Navy - Estimates of Potential Military Strength - Documents G. Naval Attache Tokyo - Vol. III, February 13, 1940 - September 5, 1941

Documents G Toyko Vol. III ESTIMATE of Potential Military Strength Documents G Naval Attaché TO KYO DECLASSIFIED E.O. 11652, Sec. 3(E) and 5(D) or (E) OSD letter, May 3, 1972 By RT, NARS Date MAY 211973 Volume 3 Documents Numbers 55 to 98 (13 Feb. 1940 - 5 Sept. 1941) 56 N.N.I.M ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT ATTACHE'S REPORT 11402-Q c-10-n Prevent - spin coriginal and atx I this somier . - - of a Balled - MO.N.I. and - of the - for I I I 2 1 I I I 1 I I 2 al 1 I I 6. 2 M . I 1 1 From NA/Tokyo Date Feb. 13 1940 Serial No. 16 File No. 400-409 - - proper emplor- I I 1 - d. Indian) Source of information ostly official Subject Japan Economic - Manufactures (Nation reparted ea) Clader - - per Inter alboat) Reference Bacar min, indecting, and distribution of reparte by o. M. 1. will be - appellied If a brief - of the - la - in the - Mention indiag peneral, or polities - - the - of - General intelligence Summary - Electric Power Shortage Japan is suffering from an acute power shortage caused by a shortage of coal and a lack of rainfall. Power reduction except to essential military industries averages 30% and there is no immediate prospect of improvement. Coal is being imported from Canada and india and imports of Chinese coal are being in- creased. These measures will help but the situation cannot be expected to change much until the rainy season starts in May or June. - - I - I - - - I - A-B-C-D-E f : - I E C.M.O. I College KLR 1 s LAR CAR s S.&.A. M.A.S. 1 U.S. M.C. N.O. NC I Com. Chc Can 8 & E Operations 23-M - Return to Des. U.S. E. M. Par. - Far, - ALL Ab Can Die. W.P. J - 7 Γ Use forma for all copies, Das only forms M supplied by O.N.I. Make all statches, - sellere in - with this form visas practical. Robert extra. copies of slippings, aurbone of skatobes, ass., where protional. If practicable, a beatt sketches is mishis for blosprinting of photostating. 0.0. - PRINTING ama ! Report No. 16 Japan 400 - Economic February 13, 1940 409 - Manufactures General Intelligence Summary - Electric Power Shortage Japan is today faced with a multitude of problems of assorted sizes, but one, that brings home to the populace and in- dustry some of the far-reaching effects of the struggle in China and its drain on the economic structure of Japan, is the dire shortage of power throughout the length and breadth of the nation. To obGain foreign exchange, without which Japan may not replenish her war stocks, exports must be pushed and subsidized, even to the point where the lack of certain necessary commodities within the nation remains a source of perturbation and real annoy- ance. The relation between power and exports is obvious. With a cut in power consumption occurs a corresponding reduction in volume and value of export goods. And, at this writing the percentage reduction of power to all industries, except those vitally necessary to prose- oute the war, is running in the neighborhood of 30 percent. The present power shortage is not a phenomenon nor an entirely unforseen possibility. In the summer of 1939 there were definite indications of a serious coal shortage for the coming win- ter. The authorities concerned were well aware of this and a great deal of meaningless wordage from them plastered the newspapers, though no concrete measures were instituted to relieve the famine. Besides the lack of coal for generating and power purposes, there was an extremely light rainfall over the entire country and many large cities were forced to ration water for daily living. This water shortage forced hydro-electric plants to first curtail, then suspend operations entirely. One by one, particularly on the small tributaries of the larger rivers and lakes, the small power plants fell idle, and transmission and distribution facilities from other producing plants were unavoidably overloaded to prevent a complete lack of power in certain areas. Alarmed by protests from consumers, the Government sought desperately to alleviate the power famine. Neon signs and other advertising lights were forbidden, an appeal was made to the public to diminish consumption and, when that failed of major results, the public was constrained to accept a thirty percent cut in power allot- ment to homes. However, the worst was yet to come. Electric trains were heatless, then the service itself was cut by half, elevators and escalators either stopped completely or operated only during rush hours, electric heaters were forbidden, and in certain cities pover was completely off for periods ranging from ten to fifteen hours each day. Factory districts, at first eliminated from the restric- tions, received notification that each third day would be an enforced holiday, with no power available. Even though "holiday wages" were paid workers during enforced idleness, the rising costs of labor and idle machinery brought forth anguished. howls of protest. Attempting to make up for lost time, the industrialists worked overtime and used more power than had been planned so that the net effect of the power holidays was no decrease in consumption. The next step was to declare every other day or two days out of three a rest period. Crowning the succession of misfortunes, terrific blizzards and offshore rales disrupted transmission lines, upset coal trans- portation schedules and added more woes to the everlengthening bare subsistence levels.The last, and least desired, remedy now appeared inevitable. Articles 3 and 4 of the Electric Power Adjustment Ordi- nance have been invoked for compulsory limitation of the power con- sumption and supply. Public clamor, and the failure of mere volun- tary limitation left to administrative discretion to cope with the Report No. 16-40 Report No. 16-40 - 2 - difficult situation, forced the Cabinet to draft plans for invoking the Ordinance. The articles referred to read as follows: Article 3. The Communication Minister may limit or prohibit the consumption of electric power, or order measures necessary for limiting or prohibiting the said consumption by designating the area, period and other particulars concerned in the said limita- tion or prohibition. Suppliers of electric power shall take proper measures in regard to the supply of electric power when the foregoing limi- tation or prohibition is ordered or when the foregoing order for necessary measures are issued, so that the said measures may be enforced smoothly. Article 4. The Communication Minister is empowered to order suppliers of electric power to supply or receive electric power and limit or prohibit the said supply. The Communication Minister may order suppliers of electric power to take proper measures necessary for enforcing the limita- tion or prohibition stipulated in the foregoing peragraph. Thus shifting the burden on to the shoulders of the Com- munications Minister does not in any manner relieve the power de- ficiency, nor Goes it insure that strict measures required for pro- per distribution to consumers are under way. After consultations concerning the matter, the Communica- tions Minister arrived at the conclusion that such proposed measures as & Coal Requisitioning Ordinance or compulsory buying of coal, ough appealing to amateur troubleshooters, would be quite useless in practice (through lack of cooperation). The cooperation of the Mitsui and the Mitsubishi interests was sought to secure the necessary 160,000 tons of coal required for power plent operation during Febru- ary (from Canada and India). These acts are only stopgap measures and do not eliminate nor mitigate the fundamental problems. The essential, basic factor concerning the lack of coal for power gener- ating purposes is the lack of adequate transportation facilities. This is caused by & desire on the part of shipowners to reap frest profits in the booming trade between Chine-Manchoukuo and Japan by not diverting ships to the coal carrying routes (low freight rates), and by the lack of rolling stock and coordination in the railway setup in Japan proper. Among the troubles encountered by industrialists are the following: 1. Because of the derangement of production plans in the export industries, claims in overseas transactions are likely to be favorably received by foreign customers, for failure to fulfill orders. 2. In industries such as spinning and weaving mills em- ploying girl operatives, these operatives are granted leaves during enforced holidays. Holiday allowances are not tempting and labor troubles result from failure to return to work, the lack of information as to when power will be available and for other, lesser reasons. 3. Where the shift system is employed, the announcement of the suspension of operations on the occasion of the arrival of & new shift tends to undermine discipline and will eventually disable the management of the plants. Power Reduction in the Kwansai: Last summer the daily power supply for the Kobe-Osaka area amounted to 25,000,000 kwh. On the 1st of February, 1940, the supply amounted to 14,200,000 kwh, & decline of 10,800,000 kwh. An addition- al restriction effective on 2 February was 8. further cut of 1,000,000 kwh. Even the supply to electric furnaces was partially suspended. Electrolytic plants, which may be subject to explosions in case of power suspension, will also be affected after due notice to close down Report No. 16-40 Report No. 16-40 - 3 - has b.en given. A general power supply suspension emounting to be- tween 70 and 85 percent will also affect spinning mills, ceramics plants, weaving shops, fertilizer plants, beer breweries, confec- tionery and foodstuffs factories. Electric cars will decrease in number, further congesting traffic, and the power supply to small consumers will be BO drastically out as to enforce complete idloness. Conditions of leading industries since the power supply restrictions went into effect on 14 January, 1940, are: Spinring: Power out 45-53%, with an estimated (conservative) 30% reduction in output. As the spinning industry is one of the largest consumers of power, spinning mills have been forced to close one day in three, end, from 2 February, every other day. Chemical Industries: This is one of the least affected industries, as the dangers of explosions due to suspension of the power supply has made the authorities cautious. Electric furnaces are being shut down in the large plants. Smelting: Iron mills received a cut of 30-40%. Blast furnaces must be kept in operation but the electric furnaces (open hearth)are suspending operations. The largest producer of Aluminum in Japan is ceasing activities as his blast furnaces empty. Machinery: Scarcity and government control over materials had al- ready forced this industry to accept a 20% cut in production, and the application of continued power restrictions to the smaller companies will seriously affect the small and medium sized pro- ducers (the great majority). Other industries: Glass plants and medicine factories have already accepted E 30% reduction in power. Glass production was almost halved and leading medicine plants have suspended operations. When the 2 February restrictions take effect, the 60-70% reduction will force many industries to close completely during the period of power limitation. Report No. 16-40 W.N.LM 21. ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT ATTACHE'S REPORT 11402-Q Forward apples cortained and als enror this sumber . - - of to Mated personal is 0. M. 1. and C-10-2 - of the I I I I I I / = In I I 2 al di 1 1 I I I 2 . I I From NA/Tokyo Date Feb. 18 1940 Serial No. 17 File No. 401-10 (Ompanymen - - I I 1 Bource of information Mr. D. W. Smith, Acting CommeTer Attache, - Tokyor Subject Japan Economic - Industry in general - 1 Other Clader - - M. - 1 General Reference as - Mention Inding prographies, personal, of politions - and - - of the Bacar. Indecing, and distributies of reports by o. N.L. vill be - appelited If . bird - of the - to - to General Intelligence Summary - Economic ANNUAL ECONOMIC REVIEW OF JAPAN, 1939 This report was prepared by Mr. D. W. dmith, Acting Commercial Attache to the Embassy in Tokyo. 18 should be noted that Mr. Smith concludes that: a. No improvement can be expected in Japan's general economic position until the hostilities in China are terminated; b. Shortages of daily necessities will become more acutein 1940; 0. The financial outlook is unfavorable and inflation a.coom- panied by increased commodity prices, production costs and living costs can be expected; d. Exports will be maintained at a high level by the policy of making heavy shipments to foreign currency countries; e. Imports from the United States are expected to remain at the high 1939 level, although imports from other foreign currency countries will probably decline; f. Government control of all phases of business, industry and trade will be extended. MAR 1940 I april - - - - B. Check - of - I I - 1 1 - 1 I 1 - I - - - I I - I ABCDEC - ANAMMAL Miney 1 I C.M.O. GasT We I Cologo RIA Mr. 1 Lak CAR I LAL MAR 5 U.S. M.C. N.O. Took сьс Can. Cap. chc Com Can & E Openition 7 U.S. Bei. Per. 7 F E and Air Can Dia. W.P. I 3 Return is an - I / 48 of slippings, terboas of statches, Ms., when protibil, If about la - styles for or photosticing. Das Forms for all expire, Um only brea M empilied by o. N. Make all stratches, M. - in - with this hrs yours practical ertra copies - PRINTION email Report No. 17 400 - Economic Japan 401 - Industry in general February 14, 1940 100 - General General Intelligence Summary - Economic ANNUAL ECONOMIC REVIEW OF JAPAN, 1939. General Economic Developments: Preoccupation with the efforts to settle the China inci- dent dominated Japan's economy during 1939, and overshadowed all other developments including the notice of the abrogation of the United States-Japan Treaty of Commerce and Navigation, and the out- break of the hostilities in Europe. While most economic statistics indicate unparallelled business and industrial activity and a de- cided improvement in the agricultural situation, there were signs that the economic structure of the nation was weakening under the continual strain of concentrating its economic resources towards coping with the situation in China. The most obvious of these signs were: a sharp increase in note circulation and a definite trend towards inflation; a sig- nificant decline in the absorption rate of national bonds during the closing months of the year; an increase of 32% in the national debt and the necessity for increasing the tax burden of all classes; mounting commodity shortages due to the depletion of the reserve stocks that had been accumulated prior to the outbreak of the China incident and the concentration on the output of military and allied equipment; a decline in labor and industrial efficiency; and general discontent over the ireffectual price control policies of the Govern- ment. Perhaps the most discoursging development of the year was the lack of actual progress made towards a solution of the China problem despite the territorial gains of the military forces. Factory employment and industrial output reached a new high level but nevertheless the labor supply was inadequate and the volume gain in industrial production was limited primarily to un- productive goods by the munitions industries. Farm income reached the highest level since the 1914-18 war boom period, but the rise in farm prices was one of the prime factors in the upward trend of living costs in urban centers. Financial statistics reflected a high degree of internal prosperity brought about by the inflationary trend which has followed the heavy excess Government payments and rising commodity costs. The value of the export trade and the favorable merchandise trade balance were the highest ever recorded, the result of heavy shipments of both producers and consumers goods to the yen- bloc countries. There was, however, some improvement in the trade with foreign currency countries and a reduction of the visible un- favorable trade balance with these countries. There was a 32% gain in the national debt and further indications that increased bond issues would be required to finance the 1940-41 budget. Commercial relations with other countrees took a decided turn for the worse during 1939, all other developments in this field being minimized by the notice of the United States of its intention to abrogate the Treaty of Commerce and Navigation of 1911. There was general regret that the step had been taken and uneasiness over the fear of an eventual embargo on such Urgently required materials as oil, scrap iron and machinery. Maturer deliberations and press comments from the United States intensified the apprehension of the business community regarding the prospects of a treatyless period as the year closed. Rolations with Germany, which had given promise of becoming exceedingly fevorable after the conclusion of a trade pact with that country, took a decided turn for the worse following the announcement of the German-Soviet non-aggression pact. Japan's com- mercial relations with the Soviet Union remained strained during the greater part of the year, elthough towards the close of 1939, it appeared highly probable that trade negotiations would be opened be- tween the two countries early in 1940. Inability to reach en Report No. 17-40 Report No. 17-40 - 2 - agreement with Great Britain over certain matters in connection with the administration of North China led to strained commercial relations with that country during the last half of 1939. The outbreak of the war in Europe came as a severe shock to all classes of the Japanese people, this development greatly aug- menting the numerous and perplexing problems facing the nation. The effect of the war was considerably lessened by the previous organi- zation of the nation's economy on a wartime basis but the Government took immediate steps to further cushion the impact of European war developments. These included revisions in the Materials mobilization and productive capacity expansion plans, trade progress, and financial mobilization with dual aims of strengthening the economic structure and establishing an economic system which would insure self-sufficien- cy in the yen-bloc. Furthermore, measures were introduced to suppress speculation, regulate commodity prices, assure the continuation of low money rates for the smooth absorption of national bonds, provide nec- essary war risk insurance and supervise shipping. There was a specu- lative wave of buying of shares in export enterprises in anticipation of a war boom, but it was subsequently realized that Japan was not in a position to take full advantage of the opportunities offered by war in Europe. At the close of the year it was obvious that the nation was unswerved in its determination to carry on the China incident to a successful conclusion, but public leaders and economic observers were more outspoken regarding the indefinite period and the further sacrifices which would be required to achieve this objective. There was, however, general discontent towards the upward trend of living costs and of the ineffectual efforts of the Government to control commodity prices. The dissatisfaction on the part of the public against the Government's price policies and its inability to cope with commodity shortages were primarily responsible for the downfall of the Abe Cabinet shortly after the close of the year. While the efforts to regiment the economic resources of the Empire covered all phases of industrial, commercial and business activity, particular attention was directed towards the execution of an ambitious industrial expansion program for the yen-bloc countries, and a domestic materials mobilization plan. Due to the commodity and labor shortages which prevailed throughout the year and a serious power shortage during the closing months of 1939, it is apparent that the scheduled expansion of industrial productivity was not accomplish- ed. The materials mobilization plan likewise appeared to have fallen short of its objectives and both plans are reported to be due for drastic revision during 1940. Throughout the year there was a further trend towards totalitarianism and evidence of a desire towards the planned economy measures of certain European nations. This was no new development, 38 there were no major changes in the country's basic economic poli- cies, but rather a more intensive application of a policy of greater official control over the economic activities of the nation. Economic Policies, Extension of Official Control and Trend of Legis- lation: Japan's basic economic policies during 1939 remained un- altered from the preceding year in spite of two changes of cabinet. Practically all of the laws and regulations introduced and made effec- tive during the year under review were aimed at marshalling the eco- nomic resources of the empire to the fullest extent for carrying on hostilities in China. Steps taken to achieve this objective were similar to those invoked in 1938 but the scope of governmental regula- tion of the nation's economy was expanded and control still more in- tensified. Prolongation of the China hostilities and the outbreak of the European war necessitated the making of radical changes in Japan's program for industrial expansion and were instrumental in forcing the Report No. 17-40 Report No. 17-40 - 3 - Government to adopt more rigid official control of commodity prices. The paternalistic attitude toward the development of amall-scale establishments was altered, regardless of their importance to the general productivity expansion program, the Government favoring the consolidation of capital investment and equipment in large-scale enterprises. The necessity for more intensive regulation of commodi- ty prices and charges for services prompted the enactment of a series of price control regulations which froze quotations at the levels prevailing on September 18, 1939. In addition, regulations prevented further increases in freight charges, storage charges, in- surance premiums, processing charges, wages and salaries. House and ground rents were also fixed, at the levels prevailing on August 4, 1938. The Central Commodity Price Control Commission was active throughout the year in fixing standard maximum prices for an ever expanding range of articles. Efforts to combat commodity shortages and illegal trans- actions in commodities were made through the expension of the dis- tribution control system, there being a pronounced trend away from autonomous control by trade organizations in favor of official re- gulation. Many new commodities were added to the list of items sub- ject to state control and previously instituted measures were revised and strengthened to provide for more intensive regulation. Farticu- lar attention was given to ensuring an adequate supply of raw materi- als for the export industries and for the rural communities. The was reflected in the imposition of many new restrictions on the use desire to utilize basic commodities to the best possible advantage of the materials required for military purposes. Restrictions were also imposed on the installation of new equipment for the non-urgent industries, and later on the installation and expansion of the mechanical facilities of small-scale undertakings. Various measures aimed at mobilizing the labor forces of registration of vocational ability, the restriction of employment, the nation were introduced during the year, including the compulsory of technidans and skilled workers. Most of these measures were in- the restriction of working hours, control of wages, and the training Act. troduced under the authority of the National Governal Mobilization The Government extended its active participation in in- dustrial and commercial enterprises through the establishment of new semi-official monopolistic concerns including the Japan Power Generating and Transmission Company, and the Japan Aeronautical Transportation Company. Government aid to privileged enterprises was extended through the Light Metal Manufacturing Industry Law and the Shipbuilding Industry Law. Important financial legislation introduced during 1939 included an upward revision of the China Incident Special Tax Law, an upward revision of the Temporary Excess Profit Tax Law, revision of the Temporary Funds Adjustment Law providing for more intensive Government supervision over loans, an expansion of the legal limit of fiduciary note issues of the Bank of Japan, the invocation of Article 11 of the National General Mobilization Law providing for the restriction of corporate dividends, and the granting of increased subsidies for gold production. Towards the close of the year, the Government invoked Articles 10 and 13 of the National General Mobilization Law authoriz- ing the expropriation of certain commodities and factories and work- shops engaged in the production of such commodities. Industrial Developments and Production: Due to the attention centered on the production of muni- tions and allied equipment, Japanese industrial activity reached a. record high during 1939. All available indices of industrial out- put indicate that the net volume gain in industrial production was Report No. 17-40 Report No. 17-40 - 4 - about 5% to 0% over the previous year and from 10% to 12% over 1937. When it is considered that thousands of small firms have been estab- lished during the past two years to produce military equipment, that more than Yen 4,700 million has been invested in expanding the pro- ductive capacity of the nation since the outbreak of the China inci- dent, and that factory employment reached an all-time record during he past year, Japan's record of industrial output during 1939 is not impressive. Factors responsible for the comparatively small volume gain registered in industrial production include the following; a shortage of coal and electric power, primarily as a result of the expanding of the nation's productive capacity to a greater extent than the output of the electric power and coal industries, a severe drought which curtailed the power output of hydro-electric stations; a definite shortage of labor, particularly skilled labor, and a de- cline in labor efficiency due to the increasing physical exhaustion of workers and the employment of unskilled labor; a decline in plant operating efficiency which has resulted from the shortage of materials for maintenance since the outbreak of the China incident; a general shortage of basic raw materials, and the restrictions imposed on the activities of the "peace" industries. The limited volume increase in industrial production during 1939, is reflected in the official indices of industrial activity published by the Ministry of Commerce and Industry. The composite index covering the major manufacturing industries and mining enter- prises, averaged 179.9 (1931 - 1933 = 100) during the first nine months of the year, compared with 169.7 during the corresponding veviod of 1938, a gain of 6%. In view of the more pronounced fuel JAS materials shortages which prevailed during the last quarter, it is believed that the rate of increase was not so great as during the finst nine months of the year and the estimated net gain in the volume of industrial production for 1939 therefore is placed at between 5% and 6%. The slight volume gain in industrial production registered during 1939 was due almost entirely to the greater output of the heavy industries. The Ministry of Commerce and Industry's composite index covering the output of pig iron, steel materials, and machine tools averaged 332.9 during the first nine months of 1939, compared with 284.2 during'the same period of 1938, a gain of 17.1%. Varied trends were noted in the textile industry - the production of cotton yern, raw 811k, rayon textiles, and staple fiber being below that for the previous year but slight gains were reported in the output of cotton, silk. and woolen textiles. Chemical production was restricted as a result of the prevailing shortage of electric power and the output of such important items as emmonium sulphate, calcium cyenide, soda ash and coustic soda was below the level of the 1938 production. A de- cline W&B also noted in the output of the cement and plate glass in- dustries, The volume gain in the mining industry showed only 8. 