18 Fed. Res. Bull. 309 (1932)
Annual Report of the Bank of Japan

handle is hein.journals/fedred18 and id is 335 raw text is: ANNUAL REPORT OF THE BANK OF JAPAN

The annual report of the Bank of Japan for
1931 was presented to the general meeting of
shareholders on February 20, 1932. Sections
of the address of Mr. Hisaakira Hijikata,
governor of the bank, are given herewith:'
The financial difficulties which, began in
Austria and Germany, and led eventually to
the suspension of the gold standard by Great
Britain, made their influence felt in Japan,
where the situation was further aggravated by
the outbreak of the Manchurian disturbance
about the same time. Prices of staple com-
modities and securities underwent so sharp a
decline that stock exchange transactions were
temporarily suspended. Owing partly to anx-
iety regarding the gold standard in Japan, the
foreign exchange market had to meet a strong
demand for dollars, which caused an outflow of
gold in considerable amount and a decline in the
volume of funds available to the market.
Toward the end of the year money became
tighter and   dearer. With     the  change   of
Government on December 13, gold exports and
the conversion of bank notes into gold coin
were prohibited except under license, and there-
after the yen exchange declined steadily, while
commodity    prices advanced. The advance
was most marked in prices of international
commodities which were influenced by specula-
tive dealings, and was reflected in -a general
rise in stock market values. The business
situation thus underwent a marked change.
Money market.- In spite of the fact that
bank deposits declined, the money market was
easy during the greater part of the past year,
partly  because the credit requirements of
business were smaller and partly because the
uncertain outlook discouraged long-term lend-
ing. Interest rates declined rapidly-in fact,
each succeeding issue of treasury bills carried
a lower rate of interest. The average discount
rate at which allotments were made declined
from 0.93 sen per diem per 100 yen (3.39 per
cent per annum) on January 17 to 0.38 sen
(1.39 per cent) on June 19, when day-to-day
loans were quoted at 0.3 sen (1.10 per ernt).
After April 1, the associated banks one after
another throughout the country lowered their
rates of interest on deposits. As a result of
the low rates, funds were invested in Govern-
ment bonds-which gradually rose in value-
and in foreign markets. On the whole, how-
Taken, with some textual revision and rearrangement, from the Eng-
ish version published (in abridged form) by the Bank of Japan. In
addition to the address o the governor, the report contains numerous
tables showing the condition and oprations of the bank in detail. Far
earlier reports, see BULLETIN for Ju y, 1931, May, 1930, April, 192q, etc.

ever, the position continued to be easy until
the last quarter of the year, when several gold
shipments aggregating 354,000,000 yen were
made to settle dollar obligations. The re-
sources of the market gradually became ex-
hgusted, and money tightened appreciably.
The bank accordingly iaised its discount rate on
October 6 and again on November 5, while the
associated banks advanced their interest rates
on deposits about the middle of December.
The customary   year-end requirements for
currency and the special demand for funds
in settlement of foreign exchange contracts
brought about a renewal of adtivity. Borrow-
ings at the bank increased subhtantially, and
the volume of advances outstanding on Decem-
ber 30 was greater than it had been since the
financial panic of 1927. The rate for day-to-
day loans on that day was 0.9 sen (3.29 per
cent) higher than on December 31, 1930.
Foreign exchange.--During the greater part
of the year the rate on New York fluctuated
within narrow limits around $0.49%. The easy
position of the money market, however, led
banks, insurance and trust companies, and
others to seek employment for their idle funds
in London and New York. This created an
increasing demand for foreign exchange, in
spite of the fact that our foreign trade balance
was fairly satisfactory and that the Taiwan
Electric Power Co. had floated a foreign loan.
After Great Britain suspended the gold standard
and it became necessary to acquire foreign
balances in place of those formerly held in
London, dollar exchange was in great demand.
When the gold embargo was imposed in Decem-
ber, the exchange value of the yen declined
steadily and reached $0.34% at the end of the
year.
Discounts; deposits.-Loans and discoants
were relatively stable at about 600,000,000
yen until September, but gradually increased
during the last quarter as a result of stringency
in the market and of the export of gold.
On December 31 they amounted to 964,000,000
yen, of which 575,000,000 yen represented
discounts under the indemnity act. Govern-
ment deposits maintained a monthly average
of 100,000,000 yen during the first half of the
year, but in the second half rose to 200,000,000
yen, whereas private deposits stood at approxi-
mately 200,000,000 yen during the first part
of the year, rose to over 300,000,000 yen in
May, and then gradually declined to about
100,000,000 yen toward the end of the year.

FEDERAL RESERVE BULLETIN

MAY, 1932

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