GEOGRAPHIC position and industrial progress have combined to place within the reach of Japan the economic leadership of Asia. But Japanese policies on the mainland have not always been of the sort to contribute to the attainment of that leadership. There has been a conflict of political and economic interests in which the cultivation of friendly relations with Asiatic neighbors has alternated with acts of imperialistic and commercial aggression. Japan is recognized as the most powerful nation of Asia and her economic development is the most advanced. However, in China, in India and in other parts of the continent she is not accepted as a leader but is regarded with increasing suspicion and animosity. Boycotts and tariffs are barring Japanese goods from Asiatic markets -- and these markets are essential to the continued expansion of Japanese manufacturing.

Of the amazing changes that have occurred in Japan since the country was opened to foreign intercourse, none has been more striking than the development of manufacturing industries. Stimulated in the earlier years of the modern period as the one possible defense against the western nations, industrialization has come to be regarded as the most promising solution to the problem presented by a population which has doubled since 1873 and which is increasing at the present time at the rate of approximately one million per year. There is no outlet in agriculture: the area of the Japanese islands is limited and only 16 percent of the surface is arable.

Manufacturing has therefore been encouraged, and though Japan still remains essentially agricultural the progress made has been remarkable. There are now about two million workers in Japanese factories. Japan has become an important manufacturer of cotton textiles, raw silk, rayon, electrical equipment and numerous other items. She now ranks seventh among the nations in number of cotton spindles, and only the United States and the United Kingdom consume a greater quantity of raw cotton.

Japan's industrial progress has been accomplished, however, in the face of severe handicaps. She possesses a supply of labor, unskilled but cheap; she has had the benefit of all the mechanical advances made by Europe and America in the century and a half since the industrial revolution; and the Japanese Government has provided protection and liberal financial aid to the new industries. But there is in the country a scarcity of essential raw materials. Coal is limited in quantity, very little of the reserve is suitable for the manufacture of a metallurgical coke, and costs of mining are high, due to the depth and the thinness of the seams. In a comparatively few years Japan will be faced with an actual shortage of fuel. Though conditions in the islands are highly favorable for water power, the entire potential supply, if developed, would be little more than the amount of power now supplied from all sources. Again, there is practically no iron ore in Japan proper and the reserves in Korea are not large. Other minerals are of minor significance. Japanese textile mills are dependent almost completely upon the United States, India, China and Egypt for raw cotton and upon Australia for wool. The one raw material for manufacture produced in quantity in Japan is raw silk, and though it is the basis for a weaving industry, over 80 percent of the annual output in recent years has been exported from the country in its raw form.

II

With the progress of industrialization, Japan has needed larger and larger imports of raw materials. In addition, she has been an importer of capital goods in the form of machinery and factory equipment. Since 1875 the value of Japanese imports has increased more than fifty-fold, the principal items at present being raw cotton, wool, petroleum, iron ore, timber and machinery. More than 70 percent of the imports are raw materials or goods intended for further manufacture. These imports must be paid for. And since Japanese investments abroad are small, and since in Japan there has been only a limited development of services such as shipping and insurance, the payment must be in the form of the export of commodities.

The increase in commodity exports since the early years of the modern period has been phenomenal, but it has not been sufficient to keep pace with the mounting volume of the imports. Year after year, with only occasional exceptions, imports have greatly exceeded exports in value. It thus has been necessary to meet the accumulating adverse balance by government and private borrowing abroad. The World War provided a fortunate interlude in Japanese trade. With the withdrawal of the European countries from the Asiatic market, Japanese exports boomed. In the four war years the favorable commodity balance was sufficient not only to pay off all of Japan's accumulated foreign indebtedness, had she so desired, but to establish a substantial surplus credit abroad.

Since the close of the war, however, exports have declined, imports have increased relatively, and a tremendous unfavorable balance is accumulating. It presents Japan with what is perhaps her most serious problem. Though an adverse commodity balance is not in itself a symptom of an unhealthy economic condition, especially in a newly developing country, the international payments cannot be met indefinitely by foreign loans. There must be a reasonable prospect that exports will eventually make repayment possible. The extremely low prices quoted on Japanese securities in the New York and London markets, and the depreciation of the yen to 40 percent of its par value following the abandonment of the gold standard, are evidences of a weak international financial position.