3% ingrease over the previous year, according to the official index, despite the strenuous efforts being made to expand the nation's output of minerals. No figures are available concerning the volume or value of the production of Japan's home industries during 1939, but this brapch of industry, which is estimated to have produced between 12% und 15% of the total of all menufactured products during recent years las upgoubtudly suffered to a considerable extent from the restric- ions on the supply of raw materials. Although the value of the out- jut of the home industries probably showed a slight increase during the past year, this trend was primarily the result of the increase in the gosts of r&w materials and the volume of production was undoubt- diy,below the level of the pre-incident years. As in the revious year, the major industrial devolopments during 1939 were centered on expanding the productive capacity or the vation's hoavy industries with particular effort directed towards some Gegree of self-sufficiency in iron and steel materials, pig iron, Report No. 17-40 Report No. 17-40 - 5 - non-ferrous metals, automobiles and aircraft, and synthetic chemical products. Considerably less publicity was given to the development of substitute products than in the previous year but it is believed that the authorities were active in encouraging the further develop- ment of substitute industries and that the production of such pro- ducts was greatly expanded during 1939. In the early part of 1939, the Cabinet Planning Board an- nounced a three-year program of industrial expansion for Japan, Man- churia and North China, the plan envisaging self-sufficiency in the besic commodities required for national defense by the end of 1942. The plan provides the increased output of iron and steel materials, ccal, non-ferrous metals, petroleum products, artificial fuels, chemicals, wood pulp, machine tools, railway rolling stock, automo- biles, and gold. No definite program was announced regarding the extent to which Japan's industrial output would have to be enlarged to carry out the scheduled increases but it is apparent that it will be necessary to greatly increase the domestic output of automobiles, machine tools, chemicals, and rolling stock, to ensure the success- ful outcome of this phase of the program. The outbreak of the hostilities in Europe has consequently resulted in the necessity of revising the industrial expansion plans of Japan and the yen-bloc countries as the success of the plan de- pended to a considerable extent on plant equipment and materials from Germany which were to be furnished in exchange for Manchurian pro- duce. The latest available reports regarding the revised program state that the Cabinet Planning Board intends to concentrate on in- creased mineral production and pay less attention to expanding the production of all other items, except those most urgently required by the military authorities. There was a definite trend towards the consolidation of industrial firms and the diversification of production throughout the year. The former development was prompted by the desire to reduce production costs, and consolidate limited supplies of raw materials in order to maintain greater operating efficiency at certain plants. The diversification was most pronounced in the heavy industries, many concerns undertaking the production of parts which they had formerly purchased for assembly, the processing of raw meterials instead of purchasing semi-manufactured goods, and the production of complete units, such as machine tools and heavy industrial equipment, instead of pig iron and steel materials. Until the outbreak of the European war, it appeared that the Covernment was endesvoring to favor the small industrialist as steps had been taken during the early part of the year to finance the shifting of small industries from the production of consumption goods to munitions. A-revision of the Industrial Association Law was also approved by the Diet which authorized the esteblishment of industrial guilds of less than ten members - such guilds being exempt from busi- ness taxes and eligible for government subsidies. Following the out- break of the war, however, it was found that the further expansion of productive capacity should be limited to efficient large-scale pro- ducers and, accordingly, restrictions were imposed on the new estab- lishment or expansion of mechanical facilities of small firms. Ample funds for industrial financing were made available through the extension of the bond issue of the Industrial Bank of Japan, although towards the end of the year it was evident that the Government intended to exercise greater control over industrial ex- punsion by the revision of the Temporary Funds Adjustment Law providing for the reduction of the limits of loans which could be extended with- out official permission. Report No. 17-40 3 Report No. 17-40 - 6 - Cotton Spinning and Reaving: The Japanese cotton textile industry during 1939 operated under somewhat improved conditions as compared with the preceding year. Although statistics show little improvement the disrupted state of the industry was largely smoothed out, as manufacturers and dealers became more accustomed to working under wartime restrictions. The export-import link system, which underwent considerable changes during 1938, continued in force during 1939 with only minor altera- tions. Raw cotton imports and textile shipments were slightly higher than those of the preceding year, but remained far below the normal pre-incident level. The advance in textile exports occurred in spite of heavy reductions in shipments to the yen-bloc area, which were restricted by Government control. The steady increase in stocks of pure cotton textiles has become & problem which officials and industrialists have not yet suc- ceeded in solving. Warehous stocks advanced from 180,000 bales in October 1938 to 334,000 bales for the same of 1939. Although defin- ite information is no longer available, unofficial estimates indicate that an equal volume of textiles is on hand at mills. Since the total output of cotton cloth, including mixtures with staple fiber and wool, has shown only a slight increase over 1938, it is apparent that the unusually heavy stocks of pure cotton cloth are due to the diminished production of mixtures for domestic use. Exports of cotton textiles during 1939 amounted to 2,446,000,000 square yards, a gain of 12% over the previous year. In spite of this gain in volume, the value of the shipments declined 0.1% due to the steady downward trend of prices, particularly in the case of grey cloth. The price decline is largely attributable to the link- ing system, which obliges manufacturers to dispose of their stocks in order to obtain new supplies of raw cotton. This serves to put the exporter at the mercy of foreign buyers, and in some cases it is re- ported that sales were made at quotations below the ectual cost. Under the same incentive, there was a substantial increase during the first part of the year in the grey cloth trade, since the seles of this type permit a rapid turn-over. This adverse trend was partly alleviated in April by the establishment of the Cotton Yarn and Piece Goods Ex- port Promotion Guild. All mills engaged in the export trade have to be members of this association, which has the power to withhold per- mits for raw cotton from those members which export excessive amounts of the low-riced grey cloth. The guild is also reportedly empowered to buy up and export cotton goods which are offered at rates below cost, thus strengthening the market. Raw cotton arrivals during the year amounted to 1,335,134,- 000 pounds, an increase of 7% over 1938. India and Brazil received most of the benefit of the advance, while imports from the United States and China declined. American cotton was heavily purchased at the beginning of the year, but imports during the summer and early fall were so low that the early gains were completely offset. How- ever, the American subsidy strengthened the competitive position, and even after the subsidy was withdrawn the speculative rise in Indian cotton prices continued to close the gap between American and Indian quotations. Consequently the outlook for American cotton during the 1940 year is considerably brighter. Iron and Steel Industry: The activity and output of Japan's iron and steel industry undoubtedly reached & record level during 1939, but despite the ex- pension of the industry, the supply of iron and steel materials was admittedly short throughout the year. The scarcity of these materials is reported to be primarily responsible for the slow progress made in expanding the productive facilities of other industries as the short- ages of steel for building purposes had held up the construction of many projected factories and workshops, while the lack of adequate Report No. 17-40 54 Report No. 17-40 - 7 - quantities of special steels has greatly restricted the activities of the machine tool, automobile and metal manufactures industries. Early in 1939, the expansion program on which the industry was engaged was greatly enlarged. According to press and trade re- vorts, the general industrial expansion plan of the yen-bloc countries provides for the following increases over the 1938 productive capaci- ties: ordinary steel, 60%; special steels, 100%; steel ingots, 60%; pig iron, 100%; and iron ore, 150%. No details have been published regarding the extent to which the domestic industry is to enlarge its present productive capacities to attain these objectives but it is estimated that the Japanese share is 7,750,000 metric tons of pig iron, 9,200,000 metric tons of steel blooms, and 8,300,000. metric tons of steel materials. Definite progress towards this objective was made during the year, four new melting furnaces with an aggregate annual capacity of approximately 900,000 metri: tons having been put into operation during 1939. Eight additional furnaces with an esti- mated 1,500,000 metric tons capacity were reported to be under cons- truction at the end of the year and are scheduled to be blown-in during 1940. The notice of the abrogation of the Treaty of Commerce and Navigation by the United States and the outbreak of the European war, resulted in a drastic change in the nation's iron and steel policy. Prior to these developments, it appeared that every effort was dir- ected towards expansion of the industry regardless of size or effi- ciency. When some fear began to be entertained regarding the pros- pects of obtaining adequate supplies of scrap from the United Stetes and iron ore from the colonial possessions of Great Britain and France restrictions were imposed on the further development and expansion of small scale establishments and on deliveries of raw materials to un- economical plants. Furthermore, it was decided to exercise unified control over scrap iron purchases and distribution; to establish pool price levels for raw materials in accordance with the classification of various plants based on equipment, quality of products and volume of material consumption; to allocate official production allotments, and to merge the three existing steel materials sales guilds into 8 single sales organization. Because of the uncertainty prevailing re- garding the raw material supply, a maximum scrap allotment of 60% was officially established for the fourth quarter, monthly allotments of tin-plate were reduced to one-third of the previous monthly deliveries during the last two months of the year, the blacksheet allotments were reduced by 50%, and sales of steel materials to private consumers were temporarily discontinued by the Steel Materials Seles Guild. Throughout the year the attention of the industry had been centered on the utilization of low grade domestic ores but these efforts were redoubled during the last few months of the year. Verious reports were published to the effect that plans had been drawn up to cope with the possible embergo of scrap iron from the United States, that processes had been developed to produce steel materials direct from iron ore, and that domestic iron sand could be substituted for imported ore in the event of emergencies but there is no question but that some apprehension prevails among iron and steel manufacturers concerning raw materiel supplies during the coming year. Labor, Employment and Wages: The previously accepted theory that Japan has an unlimited labor supply has been dispelled by the developments of the past two years as it is becoming increasingly obvious that the nation is in- capable of supplying the military requirements for manpower and the industrial demand for factory workers at the same time. Despite a 10% increase in factory employment during 1939, the labor supply was to- tally inadequate and the shortage of workers, perticularly skilled workers, was undoubtedly responsible for the slight net volume gain in industrial production. Employment in the mining industry is also esti- mated to have increased by 10% during 1939, however the shortage of labor was partially responsible for the lack of progress made by the Report No. 17-40 Report No. 17-40 - 8 - industry during the year, the coal industry in perticular having been greatly handicapped by the scarcity of miners. To some extent the demand for labor in the heavy industries was met by a shifting of employment from the light industries during the pest year, the machinery, vehicle, tool and instrument, and metal industries registering gains of 29%, 27%, 30% and 20% respectively during the first eight months of 1939, compared with respective losses of 8%, 3%, 5%, 9% and 12% in the spinning, weeving, dyeing, braiding and knitting, and rubber industries. The concentration of employment in the heavy industries since the outbreak of the China incident is reflected in the official employment indices of the Cabinet Bureau of Statistics. These show that at the end of August 1939 the rate of increase of employment in all industries was 26% over July 1937. The increase in the machinery industry was reported at 94%, precision tool industry 68%, shipbuilding and vehicle industry 63%, and metal industry 42%. They also show a definite concentration of labor in large-scale undertakings, there actually being a 14% decline in em- ployment in metal, machinery, shipbuilding and vehicle, precision tool, and spinning and weaving establishments employing less than 50 workers during this period while there was a 29% increase in the workers. number of workers in similer establishments employing more than 50 The extent to which labor has been required to work over- time to compensate for the shortage of workers since the outbreak of the China incident is also reflected in the statistical reports of the Cabinet Bureau of Statistics. Only a 3% gain in hours of em- ployment was reported during July 1939 but there was a 29% average increase in "extra hours" worked during that period compared with July 1937. The increase in overtime which r ached as high as 97% in the machinery industry supports the view expressed in a previous sec- tion of this report to the effect that the long hours that are re- quired of workers are responsible for a decline in labor efficiency. According to the Bank of Jepan's lebor indices, average rates of wages in industry were 7.5% higher during the first eight months of 1939 than during the previous twelve months, 11.4% above those for 1937, end 13.7% above the average during 1936. Due to overtime work, actual earnings made more pronounced gains than wage rates, the average for the first eight months of 1939 being 9.9% above the twelve months average for 1938; 20% above 1937; and 26.5% above 1936. Earnings have not kept pace with the upward trend of com- modity prices which was responsible for recurrence of labor troubles during the first half of the year. The actual number of lebor dis- putes during this period was 590 against 593 during the correspond- ing period of 1939 but showed a gain of 171 from the number reported for the last six months of 1938. The total number of leborers in- volved in disputes during the 1939 first six months was 56,664 com- parod with 31,330 during the same months in 1938. Evidence of dis- content over the increasing disparity of the actual eernings and commodity prices is afforded by the fact that 54% of the. strikes during the first half of 1939 were concerned with demends for higher wages year. in contrast to only 43% during the same poriod of the preceding Commodity Prices and the Cost of Living: Commodity price control was one of the outstanding pro- blems of the past year for Japan 88 under the stimulus of diminish- ing supplies, the difficulty of adjusting the demand and supply of commodities, and rising production costs, wholesale and retail prices surged upward month by month. Prior to the outbroak of the European war efforts had been made to regulate commodity prices by extending the list of items subject to official price control but these measures had comperatively little effect on the general up- ward movement. Following the outbreak of the hostilities in Europe, the Government moved to peg the prices of commodities et the levels Report No. 17-40 Report No. 17-40 - 9 - which prevailed on September 18, by the invocation of Article 19 of the National General Mobilization Law. Even this action had little restraining effect, particularly since the application of the penal measures of the law were not strictly enforced. Ganeral dissatis- faction of the ineffectual policies of the Government towards price control was openly expressed when an informal motion of non-confidence In the Government was passed by a majority of members of the Lower House of the Imperial Diet towards the close of the year and was one of the contributory causes of the downfall of the Abe Cabinet during the early pert of January 1940. The extent to which commodity prices advanced during 1939 is demonstrated by the price indices of the Ministry of Commerce and Industry and the Bank of Japan. These show that wholessle prites advanced by an average of from 8% to 11% during the first eleven months of the year over the monthly average during 1938; that they were from 15% to 22% higher than in 1937; and from 33% to 50% higher than in 1936, the spread between the figures being due to the separ- ate methods of preparing the indices. Retail prices, prepared by the same sources, reveal more striking similarity and even more pro- nounced gains. The. average retail price indices indicate an advance of between 12% and 13% during the first eleven months of 1939 ovor the monthly average of 1938, and gains of 28% to 31% over 1937 and 40% to 44% over 1936. The Tokyo retail price index of the Bank of Japan for the month ending December 15, 1939, shows that compared with the corresponding period of 1938, food prices advanced by 17.4%, fuel by 4.4%, clothing by 12.7%, and "other" commodities by 10.5%. The rise in living costs during the past year is reflected in official indices compiled by the Cabinet Bureau of Stetistics. These show an advence of 15.3% in the cost of living for the laboring class and a 14.1% gain for the salaried class during the twelve months ending December, and increases of 30.7% and 28.5% respectively since the outbreak of the China incident. The most pronounced gains in living costs during 1939 occurred in food and clothing which advanced by approximately 23% and 21% respectively over the previous year. 5%. Light and fuel costs advanced by about 7% and rents by approximately Agriculture: The improvement in agricultural conditions in Japan was one of the most favorable aspects of the nation's economy during the past year - it being estimated that the gross farm income reached the highest level since the period of the World War. This development was entirely unpredictable at the end of 1938, as during the previous two years, and particularly since the outbreak of the China incident the rise in the price of farm products had lagged far behind the prices of the commodities required by agricultural communities. After the first few months of 1939, there was a complete reversal of the disparity between farm prices and quotations for goods for consumption in rural areas. Official weighted index figures compiled by the Ministry of Agriculture and Forestry show a 50% increase in average prices of rice, wheat and raw silk from the end of December 1938 to the end of November 1939 while the advance in the cost of the prinei- pal articles of consumption required by farmers was only 6% during the same period. Figures from the same source show an 81% advance in farm prices since June 1936 and a 59% advance in the prices of goods for farm consumption during the same period. No official estimate of gross farm income has yet been published but in November one of the leading Japanese economic jour- rals, "The Oriental Economist", estimated the gross value of the 1939 rice, wheat, and cocoon crops at ¥4,057 million, compered with ¥2, 718 million in 1938. While farm production costs advanced steadily during 1939, the increase in the net returns to producers was even greater and resulted in more general prosperity in rural areas than has ex- isted for years. The improved conditions in these areas were reflect- ed in an increased demand for currency, the liquidation of bank loans, and a sharp rise in rural bank deposits. 