War Talk

Bonds of the Imperial Japanese Government, which had already dropped some 30 points, dropped ten more points last week to 61. Tokyo City bonds dropped over seven points. Bonds of Daido Denryoku Kabushiki Kaisha (Great Consolidated Electric Power Co. Ltd.) dropped over 13. The yen sank to a value of 35-c-, lowest level in history (par: 49.84-c-).

The decline began two months ago when Japan went off the gold standard. Last week's drop was the investor's reaction to war. A total of some $390,000,000 worth of Japanese bonds are the major portion of the $451,000,000 U. S. investment in that country. Altogether last week they were worth about 60% of par. Thus Japan's credit was being scrutinized in the U. S. more carefully than at any time in a decade. Prime point is that in all Japan there is only $190,000,000 worth of gold bullion, a small fraction of its paper currency and discounts (28% on Dec. 19).

But whereas investors and others concerned with Japan's fundamental credit may have viewed war events with alarm, those who sell goods to Japan for cash had reason to cheer. Shipments of cotton from the U. S. to Japan in the July-December period were double what they were in the same 1930 period--1,069,000 bales v. 490,000. January sales were probably about 500,000 bales against 315,000 in December. Great arguments were waged last week as to whether these purchases were for munition-making or to safeguard spinners against a further yen-drop.

During December Japan bought 1,244 automobiles and trucks against 300 in November. Iron, steel, and gasoline purchases were also heavier. Reports from Japan last week told of depleted lumber stocks (largely imported from the U. S.) and rising steel prices.

In Chicago last week March wheat jumped 2 3/8-c- to 58 3/4-c- on the war scare. Best opinion was that since wheat in U. S. markets averages 5-c- higher than Liverpool at present, other nations, particularly Australia, would be more likely to get war orders. A Japanese blockade would almost surely eliminate China as a customer. Last week a large shipment of wheat was made to China, part of the Farm Board-Chinese Nationalist Government transaction.

Whether or not a bigger & better war would, in the sum total, aid or harm U. S. business, it would be certain to bring about many an unexpected trade stimulus, many a sudden stoppage. Much of what would be destroyed would be rebuilt. Thus last week officers of the demolished Commercial Press, Shanghai, one of the largest and most remarkable shops in the world, employing 14,000 men, were planning to buy new equipment in the U. S., a fat order for hungry manufacturers. But only a mighty war would be likely to benefit the "war babies" of 1915: steels, chemicals, coppers, oils, ordnance makers.

Companies with properties in China might be hurt, as well as the insurance business as a whole. Of the $130,000,000 U. S. investment in China some $43,000,000 represents oil distribution systems (big business is done not in crude or gasoline but kerosene for lamps). International Telephone, American & Foreign Power, several large Manhattan banks, Singer Manufacturing and other industrials have large investments in China. Companies which would suffer from loss of trade include the makers of canned foods, evaporated and condensed milk, machinery and electrical equipment, also producers of iron and steel, leaf tobacco, lumber, wheat flour. Hard hit would be the growers of ginseng, an herb which China buys from the U. S. at a $1,400,000 annual volume.

The biggest U. S. imports from Japan, silk and pottery, would probably continue. If China could not export, there would be shortage in general specialty markets. Among commodities in -this class are: sausage-casings, human hair, furs, dried and frozen eggs, straw braid, bristles and tung oil, a heavy substance made from tung tree seeds, valuable to paint and varnish makers.

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