The Yen and the Sword

Abstract

CURRENCY has proved to be one of the decisive weapons in the present war between Japan and China. Much though its importance is underrated by many close observers of the great conflict, the two participants have long been well aware of this fact. More than two years before military hostilities actually started, the SinoJapanese currency war was already in full swing. The Japanese took the offensive when they attempted, early in I935, to link North China's currency with that of the Bloc. It was hoped that by this means the five big northern provinces could be severed from China and virtually conquered by Japan, without any expenditure of blood and ammunition. It was not only by Japan's diplomatic and military pressure, coupled with a great variety of subversive political activities in North China, that this scheme was to be forced on the unwilling country. China's old and obsolete silver currency being in a precarious state at that time, the Japanese realized the chances of direct, aggressive action in the monetary field itself. This took the form of an attempt at denuding China, and especially the Northern provinces, of silver, the legal tender. Under the careful direction of the Japanese authorities on the spot, therefore, very large quantities of silver coins and bars were bought up by Japanese agents in the North, at the abnormally low prices, measured in terms of foreign exchange, which then prevailed in China. In spite of the Chinese Government's ban on silver exports, it was smuggled out to Japan, where its arrival was not shown in the official import returns. But the re-shipping of the silver to Britain was done quite openly, Japan's official foreign trade statistics giving a total of more than Yen 275,000,000 of such silver exports for the years from I934 to I936. The Chinese origin of the metal was obvious enough, for Japan is not itself a producer of