57 Report No. 17-40 Report No. 17-40 - 10 - Although the rice crop in the Western part of Japan was seriously damaged by one of the worst droughts in recent years, weather conditions were reported to have been favorable for all crops in other sections of the country. Estimates of the 1939 rice crop of Japan Proper indicate that it was about the same as in the previous year, but a sharp decline in the volume of the Chosen crop has necessitated restricting domestic rice consumption and the im- portation of the foreign rice to balance the supply and demand until the 1940 crop is harvested. The yields of other cereal crops - wheat, barley, and rye - reached record high levels and the cocoon crops are reported to have reached the highest level since 1933. The favorable returns of the 1939 crops in the face of the heavy drain on farm labor for military service and factory employment, a decreased supply of fertilizer, and a general shortage of farm im- plements and equipment were primarily the result of the reorganization of Japanese agriculture on a wartime basis. Raw Silk: Conditions at the close of 1938 and during the first part of 1939 clearly foreshadowed a rapid increase in prices during the year. Domestic consumption was heavy, foreign demand was strong, and stocks on hand were low due to the poor 1938 cocoon crop. Specula- tive activities on the part of raw silk dealers, combined with the naturally strong position of the market, soon forced quotations up to a point where the Government began to sell its holdings under the law which provides for such sales when prices reach a certain speci- fied maximum level. The market succeeded in absorbing the official silk in a few months and continued its upward trend. During most of the year there were rumors that the author- ities would take some action to control prices, but, aside from warning the dealers that control was inevitable if quotations contin- ued to advance, no official steps were taken to curb the upward trend. The Government's forbearance presented a sharp contrast to price legislation in other lines, and was locally ascribed to the increased amounts of foreign exchange which became available as a re- sult of the higher unit cost to foreign importers. The outbreak of the war in Europe, the strong position of the American market and heavy domestic consumption all helped to sustain the forward movement of the raw silk price. The extent of the increase in quotations is shown by the fact that the average price during December 1938 was ¥821.00 per bale compared with ¥2,230.00 per bale on December 30,1939. Although no legislation was enacted to halt the price rise a Government plan which went into effect on January 1, 1940 provides for the establishment of & reserve fund for the "maintenance and security" of the silk industry. Payments into the fund are to be made from foreign sales of silk on a graduated scale. These payments start at a base rate of ¥1,700.00 per bale. At prices above this level 30% of the difference must be paid into the fund. This per- centage gradually increases up to 70% of all amounts in excess of ¥1,900.00 per bale. Further legislation early in Jenuary 19.0 es- tablished an allotment system for raw silk to be used in manufacturing textiles for domestic use. This is designed to make heavier supplies of silk for foreign trade. Rice: Covernment measures to check rising prices and to control the distribution of rice were important features of the 1939 trade in this commodity. The first development along these lines was the passage of the law providing for the Japan Rice Company. Although this proposal was opposed by a number of influential people, inclu- ding most of the important rice dealers, it was approved by the Diet in March. The "Bill for the Control of Rice Distribution ", às this legislation was entitled, ordered the esteblishment of a ¥30,000,000 concern, one-half Government owned, to operate and control the rice Report No. 17-40 Report No. 17-40 - 11 - exchanges throughout the nation. The former private exchanges were closed in October when the new company was organized, and all dealers thereafter were licensed by the Government and were only permitted to do business within a limited price range and under strict offi- cial supervision. At first the passage of this law tended to discourage further price advances on the open exchange, even before such in- creases became illegal. However, the failure of the June rainy sea- son and the small volume of arrivals from Chosen drove quotations up to ¥38.90 per koku (one koku equals 5.12 bushels), the highest level since 1926. At that time the Government stepped in and established an official maximum price of ¥38.00 per koku, which resulted in a large volume of illegal, "out of the market" business at much higher prices. The diminished volume of imports from both Chosen and Taiwan, combined with heavy domestic consumption, reduced stocks at the end of the rice year (October 31) to only 4,061,351 koku, the smallest carry-over since 1918. When this dangerous condition be- came apparent, the vernacular press began to take up the rice ques- tion, and political parties, rice dealers and agricultural groups helped to impress upon the Government the necessity for some immedi- ate action. The authorities responded by appealing to the farmers directly and through the prefectural governments to sell their rice as soon as possible in order to relieve dangerous conditions in the southern sections which had been severely affected by the drought. Although the farmers were assured that no price increase was con- templated, the Covernment raised the rice price to ¥43.00 per koku after a substantial volume of sales hed been made. In the face of protests resulting from this action, it was finally decided to re- imburse agriculturists for their losses. The low volume of stocks on hand and the reluctance of the farmers in disposing of their crop were responsible for a rice shortege which occurred in metro- politan areas during December. This condition, which was attributed to poor distribution, caused considerable local dissatisfaction, but the authorities took measures to remedy the situation so that the shortage was alleviated by the end of the month. Although the second estimate of the 1939 rice crop placed the harvest at 65,281,000 koku, a decrease of only 0.9% from the preceding year, the outlook for 1940 is distinctly gloomy. Chosen, which normally supplies Japan Proper with 5,000,000 to 10,000,000 koku had one of the poorest crops on record, and it is admitted that arrivals from that area during the present rice year will not exceed 1,500,000 koku at best. The reduced volume of rice to be supplied by Chosen, and the low level of the 1939 carry-over were responsible for heavy rice purchases from foreign countries, an- nounced by the authorities in December. Further purchases will probably be made later in the season. In addition to measures to provide for a heavy crop during 1940, the Government has taken steps to lower domestic consumption by ordering sake (rice wire) producers to curtail their output, and by prohibiting the use of fully polished rice, since the consumption of partly polished rice increases the volume of food available. Some quarters are demanding a ration sys- tem or the establishment of a Government monopoly. The authorities will avoid action of this type except as a last resort, but. stricter control of rice supplies and distribution appears to be inevitable. Financial Developments: While the majority of financial statistics indicate a high degree of internal prosperity and unparalleled business acti- vity throughout Japan during 1939, it is becoming increasingly oh- vious that the financial structure of the nation is being weakened by the continual strain of meeting the costs of the military cam- paign in China. At the end of 1939, the national debt of the country was slightly more than twice as great as in June 1937, the month prior Report No. 17-40 Report No. 17-40 - 12 - to the outbreak of the China incident, and if the current deficits are maintained the long-term debt will again double at the end of four more years. To Japan's credit it must be noted that the entire cost of the China incident has been financed internally and the nation has not had to resort to the flotation of foreign loans. Luring the last half of 1939, however, there was & pronounced decline in the rate of digestion of national bonds and & pronounced infla- tionary trend which was manifested in a sherp increase in the note issue and a steady rise in commodity prices. Those developments ad- mittedly caused some apprehension in financial circles end the task of maintaining the bond absorption rate at a satisfactory level and controlling the inflationary trend were among the greatest economic problems facing the nation et the close of the year. The position as regards Japan's gold reserve is not known but from the reports published during the year regarding the unsatis- factory results obtained from gold mining operations it must be as- sumed that the gold output was not 8.8 great 88 had been anticipated. Despite a visible unfavorable trade balance of ¥405,000,000 with foreign currency countries, however, the specie reserve of the Bank of Japan was reported unchanged at ¥501 million. As in the previous year all foreign exchange transactions were rigidly controlled by the Finance authorities. Due to the scarcity of foreign exchange, importers experienced increasing delay and difficulty in securing permits to make remissions in foreign currency. The foreign exchange situation became so acute during the last half of the year, that the majority of American firms exporting to Japan refused to consider new business except on the basis of an irrevocable letter of credit confirmed by an American bank. There was a further accumulation of the frozen funds of American firms operating in Japan during 1939. Aside from a wave of speculative buying of shares in cer- tain export industries which soon subsided, and the linking of the yen to the dollar instead of the pound, the outbreak of the war in Europe had comparatively little effect on Japanese financial mar- kets. The action of the Government in pegging the yen at $0.23-7/16 instead of its former pegged level of 1 S. 2 d. was intended to faci- litate the operation of Japanese funds abroad and to prevent the yen from fluctuating in terms of collars. The strict control of foreign exchange in London also prompted the move to link the yen with the dollar. The outbreak of the hostilities in Europe did have the psychological effect of stimulating the upward trend of commodity prices in view of the anticipation of 6. world rise in commodity quo- tations. It W&S generally realized, however, that due to the concen- tration on the settlement of the China incident, the prevailing com- modity shortages, and inability of the nation to finance the sale of goods in world markets, Japan was in no position to profit from the war in Europe to the same extent that it profited in 1914-1918. Despite the many unfavorable domestic and international developments of the past year, the stock market staged a strong re- covery from the dullness which had influenced transactions during 1938. The accumulation of surplus funds was responsible for an un- precedented wave of solective buying of spot issues for investment purposes, spot transactions accounting for 18% of the total volume of transactions of 114,886,000 shares, compared with 9% of the 1938 transactions of only 96,062,000 shares. Long-term transactions were influenced by the suppression of speculative operations in the stock and commodity markets, restrictions on stock dividends, and fear of more intensive Government control over business and industry. Never- theless, average stock quotations showed & steady upward trend through. out the year. According to 6. report of the Hypothec Bank of Japen, the average value of a group of selocted shares was ¥95.88 during December 1939 compared with ¥80.08 during the corresponding period of last year, while the Tokyo Stock Exchange's index of share prices Report No. 17-40 Report No. 17-40 - 13 - advanced from 150.45 (1921 = 100) to 160.3, a gain of 6%. Average yields declined steadily, the average for the month of November amounting to 5.45% compared with 6.69% in January, 6.17% in June, and 5.66% in September. There was a heavy demand for bank loans for the financing of the industrial expansion program, the loans outstanding at the end of the year totalling ¥15,606 million, an increase of 23% over 1938. There was, however, more than a corresponding increase in bank de- posits, namely a gain of 31% for a total of ¥25,091 million at the end of the year. Bank holdings of securities increased by 30%, the value of such holdings amounting to ¥12,308 million on December 31, 1939. Rising commodity prices, the sluggish trend of circulation of the huge sums paid to the munitions industry, increased prosperity in rural districts, and an increasing tendency towards cash trans- actions resulted in an unprecedented demand for circulating media, particularly during the last half of the year. The average daily note issue of the Bank of Japen was reported at ¥2,374 million, compared with ¥1,919 million during 1938, and ¥1,535 million during 1937. During October, the tax free limit of the Bank of Japan of million was exceeded by more than ¥100 million for the first time since the new limit was established on April 1, 1939. On December 30, when the total note issue reached a record high of ¥3,817,752,000, the excess of the legal limit reached ¥1,116,465,000. At the close of the year (December 31), the note issue stood at ¥3,679 million, an increase of ¥924 million over the corresponding date of 1938. The substantial increase in postal savings and life in- surance contracts reflected the general internal financial prosperity which prevailed throughout the year. Total postal savings deposits amounted to ¥5,574 million at the end of December, a net increase of ¥1,199 million for the year, while outstanding life insurance con- tracts in force at the end of October were valued at ¥23,485 million, an increase of ¥4,175 or 21% over the corresponding date of 1938. The improved financial status of the agrarian community was reflected in a decline in rural bank loans on immovables. The financing of the 1939-1940 budget was accomplished to the extent of 56% through the issuance of national bonds during 1939, the total issued during the year amounting to ¥5,281 million, compared with ¥4,330 million in 1938. The visible absorption rate was somewhat higher than in the previous year, advencing from 87.4% to 89.2%; however, the rete fell from 104% during the first half of 1939, to approximately 77% during the July-December period. Further- more, the higher rate of bond digestion during the past year was made possible, to some extent, through the increased purchases by the Deposits Bureau which utilizes postal savings deposits for this pur- pose - thus explaining the strenuous efforts being made to encourago this form of savings. Due to the decline in the rate of absorption of new bond issues towards the end of 1939, some concern has been expressed re- gerding the future trend of digestion as estimates of the probable issues during 1940 are placed at approximately ¥5,800 million. Finance Ministry officials have issued repeated statements to the effect that the Government will not resort to compulsion to require banks to purchase new issues but such steps may eventually become necessary if the heavy expenses in connection with the military oam- paign in China are maintained at present levels. The huge bond issues of the year resulted in a further increase of ¥5,297 million in the national debt, the total out- standing long-term indebtedness of the nation amounting to ¥21,520 at the end of 1939. Actual Government revenue for the first eight months of the 1939-40 fiscal year amounted to ¥1,939 million, an increase of ¥318 million over the receipts during the corresponding Report No. 17-40 Report No. 17-40 - 14 - period of last year, while the expenditures totalled ¥1,750 million, an increase of ¥276 million during the same periods. In December, the Cabinet approved budget estimates of ¥10,360 million for the 1940-41 fiscal year for the General Accounts and the Extraordinary Military Special Accounts. These estimates, which are by far the lergest in the nation's history, represent an increase of ¥951 million over the 1939-40 budget. The amount of ¥5,900 reserved for the General Accounts, represents a gain of ¥1,095 million over the expenditures approved during the current year, while the ¥4,460 million reserved for the Extraerdinary Mili- tary Special Accounts is ¥145 million lower than the current budget. The increases in the departmental estimates in the General Accounts were strongly criticised on the grounds that it represents a perma- nent expansion of Government spending. The necessity of obtaining additional sources of revenues and the desire for a more simplified and flexible tax system was responsible for the complete revision of the present tax system towards the end of the year. The new tax system, which has yet to be approved by the Diet, and which will undoubtedly be introduced from the beginning of the next fiscal year on April 1, 1940, will provide for a further increase of ¥373 million in revenues next year and an increase of about ¥510 million thereafter. All classes will share in the increased tax burden which has been made necessary by the increasing costs of government and the military activities in China. The rise in revenue from taxes, from approximately ¥1,050 million during the 1936-1937 fiscal year to ¥2,245 million in the 1939-40 fiscal year, reflects the tax burden which has been imposed since the outbreak of the China incident. Ample funds were available for the financing of the 1939-40 budget and the industrial expansion program, the total capital pay- ments, including short-term Government notes, reached ¥10,245 million campared with ¥8,625 million during the previous year, according to a report of the Hypothec Bank of Japan. Stock payments increased by ¥206 million to ¥1,799 million while the value of corporation bonds increased by ¥644 million to ¥2,063 million both record highs. Of the total new capital paid for corporation bonds and stocks during the year, ¥1,701 million was invested in the manufacturing industry, an increase of ¥642 million over the 1938 investments, and ¥310 mil- lion in mining enterprises, an increase of only ¥19 million over the amount involved during the previous year. Despite the heavy demand for funds for industrial financ- ing, money rates remained easy throughout the greater part of the year due to the excess Government payments which averaged ¥444 mil- lion monthly or ¥48 million more per month than in 1936. Over-night rates were quoted at 2.19% to 2.555% during the greater part of the year, but the rate firmed to 2.7375% during December due to the unusu- ally heavy demand for funds for year-end settlements. The general increase in business activity during 1939 was reflected in the bill clearings which reached an ell-time high in number and value - amounting to 51,810,126 valued at ¥107, mil- lion, increases of 9.8% and 24.4% respectively over the previous year. There was a further reduction in the number and value of dis- honored bills reported in 1939, the total amount involved being in- significant compared with the total clearings. Foreign Trade: The total foreign trade of the Empire was valued at ¥7,060 million, a 23% increase over the previous year but a 3% de- cline from the all-time record established during 1937. Exports, which totalled ¥3,032 million, increased by 35% over the previous year to a new high level. Imports of ¥3,127 million were 10% greater than in 1938. The favorable merchandise balance of trade was valued at ¥805 million, the highest trade balance ever recorded. Report No. 17-40 Report No. 17-40 - 15 - The foreign trade of Japan Proper was valued at ¥6,494 million, an increase of ¥1,141 million or 21% over the previous year. Imports were valued at ¥2,917 - a 9.5% increase. Exports were valued at ¥3,576 million - an all time high, and an increase of ¥886 million or 32% over the previous year. The favorable merchandise balance of ¥659 million represents a marked increase over the 1938 favorable balance of ¥27 million. The expansion of the country's export trade during the past year was primarily the result of increased shipments to the yen- bloc countries, 8.8 despite the restrictions imposed on this trade during the fourth quarter, total shipments to Manchuria, Kwantung Leased Territory, and China (exclusive of Hong Kong) were velued at ¥1,747 million, a gain of 50.0% over the 1938 trade. Imports from the same countries were also much higher than in the previous year, increasing from ¥564 million to ¥682.9 million, a 22.1% gain. Trade with foreign currency countries increased by 12.1%, exports rising by 18.0% to ¥1,829 million, and imports by 6.4% to ¥2,234 million. The net unfavorable foreign currency merchandise trade balance fell from ¥575 million to ¥405 million. Japan's foreign trade by geographical areas showed some variations compared with the previous year but fairly significant changes compared with the trade in 1937. In brief, there has been a definite increase in the importance of Asiatic markets, perticularly the yen-bloc countries, the share of this area in the export trade rising from 51.8% in 1937, to 62.0% in 1938, and 64.9% in 1939, and in the import trade from 34.3% to 38.4% and 40.4% respectively. All other geographical areas took less from Japan in 1939 than in 1937, although during the past year the exports to North American markets (Includes United States, Canada and Alaska, according to the Japane'se tiade returns.), accounted for 18.4% of the trade, compared with 16.4% in 1938. Only North American countries increased their share of Japan's import trade during the past two years, accounting for 36.4% of the total foreign merchandise purchases in 1937, 37.8% in 1938, and 38.7% in 1939. There was some improvement in the relative im- portance of South American imports during 1939, namely from 3.4% to 4.0% of the total, but the share of this area was not so great as in 1937, when arrivals from this source accounted for 4.3% of the total. Shipments of all economic groups registered substantial value gains during 1939. Foods, drinks and tobacco increased by 43.8% as the result of increased exports of aquatic products, tea and canned foodstuffs. Raw material shipments advanced by 74.4% due to the heavy volume of lumber shipments to the yen-bloc countries. A 41.1% gain was registered in exports of semi-manufactures due to the rise in the value of raw silk shipments and substantial volume and value gains in the exports of vegetable oils, and cotton and rayon yarns. Exports of manufactured goods increased by 23.5% due to the heavy demand for such products originating from Manchuria and the occupied areas of China. There was a significant increase in the value of imports of raw materials and semi-manufactures during 1939, and a decline in the value of arrivels of mánufactured products - a reflection of the efforts to reduce the unfavorable foreign currency trade balance by the processing of materials in Japan. Receipts of raw materials ad- vanced by 9.1% and semi-manufactures by 22.5%, increased purchases of oil cake and raw cotton being responsible for the gain in the value of the former group, and a sharp increase in the value of certain unlisted items, believed to be chiefly ores and metals, was respon- sible for the gain registered in the latter group. Heavier purchases of beans and peas from China were the sole resson for the increase in the total arrivals of food, drink, and tobacco. Reduced purchases of aircraft and automotive products are believed to have been primar- 1ly responsible for the 12.8% decline in the value of imports of Report No. 17-40 Report No. 17-40 - 16 - of manufactured products during the year, as machinery imports, which constitute one of the major items of the group, were somewhat higher than in the previous year. Various steps were teken to eliminate some of the diffi- culties which had been experienced by the export trade durins the previous year and to encourage the trade. The measures introduced during 1939, included the modification and the extension of the link system, a system of compensation for producers of export products, end the establishment of special firms to fecilitate the delivery of raw materials to firms engaged in the manufecture of goods for foreign markets. Despite the desire to promote exports, some effort was also made to conserve existing supplies of basic materials and equipment by the subjecting of a wide range of non-ferrous metals and minerals, industrial and electrical machinery, and drugs to a system of licensing. Similar restrictions were also imposed on a wide range of products for shipments to the yen-bloc countries. Foreign Trade with United States: Japan's total trade with the United States was valued at ¥1,643 million, a 24.8% gain over the previous year. Imports were valued at ¥1,002 million, a 9.5% increase and exports at ¥641 million, a sharp gain of 50.8% over the previous year. Imports of raw cotton which constituted only about 15% of the value of the total United States trade with Japan, declined by 11.8%, this loss being more than offset by increased purchases of scrap iron, refined copper, and machine tools. Although not shown in the official customs re- turns, it is believed that the value of imports of petroleum pro- ducts, aircraft and automotive products also fell off during the year. There was a substential improvement in exports of many important items to the United States during 1939. The sharp rise in raw silk prices was entirely responsible for & value gain of 47% in S. 1k shipments, & S the volume was below that of the previous year. Cains in other commodities, however, were even more pronounced. Tea registered an advance of 79%, acquatic products 168%, canned foods 162%, vegetable oils 71%, fish oils 60%, camphor 91%, unbleached cot- ton textiles 338%, and electric bulbs 82%. More moderate advances were noted in the value of porcelainware and toys, these items re- gistering gains of 28% and 16% respectively. Effects of the European War: The outbreak of the European war had a stimulating effect on exports to all markets, including the yen-bloc areas despite the restrictions imposed on shipments to these areas during the last quarter, although the value gains registered during the last four months of the year were due to the fall in the value of the yen. Shipments to all countries, which had averaged ¥263.3 million during the first eight months of the year, increased to ¥367.5 million dur- ing the last four months. Exports to the yen-bloc areas increased from ¥132.3 million to ¥172.0 million, while those to foreign cur- rency countries from ¥131.0 million to ¥195.5 million. The most pronounced gains were made in shipments to the North American and South American markets, the former increasing from 8 monthly average of ¥40.6 million to ¥83.0 million and the latter from ¥4.3 million to ¥8.2 million. Exports to "other Asiatic markets" advanced from ¥45.2 million to ¥53.0 million, to Central American markets from ¥3.0 million to ¥14.2 million, to Oceania from ¥7.3 million to 9.4 million, and to European markets from ¥19.6 million to ¥20.1 million. Imports were comparatively little effected by the war, averaging ¥240.5 million during the last four months, compared with ¥243.4 million during the previous eight months, although arrivals from European markets dropped from ¥29.3 million to ¥18.8 million. Imports from Germany were surprisingly well maintained despite the Report No. 17-40 Report No. 17-40 17 - economic blockade, receipts from that country being valued at an average of ¥6.7 million during the September-December period, com- pared with ¥14.5 million during the previous eight months. The Outlook for 1940: No improvement can be anticipated in Japan's general 600- nomic position until the economic resources of the nation are dir- ected towards the production of productive goods instead of non- productive military equipment. The many perplexing economic problems facing the nation at the beginning of 1940, can not be solved by the strengthening of Government control but only by the termination of the military campaign in China which is the root of the economic ills of the nation. Furthermore, the trend of economic developments during the coming year will depend largely on the course of action which the United States intends to follow regarding exports to this country. A complete embargo on exports of all materials would disrupt Japan's plans for industrial expansion, curtail the output of the munitions industries, and greatly handicap the export trade which is dependent to 8 considerable extent on American raw materials end semi-manufac- tures. In the financial field, the outlook is decidedly unfavor- able. The nation appears in no immediate danger of a complete fin- ancial collapse but nevertheless a more pronounced inflationary trend is anticipated with the consequent ill-effects on commodity prices, production costs, and living costs. Bond issues will, of necessity, have to be larger than in the past and it is probable that compulsory measures will have to be introduced to ensure a satisfactory absorp- tion of the new issues. Strenuous efforts will be made to cope with the expansion in note issue and it is most likely that a compulsory system of savings will be instituted. The commodity shortages, particularly the shortages of daily necessities will not only continue but will probably become much more acute than they were during 1939, and in order to cope with the situation the Government will undoubtedly be forced to in- stitute a rationing system for such commodities as rice, matches, coal, charcoal, and sugar. Only & very slight gain in the volume of industrial production is anticipated during 1940, due to the lack of adequate supplies of raw materials and the probability of a pro- nounced fuel and electric power shortage during the first quarter of the year. Farm income will probably be about the same as in 1939, and continued prosperity is anticipated in rural areas. In all pro- bability, average silk prices will not be maintained at the high levels which prevailed