To improve this position it becomes highly important to increase Japanese exports through the expansion of the markets for Japanese goods. Other countries, faced with the dilemma of exports that can be paid for only by piling up in foreign markets credits which are uncollectable because of artificial restrictions on imports, may play with the idea of reversing the orthodox economic thought with regard to world trade and adopt restrictions upon exports. But the situation in Japan is very different. Japan is far from being a self-sufficient country. She is dependent upon imports for many of her requirements. Some adjustments in the import trade are perhaps possible through the curtailing of luxuries, but if manufacturing industry is to grow there must be an increase in the imports of raw materials and there is every indication that with the increasing population it will be necessary to bring in larger quantities of food. Japan's difficulty will not be to collect upon her exports but to increase those exports to provide payment for her essential and mounting imports.

Japan's export trade is not complex, like the trade of the United States, Great Britain, or any of the leading European countries. It is extremely simple, both in its list of important commodities and in its principal markets. Thus, since the beginning of the modern period, raw silk has regularly constituted from 35 to 40 percent of the value of all exports. In the earlier years a variety of items made up the remainder of the Japanese trade -- tea, aquatic products and copper. But in more recent years the trade in these has declined and their place has been taken by textile manufactures -- cotton, silk and rayon textiles and clothing. This group of commodities now constitutes more than 33 percent of the value of the export trade. Not only is the list of exports limited, but they go to a very restricted market. Of the raw silk, 95 percent of the export (some 75 percent of the total output of Japan) goes to the United States. The manufactured textiles go mainly to the continent of Asia. These two markets in recent years have taken over 80 percent of Japan's exports.

The dangers of having so restricted a list of exports and so limited a market are apparent. As a result, Japan has been striving to develop trade in other commodities and in other parts of the world -- South America, Oceania, Africa and even Europe. But, despite all her efforts, the concentration in commodities and in markets is becoming even more pronounced. For example, in the five-year period ending with 1885, the United States, China and India took 58 percent of the exports of Japan; in the period from 1901 to 1905 the share of those three markets had increased to 65 percent; and in the five years ending with 1932 it had grown to 73 percent. In the earlier years of the twentieth century, 59 percent of Japan's exports to the United States were raw silk; at the present time raw silk accounts for nearly 82 percent of that trade. Textiles are assuming an increasing importance in Japan's exports to the China market.

For many years to come Japan will continue to depend, as in the past, upon two markets, the United States and Asia. Asia holds out much the greater promise. The American trade, as indicated above, has been made up mainly of the one luxury item, raw silk. Japan already supplies most of the American consumption, and an increase in the trade can be accomplished only by an increase in the total American demand arising from an increase in population, a substantially higher standard of living among the American people, or a lower price for the raw silk. Meanwhile, there is the threat of competition from a steadily improving rayon, and from a Chinese silk industry rejuvenated after the attainment of political stability. In the case of all other products Japan labors under a serious handicap in America and in fact in all Occidental countries, with their alien cultures and their highly advanced industrialization. Japanese manufacturers almost inevitably must seek to satisfy demand through imitation. Distances to the American and European markets are so great that it is difficult, if not impossible, for Japan to keep pace with changing tastes and styles. It is to Asia that Japan must turn for any substantial expansion of her trade.

III

In the Asiatic market, Japan possesses many decided advantages which place her in a preferred position above the manufacturing nations of Europe and America. Her culture gives her an understanding of Oriental needs and tastes. She is situated near the mainland. Concentrated near the coasts of southeastern Asia and in the adjacent islands live approximately one billion people, or more than one half of the world's population. It is true that the purchasing power of the region is low. The people are mainly dependent upon agriculture of a subsistence type, and their earning power is small. There is little surplus for trade. In 1929, the imports of China, a country with a population of probably 400,000,000, were valued at only $820,000,000 gold; and in the case of India, a country with 350,000,000 inhabitants, they amounted to only $1,173,000,000 gold. For the same year tiny Netherlands, with a population of 8,000,000, imported goods for consumption within the country to the value of $1,106,000,000 gold.

In recent months Japanese spokesmen, attributing American sympathy with the Chinese cause to a hope for trade advantage, have sought to convince the American public that China is not and never can be an important market for American goods because of this low purchasing power. There is little question, however, that the Asiatic market, and especially China, is the world's remaining market of greatest promise. At present, imported goods are consumed mainly in the port cities and along the rivers or the few railroads which penetrate inland. The people of the interior are mainly self-sufficient. They weave on hand looms most of the cloth which they wear and even spin yarn from locally grown cotton. Other needs are few and are met by the old handicraft industries to be found in every Chinese village. But as transport improves it will be more and more difficult for these industries to withstand the competition of factory-made goods. Transport will also permit a more effective utilization of China's resources, as was the case in Japan in the years following 1870, and the purchasing power of the people should be increased. In fact, the history of Japan suggests a probable trend of development in China. China now imports each year goods to the value of $2, gold, per capita. In the period from 1876 to 1880, the Japanese per capita imports averaged only 50 cents, and they did not equal the present Chinese figure until 1896 or 1897. Even in India, under British control for many years, the hold of the domestic workshop industries is amazing. It seems highly probable that in the next century there will occur in Asia a greater relative expansion of foreign trade than in any other part of the world.

