Vol. 70, No. 6

Eiji HOTORI
The Inspection of banks by the Ministry of Finance in wartime Japan 1935~1945, with special reference to 'prudential regulation'

The financial crises of the interwar period left the Japanese banking system with a heavy burden of non-performing loans (NPLs). However, the problem was largely resolved during the period of the wartime economy. The main object of this paper is to clarify the role of the regulatory agency in managing the crises, by focusing mainly on the inspection of banks carried out by the Ministry of Finance (MOF).

The first section of the paper examines three components of the bank examination system: the budget provided, the nature of the staff, and the actual procedures followed. The second section is an analysis of the policy and functioning of the system based on the historical records of zaibatsu banks and dominant regional banks. The third section investigates Ryo'u Bank as a concrete example of the role of the inspection process in accelerating the disposal of NPLs.

In conclusion, it is clear that the MOF inspection system included both mechanisms that accelerated the disposal of NPLs and improved prudential techniques that were incentive compatible. The financial problems were overcome through a combination of three factors: the overall economic recovery, the endeavors of bank managers, and the inspection system, which improved the risk management capabilities of bank managers.

Tomoki SHIMANISHI
Major coalmining companies during the early period of post-war rationalization: the Hokkaido Colliery and Steamship Company Ltd. and the sub-leasing of coalmines from the early 1950s to the early 1960s

Sub-leased coalmines (SLCs) were one method of rationalization attempted by major coalmining companies during the early 1950s to the early 1960s. This article demonstrates how the Hokkaido Colliery and Steamship Company Ltd. (hereinafter Hokutan) was able to use SLCs to reduce mining costs, stabilize production, rationalize the development of mining areas, and adjust its employment levels.

Hokutan made sub-leasing contracts that included exclusive purchase agreements with subsidiaries and contractors. The use of SLCs, which depended on cheap labor and mined coal pillars in Hokutan's mining areas, guaranteed large supplies of inexpensive coal without the need for capital investment in Hokutan's own coalmines. In addition, they provided employment for retirees from Hokutan and relatives of Hokutan workers.

The utilization of SLCs by Hokutan came to an end in the early 1960s, when they began to close in rapid succession. This was caused by many factors: active intervention in sub-leasing contracts by the Hokutan labor union, increases in the cost of mining SLCs, and legislation which promoted their closure.

Satoru KOBORI
Japan's energy policy during the 1950s

The purpose of this paper is to analyze the characteristics of Japan's energy policy during the 1950s. The paper focuses on the policy to protect the domestic coal industry through regulating crude oil consumption as it was actually carried out in the period from 1954 to 1960. Two main characteristics were found.

First, the government consistently encouraged firms to save energy, for example by means of the netsukanri (heat control) policy. Since switching energy from coal to crude oil was very effective in netsukanri, from the outset the regulation of heavy oil consumption was not tough. Second, in the second half of 1956, the government predicted that Japan's energy consumption would increase rapidly in the near future. It therefore made a variety of advance provisions in order to increase Japan's ability to import crude oil, despite the fact that it was more expensive than domestic coal. At the same time, the regulation of crude oil consumption grew progressively weaker, so that it was virtually nonexistent by 1960.

Because of these characteristics, the protection of the domestic coal industry was a marginal aspect of Japan's overall energy policy. Further, Japan's energy revolution was faster and more comprehensive than similar processes in European countries.

Keishi SHIRATORI
The Ministry of Finance, the Bank of Japan, and the recovery of special compensatory loans (1927~1936)

The Bank of Japan (BOJ) made large amounts of capital available in the form of special compensatory loans as a relief measure during the 1927 financial crisis. At that time, the Ministry of Finance (MOF) decided on a policy of recovery and disposal to minimize losses, not really in order to protect depositors but so as to minimize fiscal spending and control the amount of government debt.

However, the policy to return Japan to the gold standard made it necessary to recover the money as fast as possible. The BOJ tried to do this but was hindered by the government's policy of deflation, the economic crisis itself, and the need to rescue the central banks in Japan's colonies. When the economic crisis further endangered the financing of small and medium-sized enterprises, the MOF briefly considered fulfilling its commitment to compensate the BOJ for its losses. In fact, however, since the inflationary trend that began in 1934 made it easier to recover the loans, the MOF was able to postpone any moves to compensate the BOJ. As a result, the policy of recovery and disposal reflected the process of the shift from the gold standard to a managed currency system.