during the latter part of 1939, but any de- cline in farm income from this development will undoubtedly be off- set by higher average rice quotations. Particular efforts will be made to furnish adequate supplies of goods to form areas, porticu- larly farm implements and fertilizers, in order to maintain crop yields at satisfactory levels. Efforts will also be made to stabi- lize the prices of goods for consumption by farmers even at the cost of Government subsidies. Although there is every prospect for another prosperous year for agriculture during 1940, the current rice situation is admittedly precarious. Any adverse developments such as unfavorable weather or floods which might affect the 1940 rice crop would be calamitous for the nation. It is anticipated that exports will be maintained at a high level during 1940, due to continued heavy shipments to foreign currency countries. Imports should show little change due to the rise in world commodity prices si:ce the outbreak of the European wer, although Japan's volume of imports from foreign currency coun- tries will probably decline. Imports from the United States are ex- pocted to at least remain at about the 1939 level in view of the de- pendence on that country as a source of raw materials for the heavy industries, providing, of course, that no restrictions, moral or otherwise, are imposed on shipments to Japan. Every effort will be Report No. 17-40 Report No. 17-40 - 18 - made to maintain export shipments to the United States, but it is not likely that the total value of the trade will show much improvement due to a probable decline in raw silk quotetions. Perticular efforts Central American countries. will be directed towards improving trade relations with South and Government control will be extended and intensified to dustry and trade. provide for the official regulation of all phases of business, in- Report No. 17-40 N.N.I.M ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT ATTACHE'S REPORT P-4-C Perved EFFES epte (origizal and de earlong); this sumber . - - of the Maited personal is o. H. 4932-B and - of the for quickly discuminating information - The explase will be distributed by o. N. L - - of devision, to mile. From NA/Tokyo Date Feb. 15 1940 Serial No. 21 File No. - and Chiest proper unapter Bouros of information Press Limit I 1 - d. Index) Subject Japan 58 (Haties reported es) (lader title - - Indos abovt) I Reference Barar. review, Industring, and distribution of reporte by O.W.I. vill be grully appellted If . brief many of the estable . end in this - Mention lendling grophiphical, personal, of politived - and the - of the Japanese Naval Writer Discusses United States Navy The best known Japanese Naval writer, Mr. Masanori Ito, who formerly had close relations with the Japanese Navy Depart- ment, discusses the U.S. Navy and the naval building program. It is interesting to note that Mr. Ito States: a. In his opinion the relative strengths of the American and Japanese Navy are 5 and 4. b. Japan must increase her building if this ratio is to be maintained. MAR 9 1940 12 10 2 9 3 5 - - - - - 1 - - of - - 1 - - - the - - - - - - - - - - - - - - ABCDE Γ C.K.O. Gas'll We - I F I F AIR No. 1 TAB CAR I LAL M. M.A.S. Aes. U.S. 1 N.C. J N.O. Two CBC 3 Com. сьс Can Can. Amount - I Dw. U.S. Bei. Pm. 5a. Fm. Asia R.T. - Case- les - ILL Also Can Die. W.P. J The - Inc Ma. Das furtna for all copies, On only forma M supplied by O.N.I. Main all sizetches, - - is - with this form when practical. Bubmit extra expie 76 of allppings, terbone of skatobes, MA., where protical. If practicable, without sicetoble is styles for blueprinting or photostical SEVENDMENT PRINTING - Report No. 21 Japan February 15, 1940 Japanese Naval Writer Discusses U. S. Navy The following articles by the well known Japanese Naval writer, Masanori Ito, have received widespread publicity in Japan, having been first published in Japanese in the Tokyo Asahi and later in English in the Japan Times, both daily and weekly. Mr. Ito has in the past had excellent relations with the Japanese Navy Department, and it has been considered that the views expressed in his articles reflect to a very great ext nt the views of the Japanese Navy. In recent years no Japanese May been able to write intelligently of the Japanese Navy, since all aspects of that service are considered to be secret. Mr. Ito's articles have, there- fore, lost much of their value and interest. These articles, in which the American naval programs and the American fleet are discussed are forwarded in full translation in view of Mr. Ito's past and present connections with the Japanese Navy. It is probable that they were prepared after consultation with the Japanese Naval Publicity Section, and represent semi-official naval opinion in Japan. This Japanese estimate of the comparative strengths of the American and Japanese navies is interesting, and it should be noted that the hope is expressed that "public opinion" in the United States should be exerted shelve the latest United States building program since it tends to cause antagonism between America and Japan. U.S.Naval Expansion Program May Prove Menace to Japan. "Five years have passed since the world began its armament expansion race. In that time the aggregate military budget of all nations jumped from ¥22,000,000,000 in 1932 to ¥65,000,000,000 in 1939. "If we realize that military expenditures of the eight major powers totalled ¥13,000,000,000 in 1913, just before the World War, it is easy to see how intense has been the armament race in recent years. "Under those circumstances no nation could afford to stand aloof from the drive for larger and larger defense systems. All found it vitally necessary to participate, regardless of their national policies. Even though their policies called for world peace and friendship through trade, those policies were considered the very reason for arms expension. Every country considered its arms expansion a protection measure. "President Roosevelt's message to Congress January 4, which cited a defense budget amounting to ¥10,000,000,000 stressed the necessity of such an expenditure because of the United States' national policy. "Since the armament expansion plan is nothing new in a world plunged into a frantic race for larger defenses, the American people must have taken it as 8. matter of course. "But since we live on the other side of the Pacific, it cannot fail to attract our attention. Geographically we are com- pelled to be interested in any news about the United States Navy. Likewise, it is the United States which is of all countries most concerned about developments in the Japanese Navy. "The President's message explained the necessity of the expansion plan, but the real expansion has been going on ever since he was elected President. "In 1932, America's defense budget was $770,900,000, or 6.6% of the total. In the present year the defense budget is ¥2,336,000,000, occupying 27.8% of the total. This means that annual military expenditures have increased three times during Roosevelt's presidency. The increasing defense budgets have been spent steadily for & premeditated expansion program. Report No. 21-40 1 Report No. 21-40 - 2 - "Leaving aside the Army and Army Air Force enlargement plans, which are comparatively less interesting to this country, we shall examine how the United States Navy has been enlarged. "The examination will present to our eye a great, well- balanced fleet which has been looming with increasing clearness in detail. "When the universal naval expansion race had not yet started, in 1933, the United States appropriated $130,000,000 from the Industrial Recovery Fund to build 32 battleships aggregating 120,000 tons, obstensibly to help business recovery. "Born in this stage of expansion are the two aircraft carriers YORKTOWN and the ENTERPRISE, the 10,000-ton ciuiser QUINCEY and the 10,000-ton light cruiser BROOKLYN and twenty cruiser-destroyers each with a cruising range of 6,000 nautical miles. "The famous Vinson plan was announced in 1934, involving six capital ships and 96 auxiliary ships aggregating 102 craft and 430,000 tons. It had a great significance to the United States Navy and added to the pressure Japan was feeling in the West Paci- fic because the plan fundamentally was aimed at enabling the Main United States Fleet to carry out & long-range expedition. "Because the 15 capital ships of the U.S.Navy lacked auxiliary craft which would have made possible a transoceanic ex- pedition, they did not constitute a menace to Japan at the time of the Manchurian Incident. The Vinson plan was formulated in view of this fact. For the U.S.Navy, the plan was most appropriate, for Japan it constituted a menance. "The second Vinson plan was announced in 1938, adding to the Pacific tension. Considering the first Vinson plan unsatis- factory for the operation of a large fleet in the seas 4,000 nauti- cal miles off the American coast, the United States decided on a 20% expansion, including construction of craft specially suited for ocean strategy. It involved two battleships, two aircraft-carriers, nine cruisers, 23 destroyers, nire submarines, and 26 various spec- ial duty craft aggregating 71 vessels and 400,000 tons. "Many ships built according to the above plans are now on the Pacific. 98 others are still under construction. "America's naval expansion, which has been made to date in three stages, led the world neval race rather. than followed it. The fourth expansion plan is now presented to Congress. "The expansion program which has been followed by the U.S. Navy may be summed up as follows: (a) Expension for Industrial Recovery, 1933, 32 craft and 120,000 tons. (b) First Vinson Plan, 1934, 102 craft and 430,000 tons. (o) Second Vinson Plan, 1938, 72 craft and 400,000 tons. Total: 206 craft and 950,000 tons. "The werships involved in the three plans are: 8 capital ships, 5 aircraft carriers, 21 cruisers, 100 destroyers, 41 sub- marines, 30 vessels for special duties. Some of the ships already were built, the majority are now under construction.- Work on the rest will start this year. All the vessels involved in the expan- sion programs will be at sea in 1942. "The present U.S.Navy is gigantic but it lacks balance. Besides the ARKANSAS with 12-inch guns, it has 14 capital ships, 5 aircraft carriers, 18 eight-inch-gunned cruisers, 17 six-inch- gunned light cruisers, 223 destroyers and 91 submarines, totalling 369 craft and 1,250,000 tons. "Closer investigetion, however, reveals that although in tonnage the ratio of the U.S.Navy to Japan's is 5 to 3, in real strength it is 4 to 5, in my estimate. This is because obsolescent ships with poor performences are listed in the first fighting units in its lineup. It real battle these old vessels will prove on im- pediment rather than help. Report No. 21-40 78 Report No. 21-40 - 3 - "Especially noteworthy are its destroyers, of which there are 223. In my view, only from 55 to 60 of them will be useful in transoceanic expedition, in the points of cruising range, fighting power and speed. The rest of them are good only for coast patrol. The same may be said of the submarines. About two-thirds of the 91 undersea craft belong to obsolescent types. "The U.S. Navy has a sufficient number of 8-inch gunned cruisers but is short of 6-inch-gunned light cruisers. In the latter type the U.S.Navy lags behind the Jpanese Navy considerably. This lack in light cruisers and destroyers greatly limits the per- formance of the main fighting unit in a transoceanic expedition. "The figures above are of January 1939 but subsequent additions were quite few. They explain clearly why the 1933 and 1934 expansion programs were necessary. "We shall now examine what sort of improvement is being made under the three-stage expansion program. "Warships built after 1933 are the most up-to-date in the world. At this rate, the Navy is likely to boast of a well- balanced fleet which will find it easy to accomplish a 4,000 nautical mile expedition. Such a fleet will comprise 21 capital ships including eight newly built ones, eight aircraft carriers and about 600 airplanes. The light cruisers will number 35, the new destroyers 144, and the new submarines 56. The U.S.Navy's fleet in 1942 will be composed of the following craft: Battleships 21 550,000 tons Aircraft Carriers 8 200,000 tons Cruisers 50 450,000 tons Destroyers 144 228,000 tons Submarines 56 82,000 tons Total 279 1,510,000 tons "If special service ships are added, the total will be about 300 ships amounting to 1,600,000 tons. The whole tonnage will be far superior to the present U.S.Navy's in quality. "Especially the quality of the U.S. auxiliary vessels in 1942 is far better than that of 1933. And auxiliary vessels as a fighting unit is very important. In fact destroyers will be a de- cisive factor in a large naval battle. "Britain feels herself still unsecure with her more than 170 destroyers. Because Germany lacked cruiser-destroyers, she had to sacrifice one of her pocket battleships for commerce dest- ruction warfare. Poland's navy is not yet defeated because its three destroyers are still active in the North Sea. The United States could stage a neval battle near Japan if only she had a powerful fleet of destroyers. "The new United States destroyers are of two types. One is capable of cruising 6,000 nautical miles without refueling al- though it is only 1,500 tons and carries 400 tons of heavy oil. It has four 5-inch guns, sixteen 21-inch torpedo tubes and develops C. speed of 37 nautical nautical miles per hour. It costs ¥17,000,- 000 to build a vessel of this type. "The other type is 1,800 tons with eight 5-inch guns, 12 torpedo tubes. It has a cruising range of 6,000 nautical miles. The U.S.Navy is said to boast that it compares favorably with a Japanese destroyer of the FUBUKI type. It costs ¥20,000,000 to build a destroyer of this type. The sum is the same as required for building the Japanese battleship YAMASHIRO. "The United States will spend about ¥1,800,000,000 to build & fleet of one hundred new destroyers of the two types. When it is completed it will become possible to stage a battle for about & week in the waters near Japan after refueling at Wake or Midway. I might Add here that America's new submarines are able to cruise from 15,000 to 17,000 nautical miles without refueling. "nowever, the United States is still unsatisfied with this stage of expansion. The Vinson plan, proposed to Congress on Janu- ary 3, the fourth expansion since 1933, aims at 8. 400,000-ton Report No. 21-40 19 Report No. 21-40 - 4 - increase in the present naval strength. It also stipulates that the President is to be empowered to increase the rate of expansion to 50% and that the Naval Air Force is to be increased to 6,000 craft. At least, part of the plan is expected to be realized and will constitute a considerable menace to Japan. In the three first stages of its expansion, the Navy will be more powerful than one strong enough to defend the country. In the fourth stage, it will become definitely a navy strong enough to attack another coun- try. And Japan will be forced to cope with it. "In the spring of 1938, editorials of the New York Times played a leading part in the shelving of the bill to militarize Guam. We shall watch whether the recently proposed naval expansion plan, which tends to cause antagonism between America and Japan, will be likewise laid aside by the force of public opinion." B. U.S. Navy to be Modernized. "For over two years the organization of an independent Atlantic Fleet has been urged in the United States, and recently opinions in favor of this move are gaining force. It is probable that such a plan may materialize - but in a remote future. However, since America often accomplishes the unexpected, the organization of an American Atlantic Fleet has more possibility of realization than the grand-scale construction program announced by Spain re- cently. "International politics would be the determining factor. An early peace in Europe would cause the plan to be dropped, since it is probable that a policy of the limitation of armaments would be followed by the Powers after the war. Should the war be pro- tracted, there is a strong possibility that America will carry out a great expansion of her Navy. It should be remembered that Ameri- ca may gradually construct ships without announcing a definite plan for the organization of an Atlantic fleet. It should also be re- membered that additional ships so built could reenforce the Pacific Fleet within one week. In other words, an additional naval vessel on the Atlantic is a potential unit on the Pacific. "In the past, in certain circles in Japan it was main- tained that battleships displacing over 35,000 tons could not pass through the Panama Canal. This is nothing but propaganda. Ships with a beam of 106 feet have no difficulty in passing through the canal. (The beam of the HOOD, the largest warship afloat displacing 42,000 tons, is 106. The same design is practicable for a 50,000- ton battleship.) "Several months ago American neval authorities announced that the ectual ratio between the U.S. and Japanese Navies stood at the ratio. of 5 to 4. It was suggested that while a simple .com- parison between total tonnages of the two navies remained at 5 to 3 as was provided by the Washington Treaty, when age of vessels and equipment is taken into consideration the actual ratio stood at 5 to 4 and that accordingly in order to regain her superiority America had to build additional ships. "Lepending on the methods of calculation the ratio may be variously computed at 5 to 4 and 5 to 3.5. At any rate the author firmly believes that the Japanese Navy's actual fighting strength is above the ratio set by the Washington Treaty. Accordingly, he believes that our navy should be able to meet the U.S. Navy and retain control of the hest Pacific. From the American standpoint her Navy is not strong enough to insure victory 5,000 nautical miles away. In short, the Japanese Navy in an agressive campaign will necessarily be defeated, but on the defensive it will have a chance to win. The Navy will always be victorious against Japan if it remains on the defensive but mey be defeated if it un- dertukes an overseas campaign. Japan desires to add to the mergin of safety in her defensive strategy and eventually to establish & morgin which will socure her position for an agressive campaign. 80 Report No. 21-40 Report No. 21-40 - 5 - "The competition is silently but steadily going on. It has been some time since the question of a naval race was much be- fore the public but nevertheless the naval authorities of both countries have been busy in building and manufacturing ships and naval equipment. The rumor that Japan is building super-NAGATO- class ships, and the fact that the U.S. has decided to construct two battleships displacing 45,000 tons shed some light upon this silent competition. "As to the actual situation existing at present one im- portant fact is that during the past three years America has suc- ceeded in modernizing her auxiliary vessels. For instance, at present she has completed 18 10,000-ton-8-inch gun cruisers com- parable to our ATAGO class ships. Her treaty cruiser fleet is the largest in the world; and even though our FURUTAKA class vessels are included our comparative ratio in this category is but 60%. "In addition to the 10,000-ton-8-inch-gun cruisers, light cruisers and destroyers are types indispensable for an overseas campaign. In America, the construction of these typese has pro- gressed rapidly; the BROOKLYN class cruisers displacing 10,000 tons and carrying 6-inch guns are in no way inferior to our KUMANO class ships, and the ATLANTA class vessels are superior to our ISUZU class. In three more years America will be in possession of 50 cruisers with a total displacement of 450,000 tons, including the above mentioned light cruisers as the main force. "The same improvement will be accomplished with destroyers types and within three years new destroyers numbering 144 units displacing 228,000 tons will be in service. The existing destroyer strength consists of 223 vessels of which modern units do not ex- ceed 52. Thus, by 1942 American destroyer strength will be trebled. "In the same manner large submarines capable of overseas operations will be increased to 56, with a total displacement of 82,000 tons which is more than twice the existing strength. "The question is what will be Japan's naval strength in 1942, when the American construction programs are corpleted? "Provided that the existing comparative ratio is now 5 to 4, how much building will be necessary to maintain the ratio? Or, is the necessary construction already in progress? We should re- member that the silent construction race is going on. Report No. 21-40 81 F.N.LM ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OP NAVAL OPERATIONS, NAVY DEPARTMENT ATTACHE'S REPORT 7206-S 0-12-C BITER copies cortginal and six this sumber to MMMT I of the Mailed personal is 0. N. L and benes of the for quisity desmission information true Them expire will be distributed by 0. N. L - - of devision, amording to missins nails. From NA/Tokyo Date Feb. 15 1940 Serial No. 22 File No. 902-100 - arte School proper assister - January Ind Irom d. M. Indiana) Source of information Subject Japan Policy - Basic Diation reported - (Inder title - - Inder Reference review, Indering, and distribution of reporte by o, M. 1. vill be gratty appetited If . brief number) of the - la I is - apace. Mention leading peopriphical, personal, - politions - and the - of like No Changes in Japanese Naval Programs to Reault from Latest American Program Japan will not increase or change her building program as a result of recent proposed increases in the U.S. Navy. Her present program was formulated after considering previous American programs and whatever changes may be necessary will be made after further study has been given to the latest American program. - - I - - I #. Chest - of - - - - - - - - - - - . - - - - - - - - - aons A-B-G-D-E Mano ⑇ U.S. Destriber ARRAMAL F College a B. Nov. Ond CAR I LAL M.A.S. les N.O. 1 I I M.C. Tech chc s Com. chc Com Cos. - et 1 - 3 Return to Der. U.S. M. Pm. 1 1 Asia III Alle Can Die. W.P. Com. R.T. - Room Ms. 2 Das forms for all copies, Das only forms as supplied by O.N.I. Make all statches, - is - with this hrs when pretical. Bubmit estra copies of displage, carbone of skatches, sis., where If pranticable, submit sizetches is styles for biseprinting of photostacing. PRINTING since ! heport No. 22 900 - Navy Japan 902 - Policy February 15, 1940 100 - Basic No Changes in Japanese Naval Programs to Result from Latest American Program The concern with which the Japanese press and people have received the reports of the contemplated increases in the American Navy have been reported to the Department. This concern appears to be genuine and widespread. However, according to statements reported to have been made by the Naval Minister in the Budget Committee of the Diet, the Japanese Navy does not propose to make any changes in the building program already drawn up - at least not for the present. Vice Admiral Yoshida stated that while the latest American expansion program was scheduled for completion within the next two years there was considerable difference between beginning a program and finishing it. Japan will therefore not have to begin a counter-program immed- iately but can watch developments, receive more complete and detailed information, make certain studies and then formulate her own building program to meet her own needs. The Naval Minister also intimated that Japan's present program is based on the previously approved American programs and that if the funds for continuing this program are approved, the Japanese people can face the future with confidence that their Navy is sufficient for present needs. In discussing the Navy section of the China Incident Bud- get, the Navy Minister stated that the ¥737,000,000 which was re- quested was to be used for the maintenance of vessels, transports, air units and landing parties in China - including pay, purchases of munitions, clothing, food, fuel, general supplies, emergency repairs to vessels, and grants to war dead. He withheld further details in order not to reveal "strategic secrets" and made no mention of the use of China incident funds for naval construction purposes - a use to which a considerable portion of these funds is being diverted. Report No. 22-40 N.L.N ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF FE NAVAL OPERATIONS, NAVY DEPA' "MENT ATTACHE'S REPORT Perved - empire cortained and als this somber to - - of the Intel personal is 0. X. 1. and - of the - for quietly discominating information - attachés. These sepins - be distributed by o. H. L - per - to - From NA/Tokyo Date Feb. 16 19.40 Serial No. se File No. 100-108 (Comptimes - arte I I I Source of information Various I 1 I 0. Indied Subject Japan Political - International relations (Nation reported ea) Clades Mile - per Index sheet) Reference (The redew, indecing, and distribution of reports by o. M. will be graily aspetited If a beld number) of the estasts b estend is - apace, Mention lending peopliphical, personal, of politival - and the give of the nipar(.) General Intelligence Summary - International Relations Japan's international position is a difficult one, and it appears to be getting worse. The Japanese are worried 10- cause they do not know what to do to improve it. - - - - le - N.L. - - of - - - - - Billys - - - - - - - - - - - - - - uas A-B-C-D-E HRHKHHL I And I C.M.O. Ges't Ww Board KLB. Nov. TO LIA CAR LAL U.S. Irea / MAS N.O. 1 College 1 N.C. 1wk chc Can. Con. C.N.C. Com. Com. - all Operations i I Return - Der U.S. Bet. Pm. 5a. Per. date all Ab Ca. Div. W.P. g An Th. I 7 I Das forms for all Use only forms M supplied by O.N.I. Make all - vallure in - with this form when pratical. Bubmit estra copies of elippings, earbone of skatebes, see, when practical. If presticable, submit signature is suitable styles for bineprinting - photosticing ! I I I : 11399-0,C-10-i Report No. 29 Japan 100 - Political February 16, 1940 103 - International relations General Intelligence Summary - International Relations The most pressing international problems which now face :0 Japanese Government, aside from the problems arising from the nostilities in China, are the adjustment of relations with the United States and with Soviet Russia. During the past several months the Japanese have made verious attempts to improve relations with the United States so that a Treaty of Commerce and Navigation might be negotiated and at the same time to remove various points of friction between Japan and the Soviet Union. So far these efforts have met