell in 1922 and the non-party Cabinet under premier Tomosaburo Kato followed. New Finance Minister O. Ichiki preferred a policy of balanced budget as a preparation for removal of the gold embargo. This change in policy was in a sense the inevitable result of the economic process, but in another it was a realization of the capitalist's interests. Among the capitalist groups was the industrial capitalist that supported the inflationary policy of the Seiyu-kai, and the financial capitalist that paid great attention to the exchange value of the yen. The adjustment of the opposing interests between them was achieved with the visit of the mission of Japanese business leaders to Ameirca and Europe in 1921, which laid the foundation of the Nippon Keizai Renmei Kai, the powerful alliance of the industrial capitalist and the financial capitalist, established in 1922. The message, issued by the mission after having seen the recovery of the U.S. economy far quicker than expected, emphasized the importance of the deflationary policy, warning against the danger of failure in getting a favourable position in the world economy. Thus it would be obvious that the government policy in 1922 had close connection with the adjustment of the interests of the powerful capitalist groups. Though the changed policy failed to be carried out, it can be estimated as an original or germinant form of Finance Minister Inoue's policy in 1930, and we can recognize that the series of such policy fundamentally tended toward the policy for the industrial and financial capital.