CO129-575-3 Japanese affairs 2-1-1939 - 21-12-1939 — Page 214

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Planning Council is inadequate for the functions which it is called upon to fulfil, and it is now proposed to carry out yet another reorganisation of that body and to include a specialised Mobilisation Department within the framework of the new council. From this it would appear that the necessary plans for the full enforce- ment of the economic provisions of the law have not yet been worked out, and that even though further ordinances may be promulgated in the near future-and according to press and other forecasts their appearance is already overdue some time will elapse before the Government will be in a position to make use of their powers under them.

5. The difference between the military authorities and the Minister of Finance, which was reported in my telegram No. 1336 of the 9th November, has been disposed of by an announcement issued by the Ministry of Finance on the 18th November to the effect that it was not regarded as fitting that companies paying dividends of more than 10 per cent. should further increase those dividends and that suitable measures were to be devised to prevent them from doing so. It is also understood that companies paying less than 10 per cent. will not be per- mitted to raise their dividends beyond that level. On the other hand, powers will not be taken under this article, for the present, to direct the employment of funds held by banks and other financial institutions. On the same day Colonel Sato issued a brief statement to the effect that the military authorities endorsed the new stand taken by the Ministry of Finance on this question.

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6. When it became clear from these announcements that the action con- templated was not to be so drastic as had at first been feared, there was an immediate recovery on the stock market, which had fallen sharply as the result of Colonel Sato's statement of the 9th November. Yet it will be seen that the military authorities have gained their point of principle and that dividends are, in fact, be controlled. There is, moreover, little doubt that general sentiment lies with the military authorities in this matter, for placards have appeared in the streets of Tokyo branding as unpatriotic "those who oppose the Government in the The fighting exercise of full powers under the National Mobilisation Law. services have gained enormous prestige in the country as the result of the sweeping victories won at Hankow and at Canton, and they are momentarily in a stronger position than they have been before to impose their will in matters of domestic administration. The settlement of the article 11 controversy, though relatively unimportant in its immediate effects, represents another defeat for the forces of conservatism and of economic orthodoxy.

I have, &c.

R. L. CRAIGIE.