with indifferent success. Not only has Japan's international posi- tion shown no improvement but with American-Japanese trade relations being placed on a "twenty-four hour" basis, it appears to have weaken- ed considerably. The uneasiness and uncertainty of the future of Japan's relations with foreign countries has been reflected in the interpell- ations in the Diet, in the press and in the general conversation of the people. There is a deep undertone of anxiety in regard to the present situation, both internal and external, and certainly one of the greatest causes for this anxiety is Japan's precarious internation- al position. This is a period of crisis in Japan's history, and from the Japanese standpoint this crisis is made worse by the fact that nobody in Japan seems to know what to do to meet it. Japanese-Chinese Relations: Japan's international difficulties spring from her pro- blems in China. During the past two and a half years she has spent 16% billion yen and lost several hundred thousand of her best citi- zens in trying to carve out an Empire on the continent. So far she has failed and to make matters worse she doesn't know what to do te insure success. Greater militery efforts are possible, but they cannot be exerted without running grave risks of internal trouble and dissention. Present militery efforts have proved inadequate and no retreat is possible without endangering her hold on Manchoukuo and Chosen. Recent Japanese military efforts have been designed to inflict severe damage on the remaining Chinese ermies rather than to occupy territory. Drives to the west of Paotow into Inner Mongolia, to the north of Canton and to the west of Nanning have been made, and in each case the Japanese have withdrawn - for no good reason ex- cept that the forces used were not strong enough to defend the ex- tended lines of communication. No real progress has been made since the capture of Nanning. Other Japanese efforts have been designed to cut the remaining supply routes to the interior of China and in this, greater success has been attained. The recent attacks on the Yunnan railway seem to have destroyed for all practical purposes the most important remaining route. Further attacks on this line and the roads from Indo-China can be expected, and if the "incident" is not settled soon, attacks on the Burma road and on the overland routes to Soviet Russia can be expected. The Japanese public is putting great faith in the new cen- tral Government about to be formed under Wang Ching-wei. They be- lieve that the peace terms revealed in Hongkong early in January are approximately correct. Unfortunately for Japan the acceptance of these or any other terms by & new puppet government, will not create the stability and security necessary for economic and political re- construction. Japan must continue to lose men and to spend money in China - because if she does not she will find herself reduced to a second or third rate power and she is not yet prepared to admit de- feat. Report No. 29-40 218 Report No. 29-40 - 2 - Japanese-American Relations: The Japanese do not know what to do about their relations with the United States. They realize that it is essential for Japan to continue to export silk and other products to America and to have American raw materials available for their use and now they find hemselves in the position of being assured of neither of these essentials. The action of the United States in terminating the Treaty of Commerce and Navigation has left Japan without any such assurance whatever. The Japanese Government, the Army and the people are genuinely alarmed - in spite of bold announcements that Japan will not give in to outside pressure. If it is the considered policy of the United States to do everything short of going to war to have the Japanese continental program fail, the present policy of "non-cooperation" with Japan will be continued. Each month finds Japan becoming weaker and weaker - economically, financially, socially and militarily - and each month finds her farther and farther from her goal in China, provided Chinese resistance does not collapse completely. It might even be to the advantage of the United States to give greater assis- tance to China financial, material and moral, in order to increase China's ability and determination to continue the struggle. Many Americans appear apprehensive that such a course will eventually lead to hostilities with Japan, but it is believed that such a risk is very remote. Other countries - Soviet Russia, Great Britain, France, Germany and Italy - have supplied China with materials, money, technical assistance, etc., and have not gone to wer with Japan. The United States can do the same without taking undue risks. Other Americans believe that Japan and Soviet kussia may combine and agree to split China up into spheres of influence. This of course is possible but effective Soviet-Jepanese cooperation for any great period of time seems to be entirely out of the question. The aims of these two nations in the Far East are too far apart for that to come about. Japanese-Russian Relations: Japan's relations with Russia are better now than they have been for a number of years, but they are still far from satis- factory. Late last year a modus vivendi extending the validity of the fishery agreement for another year was signed and trade discussions aiming at a trade agreement between the two countries are being held in Moscow. On the other hand the border negotiations held at Chita and Harbin ended in failure and the problems connected with the Japanese leases in Karafuto remain unsettled. There can be no doubt however that there has been a recent improvement in relations between the two countries - as evidenced by the lack of the usual charge and counter-charge when the Harbin conference broke up - but at the same time there has been no positive or complete rapproache- ment. The fact remains that it is to the advantage of both Japan and Soviet Russia to compromise their differences to the extent or avoiding a repetition of the Nomonhan and other border incidents, and to restore normal trade relations between the two countries. This can be done without bringing up such controversial questions as Russian assistance to China, conflicting interests in Inner and Outer end Mongolia and the anti-Comintern Pact. It is probable thet in the the it will be done, to the mutual advantage of both countries. At not seme to mention an alliance (as advocated by certain Japanese redical time it appears most improbable that & genuine rapproschement, elements), will be brought about in the near future. Report No. 29-40 9 Report No. 29-40 - 3 - Japanese-British Relations: Japan's relations with Britain continue to be bed, and the prospects are that they will remain bad until the China incident is settled one way or another. An important part of Japan's continentel program is to eliminate foreign interests from the Fer East end the nation with the greatest interests - Great Britain - happens to be he country which is the most vulnerable and least able to strike back. Japanese attacks on British interests could be expected for this reason if for no other. There are many Japanese who feel that this policy - which is really an Army-Navy policy - is a mistaken one and that it is in Japan's best interests to restore good relations with Great Britain in order to prepare for the eventual struggle with Russia. However, just as the work of this group begins to show cer- tain results a Tientsin incident or an ASAMA MARU affair happens and the relations between the two countries deteriorate again. Public feeling in Japan toward the British will not improve for a long time to come. Relations with other Countries: Since Japan, at the present time, has adopted a policy of "independent and autonomous" diplomacy based upon her need to dispose of the China affair, her relations with countries other than China, the United States, Soviet Russia and Great Britain depend entirely on the attitude these countries take toward the new situation in East Asia. The anti-comintern pact has not been abrogated, since to do so might antagonize Italy, and feeling toward Germany has con- tinued to be generally favorable in spite of the German- Soviet rapproachement. Various problems between Japan and these other countries remain but they are of minor importance. Among these are the disagreement with France over the bombing of the Yunnan railway which may make the negotiation of 8. new commercial pact between the two countries difficult and the termination by Japan of the Treaty of Arbitration and Conciliation with the Netherlands. These are, however, relatively unimportant compared with other problems facing all of the countries concerned. Report No. 29-40 120 N.N.L.S ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT ATTACHÉS REPORT 21848, c-10-m quality titermation Ins - These explaine will be - distributed by o, - - - or - - the - of the - - Perved I - comples - de - member . - Y - - MAY 6.1940 for From NA/Tokyo DateMarch 28 1940 Serial No. 47 12 200 - - I - Observation. I 1 [ Indian) Source of information 9 Subject Japan Social 4 (Nation reparted on) (Inder title - - - these) I Reference review, Indesting, and distribution of reports by 0, vill to puly applied If . beld - I in the spon. Mention leading geopraphical, personal, or political - and the - of the - General Intelligence Summary - Social SOCIAL UNREST INCREASING Social unrest in Japan is increasing as a result of inflation, commodity shortages and high costs of materialsl The Japanese people are beginning to complain more openly, and what is worse there are thousands of violations of Governmental economic regulations. There appears to be no doubt that the "spiritual mobilization" campaign to make the people endure hardships to bring about the conclusion of the China Incident has not been completely successful. The desire to make a personal profit from the Incident is much more in evidence than the desire to endure hardships. - . - - - - - I - - I - - - 1 - - - I I - - I - - ADN ABCDE I Garl Ye E C.N.O. AD Ma. 1 MA CAR I SAL MAR U.S. Bard F M.C. N.O. Director 1 - Tesh Con. Can. - al - cwc c. 3 cbc Com - Cam- les - Dwn. U.S. Bei. Fax. 1 Ade ILL All Can Dia. W.P. Can. AD - / Γ of elippings, nurbone of abotation, - where If presticable, when skatches is antiable styles for bineprinting or photostating. Use forms for all copies. Das only forms - supplied by O.N.I. Make all - - in - with this form visa practical. Bubeit eta espier - PRINTING - ! Report No. 47 Japan 200 - Social Laroh 28, 1940 General Intelligence Summary - Social Social Unrest Increasing. Throughout Japan today there is an undercurrent of dis- satisfaction with the policies of the government and the results of the "Holy War", particularly concerning the economic conditions pertaining to daily livelihood. This does not necessarily connote that a revolution, or mass uprising, is in the immediate offing, but as an indication of the elastic limit of Japanese petience and ability to maintain a united front at home, it explains the subtle murmurs and less concealed outcries of all classes against being pushed too far by a government frantically endeevoring to terminate the Incident. Well known are the hardships imposed upon, end ably car- ried by the great mass of the Japanese people. During the past win- ter there has been F. marked shortage of daily necessities such as coal, charcoel and P88 for heating purposes; cotton and wool for clothing are largely unobtsinable at any price; automobiles end gaso- line are under such severe restrictions that they properly may be considered symbols of the wealthy, and the transportation systems in general have suffered E. considerable decrease in both efficiency and accomodation. Matches and beer are being rationed, food supplies are hoarded and sold at double the officially "fixed" figures, and the cost of any mentioned article has risen, officially by about 40%, actually by about 100% over the level of last year. Paper money is plentiful throughout the nation end there is an apparent, though mis- leading, internal prosperity. This has been ocused by a sharp in- crease in the note issue of the Bank of Jepan, heavy excess govern- mental payments with a corres onding inflationary trend and & terri- fic rise in commodity prices and the cost of living. Had wages risen in proportion to the mounting commodity prices the populace would have had few grounds on which to base com- plaints. But the government, by invoking the verious articles of the National Ceneral Mobilization Law, attempted to stabilize wages at pre-incident levels, meanwhile sanctioning some increases of commodity prices by a succession of official edicts. The differ- ences between the two levels has already caused considerable hard- ship to the portion of the populetion who are factory workers, office workers and otherwise employed in fixed salary positions. Labor disputes, principally over wage problems, have mounted to alarming proportions - so much so that even the well controlled press is be- ginning to take. notice. The following appeared in the Tokye Kokumin recently: "The labor disputes are becoming serious. There are indi- cetions that loborers, including ordinary factory workmen, skilled laborers and techniciens, will sabotage when forced to do so un- less some measure is devised quickly to prevent it. Should the Government feil in seeing to it that these fectories and firms devise appropriate measures to cope with the situation with which they are confronted at present, serious results will follow." According to information from reliable sources, there have been five separate, minor outbreaks in the northern prefectures of Honshu during the past six months. The general causes were a short- age of rice, lack of food and materials and the reactionary police supervision of distribution. The men involved were sent to Chine for "field service", and it is expected that feww will return. The Japanese are noted for their quick and forceful suppression of any disturbances. In Fukunka there was 8 rice riot involving nearly & thousand people, not long ago. It was ably quelled with the pre- vailing stern measures. Report No. 47-40 37 Report No. 47-40 - 2 - In talking with small shopkeepers, after their confidence has been fained and a promise made to keep information from leaking to the police, it has been learned that thousands of small business- men have been forced out of business by lack of commodities to sell. No replacements for certain stocks have been forthcoming and when the available supply has been exhausted no other alternative remained but to close. Any recriminations, any bitterness voiced aloud was a sure signal that a police officer would shortly call upon the store- keeper and demand an explanation. To the question, "What is there for me to do?", the usual and obvious answer is always, "Go to Manchoukuo". A ticket (one way) is provided free by the authorities to the family. However, the Japanese apparently have no great de- sire to leave the poor comforts of their homeland to seek their for- tunes in the cold discomforts of an alien land, for the percentage of men and their families going to Manchoukuo is small and generally forced. Consequently, the men are coerced into factory labor to sup- port their femilies. And if their wages are not sufficient to do this properly, it is reasonable to assume that they remain dissatis- fied. Soldiers returning from the front in China will prove among the most troublesome sources of unrest in Japan. Japanese in- formants state that the soldiers are disgusted at the misinformation printed in the daily newspapers concerning the China Incident, casualties, and the glowing accounts of Japanese victories. Dis- seminating a correct interpretation of occurences on the continent will further the people's distrust of the propaganda smothering the country. Educated and thinking menend women throughout the nation are already openly asking why, with the unbroken stream of glorious victories featured by the press, the Imperial forces have not suc- ceeded in terminating the Incident and setting up the New Order in East Asia. The recent statements of the Premier and the War Minis- ter in the Diet, calling for the renewed determination of the people to withstand a lengthy period of hostilities have served to heighten the general and widospread apprehension and uneasiness. It is difficult at this time to judge the ultimate effects of this increasing social unrest which prevails throughout the coun- try. So far, it has not reached alarming proportions, because, while the general economic situation is becoming more serious, it is not yet desperate. The Government is taking great. precautions to keep the general public from knowing exactly what is going on and being done to "stabilize living conditions". Vague statements, meant to be resssuring, are issued periodically by Government offici- als and these are generally accepted, but there is no doubt that the Japanese people are becoming more and more skeptical as the incident drags on and commodities become more and more scarce in spite of Government pronouncements. The Japanese have always boasted that the nations spiritual power and patriotic sentiment was sufficiently great to enable the nation to meet any possible crisis and to endure any hardships with an indomitable spirit. The thousands of viola- tions of the Government's economic regulations, the widespread hoardings of commodities in spite of the national spiritual mobili- zation propaganda, the willingness with which all classes of people attempt to profit by the Incident lead to the conclusion that the successful conclusion of the China Affair is not yet of sufficient importance to the great masses of the people to cause them to endure great hardships willingly. If the Japanese mainland were being in- vaded there would be no question about the national morale, no matter how great the hardships, but the success of the China cam- paign and the setting up of the New Order in East Asia are another matter. Even the well disciplined, docile and easily lead Japanese are beginning to complain. If this year's crops are good; if com- modity prices and wages are adjusted; if the shortage of consumer goods is remedied; if the electric power problem, the coal problem and the rice problem, are solved; and if more interest can be aroused in the China affair, the authorities will be able to prevent the 88 Report No. 47-40 Report No. 47-40 - 3 - present social unrest from reeching serious proportions. However, needed at home is continued and if the China incident continues to if the crops are poor; if the policy of exporting commodities badly be a serious drain on the nation's treasury much longer, the com- plaints may change into something more serious and the undercover opposition. opposition to the Government's policies may change into more active Report No. 47-40 89 N.N.I.M ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT 22704 Caren ATTACHE'S REPORT D-11-a Pared MTHS copies original and als ourboas); this sumber - because of the Instad personal is O.N. 1. and hangle - for quality information from eltachée. Them copies will be distributed by 0, N. 1. - par of amording - mader. From NA/Tokyo Date April 4 1940 Serial No. 49 File No. 302-200 (Ompany - arte anster Source of information Official Gazette Limit I 1 Index) Subject Japan Finance - Budgets - Navy OF (Nation reported on) (Inder title - per Inder shart) LIGENCE Reference Daier-(The review, indesing. and distribution of reports by o, N. will be gradity espedited If a brief summary of the materials la setured is the space. Mention inding geographical personal, of political and the per of the repert.) Japanese Naval Budgets - Fiscal Year 1940-41 The Naval Budget for the Fiscal Year 1940-41 as announced in the Official Gazette totals ¥1,766,039,570. The published figures give no details of the Budget, but it should be noted that increased funds are appropriated for ship construction, improvements to yards, the expansion of the air force and operating expenses of ships and stations. The amounts for ship construction will be greater in 62 1941-42 and 1942-43 than for the present year. - - I - for - - - - - - - A-B-C-D-E F We F C.N.O. Ges't N.L.D. Non, OnL tax CAR I S.&.A. M.A.S. 1 U.S. Director gruph I Board Fife x M.C. N.O. Twis CWC Cop. Com. C.W.C. Com. Attached of Operations Cam 3 les to State Der, U.S. Bet. Fer. Sea. Fm. Asia 1.1.1. AM Can Die. V.P. Com. PLT. - I 7 Use forms for all copies. Cas only forms M supplied by o. N.I. Make all - ta sise with this form when practical. Robeit explaine of dipping, carbosa of sketches, etc., where preciosi. If presticable, submit signature in suitable style for blusprinting or photostäting. .. DEVERSMENT PRINTING OFFICE ! Report No. 49 300 - Finance Japan 302 - Budgets April 4, 1940. 200 - Navy Japanese Naval Budgets - Fiscal Year 1940-41 Following approval by the Diet certain details of the Government's basic general budget and supplementary budgets were promulgated in the Official Gazette. These details are given below. A. Basic General Budget NAVY Ordinary Account. Budget Budget 1. Navy Department Proper 1940-41 1936-40 (a) Pay 673,088 511,760 (b) Office expenses 281,549 231,794 TOTAL - Navy Department Proper 954,637 743,544 2. Military Expenses. (a) Pay 72,301,282 63,623,145 (b) Office expenses (furniture, postage, stationery, hauling expenses, telegrams, cables) 2,566,258 1,729,229 (c) Miscell. pay and expenses (foreign and domestic travel, employees pay, subsistence and quarters allowance, entertain- ment expenses, etc.) 8,999,473 7,284,939 (d) Expenses for food and clothing 35,836,545 30,590,339 (e) Ship construction, ordnance manufacture and repairs (in- cludes purchase airplanes and aviation equipment) 151,934,704 119,055,802 (f) Expenses for maneuvers 911,845 715,349 (g) Care of patients 1,775,011 1,606,895 (h) Upkeep of Naval Ports 1,293,331 1,200,698 (1) Operating expenses of ships and stations 61,875,049 50,636,734 (j) Hydrographic expenses 2,126,099 1,815,385 (k) Miscell. training expenses 3,209,650 2,535,417 (1) Aid to families of enlisted men 1,262,951 1,157,765 (m) Subsidy to employees' mutual aid guild 5,265,111 3,561,220 (n) Expenses in connection with prisoners 12,109 11,338 (o) Confidential fund 99,300 63,300 TOTAL - Military Expenses 349,468,658 285,587,555 3. Miscell. Expenses (discharge allow- ance, special death gratuity, accident allowance, etc.) 875,166 884,896 TOTAL - ORDINARY ACCOUNT 351,298,461 287,215,995 Extraordinary Account, 1. Ship construction expenses 359,652,069 299,874,625 The above item is a continuing expenditure. Future annual allo- cations of funds are as follows: 1941-42 - ¥390,836,000 1942-43 - 384,185,000 1943-44 - 290,080,000 1944-45 - 62,330,000 Report No. 49-40 Report No. 49-40 - 2 - A, Basic General Budget, continued NAVY, continued Budget 9udget Extraordinary Account, continued 1940-41 1939-40 2. Additions and improvements to shore stations (a) Office expenses 3,070,680 1,990,500 (b) Naval dockyards, additions and improvements to 117,806,046 65,435,234 (o) Facilities and equipment for various defense corps 23,850,400 13,600,850 (d) Miscell. equipment for Naval ports 5,998,200 4,021,000 (e) Expenses of training facilities 13,034,258 6,488,992 (f) Expansion of hospital facilities 1,574,600 743,740 TOTAL - Item 2 165,334,184 92,280,316 The above item is a continuing ex- penditure. Future ennual allocations of funds are as follows: 1941-42 1942-43 1943-44 1944-45 Office Expenses 2,854,790 1,642,470 715,030 368,470 Naval dockyards, addi- tions and improvements to 95,454,724 55,275,520 30,500,170 28,705,630 Facilities and equipment for various defense corps 23,445,600 11,533,600 5,011,600 3,150,400 Miscellaneous equipment for Naval Ports .... 5,481,286 3,626,990 2,938,200 1,190,500 Expansion of training facilities. 10,094,500 3,024,120 Expension of hospital facilities 2,724,100 1,745,300 Budget Budget 1940-41 1939-40 3. Expansion of Naval Air Force 80,891,489 65,373,155 The above item is a continuing ex- penditure. Future annual allocations of funds are as follows: 1941-42 - ¥79,820,000 1942-43 - 73,884,000 1943-44 - 29,600,000 4. Alteration, repair and equipment of vessels (a) Modernization of ships 26,400,000 40,717,000 (b) Special repairs to ships 14,100,000 12,795,000 (c) Replacement of submarine storage batteries 1,721,904 1,728,424 (d) Construction of miscellaneous boats 782,000 790,000 TOTAL - Item 4 43,003,904 56,030,424 The above item is a continuing ex- penditure. Future ennual allocations of funds are as follows: 1941-42 - ¥18,667,000 1942-43 - 6,269,000 1943-44 - 4,000,000 1944-45 - 4,000,000 5. Replenishment and renewal of military stores 11,017,000 7,864,000 Report No. 49-40 Report No. 49-40 - 3 - A. Basic General Budget, continued NAVY, continued Budget Budget Extraordinary Account, continued 1940-41 1939-40 6. Construction and repairs to buildings 269,362 239,062 7. Expenses of trial digging of naval reserve oil field 570,000 760,000 8. Work to be performed by Navy for other government departments 770,569 160,129 9. Making charts for public sale 172,356 146,962 10. Research expenses Research in engines and ordnance 6,052,684 5,430,000 11. Gratuities (a) Lump sum payment 340,040 283,040 12. Japan's share of International hydrographic expenses 2,875 5,579 13. Restoration of earthquake damages 200,000 200,000 14. Despatching vessels to northern waters 680,000 180,000 15. Making meteorological charts of upper air currents 49,663 49,663 16. Increase in allowance due to apprecia- tion of foreign currencies 740,478 537,865 17. Expenses for ordnance equipment for training purposes 2,000,000 2,000,000 18. Amount transferred to special account to replenish circulating capital of Navy Yurds 5,900,000 500,000 TOTAL - Extraordinary Account 677,646,669 366,726,767 Ordinary Account 351,298,467 287,215,995 TOTAL - Basic General Budget 1,028,945,136 653,942,762 B. First Supplementary Budget NAVY 1. Military Expenses (a) Miscell. pay and expenses 49,778 (b) Subsidy to employees' mutual aid guild 8,281 (c) Miscell. expenses 36,381 TOTAL - Military Expenses 94,440 C. Extraordinary Military Expenses The Official Gazette gives the following information concerning this budget: Army 2,973,000,000 Navy 737,000,000 Reserve fund 750,000,000 TOTAL 4,460,000,000 Report No. 49-40 93 Report No. 49-40 - 4 - SUMMARY OF ABOVE BUDGETS: NAVY: General Basic Budget Ordinary account ¥ 351,298,461 Extraordinary account 577,646,669 First Supplementary Budget 94,440 Extraordinary Military Expenses 737,000,000 TOTAL - NAVY 1,766,039,570 Report No. 49-40 74 W.N.I.M ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONE, NAVY DEPARTMENT MAY 20 1980 ATTACHE'S REPORT 7525-I F-10-2 12 Newd MYSE supire cortginal and als this sumber . - because of the beined personal is O.N.L - If for quickly deministing information tra attachle. Times expire will be distributed by 0. N. - - foolacte of alsowbers, to From NA/Tokyo Date April 22 1940 Serial No. 61 File No. 9024280 - aeries (Select bumber - January And - M Index) Source of information Reliable Subject Japan Navy - Organizationava: Fleats; (Nallen reported en) (Inder sitle - per Inder sheet) Reference (The review, Indexing, and distribution of reports by O.N.I. will be grattly expedited if . brief summary of the contants la entered is this space. Mention lesting geographical, personal, or political - and the per of the report.) 0 Japanese Combined Fleet - Organization This organization of the Combined Fleet shows no great change from previous years. Two additional capital ships and four additional heavy cruisers have been added to the Fleet. 63 REQUESSIFIED E.O. 11652, Sec. 3(B) and B(D) MP 6 OSD letter, May a, 1978 Ehr RT, NARS Date MAY 21 1973 - - - - for M.S. - of - - - - - - - - - - - of - - - - - - - - - A-B-C-D-E F I GesT : Destribe - { C.K.O. M.I.B. 1 1 T.S. CAR I S.A.A. MAS Awa U.S. N.O. - I Board F N.C. B-12, B-11, B-15, Two cmc 3 3 c.b.c. Com. Cash America at Operations De- vota Came less to Dw. U.S. F Bei. Pm. 7 T Asia and E Ca. Dis. W.P. Com. M.T. - 7 Γ Use forms for all copies. Use only forms - supplied by 0. N.I. Main all statebes, - - in ates with this form when practical. Babeit extra copies of clippings, nurbose of skatobes, where practical. If practication, when statches in rultable signe for blueprinting or photostating ** GEVERNMENT PRINTING - ! Report No. 61 900 - Navy Japan 931 - Organization April 22, 1940 200 - Fleets Japanese Combined Fleet - Organization The following ppears to be organi-ation of the Japanese Combined Fleet, thich is now holding aneuvers between Formosa and the Mandate Islands. This Fleet was in Amcy on 31 !arch, 1940. Combined Fleet: Mutsu (F) First Flest: Batdiv One - l'utsu (F), Nagato, Ise Batdiv Three - Hyuga (F), Kongo, Kirishima Batdiv Five - Eiyei (F), Haruna Desron One - Sendai (F) Desdiv Eleven - Yiyuki, Shirayuki, Hatsuywki Desdiv Twenty Four - Kawakaze (F), Unikaze, Yamakaze, Suzukaze Subron One - Abukuma (F) ? Taigei Subdiv Eight - I-5, I-4, I-6 Subdiv Thirteen - ? Subdiv ? Airon One - Akegi, (F), Ryujc Desdiv Sixteen - ? Second Fleet: Chokei (F) Crudiv Four - Chokei (F), Maya Grudiv Five - ! ikumc. (F), Suzuya, Kumano Crudiv Six - Chikums, Tone Crudiv Seven - Aoba, Kinugasa Desron Two - Xune (v) (?) Desdiv Six - Eibiki, Ikazuchi, Inazuma Desdiv Seven - Ushio, Obero, Akebone Desdiv Eight - Amagiri, Asagiri, Yugiri Subron Two - Isuzu (F) (?) Subdiv Eleven - , Subdiv Twelve - I-68, I-69, I-70 Subdiv - Airon Two - Soryu (F), Hiryu Desdiv P. Report No. 61-40 ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF A-1-9 16224-E OF NAVAL OPERATIONS, NAVY DEPARTMENT WAY 20 man ATTACHE'S REPORT If 12 Permet - - - and da - - sombe . - - of the - personal is 9. - - for - - The copies vill be by o. N. L - - - - to 1 9 From NA/Tokyo Date April 22, 22 1940 Serial No. 63 & No. 1600-1006 - are - I I 1 7 Source of information Official Gazette Indias) 6 DE or Subject Japan Aviation (Haties reported - (Inder citle - per into alood) REORIDED Reference review, Indesing, and distribution of reports by o. N. will be gradity appedited If a brief number) of the contents to entared is - space. Mention leading peographical, personal, or politions - and the - of the repart.) Civil Aviation Items - Budget Fiscal Year 1940-1941 The total amount appropriated for oivil aviation in the 1940-1941 Budget is ¥50, 334, 540. While part of this is for non-military aviation, it 1a believed that the greater part is for the prupose of developing military aviation. - - - - - - - of - - - - - - - - - - - of - - - - - periodo - --- ABCDE Γ Wer F C.M.O. KLR 1 OnL T.S. CAR 1 S.G.A. M.S. U.S. Aire, N.O. Director push If I M. M.C. Took сьс Com. Com. & E 3 CNC Com. Operations State Case Return to Des. C.&. & Bat. Fee. Sex. Fe. Ade ALL F Can Die. W.P. Com. A. - - Ma. Das forms for all copies. Cas only forms - supplied by o. N.I. Make all skatches, where in - with this form where practical. Bubmit extra copies of dippings, carbone of skatobes, ste., when production. If presticable, submit skatches in styles for bluegrinking or photostating ... envos - Report No. 33 1000 - Aviction Japen 1006 - Commerciel April 22, 1940 Civil Aviotion Items - Budget Fiscel Year 1940-41 The following is a resumé of the amounts appropriated for civil avietion in the basic general hudget for t.e fisc. 1 year 1940-41. It is clear the the proper place for most of these expenditures vould be under the Army or Navy hudgets. For example, the items "Training Institute for ilots - ¥1,621,106", and Expenses for establishment of training facilities for pilots - ¥10,757,089 is obviously intended to aurment the training fecilities for Army /ná Frvy pilots. Expenses for the Avition Research Letoratory ¥491,686 and ¥3,595,556 is no doubt used as e source by the militory for developing militory airplanes. The items, "Subsidies for establishing air defense facilities" which adds up to a considerable amount is a purely military undertaking. Summing up, it may be said that the civil avietion items oppeering in the Budget for the Fiscal Year 1940-1941 are intended almost solely for the development of military avietion. Department of Jonmunic tions: Ordinary Account: Aviation Bureau ¥ 1,075,063 (a) Pay ¥323,053 (b) Office expenses 751,211 Training Institute for aircraft crews 1,621,103 (a) Pay 82,074 (b) Expenses of vork performed 1,539,032 Centrol Aviation Research Laboratory 491,506 (a) Pay 36,481 (b) Operating expenses 425,205 Extraordinary Account: Air Transportation Subsidies 10,882,000 Aviation subsidies 1,189,837 Subsidy for improvement of flying fields 1,380,177 Expenses for establishment of flying fields 2,000,895 Expenses for establishing fecilities for aviation tests 100,000 Expenses for establishing facilities for sefe flying 570,000 Expenses for encouropement of the aviation industry 4,200,320 Expenses for making preparations for opening international Fir routes 13,238 Expenses for establishment of training facilities for pilots 10,757,089 The above item is a continuing program details of which follow below: 1941-42 - 16,114,411 1942-43 - 9,150,000 Expenses for establishing Central Aviation Research Laboratory 3,595,556 The above item is e continuing program details of which follow below: 1941-42 - 14,028,956 1942-43 - 16,470,000 1943-44 - 1:,660,000 1944-45 - 5,293,400 1945-46 - 3,000,000 1946-47 - 3,400,000 Report No. 63-40 Report No. 63-40 /2/ Department of Home Affairs: Subsidies for establishment of Air defense facilities ¥ 5,245,477 Sucsidy to Japen Air Defense Association 100,000 Subsidy to air defense corps 1,300,000 Department of Education: Expenses for establishment of aerological observation frcilities 12,500 Experimental expenses for unifying avirtion research 50,000 Korean Covernment General: Aviation subsidies 72,523 /.1r Transportation subsidies 649,354 Formosa Government General: Air transportation subsidies 1,948,000 Civil avistion subsidy 30,000 Subsidy to air defense association 20,000 Subsidy for aircroft repairing industry 120,000 Improvement of Taihoku air field 205,000 Establishment of Toihoku No. 2 air field 350,000 Saghalien Prefecture: Expenses for establishment of flying field 300,000 Air defense expenses 124,287 South Sea Islands Prefecture: Establishment of aircraft communication facilities and other facilities 1,186,225 Establishment of facilities for air routes 512,174 Total ¥50,334,540 Report No. 63-40 99 CM INSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIP 7206-5 OF NAVAL OPERATIONS, NAVY DEPARTMENT 0-12-C ATTACHE'S REPORT MAY 20 a information - The - will be corributed by o, H. L - per Informato - - have - - / - als - - sember be - I of the - I is O.N. L and I of as - for If From NA/Tokyo Date April 25, 1940 Serial No. 70 % No. -100 (Ompanymento - - Source of information Naval Attaché I 1 I employer Indies) 4 Subject Japan Navy - Policy Basio Naval Policy (Hatim reparted ea) (Inder - - per Inter alient) again OF Reference IGENCE review, toducing, and distribution of reports byO.N.I. will be gratily expedited If . beld authory of the R la entered in - space. Mention landing pregraphical, personal, of politived - and the - of the repart.) Japan's "Naval Secrecy" Policy Japan will probably continue to keep her naval building programs secret. - - - - - . - - of - - - - - I - - - - of - - - - - - - - - ADM ABCDE Mine- é Carl : E C.K.O. M.C. 1 Ond T.S. CAR / LAL MAR Aes. U.S. Director 1 I College F I M.C. J N.O. ACH I all 1 Tack chc & Com. cac Com & 1 Case- Return to Dr. U.S. Bal. Fee. 3a. Pm. Ade and Air Can Dia. W.P. 1 R.T. - 7 Γ Use forma for all copies, Das only forms - supplied by O.N.I. Males all sizetchen, a sollons in - with the form visa practical. Submit extra copias of dippings, nurbose of sketches, as. when practical. a practicable, submit skatches in rultable styles for biospriating or phosostating. 1.1. . PRINTING arrice ! Report No. 70 Japan 900 - Navy April 26, 1940 902 - Policy 100 - Basic Naval Policy Japan's "Naval Secrecy" Policy As has been reparted to the Department, the official re-action in Japan to our proposed naval building program is that while Japen is gravely concerned about any expansion of the United States Navy, there is as yet no need for enxiety, since the Japanese Navy is "strong enough to cope with any situation". The Japanese Navy Department realizes that in preparing Japanese Naval estimates they have 8 very great advantage over the United States, since our future programs are widely debated long before they are approved and the vessels authorized are laid down. However, another important reason for the comparative calm with which our latest programs are received here is that the Japanese Navy is already engaged in a the Chief of Naval Operations on 15 April to the Senate Naval huilding program which is at least ES large as that reported by Affairs Committee. Admiral Stark's estimate of eight battleships, four aircraft carriers, eight cruisers, thirty-two destroyers and tventy submarines is believed to te a conservative one. With this program in hand, the Japanese do not need to be "al/rmed" for the time being. There has been a suggestion that as a result of Admiral Stark's statement regarding the Japanese program, and probable increases in our program, the Japanese may be orliged to recon- sider their "secrecy policy". This may be the case, and it is possible that we may expect some official or unefficial discle- sure of what the Japanese are doing. How ever, the Naval Attache inclines to the telief that the "secrecy policy" will be con- tinued et least for the present. There are E number of food reasons to support this belief. Firstly, the Japanese have come the United States, Great Britain and Holland uninformed about to realize the great advantages which are theirs if they can keep what they are dring. They know whet these nations are building, and they can prepare in secret the vessels they need to meet the nations they consider their most probable enemies. This secrecy policy would work to Japan's disadvantage only if the United States were to cut-build Japan by en overwhelming ratio - say two to one, and there appears to be no immedia prospect of this. Secondly, the Japanese Navy does not want the Japanese people to know : ow much their Nevy is expanding. Naval authori- ties know that &8 long ES they inform the people in vague terms that this is an "emergency situation" and that in order to meet it they must have certain sume of money to build up the Nevy to meet foreign threats, the money vill probably be appropriated. On the other hand, the Jepanese Diet and people would probably refuse to senction & building program which is as large as the United States program. With Japanese economic and financial position deteriorating under the strain of the China Incident, the people would question the wisdom of embarking on & naval race with the wealthiest country in the world - for no apparent reason. The purpose of the Japanese Navy is much better served by keeping from the world at large and the Japanese people partiou- lerly, what sucrifices are heing deminded of the nation in order to wild up & huge navy. Report No. 70-40 N.K.I.M. ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT 20960. ATTACHE'S REPORT II-11-a Perved INTER emples and als earbong): this sumber la - because of the limited personal is O.N.L and of the - for quickly diseminating information true These empies will be distributed by O.N. 1. - per footaote of slowbers, amording to mubject naile. From N/A Tokyo Date May 3 . 1940 Serial No. 71 File No. 300-302 per are (Balest proper sumber each January first) trues d. N.I. Index) Source of information Official Subject Japan Finance Budgets (Nation reported on) (Inder title - per todas sheet) (Subtitie) Reference review, indesing. and distribution of reports by O.N.I. will be greatly expedited If a brief summary of the contents is entered la as space. Mantion leading geographical, personal, or politimi names, and the - of the report.) Government Budget Fiscal Year 1940-41 The official Japanese Budget for the fiscal year 1940-41 calls for an expenditure of ¥10,557,341,434 Ordinary and extraordinary revenues to meet these amounts are ¥5,822,962,303. No detailed statements of other revenues are available - published budget figures being designed to prevent the public from getting a clear picture of government finances. 4-1940 1940 12 2 3 4 Distribution: 66 SENCE - - - - to & Chast - el - - - - - - - - - - - of - - - - - - - - - A-B-C-D-E - Gas' Yes M.S. U.S. Director E C.K.O. N.C.R. Mes. OnL T.S. CAL I LAL les. 1 I Bard M.C. N.O. College Twich CHC Cas. Can. ChC Com I Mark al I - Case- Baters is Der. U.S. 7 F 3a. Pm. Ade an Alr Ca. Die. W.P. Com. M.D. - law Ms. 106 Das forma for all copies. Use only hrms M supplied by O.N.I. Make all sizetches, a. upiform in sise with this form when practical. Bubmit extra copias of dipplage, carbone of ass, visas prestical. If practicable, submit in vultable style for blueprinting or photostating. ========== PRINTING OFFICE ! Report No. 71 300 Finance Japen 302 Budgets May 3, 1940 Government Budget - Fiscal Year 1940-41 The figures for the 1940-1941 budget 8.8 passed by the 75th Diet are given below: General Accounts. Ordinary Extraordinary Total Imperial Household ¥ 4,500,000 ¥ --- ¥ 4,500,000 Foreign 23,605,174 40,474,138 64,079,312 Home 336,861,529 173,954,526 510,815,055 Finance 1,097,925,183 724,311,573 1,822,236,756 War 182,019,661 1,092,761,400 1,274,781,061 Navy 351,298,461 677,646,659 1,028,945,130 Justice 51,536,887 5,565,039 57,101,926 Education 159,121,989 27,540,814 186,662,803 Agriculture & Forestry 62,035,636 148,397,464 210,433,100 Commerce & Industry 9,412,964 80,526,525 89,939,489 Communication 297,174,749 70,057,432 367,232,181 Overseas 2,950,188 52,893,808 55,843,996 Velfare 84,266,5£1 66,123,913 150,370,494 Total ¥2,662,709,002 ¥3,160,853,301 ¥ 5,822,962,303 lst Supplementary Account. Ordinary Extraordinary Total Finance ¥ 46,208,576 ¥ --- ¥ 46,208,576 Home --- 1,400,249 1,400,249 Education --- 90,000 90,000 Agriculture & Forestry --- 9,802,400 9,802,400 Welfare --- 183,384 183,584 ¥ 46,208,576 ¥ 11,476,233 ¥ 57,684,809 Report No. 71-40 107 Report No. 71-40 - 2 - 2nd Supplementary Account. Ordinary Extraordinary Total Foreign ¥ 263,280 ¥ 5,033,944 ¥ 5,297,224 Home 555,190 9,142,298 9,697,488 Finance 26,334,359 7,577,311 35,911,670 War 117,982 147,437 265,419 Navy 94,440 35,947 130,387 Justice 31,258 202,502 263,760 Doucation 1,120,519 194,764 1,315,283 Agriculture & Forestry 2,172,803 43,708,073 45,FE0,876 Commerce & Industry 128,691 73,983,185 76,111,876 Communications £,150,0.00 25,59,445 33,609,465 Overseas 2,476 8,149,552 8,152,028 Welfare 66,985 1,981,861 2,046,846 Total ¥ 39,068,003 ¥177,616,319 « 216,884,322 China Incident Army ¥2,973,000,000 Navy 737,000,000 Reserve Fund 750,000,000 Tstal ¥4,460,000,000 The total of the foregoing accounts is as follows: General Accounts ¥5,822,962,303 1st Supplementary 57,694,809 2nd. Supplementary 216,684,322 Chine Incident 4,460,000,000 Y10,557,341,434 Income: The revenues by which it is planned to meet the expenses connected with the General Accounts are as follows: a. Ordinary Account. ¥ 2,589,900,599 Taxes Stamp receipts 107,000,678 Receipts from Government Enterprises 453,998,437 and property Contributed from Special Accounts of Communications services £1,500,000 Contributed by Bank of Japen 27,425,895 l'iscellaneous receipts 77,763,771 Transferred from Special funds 7,439,559 Total Ordinary Revenues ¥ 3,345,116,939 Report No. 71-40 108 Report No. 71-40 - 3 - b. Extraordinary Account. Extra profit tax ¥ 557,463,883 Sales of Government property 8,937,838 Contributed by public bodies to expenses for public works 7,584,473 Shares of public bodies in public works 11,957,191 Receipts in Encouragement Fund for scientific research 25,000 Transfers from Special accounts 8,071,859 Contributed by insurance companies 3,352,169 Receipts in Compensation Funds 3,888,110 Receipts in Ordinary sources from Special Accounts 6,700,000 Miscellaneous receipts 123,722,975 Receipts from issue of public loans 1,671,177,866 Surplus brought forward from previous fiscal year 75,000,000 ¥ 2,477,845,364 Total Revenues ¥ 5,822,962,303 (Ordinary and Extraordinary) No detailed statement of revenues to meet the expenses incident to the 1st Supplementary account have appeared. The only statement published is as follows: Miscellaneous ¥440,000 Ordinary Department 229,960 Bond issues 57,014,849 ¥ 57,684,809 The following is a statement of the revenues to meet the expenses of the 2nd Supplementary account. a. Ordinary Account. Sake brewery tax ¥16,983,450 Government Enterprises and Sales of Government property 2,035,197 Miscellaneous 51,579 Total ¥19,070,226 b. Extraordinary Account. Sales of Government property ¥ 39,924 Share of public bodies for public works 296,667 Donations for Scientific research 137,000 Receivable from Special Accounts 344,070 Miscellaneous 13,925,964 Bond issues 178,349,383 Surplus from fiscal year 1939-1940 4,521,088 Total ¥197,614,096 Total for 2nd Supplementary Account ¥216,684,322 Report No. 71-40 09 Report No. 71-40 - 4 - The revenues by which the appropriations for the China Incident are to be met are stated very briefly as follows: Miscellaneous ¥ 600,000,000 Bond issues 3,860,000,000 Total ¥ 4,460,000,000 The following table is a comparison of corresponding totals in the 1939-1940 and 1940-1941 budgets. 1939-1940 1940-1941 Regular account ¥ 3,694,666,976 ¥ 5,822,962,303 1st Supplementary 910,543,937 57,694,809 2nd Supplementary 199,332,614 216,684,322 China Incident 4,605,000,000 4,460,000,000 Totals ¥ 9,409,543,527 ¥ 10,557,341,434 Report No. 71-40 110 N.N.I.M N ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF FE NAVAL OPERATIONS, NA' DEPARTMENT ATTACHE'S REPORT have - aples (ortginal and do extrag): this somber be MARKET Issues of the listed personal is O.N. 1. and - of the separt for quickly information be These expires vill be distributed by O. N. 1. - per factacte or courting la mile. From M/A Tokyo Date May 13 1940 Serial No. " File No. 900-912 I I I Chiest proper master Reliable I I 1 Ins d. M. Index) Source of information Japan Havy Ships Subject (Nation reported ea) I I I I 1 a (Subtitie) Reference mine, Inducing, and distribution of reporte by O.N.I. will be gradity expedited If . brief number) of the subjects is and is as space. Mention leading peographical personal, of political - and the per of the repart.) Japanese Naval Vessels Built or Building List of Japanese naval vessels in commission or which have been launched. 67 - - - - N. Cheel - of - - - - - - - - - - - el - - - for the - - - - A-B-C-D-EF F Ave We Director J CAR F S.S.A. MAS $ U.S. E C.N.O. M.I.S. Man, Drd. 7.48. N.O. put Issu I College M.C. C. Twis cwc Com Com. Attached at Operations cac Can. 3 1 3 Return to 2, Der. 11 Bet. For See. Fee. Asia 111 Ale Can Die, W.P. Com. A.Th. - Room Ma. Use forms for all repies. Use only forms M supplied by 0. N.I. Make all etc., usibre in sine with this form visa practical. Bubmit excre espire of dippings, carbons of statches, etc., where If pranticable, submit skatzhes is suitable styles for blueprinting or photostating. PRINTING EFFICE ! Report No. 74 900 - Navy Japan 912 - Ships May 13, 1940 JAPANESE N.VAL VRESELS BUILT OR BUILDING CAPITAL SHIPS: Fuso Nutsu Yamashiro Kongo Ise Haruna Hyuga Kirishima Nagato (1) Name unknown. (Launched 30 November, 1939 at Kure Naval Station) ARMORED CRUISERS: Asama Kasuga Yakumo Adzuma Idzumo Iwate "/" CLASS CRUISERS: Furutaka Vyoko Kako Ashigara Anba Takao Kinukasa Atago Nachi Chokal Haguro l'aya Mogami Nikuma Suzuya Kumano Tone Chikuma "B" CLASS CRUISERS: Hirato Yubari Yahagi Sendai Tenryu Abukuma Tatsuta Jintsu Kuma Naka Tama Isuzu Kitagami Yura 01 Natori Kiso Kinu Nagara Kashima (Launched 25 Sept., 1939 at Katori (Launched 17 June, 1939 at Mitsubishi, Yokohama} " /.IRCRAFT CARRIERS: Hosho Kaga Ryujo Soryu Akagi Hiryu Shokaku (Launched 1 June, 1939 at Yokosuka Neval Station) Zuikaku (Launched 27 November, 1939 at Kawasaki, Kobe) SEAPLANE CARRIERS: Notoro Kamoi Chitose Chiyoda Nizuho Report No. 74-40 Report No. 74-40 - 2 - DISTROYERS, FIRST LINE: Minekaze Nokaze Sawakaze Namikaze Okikaze Numakaze Shimakaze Kamikaze Nadakaze Asakaze Yakaze Harukaze Hakaze Matsukaze Shiokaze Hatakaze Akikaze Yukaze Tachikaze Hokaze Hatsukaze Yukikaze Cite Hayate Asanagi Yunagi Kagero Shiranuhi Kuroshio Oyashio Natsushic Mutsuki Ikazuchi Kisartgi Inazuma Yayoi /katsuki Uzuki Hibiki Satsuki Nenchi Minazuki Hatsuheru Fumitsuki Hatsushimo Nagatsuki "akaba Kikuzuki Ariake Mikazuki Yugure Mochizuki Shiratsuyu Yuzuki Shigure Fubuki Murasame Shinonome Yudachi Usugumo Samidare Shirakumo Harusame Isonami Umikaze Shirayuki Kawakaze Hatsuyuki Yamakaze Murakuno Asashio Uranami Natsuguno Ayanami Cshio Shikinemi Suzukaze Asagiri Arashio Yugiri Michishio Amagiri ,sagumo Sagiri Kasumi ctoro Yamagumo Sazanami Arare Akebono Minegumo Ushio Amutsukuze (Launched 19 October, 1939 at Maizuru Novel Station) Tokitsukaze (Launched 10 November, 1939 at Uraga Dockyard. Uraga) Urakaze (Launched 10 April, 1940 at Fujinarate Dockyard, Osaka) Hayashio (Launched 19 April, 1939 ct Urage Docky rd, Urage) Isckaze (Launched 19 June, 1939 at Sasebo Novel Station) Arashi (Launched 22 April, 1940 at Naizuru Novel Station) DESTROYERS, SECOND LINE: 1 omo Fuji Kashi Tsuta Hinoki Nashi Yanagi Hishi Kaya Hasu Nire Sumire Kuri Yomogi Ashi Tade Take "akatake Kcki Kuretake Tsuge Sonce Kiku Asagno Aoi Yuguo Hegi Fuyo Suzuki Karukaya TORPEDO BOATS: Chidori Hayabuse Monazuru Kescagi Tomozuru Hatsukari Ctori Hiyodori K1j1 Kcri Sug1 Hato Report No. 74-40 Report No. 74-40 - 3 - SUBMARINE CHASERS: No. 1 No. 2 No. 3 No. 4 No. 5 No. 6 No. 7 No. 8 No. 9 No. 10 No. 11 No. 12 No, 51 No. 52 No. 53 SUBMARINES: Ro - 26 I -1 I - 54 27 2 55 28 3 56 29 4 57 30 5 58 31 6 59 32 7 60 33 8 61 34 9 62 51 10 64 53 15 65 54 16 66 55 17 67 56 18 68 57 19 69 58 20 70 59 21 71 60 22 72 61 23 73 62 24 74 63 51 75 64 52 121 65 53 122 66 123 67 124 68 SURVEY SHIP: Koshu GUNBOATS, FIRST CL/SS: Yodo Ataka Fushimi (Launched 26 March, 1939 at Fujinagata Yard, Osaka) Sumida (Launched 30 October, 1939 at = = = ) GUNBOATS, SECOND CLASS Kotaka Hira Toba Hozu Saga Atami Seta Futami Katata SUBNARINE TENDERS: Komabashi Jingei Chogei Taigei Takasaki Tsurugisaki Nisshin (Launched 30 November, 1939 at Kure Naval Station) Report No. 74-40 Report No. 74-40 - 4 - REPAIR SHIPS: Asahi /keshi "INE LAYERS: Tokiwa Ashizaki Ketsuriki Ento Itsukushima "ashizeki Okinoshima Yaeyama Kuroseki Natsushima Kurokami Sarushima Toshima Nasami Kuroshire Mishima Katashima Sokuten Katoku Enoshima Ninoshima Shirakami Hatsutaka Shumushu (Laughed 14 December, 1939 at Tama Dockyard, Hibimachi) Nariu (Launched 28 August, 1939 at Mitsubishi Dockyard, Yokohama) Hashidate (Launched 23 December, 1939 at Osaka Steel Works, Osaka) No. 1 to 7 incl. Fo. 11 to 15 incl. No. 21 to 33 incl. No. 41 to 45 incl. 1 IND St EEPERS: No. 1 to o incl. No. 7 to 12 incl. Fo. 13 to 18 incl. OILERS: Sunosaki Ondo Erimo Hayatomo Sata Naruto Tsurumi Iro Shiriya STORE SHIPS: Mamiya !uroto Nojima Shiretoko ICE BREAKER: Odomari net LAYERS: Shiretake Tsubame Kamome TRAINING SFIPS: Shikishima Fuji TARGET SHIP: Settsu (?) Report No. 74-40 Report No. 74-40 - 5 - SALVAGE SWIPS Kurihashi Itahashi Yodohashi Hokuyo Saruhashi SPECIAL SERVICE SHIPS: The following vessels will be classed as special service ships until more definite information is obtained as to their class. Ukishira (Line layer ?) Aotaka (Cruiser ?) (Launched 3 January, 1940 at Dockyard) Harima Kashino (Gunboat ?) (Launched 26 January, 1940 Nagasaki) at Nitsubishi, Machijo (Cruiser ?) (Launched 10 April, 1940 at Sasebo Naval Station) Kunajiri (: ine layer ?) (Launched 6 May, 1940 Dockyard) at Tsurumi Kyosai NISCELLANEOUS BC/.TS (YARD CRAFT, ETC.) Chikubu Hitonose Atada Oshima Yamasemi Hayase Asuka Tenkai Futagemi Kaiyo No. 1 Kaiyo No. 2 Report No. 74-40 LM ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEPARTMENT 19684-a ATTACHE'S REPORT F-10-d Pervi - - terigial and de - time sember . - - of the limited - la o. N. 1. and of the - for quality Information tre These - will be distributed by o, N. L - per or amording to missins matter. From N/A Tokyo Date May 13 , 1940 Serial No. 75 File No. 907-700 - - proper unreadable - Junuary limit) - o. H. L Index) Source of information Reliable Subject Japan Navy - Operations Mov ements reported es) (Ender title - per todas sheet) (Subtitie) Reference Report No. 136 - 39 review, Indecing and distribution of reparte by o, N.L. will be grattly expedited if . brief number) of the is entered is this space, Mantion lending geographical, personal, or politimi son, and the - of the repart.) Operating Schedule of Combined Fleet The Combined Fleet is carrying out a normal operating schedule which differs very little from previous years. 1940 2 3 SENCE FINISHED - FILE. ЧАИ) - - - - - e. - - of - - - - - - - - - - - of - - - - - - - - - - OCDE F Gas' E E C.M.O. KLA Mar. Ord. T.S.B. CAR F S.&.A. M.S.S. Aara, U.S. H.O. Director 1 I Board College M.C. ADN of Operations Talk CMC Cas. I cac Com Com. - Com- Return ne Due, U.S. Ba. Per. - Per. Asia and Ale Can Div. V.P. Com. M.Tr. - Γ 7 of dippines, carbona of statement, etc., where provided. II prestientia, submit siketches in sultable styles for biosprinting or photostacing. Das forms for all copies. Um only forms - supplied by O.N.L. Make all - uniform in sine with this form visa practical Bubmit extra copies 11. &######### PRINTING OFFICE ! Report No. 75 900 - Navy Japan 907 - Operations May 13, 1940 700 - Povements Sperating Schedule of Combined Fleet Reference: Report No. 136 - 39 Official information in regard to the operations of the Japanese Fleet has been secret for a number of years and no reports of major ship movements are allowed in the press. The normal operating bases of the Fleet, - that is Saeki Bay in the Bungo Channel and Ariake Bay in Southern Kyushu are as good as closed areas to foreigners, and there- fore cannot be visited to advantage. The police control in these sections is so strict that even Japanese who are not natives of the local towns and villages are looked on with suspicion and are forced to leave unless they can give a good reason for their presence in the vicinity of the major fleet bases. It has been found impossible, therefore, to learn with any degree of certainty what the Japanese Fleet is doing. It is believed, however, that the operating schedule of the Fleet follows the scme general plan that has been in effect for many years. That is, the training year is divided into three periods, the first from February to April, the second from June to September, and the third from October to December. The first period is devoted to individual ship operations after which the Fleet makes E short cruise to Chinese ports or Fermose, the second and third periods are devoted to division and Fleet training after which e fleet problem is worked out. So far this general schedule has been followed during the present training year,- that is, the Fleet assembled in Southern Kyushu in February and made e short cruise to the South-China eroa in April. On the first of Pay the major units of the Flcet entered Yokosuka to remain most of the month. Deponding, of course, on the international situation, the month of May will be. devoted to upkeep and overhaul and the second period of the year will be started in June. Fleet units are expected to visit home ports egain in September, unless something unusual happens. The above information, while very sketchy, has been obtained in various conversations with active end retired officers and their wives. Several officers on duty in Tokyo have sons serving in the Floot (on Nasato, Kirishime end Ariake). These sons ETC nov visiting thoir perents in Tokyo, expect to lsave ebout the uná of month to be gone until September when they will probably be able to visit their perents again. Report No. 75-40 ATTACHE'S REPORT From: N/A TOKYO. June 5. 1940. Serial No. 83. Field No. 600-602 Source of information: Reliable Subject: JAPAN Cities & Twons - Const Cities and Towns ISLAND OF JALUIT - MARSHALL GROUP The following information in regard to JALUIT Island WAS obtained from & BRITISH source believed to be entirely reliable. The information is reported to be correct AS of 1938-1939. Distribution: 69 1 Report No. 83 600 - Cities & Towns JAPAN 602 - Connt Cities & Towns June 5, 1940. ISLAND OF JAMIT - MARSHALL GROUP 602-100 Importance JALUIT is the capital of the MARSHALL Group and Headquarters for Navel and Military operations in the Islands. It is & first-class advanced base for stores and air scouting. 602-200 Population Natives 1,000; JAPANESE 700 (Approximate) now 1000 Sepsexclusive of connits) 602-300 Topography and Hydrogrephy Ann scalo There are three approaches, to the port and open water-oys leading to an en- closed anchorage. Natural island formation. Troops could wade ashore. Land- ing jetties and slipways already built. No bays or inlats of appreciable size. The surrounding country is gently undulating. Cocomit trees to NO feet and car- lop mut trees to 30 feet. Maximum height of island 30 feet above mean low water. 602-400 Anchorages Depth of SE passage 40 fathoms. Swinging room for at least siz heavy cruisers in protected anchorage. Ships in anchorage could be shelled from ships off the island. 602-500 Climatology The JAPANESE Navy mainteins a meterological station. 602-600 Industries Copra, shell of all kinds, coffee (15 tone per month), fishing, shark fish- ing, fish drying. A modern connery. A plant for extracting essential oils from copra. All owned and controlled by the JAPNESE. Glycerin is extracted from corra nd stored at JALUIT. All industires vulnerable to pir attack and artil- lery bomberdment. Report No. 83-40 (1) Report No. 83-40 602-700 Government Establishments MITSUBISHI Engineering Shop, situated between the two serodromes. Well fitted with Inthes, drilling and cri-ding machines, modern cylinder and reboring machine. Steff of three draughtsmen and forty engineers and mechanics. casting possible about 1,500 pounds. One main concrete jetty about 600 yards long. Two snaller jetties about 50 yards each. On large jetty, two railroad tracks for shuttling freight. Depth of water at large jetty, high tide 25 Feet, at low tide 20 feet. Three mobile cranes, capacity ten tons each, on large jetty. All above v.lnerable and excosed to air and ortillery attacks. 602-900 Public Works Lighting system consists of two small stations employing sux-cylinder Diesel engines. Government owned. Operating voltige 110 AC, 50 -veles. Supply to town and airfield. Some powered windmills. Cas - Xil 02-100 Logistics Considerable tank storage for fuel (diesel oil and eviation gasoline) at airfield. Storage is in comcufleged, above-ground tanks. 502-1100 Rater Supply Concrete rain water busins and several deep wells. The well water is hard and brackish, but usable. Seaplane and landylane bases have own supply. 602-1400 Air Commerce JALUIT is the eastern terminus of the JAPAN-SCITH SEAS Airline, which is constPoring fortnightly service by 4-enzined Kawnishi flying bonts. Traffic is now mail only, and in the future will be restricted to JAPANESE officials and mail. The aircraft hase nt the Navy seaplane anchorage nd ATO serviced by naval personnel. Report No. 83-40 (2) 602-1500 Other Transportation There are about seventy-five trucks and 4.8 nany cars on the island. These could be used to transport troops and supplies to any portion of the island. 602-1700 Harbor Craft Above fifty, ranging from 4-cylinder 15 KP to 300 HP, all Diesel. Most of the larger ships ATD radio equipped. (amed cimpan ented Trate from great 602-1500 Communications Telefunken W/T. Telegraph and telephone, internal. Visual signal stations: two 400 foot steel structures for observation and signalling. Government omed and operated. Post and Telegraph offices in !lunicipal Building (see 602-2000). :02-1900 Streets Good ronds made of powdered corol. Road rollers and other necessary equip- ment for road building. In JAL IT Town, about four miles of bitunen roads. Easy access to all ports of the 1-land. 602-2000 Buildings The town is & modern one, with all conveniences. Hardware stores of all sorts. There are two main streets, the Marine Parade along the waterfront being three-fourths of & mile long. The main government building is the Municipal Building of two stories, concrete construction, 150 feet scuare, overlooking the harbor. Hardware stor s are one-story concrete buildings. All others are one story, thatched or werther board JAPANESE type houses. 602-2100 Health and Senitation Septic tanks in all JAPANESE houses. Two JAPANESE hospitals, 10 beds rnd outhouses. Well equipped. Situated in residential area. Native hospital, 10 beds and outhouses. Both JAPANESE and native doctors. 603-200 Fortifications Baces end trunnions mounted for 6-inch guns along the Marine Parede. No runs mounted. Report No. 83-40 (3) Three 6 inch runs and a battery of four 4.7 inch field pieces. Borracks for the regular garrison of 500 soldiers. Troops stay six months on JALUIT and then return to JAPAN. 603-300 Air Defenses Two landing fields, each with 2. large hanger capable of housing 20 medium- tised planes. No repair facilities visible but usual handling gear blocks and tackles in evidence. Adjacent galvanized iron store houses, camoufleged. Very suitable as base for seaplanes. Sheltered harbor end good ser. runway. On ber.ch opposite southern airfield is a small naval Air station. One hangar, rant. Six KAWANISHI flying bonts are the usual force on station. The airfields are for use of carrier-based planes, as none are regularly stationed there. The entire air defenses of the island could be demolished -1th & few well placed bombs. 603-400 Mobile Batteries Machine suns and antinircraft guns. Numbers not specified. AA (nins in barracks mounted on trailers and towed by Diesel tractors. Searchlights, mobile, mounted on trucks -ith pneumatic tires. Diameter of projectors - 10 inches. Candle power actimated at 1500. 28 Report No. 83-40 (4) N.N.I.M ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DEP' "TMENT JUL 23 10AM ATTACHE'S REPORT 12073-d 12 0-1-K Parwerd MTSS copies cortained and als this number is - because of the limited personnel in o. N. L and becades be urgency for quickly diseminating information from allamble. These copies will be distributed by o. N. I. M per foolante of slowbare, according to - matter. From N/A Tokyo Date June 19 . 19.40 Serial No. 98 File No. 409-400 (Commenes - series (Seless proper number sech January first) bus d. N.I. Index) Source of information Press and Conversations Subject Japan Industrial - Manufactures - Steel production (Natide reported ea) (Inder title M per Index sheet) (Subtitle) Reference Baiar-(The review, Indesing, and distribution of reports by o. N.I. will be greatly expedited If . brief number) of the contants la entered is this space, Mention inding peographical, personal, of political and the girl of the report.) SCARCITY OF SPECIAL STEEL 07 GOOD QUALITY IN JAPAN The Special-Steel Wanufacturing Crisis in Japan. Stocks on hand of nickel, cobalt, molybdenum and vanadium are small and diminishing steadily. Higher prices of raw materials have forced revisions of production schedules, and higher subsidies. Tendency of Army to subject industry to totalitarian control. - - - - - & Check - of - - - - - - - - - - - of - - - le - - - - - AENI A-B-C-D-E Code Ve, Director HRAKHIN, E C.K.O. a. Nov. Ond T.S.B. CAR. Eng. S.A.A. M.A.S. Aws. U.S. H.O. - into Bught 1 M.C. ONA Task cwc Cas. Can. C.N.C. Com 3 Attached et Operations Cash Baten be Der. U.S. Bat. Fee. Fee, T Ade S.S.A. Ale Can Div. Com. PLTs. Room No. Use forma for all copies. Um only forms M supplied by o, N. Make all 4a. usiform in sine with this form where posetical. Bubmit extra reples of dippines, carbone of statem, etc., where If prestitable, eubait skotches in sultable styles for blueprincing or photostacing. ... SUPERSMENT PRINTING affice ! Report No. 98 400 - Industrial Japan 409 - Manufactures June 19, 1940 400 - Steel production SCARCITY OF SPECIAL STEEL OF GOOD QUALITY IN JAPAN The Japanese Army and Navy are gravely concerned over the present inadequate supplies of steel and special steels for pro- duction of munitions and allied materials. The present difficulty is a result of external and internal factors over some of which the government has no control. The European war, with a subsequent blockade of Germany and exten- sion of hostilities to Scandinavia, has strangled the importa- tion of high-grade special steel from Germany and Sweden. Anxiety also exists over the possibility of further American restrictions on export of sorap and steel to Japan. Further complicating the situation, stocks of raw materials required for the local manufacture of special steels are small, and diminishing steadily. Supplies of nickel, molybdenum, cobalt, and vanadium on hand are practically exhausted. Heretofore, American scrap iron and steel imported by Japan contained per- centages of alloys which were reclaimed in melting down. Recently, the Japanese have complained that the scrap from America no longer contains these alloys. It is probable that since scrap prices have risen, the Japanese are buying only the lower grades of scrap and feeling cheated because of the absence of alloys. Finally, the prices of scrap iron and steel, and all other metals, have risen to new highs. The Military forces, having planned certain objectives for production in 1939-40, refuse to consider demands of the steel manufacturing companies for an increase in prices for munitions. The Budget allotted certain amounts for the armed forces and they are determined to obtain munitions for prices contemplated during compilation of the budget. This requires that either: 1, the steel producers operate at a considerable loss, or, 2, that the government, from some special extraordinary account, compensate with subsidies all losses incurred. In either case, the government loses money while the Army and Navy apparently remain within budgetary limits. The Army prices upon which the budget estimates were based, were those of the third quarter, 1938. Since then, the prices of scrap iron and steel have risen more than thirty percent, and prices of the nickel, molybdenum, cobalt, and vanadium alloys have sky-rocketed even more. A choice had to be made between a volume reduction of thirty percent in production for the armed forces, or increased appropriations. Since the latter method required convening the Diet, which might have asked embarrassing questions on other policies of the government, and possibly caused a cabinet crisis, the government has announced that it will divert funds from other departments to subsidize losses. The amount of the subsidy was announced at ¥170,000,000 (170 million yen) and further subBidies for coke and coal will amount to ¥100,000,000 (100 million yen) more. During May and June, the Army authorities have tried to force industry into totalitarian control, but have been opposed by the Commerce and Industry Ministry, presided over by one of the major capitalists in Japan. Apparently, a battle between the major industrialists and the Army over control of industry will continue, with no decision probable unless a coup by Army factions gives them complete control of governmental policies. After consultations between the Ministry of Commerce and Industry and Military representatives, the following initial steps were decided upon: Report No. 98-40 Report No. 98-40 /2/ 1.) More strees must be laid upon production of high-grade special steels. Large companies must increase produc- tion or instruct smaller companies in the required processes. 2.) There must be restrictions in the amounts of special steels to conserve dwindling supplies of vanadium, cobalt and nickel. Preference in allotting supplies of these precious metals will be granted to companies producing special steel products for the armed forces. 3.) A "purge" of small, inefficient companies will be undertaken. Steel companies have sprung up like mushrooms during the Incident, a total of 80 now being registered. After an inves- tigation, it was found that only five companies may be con- sidered first-class producers. These companies are: Japan Special Steel Manufacturing Co., Special Steel Manufacturing Co., Daido Steel Mfg. Co., Kobe Steel Works, and the Hitachi Works. Six other firms are listed as "good". These are: Japan Metal Industry Co., Tokyo Steel Materials Mfg. Co., Osaka Special Steel Mfg. Co., Kawasaki Heavy Industry Co., Kwanto Special Steel Mfg. Co., and the Japan Electro-Magnetic High Frequency Heavy Industry Co. The other sixty-nine companies produce "inferior" quality goods, not desired by the armed forces. Report No. 98-40 217 N.I.W ISSUED BY THE INTELLIGENCE DIVISION, OFFICE OF CHIEF OF NAVAL OPERATIONS, NAVY DE RTMENT 7010-0 ATTACHE'S REPORT R-1-a JUL 23 Forward - cortginal and ats ourbons). this sumber - - besue of the limited personal is 0. N. 1. and because pubject of the matter. separt for quickly downinating information from attachés. These copies will be distributed by 0. N. I. M per of 12 if From N/A Tokyo Date June 20 , 1940 Serial No. 99 File No. 412-100 (Commane - arier (Balect proper pumber each January find) trues d. N.I. India) Source of information Reliable Subject Japan Industrial - Industrial Summary (Nation reported on) (Inder title M per indes sheet) (Bubtitie) Reference Darav. (The review, indesing, and distribution of reports by O.N.I. will be greatly espedited If . brief summary of the contants la entered is this space, Mention leading geographical, personal, of political and the pri of the report.) STRATEGIC MATERIALS DESIRED FROM NETHERLANDS EAST INDIES Japan has arranged for supplies of strategic raw materials from the Netherlands East Indies. DECLASSIFIED E.O. 11652, See. 3(E) and 5(D) of (I) 0SD letter. May 3, 1972 RT, 2 1973 B AND Date - - - - for - - of - - - - e - - - apped - - of - - - - - - - -- AENZ A-B-C-D-E Good S.&.A. U.S. Maybr And E C.M.O. a 5 Non. Ord. T.S. CAR F M.&S. Aara N.O. Director Collex M.C. AGA cwc J Com. all Operytions Tech Com. C.W.C. Com Des, U.S. Bat. Fee. Sex For. Asia : + Comp Refers is S.S.S. Cm Div. Com. PLT. 7 [ Use forma for all copies. Use only forms M supplied by 0. N.I. Make all sketches, etc., in sise with this form where practical. #: alt extra repies of dipplage, carbone of sketches, etc., where practical. If practicable, submit skatches is suitable styles for blueprinting or photostating. : GOVERNMENT PRINTING aprice - Report No. 99 400 - Industrial Japan 411 - Industrial summary June 20, 1940 100 - STRATEGIC MATERIALS DESIRED FROM NETHERLANDS EAST INDIES The political and military considerations which have made Japan express her interest in the future status of the Netherlands East Indies are well known. At the present time it appears probable that Japan will take no steps to try to take over these Islands as long as: (a) there is no prospect that they will be occupied by another power - the United States, Great Britain, France or Germany. (The first three of these powers have notified Japan that they desireto maintain the status quo and Germany has stated that she is not interested. Holland has stated that she does not desire or need the assistance of third powers in main- taining her position there.) (b). Japan can continue to receive supplies of materials which are necessary for her to carry on her war effort and her world trade and at the same time find a badly needed market for her products. There is no doubt that Japan hopes at some future time to dominate the Netherlands Indies - economically and politically - and that if a good opportunity presents itself, she will attempt to do so. The time will be carefully chosen, and the attitude of the United States will be ascertained before-hand. In her present weakened condition, Japan does not want to attempt an attack on any area even though the possible gains may be very great, if she runs a risk of having to fight the United States. However, it is essential at this time that Japan obtain numerous raw materials, and the Netherlands Indies are a great potential source of supply. She has indicated to the Netherlands government that in the course of the next year she would like to purchase the following strategic materials from Netherlands India: Petroleum 1,000,000 metric tons Scrap Iron 100,000 a " Nickel Ore 150,000 " # Bauxite 200,000 " 19 Salt 100,000 a # Manganese Cre 50,000 " a Rubber 20,000 " " Chrome Iron Ore 5,000 " " Tin 3,000 n a Wolfram 1,000 # # Molybdenum 1,000 " " Castor seeds 4,000 " = Quinine bark 600 " " After studying this list of Japan's requirements, the Netherlands authorities are reliably reported to have answered that they are prepared to supply Japan's needs to the extent of their ability. With many of the desired items, there is no question but they point out: (a) Japan should enter into contracts for the petroleum now,in order to insure that the desired quantity can be supplied. Japan's purchases in the last three years have been: Report No. 99-40 Report No. 99-40 /2/ 1937 869,000 tons 1938 668,000 " 1939 573,000 " Therefore, 1,000,000 tons is almost twice as much as was pur- chased last year. It is interesting in this connection to note that the Japanese stated that they were decreasing pur- chases from the United States and increasing purchases from India because of the tanker shortage and the shorter voyage to Borneo from Japanese ports. (b) Japan can have all of the scrap iron available but it may be impossible to supply 100,000 tons. Japan's purchases in the last three years have been: 1937 103,700 tons 1938 60,600 " 1939 47,200 " These amounts represent almost the entire supply. (c) The salt can be supplied if new fields are and contracts should be made at the earliest possible date if opened, but time will be required for this to be accomplished, quick delivery is desired. Indies is as follows: (d) Manganese ore production in the Netherlands 1937 15,700 tons 1938 11,200 " 1939 7,300 " In the past Japan has not purchased any manganese there, but she can in the future if she so desires. gible islands. quantities and no molybdenum has ever been found in the (e) Netherlands India produces wolfram in negli- It is believed that the negotiations have been satisfac- tory to both the Dutch and the Japanese and that as soon as be let details as to payments, etc. have been arranged, contracts will and Japan will get the raw materials she desires. Report No. 99-40 N.N.L.M-190 C-10-g 102/2 411 ISSUED BY THE INTELLIGENCE DIVISION OFFICE OF CHIEF OF NAVAL OPERATIONS un NAVY DEPARTMENT INTELLIGENCE REPORT Serial No. 153 Monograph Index Guide No. 400 (Start DEV series each year, L a. 1-6), 2-40 (7) correspond with SUBJECT given below. fee o, N. L Indes Guide. Make reparate report for each main title.) From Office of Naval Attache at Tokyo, Japan ateSeptember 17, 19.40 (Ship, finet, unit, district, office, station, or person) Reference (Directive, correspondence, previous related report, etc. If applicable) Source Various Evaluation Reliable (As official, personal observation, publications, press, conversation with-identify (As reliable, doubtful, unvertised, etc.) when practicable, etc.) Subject Japan Industrial (Nation reported on) (Main title M per Index guide) (fubtities) (Make reparate report for each title) and six copies. Officers preparing and those Investing If practicable, prepare skitches miltable for bharprinting enter careful summary of report, containing substance succiscily stated; include Important facts, names, places, dates, etc.) INDUSTRIALIZATION OF CHOSEN Chosen, especially the northern part of the peninsula is being rapidly industrialized due to the location, raw materials, abundant water power and cheap labor. The Japanese Army is aiding these plans because it is hoped to make Chosen an important supplier of the materials needed by the Army in operations on the continent. Use this form for original and copies of page and standard a by If the last page of original and retained file copy of reporta away Distribution By Origigator DNI (7): CinCAF(1); Com 16(1): High Comm'r of P. (1): Embassy (1); NA/Peiping(1); ANA/Shanghai (1); M/A Tokyo (1); File (1). has been roused for information, for further routing, or for retention. Indicate by check () - this copy the complete distribution of other copies of this report. Resting space below for - in o, N. L Draw circle around unit or units (as shows or the distribution block below) to which this particular copy of this report To I show routing not provided for 00 this form, use blank Boses. A-B-C-D-E-FA-2 Gas? Ser. Nav. Margin Wer Op-18 Op-14-1 Archine Bedget 8 1 [ of lersts. College M.L / na ChC Can. 3 cbc Com. Com. Nov. Ord. T.A.D. CAR Eng. LAL M.&S. Aers. U.S.M.C. U.S. Bar. Fer. Sca. Fe. A.F. 1 F.A.T.C. Aires, Attach4 at Op-18/11 Op-12 Op-13 Op-14 Op-28 Op.-21 Op-21 Op.-23 Op.-20 Op.-28 State of Maritime 3 CHE les be Aara Raom No. Anth a. . GOVERNMENT pointing OFFICE 10-1948 Report No. 153 400 - Industrial Japan September 17, 1940 INDUSTRIALIZATION OF CHOSEN Industry in Chosen has developed by leaps and bounds since the Manchurian Incident began in 1931. This development includes both heavy and light industries, end has reached the point where Chosen is playing a most important role in the East Asia Economic Bloc and in the Japanese Empire Defense plans. This rapid industrializetion of Chosen may be ascribed to the following factors: (a) Encouragement of industrialization by the Japanese Government; (b) An increase in the margin of Japanese capital avail- able for investment; (c) Army policy of placing Chosen on a self-sufficient, war footing basis industrially; (d) Tendency to industrialize areas where raw materials are available; (e) Abundance of cheap labor to be exploited; (f) Abundance of raw materials and resources, especially mining, forestry, marine products and agriculture; (g) Abundance of water power; (h) Geographical position near Manchukuo and China which reduces freightage, insurance, etc.; (i) Cheap land available for factory sites. At the same time that Chosen is being developed industrially, the Japanese Army has not lost sight of the importance of improv- ing agriculture in order to make Chosen an important source of rice for either the Japanese mainland or for the Japanese Army on the continent. If these plans materialize, most of the food needed by the Japanese Army in operating against Soviet Russia or China will be supplied by Chosen. The last year for which figures are available is 1938 when the total industrial output was ¥1,140,118,000, an increase of 16% over 1937. The following table snows this production classi- fied by major industries: 1938 Ratio to Gain over Rate % Total,% 1937 Spinning and Weaving 164,821,159 15 23,667,235 14 Metals 91,966,228 8 41,199,934 45 Machinery and Tools 26,798,957 2 10,234,215 38 Ceramic Products 35,877,198 3 10,805,935 30 Chemical 352,819,312 31 47,870,935 14 Sawing and Woodworking 15,054,000 1 3,317,445 22 Printing and Binding 16,948,123 2 643,648 4 Foodstuffs 277,207,781 24 39,174,956 14 Gas and Electricity 24,501,947 2 -15,503,853 -64 Other Industries 134,123,880 12 19,470,447 15 Total 1,140,118,585 100 180,810,220 16 As might be expected, the large Japanese companies which have played such an important part in the development of Japan Proper are also interested in developing Chosen. These companies include Mitsui, Mitsubishi, Kanegafuchi, Nissan (Mangyo) and Noguchi. Important enterprises include: Report No. 153-40 Report No. 153-40 12/ Chief Site of Financier Factory Onoda Cement Mitsui Komosan Kanegafuchi Spinning Kanegafuchi Suitsu Chosen Coal Industry (artificial oil) Noguchi Eian & Agochi Dai Nippon Spinning Seishin (rayon) Nippon Iron Manufacturing Seishin Nippon Magnesite Chemical Seishin Mitsubishi Mining Mitsubishi Seishin Chosen Fat and Oil Nissan Seishin Kyodo Fat and 011 Mitsui Seishin North Korea Oxygen Industry Seishin North Korea Paper Mfg. & Chemical 0ji Kissatsu Nippon High Frequency Wave Heavy Industry Joshin Chosen Electrode Joshin Chosen Magnesite Development Tansen Kanebo Jitsugyo K.K Kanegafuchi Tansen Chosen Chemical Industry Tensen Imperial Hemp-dressing Yasuda Kozan Chosen Kagaku K.K Mori Kogen Nippon Magnesium Metal Noguchi Konan Chosen Nitrogen Explosives Noguchi Konan Chosen Nitrogen Fertilizer Noguchi Konan Chosen Mining Development Noguchi Konan Konan Iron Works Noguchi Konan Chotsuko Hydroelectric Power Noguchi Konan Nippon Nitrogen Fertilizer Noguchi Honkyu Sumitomo Goshi Refinery Sumitomo Bunhei Daito Mining (artificial oil) Bunhei Onoda Cement Mitsui Sennairi Another interesting end important fact in connection with this development is that Northern Chosen, that is, Kankyo-Nokudo and Kankyo-Nando, formerly purely agricultural areas, now produce 40% of Chosen's industrial products. This percentage will probably be increased when the various hydro-electric plants now being constructed are completed. At the present time the Fusenko, Choshinko, Kanko and Yalu rivers are used to supply considerable quantities of electric power. Important power plants are those of the Chosen Fertilizer Co., Choshinko Hydro-electric Co., Yalu Hydro-electric Power Co., Funei Hydro-electric Co., and the Kokai Hydro-electric Co. Report No. 153-40 FE ISSUED BY THE INTELLIGENCE DIVISION OFFICE OF CHIEF OF NAVAL OPERATIONS NAVY DEPARTMENT INTELLIGENCE REPORT Serial No. 160 Monograph Index Guide No. 603-300 (Rart - aries ent year. HA HD (Ty surrespond with SUBJECT gives below. fee o. N. L Index Guide. Make separate report for each main title.) From Naval Attache at Tokyo Date September 29 1940 73 (Rhip, Beet, unit, district, office, station, or person) Reference (Directive, correspondence, previous misted report, etc. If applicable) Source Various reliable Evaluation Reliable (As official, personal observation, publications, pres, conversation with-klentify (As reliable, unvertised, etc.) Subject Japan when practicable, 14. Aviation - Coast Defenses - Air Defenses (Nation reported en) (Main title as per Index guide) (Bubtitles) (Make separate report for each utile) ester oarsful summary of report, containing substance succisetly stated; Include Important lacts, names, places, dates, etc.) 1 1 1 I de I 1 I a INC. I 1 = I I ! I I I under à al JAPANE33 AIR AND NAVAL BASES WITHIN RANGE OF PHILIPPINE OPERATIONS A consise compilation, with sketches, of the defenses and bombing objectives at Hainan Island wei Chow Island San Chew Island Chusan Islands ANGY Canton Pessadores Islands Taiwan, and Palae DECLASSIFIED E.O. 11652, Sec. 3(E) and 5(D) or a OSD letter, May 3. 1972 Be RT, NARS Date MAY 1973 adidas In I das lise 1 she the DNI(7): (1)] R/A Circar(1); TOKYO (1); Comairal you 111: MA/Peiping (1), Com 16(1); below for - in o, K. L Draw circle around unit or units - shows (i) the distribution block below) to which this particular copy of this report I Is show has routing not provided for on this form, - blank boxes. Resting been routed - for information, for further rousing, or for relection. Indicate by check (7) - this copy the complete distribution of other copies of this report. To A-B-C-D-E-F-I-I f Gast Sex, Men. Ww Anbine Budget Of. M.L.D. N.O. an Op-14-1 1 I 1 F 5 > U.S.M.C. CWC Can Cap. C6C Com. Com. Nov. Ord. T.A.D. CAR Eng. SAL M.A.S. las U.S. Fe. F 1 É A.F. 1 I P.A.T.U. Attaché al Op-18/11 Op-12 0p-11 Op-11 Op-M 0p-21 0p-22 Op-D State 3 Martine Op.-N Op.-N - Com. Child len to Aars Γ / M a. 1. ADVERNMENT - - Report No. 160 1000 - Aviation Japan 603 - Coast Defenses September 27, 1940 300 - Air Defenses JAPANESE AIR AND NAVAL BASES WITHIN RANGE OF PHILIPPINE OPERATIONS The operating bases from which Japanese armed forces must necessarily commence any aggressive or hostile action against the Philippine Islands are Hainan Island, Taiwan, Weichow, bases in occupied territory in China, and Palao. It is assumed, from previous study of Japanese wars and observation of Japenese military activities in China, that the initial indication of hostilities would be widespread bombing raids in the Philippines for the purpose of effectively destroying, or severely limiting, the aviation and submarine defense forces. These bombing raids could develop from three directions, namely, Hainan, Taiwan and the Pacific Ocean east of the Philippines. The latter raids would be either forays by carrier aircraft or bombing missions carried out by the 4-engined Patrol planes based at Palso, or on aircraft tenders operating nearby. In any event, the attacks would undoubtedly be coordinated, and have the advantage of surprise. To permit a logical estimate of the situation by our defense forces in the Philippine Islands, the following concise compilation of Japenese bases for air and surface craft, within a thousand miles of the Islands, is hereby submitted: HAINAN ISLAND Airdromes: Kiungchow. The present me in airdrome on the island is an enlergement of the old Chinese field at Kiungchow, located midway between Hoihow and Kiungchow, and northwest of the latter place. The original field has been extended and now includes the area formerly occupied by a village to the westward. The present field is reported to accommodate 300 aircraft. The known AA defenses consist of two batteries of AA (4.7"), two searchlights and eight AA machine guns. These defenses have probubly been recently augmented. In April, 1940, there were 40 naval planes based at the field, approximately 200 aviation personnel, and'a detachment of troops for guard duty. There are barracks, fuel and munition dumps at the field. (For sketch see APPENDIX "A"). Planes stationed here are: 2 sq. SSF (Type 97) 3 sq. S/É Light Bombers (Type 98) 1 sq. Fiat BR 20's HB 2 sq. Reconnaissence (Type 97). (108 planes) Sanya. Located north of Yulinkan Bay and East of Dog Hill. During early 1940, at least 2000 workmen were constructing and enlarging the field into & large air base. During April, 1940, five naval planes were stationed at the field. At present, the 14th Air Regiment of 4 squadrons consisting of 2 sq. SSF (Type 97) and 2 sq. HB (Type 97) are based hore. (54 planes). For sketch seo APPENDIX "B") Landing Fields: Wen Chang. (Vun Sio) Located southeast of Kiangchow and west of Toncen Point. Auxiliary (132° 25') Report No. 160-40 Report No. 160-40 /2/ and Kiungchow. Auxiliary. San Kiang. Located approximately midway between Wen Chang Yai-Chu. Located near beach, midway between Saeko Point and Great Cape. Tengchino. Located vicinity of Tong kin, northeast of Yulinkan Bay. Auxiliary. Three other fields in southern part of island, location indefinito from information available. (See skotch of Hainen Island, marked APPENDIX "C"). Fortifications: In addition to the cight gun emplacements in the vicinity of Same and Yulinkon Bays, concrete gun emplacements have been constructed it the following locations: 1. Ying Ko Tsui (Ying Khoc.). (Southwost Point) 2. Ma Ling (East of Great Cape, notr Yomamin) 3. Tung Chow) 4. Shi Chow) Cablong Bey area, ccst of Yulinkon Boy. 5. In vicinity of Senya airdrome. 6. Aihsien Chang. Approximately midway betwoon Snoke Point oná Gront Cupo (South coast). Three or four guns have boon installod along the coost north of Toncon Point (Northeast coast). Some improvements have boon mode in the old Chinese fortifications at Hoihow Bay. Reported (but not verified) that guns employed in vicinity of Chappy Boy (West Coast). See sketch of Hainan Island, APPENDIX "C") Ammunition Storage Facilities: 1. Northern Area; newly constructed building loorted in roar of Fu Yun Hospital, Hoihow. 2. Southern Aroo; loonted in L large cive (Lok P1 Tung) approxim tely twelve milos norther.st of Yulinkon Boy. h considerable number of barracks and concrete store- houses have been completed in the arec adjacent to Yulinkon Boy. Work in the Erea is continuing. Facilities for houling out sepplanes have boen con- structed ct Yulinkin Bay (See APPENDIX "B") Eightoen storehouses have been completed at Hoihow. A large quentity of militory stores is concentrated here. Novel Anchorages: Novel vassels have boon observed ct the following points: North Const: Hau Sui B:y Chingmae Bcy Hoihow Boy Pochin Br.y East Coast: Chunlen Harbor Pokngo South Coast: Yulinkan Bay (APPENDIX "B") Garlong Bey (APPENDIX "D") Goneral: Hainon is boing developed by the Japanese Novy C.S & major bose for expansion southward. Report No. 160-40 Report No. 160-40 /3/ There are about twenty thousand troops garrisoning the island, which is used as a rendez-vous for supplies, aircraft, troop transports, supply ships and naval units. For some time, large forces have been poised for a swift descent on French Indo-China. Although nominally under complete Japanese control, Chinese guerillas operate with comparative freedom from molestation in the uninviting interior. Portable short wave stations operated by Chinese regularly report on Japanese activities. The island is noted for its poisonous snakes, impene- trable thickets and unhealthy climate. Tropical diseases, such as invaders. cholera, dysentary and malaria take & heavy toll of the WEI CHOW The island of Wei Chow lies in the Gulf of Tongking, northwest of Hainan and south of Pakhoi. It was occupied by Japanese forces in 1938 and used as an air base for operations against Pakhoi and Yamohow in the Nanning campaign. APPENDIX "E", a sketch of Wei Chow, is self-explonatory, with locations of objectives accurately marked. Other pertinent data also on sketch. SAN CHOW (SAM CHUI) San Chow is an island off the South China coast, directly south of the Portuguese Colony of Macao. It was occupied by the Japanese Navy and converted into an air base for carrier aircraft for use against Canton (and Hongkong). The sirfield is situated on the southern tip of the island. It is roughly rectangular in shape, with the long dimension E-W. A paved runway extends the length of the field. Size of airdrome 1000 by 300 yards. Hangars and barracks on N side of field. Fuel storage and one hangar underground in steep hill directly N of field. Ammunition dump and gas bousers to W of hangars. The following bases (plus Hainan) are under Vice Admiral Shiro Takasu, Comdr. Second China Expeditionary Fleet (Flagship H.I.J.M.S. CHOKAI) which operates south of the Yangtze dolta: CHUSAN ISLANDS Naval Base (TINGHAI) AMOY Special Base CANTON Special Base Chusan Islands - Minor repairs, supplies, seaplane tender base. Amoy - Carrier and scaplane tender base. Canton - Heavy landplane bomber base, (can accommodate 90 planes) present force 1 sq. HB (Type 97). PESCADORES ISLANDS BAKO (or MAKO) The Pescadores are & group of fortified islands about 50 miles west of central Taiwan. For details of fortifications, see Monograph - Japen - Pages 39 &137. Further information follows. Bako is on Hokoto Island, largest of the group. A small naval stution, with minor facilities is situsted as shown in sketch. A seaplano station with tender moorings is located here. The large moin radio station is near the navy yard. There is & 25 ton floating, cantilever crane. Two landing grounds, shown in skutch are being extended. 1 sq. Patrol planes. (Sketch labelled APPENDIX "G"). Report No. 160-40 Report No. 160-40 14/ TAIWAN (FORMOSA) Taiwan is a large island, north of Luzon, the most strongly fortified base of Japanese operations outside Japan Proper. Large Army ground and air forces are stationed here, and several naval and air bases. The Naval anchorages and air bases are at Keelung, Tamsui and Takao. That at Takao is situated at the mouth of the Shimotamsui river, about 12 miles SE of Takao, and is easily recognizable from the air. Army Air Bases are situated at: HOKUTO SHINCHIKU ROKUKO POTISHI KAGI (Largest Base) OKAGAMA HEITO HOZAN REIGARYU KATO SUTEIRYU sunterys BORO Boryo KARENKO SUO GIRAN TAIHOKU (Keelung) ITAHASHI Total Army planes, about 200. Other air fields, which could be converted into military bases are at: TAICHU KOKO TAINAN ANPING KAIKO GARANBI MAIN BOMBING OBJECTIVES : The single main railroad down western Taiwan, Kagi, Takao, Toko, Tainan, the main Navy Radio station at Hozan, and Taito are considered the principal objectives for bombing raids from the Philippines. OPPOSITION TO BE EXPECTED: Fishing boats, some wireless equipped, as "listening posts". 50 cal AA machine guns 4" AA batteries at Kagi, Taito Vinor Fighter Tactics. BOMBS TO BE CARRIED: Against hangars, airfields, gasoline and fuel oil dumps - 100 Pound and Incendiaries. Against factories - 100 Pound and Incen- diaries. Against docks, harbor installations, etc. 500 Pound. PALAO About five hundred miles East of Davao, the Report No. 160-40 Report No. 160-40 /5/ is the Japanese mandated island of Palao. It contains a and seaplane base, landing field for carrier aircraft, oil tanks, fortifications. The inner and outer anchorages, as well APPENDIX "H". Units of the 4th Fleet based on Palao at present 8.5 all other points of interest are marked on the sketch, have already been reported to the Department. Report No. 160-40 Report No. 160-40 APPENDIX "A" To HOINOW CHINESE GRAUEYARD Road Hung Hom Po Village Hangars AIRDROME N 4 Hangans N₈ Kung Chi MISSIONARY Temple Jenson To FUSHING v KIUNGCHOW KIUNGCHOW (KIUNGSHAN) AIRDROME 42, HAINAN ISLAND Located midway between HOIHOW and KIUNGCHOW Field: Flat and grossy. Usable in all weather Altitude 20' size: 600 x500yards. Report No. 160-40 AMEROXIMATE ADUTION New Japanese DSANYA Gir Cone THE Hill w 1276' Report No. 160-40 %0 of hand Bohand are FRID Report No. 160-40 SAMA Samage BAY wharp X , APPENDIX "B" YULINKAN BAY N 1111. Yuhnkan BAY and SANYA FIELD S./ HAINAN ISLAND chingMai A Hainon Head Mostrams Behind Piggmer! R Magpie of Pr Motou A Hou sp Kningehow Bay it 19 sankiano 655 chappy 650' Bay was chang Toncan PT Bluff R t Chunhon Bay Seckusa Pr Report No. 160-40 Pyramid Pt. +) Pak Ngo Bay shoalfy Mountain >040' Region Sifa Pt 1620' Green Pr Southwest 3140' P1 810' HAINAN yaichu ISLAND snake Pr yamamin sanya Great same Tenskin Leong soi Bay Cape I 11 cape Bastion Gaulong t Bay t anchorage Julin kan airfields Bay t mountains, ft lowland s.v. Report No. 160-40 APPENDIX "D" Ruar Middle Island 8% Only possible ancharage GAALONG Sampan Bay village in BAY this Preality N Cape cal. Biother baalong E. Brother Laalon Bay Hainan Island no area rown authorize No no supplies Nava/Jeaplane Operating case paddy fields. Report No. 160-40 Report No. 160-40 APPENDIX "E" Roman Catholic SENG JAI MISSION UILLAGE Roman Catholic MISSION AIR FIELD aread and NEW and BLOG CANNAS Reemeo 8406 BOOJAI village Road NAM TONG CHENG village seaplane ancherage abilage NAMWAN Cement BAY whart BIsland WEST BINT Highest land 250' N WEI CHOW Landingfield 1200 x 600 yous 7 ISLAND Unmettaled roads sining as military posts (not shown) Landing Report No. 160-40 field 2 NorthFort Town Report No. 160-40 Guns HOKOTO ISLAND (Ponghau Is) "C") - APPENDIX Field Fukihi Kako Naval station TESCADORES Is. BAKO Gut - cliffs, mountains on lowland we buy 1 airfield fortifications Janehow challe wan as / village Kokaku & Report No. 160-40 APPENDIX "H" is nevel regulare being outer $ a ancharage Ow. & V Amale "I" herer Is starms / - His / PAL 170 (South Seas (slands) * hight Y wish les c See Hydro Chart 11 5423 - " Report No. 160-40 N. 06-1M0 7284-A ISSUED BY THE INTELLIGENCE DIVISION OFFICE OF CHIEF OF NAVAL OPERATIONS NAVY DEPARTMENT INTELLIGENCE REPORT Serial No. 161 Monograph Index Guide No 603-300 (Rears SET series each year, I-8, 3-40 (Ty correspond with SUBJECT gived No. fee 0. N. L Indes Cruide. Make expensive repart for each Mali use From Naval Attache at Tokyo Date flort, 30 1940 (Ship, fleet, unit, district, office, station, or person) Reference (Directive, correspondence, previous related 1 - M applicable OF F Source Various reliable Evaluation IGEN@D1e CAs official, personal observation, publications, pres, conversation with-ideotify (As reliable, doubthi, unvertied, etc.) what practicable, etc.) Subject Japan Cities and Towns - Coast Defenses - Air Defenses (Nation reported on) (Main title M per Index guide) (Rubtities) (Make separate report for each sitte) 74 enter careful summary of report, containing substance succisarily stated; include Important facts, DADAS, places, dates, etc.) tional pages, Forward original and six copies. Officers preparing and those Investing sketches, when practical. If practicalité, prepare sketches miltable for blueprinting AIR RAID DEFENSE IN JAPAN 1.) Air raid signal and means of communication. 2.) Action taken during raids. 3.) All clear signal. 4.) Air Defense Organizations. etc., 5.) Fire hazards. 6.) Remarks. DEBLASSIFIED E.O. 11652, Sec. S(E) and 5(D) or (R) OSD letter, May 3, 1972 AY 211973 By RT, NABS Date 161 The this form for original and reples reports sign the last page of original and 09/11/11 Distribution By Originater DNI (7) CinCAF(1) ComairAF Com 16(1) NA/Peiping(1) ANA/Shanghai(1) M/A Tokyo(1); File (1). - in o, N. L Drive circle around unit or units (as shown on the distribution block below) to which this particular copy of this report photosting. has ben routed for information, for further routing, or for relention. Indicate by check () on this copy the complete distribution of other copies of this report. To show rouping not provided) for on this form, use black beens. Made Sex. Non. Archive I : Of, 1 College M.D. IL O. Nov. T.S.D. CAR 184 M.A.S. t if 3 Cop. C.b.C. 3 Ord. Eng. Com. Per. Sea. Fer, A.F. 1 Airea, of Attach4 et Op.-18/11 00/12 Op-13 Op-14 Op-20 Op.-11 Op-22 Op.-23 State Case Op-20 Martine Op.-28 I 3 Cell Return to Aaro lass No. birth . INVESTMENT services IFFICE Report No. 161 600 - Cities and Towns Japan 603 - Coast Defenses September 30, 1940 300 - Air Defenses AIR RAID DEFENSE IN JAPAN Air Raid Signal: Ten blasts of sirens mounted atop buildings, intervals of three seconds, between blasts. Radio broadcast and tele- phonic air raid warnings. Action to be Taken: All traffic must come to a standstill, people must leave conveyances and seek shelter beneath "eaves of buildings or in houses. bomb-proof shelters IF they can find any". People must evacuate All outside illumination must be turned off and houses are required to be shrouded in such a way that no light is visible from without. No smoking on streets. Trams and street cars shell not move, as the flashes from overhead wires would give away main streets. Tubs of water are required at the entrance to each home. All Clear Signal: A steady blast of the siren lasting one minute. Any other noise resembling e siren to be prohibited. Air Defense Organizations: Air Dofense organizations in Japan are purely local in character. Generally, each street and ward association is assigned to regulate its premises. Uniformed volunteers (with little or no training) are in charge. Fire fighting facilities are woefully inadequate. Hoses are old, worn and leaky. Water mains are shut off at night. Little pressure is available. Fire hydrants are few and far between. Sluggish canals and drainage pools are used for suction by hand-pumped and hand-carried fire apperatus. Fire Hazards: Nine-tenths of Japanese houses are roofed with tiles. Ninety-nine out of a hundred are constructed of flimsy wooden materials which catch fire and burn with alarming rapidity. Incendiary bombs sowed widely over en area of Japanese cities cities. would result in the destruction of the major portions of these Factories, warehouses, business buildings are constructed of stone facades, behind which the lath and plaster lend small support against bomb blasts. Newer government buildings are of concrete and steel construction. Remarks: The Japanese people have never had the war carried to their shores. The China Incident has been a remote and nebulous dream, affecting the citizenry but little. Should the war be Report No. 161-40 Report No. 161-40 /2/ brought home, and their homes and factories razed, the over- rated prestige of the Japanese armed forces would suffer seriously. Morale is now none too high with the man in the street, par- ticularly after three end a half years of belt tightening have restricted him to the bare necessities of life. Bomb shelters are few in number and totally inadequate to accommodate even a minute percentage of the population. Transportation facilities are already over-crowded, and the evacuation of the civilian population would be attended by tremendous difficulties. Since every home in Japan is already crowded, few accommodations for refugees are available. A complete list of important bombing objectives, including aircraft factories, steel and gas works, main transportation systems and government buildings will be prepared and forwarded. Report No. 161-40 17242 v. N. 06-1940 ISSUED BY THE INTELLIGENCE DIVISION OFFICE OF CHIEF OF NAVAL OPERATIONS NAVY DEPARTMENT INTELLIGENCE REPORT Serial No. 171 Monograph Index Guide No. 1000-1002 (Start BEY aeries each year. 1-60, 3-40 (Ty correspond with SUBJECT pives below. See o. N. L Index Guide. Make separate report for each main title.) From Naval Attache at Tokyo Date October 10 19.40 (Rhip, Seet, unit, distriet, office, station, or person) Reference (Directive, correspondence, previous related report, etc. if applicable) Source Various Evaluation Reliable (As official, personal observation, publications, press, conversation with-identify (As reliable, doubtful, unverided, etc.) when practicable, esc.) Subject Japan Aviation - Organization (Nallon reported on) (Main title M per indes guide) (Rubtities) (Make separate report for each citie) enter careful submary of report, containing substance succinctly stated; Include important facts, names, places, dates, etc.) DISTRIBUTION OF SHIP AND CHINA BASED AIRCRAFT super for Additional pages. Forward ongan and at repies, unders preparing and the sit dispings, sketches, etc., when practical. If practicalite, propare skesches miltable for Margrissing 75 From reliable sources, the mumbers and types of naval aircraft stationed in the Japanese fleets and at all outlying bases is tabulated herein. Data as of 1 September, 1940. Combined Fleet aircraft, all types 320 Other fleets, aircraft, all types 139 At bases in China, Hainan, Taiwan, Palao, Jaluit, aircraft, all types 549 Total naval aircraft at sea and at bases outside Japan 1008 Car the Bank for origin reporta sign the lant page Distribution ANA By Shanghai (1); M/A Tokyo (1): File (1). Originator DNI(7); CinCAF(1): ComairAF(l); Com 16(1); NA/Peiping(1) Resting sports below le - in o. N.L. Draw circle around unit or units - shown on the distribution Nork below) to which this particular copy of this report I 5 has been routed for information, for fursher routing, or for retention. Indicate by check () os this copy the complete distribution of other copies of this report. To show rouling not provided for - this form, DM blank boxes. E Ges1 Sex No. Op-14 Da-18-1 Bedget Of. Wer - [ Callege M. M.I.D. mga H.O. Man, Ord. M.&S of U.S.M.C. cut Com. Can T.A.D. CAR Eng. SAL C.b.C. Com. Com. U.A. Bal. Sex.Fa. A.F. Spares. Aires, V V Attaché of (Op-18/1) of 0p-11 Op-14 Op.-20 Op-11 Op-22 Op.23 Op.-20 Op-28 State Case Maritine - Cam. Chil Return be Aere lass No. Auth . a. GOVERNMENT PRINTING OFFICE Report No. 171 1000 - Aviation Japan 1002 - Organization October 10, 1940 DISTRIBUTION OF SHIP AND CHINA BASED AIRCRAFT The following tabulated list of aircraft afloat and at Japanese bases outside the mainland of Japan Proper is the result of observations by merchant captains and warships who identified plenes by numbers on fuselage and tail. The data is considered the most reliable obtainable, and final date of observation was 30 August, 1940. The abbreviations used when referring to types of air- craft is explained as follows: SSP - Scout Seaplane, Type 94 twin float, 95 single. SSF - Single Seater Fighter. Low wing monoplane. TB - Torpedo Bomber. Type 96 biplane. Fixed wheels. TB - " " Type 97 low wing monoplane. DB - Dive Bomber. Type 94 biplane VP - Patrol. Type 97 four-engined Kawanishi. It will be noted that at no time have the Japanese carriers (except KAGA) been seen with more than 48 aircraft, although in this office's previous reports a maximum of 60 have been estimated aboard the larger type. The standard number of aircraft in a Japanese squadron is twelve, except for Patrol Squadrons, which contain eight. COMBINED FLEET BATTLESHIPS (10 plus 2 (?) new) 11 Type 94 SSP 16 Type 95 SSP 27 SSP CRUISERS (Myoko 5, Nagara 2, plus 27 cruisers) 69 SSP CARRIERS 1.) AKAGI Type 96 SSF 12 Type 96 TB 24 (2 squadrons) Type 97 TB 12 48 (4 squadrons) 2.) HIRYU Type 96 SSF 12 Type 96 TB 12 Type 96 DB 18 42 (3) squadrons) 3.) HOSHO Type 96 SSF 12 Type 97 TB 8 20 (1f squadrons) Report No. 171-40 Report No. 171-40 /2/ 4.) RYUJO Type 96 SSF 6 Type 96 TB 12 Type 96 DB 12 30 (2) squadrons) 5.) KORYU Type 96 SSF 12 Type 97 TB 12 Type 96 DB 18 42 (3) squadrons) SEAPLANE CARRIERS 1.) MIDZUHO Type 94,95 SSP 20 2.) NOTORO " " = 9 3.) KAMOI " " If 9 38 MISC. VESSELS 1.) CHOGEI Type 95 SSP 1 2.) TAIGEI Type 95 SSP 3 4 Total planes in Combined Fleet, distributed by types as follows: Type 94 and Type 95 Float Seaplanes 138 Type 96 Single Seater Fighters 54 Type 96 Torpedo Bombers 48 Type 97 Torpedo Bombers 32 Type 96 Dive Bombers 48 320 aircraft NORTH CHINA FLEET CRUISERS 1.) IVATE Type 95 SSP 1 2.) KUMA (?) Type 95 SSP 3 4 THIRD FLEET (YANGTZE) KINUGAWA MARU Type 94,95 SSP 10 IDZUMO Type 95 SSP 1 OKUSHIMA Type 95 SSP 1 12 FIFTH FLEET (SOUTH CHINA) CHOKAI Type 95 SSP 3 NATORI Type 95 SSP 1 SENDAI Type 95 SSP 1 One unidentified Type 95 SSP 1 6 AIRCRAFT CARRIER KAGA Type 96 SSF 12 Type 96 TB 12 Type 97 TB 18 Type 96 DB 18 60 Report No. 171-40 Report No. 171-40 /3/ /.IRDRAFT TENDERS 1.) CHITOSE Type 94, 95 16 2. CHIYODA Type 94,95 16 3.) KAMIKAWA MARU Type 94,95 SSP 24 (24 SSP carried belong to 14th air squadron, with signal #6 prefixed to plane numbers) 56 MISC. VESSELS JINGEI Type 95 SSP 1 The aircraft carriers Shokaku and Zuikaku have not yet been identified with fleets. Zuikaku will be commissioned in November 1940. Each is reported to cerry 60 sircreft as in KAGA. cleared. Upon receipt of further information this point will be BASES IN CHINA, NAVAL AIRCRAFT ONLY. 1.) TSINGTAO Type 95 SSP 6(h squadron) 2.) SHANGHAI 13th Air Squadron consisting of: Type 98 LB 12 Type 96 HB 36 (3 squadrons) Takao Unit Type 96 HB 24 (2 squadrons) 72 72 3.) HANKOW 12th Air Squadron consisting of: Seversky SSF 12 Type 97 SSF 24 (2 squadrons) Type 96 TB 6 ( à squadron) Type 96 HB 24 (2 squadrons) Type 98 LB 12 From Kanoya NAS Type 97 SSF 12 Type 96 HB 6 ( à squadron) 108 108 4.) KIUKIANG Detachment of 12th Air Squadron: Type 97 TB 12 Type 97 SSF 12 24 24, 5.) CANTON Detachment of 14th Air Squadron: Type 96 SSF 12 Type 98 LB 12 Type 96 HB 6 (à squadron) 30 30 6.) SAN CHOW (#6 Base) Detachment of 14th Air Squadron: Type 97 TB 12 12 7.) Y/M CHOW (#12 Base) Detachment of Unidentified Unit. Type 97 SSF 12 12 8.) NANNING Detachment of 14th Air Squadron Type 97 SSF 12 Type 97 TB 12 Type 96 HB 12 36 36 Report No. 171-40