But low purchasing power is not the only barrier to the development of the Asiatic market. Disturbed political conditions hamper economic growth and make impossible any systematic encouragement of trade. It is a market, moreover, in a large part of which there is no stable currency. The use of silver, which fluctuates in price, introduces a highly speculative element into trade with China. Further, the Asiatic market to a considerable extent is under the political control of European Powers. Great Britain, France and the United States all consider their colonial possessions as a market for their own manufactures, and as a result the tariffs of India, Malaya, French Indo-China and the Philippine Islands give preference to the goods of the mother country.

Many of the countries of Asia, both sovereign states and dependencies, have industrial ambitions of their own and give active encouragement to manufacturing. China and India, in particular, possess advantages for industrialization in some respects superior to those of Japan. Their potential labor supply is large and cheap. Both countries grow cotton; China has one of the world's richest reserves of coal; and India has huge deposits of high grade iron ore and a fair supply of coking coal. In both countries the greatest development has taken place in those industries upon which Japan is most dependent, namely cotton spinning and weaving. China now has four million cotton spindles in her mills and in the larger cities there are numerous factory industries. In the Indian mills in 1932 there were 9.3 million cotton spindles or about 1.7 million more than there were in Japan. It was proposed recently that cotton spinning and weaving mills should be moved from the Netherlands to Java to meet the competition of Japanese goods.

To protect their developing manufactures the Asiatic countries are resorting to tariff barriers. The movement toward tariffs in India in recent years, in so far as it has been encouraged from Great Britain, has been for the protection of a colonial market; but as Japanese goods, especially textiles, have flooded the bazaars and seriously cut in upon the market of the Indian mills there has been a movement inside India also in favor of protective tariffs. Tariffs have been increased. They have been general in their provisions; but in practice they have been directed against Japanese goods, since the higher rates apply to kinds and grades of commodities supplied mainly by Japan. In March 1933 the Indian tariff was increased from 30 percent ad valorem to 50 percent on silk and artificial silk piece goods, a type of cloth that has been shipped from Japan to India in rapidly increasing quantities. In 1930 the rate on cotton piece goods of British origin was established at 15 percent and on non-British goods at 20 percent. By a series of amendments and enactments, the last of which went into effect in June 1933, the rate on non-British goods has been raised to 75 percent while the rate on British goods has advanced to only 25 percent.

Last April the necessary six months' notice of the abrogation of the Indo-Japanese trade agreement was given by the Indian Government, an action presaging still further increases in the Indian duties on Japanese goods through the application of the anti-dumping law of April 1933. The announcement of the Indian Government has been received with considerable alarm in Japan, since the trade with India has increased in importance in recent years. In 1927, 8.4 percent of Japan's total exports were sent to India; in 1932 the ratio had increased to 13.7 percent.

The abrogation of the trade treaty is the culmination of an antagonism which has grown up in the Indian market as Japanese exporters have attempted through an aggressive sales policy and drastic price cutting to make good their losses in China due to the boycott. Feeling has been bitter. Charges of dumping have been made, and in recent months criticism has centered upon the effects of the depreciated yen. The Japanese, though admitting the advantages of the depreciated yen, deny that there has been dumping. It is believed in Japan that the British Government, acting upon the insistence of Lancashire, is responsible for the action of the Indian Government in abrogating the treaty. Popular resentment in Tokyo has taken the form of hostile posters demanding the expulsion of the British from Asia. The Japan Cotton Spinners' Association voted in June 1933 to place a boycott on further purchases of raw cotton from India.

The friction between Japan and India is but one phase of a British-Japanese economic war which has become particularly severe in recent months because of Japanese competition. Trade restrictions directed against Japanese products have been enacted or demanded in every corner of the British Empire. Great Britain has placed a duty of 100 percent on rubber boots and shoes. The Malayan and Egyptian tariffs upon low grade textiles previously obtained from Japan have been increased. Notice of the abrogation of the trade pact between British West Africa and Japan has been given, and it has been reported that similar conventions are to be abrogated by East and South Africa. A heavy tariff is being demanded in Australia on cotton towels, ammonium sulphate, porcelain, electric lamps and rubber boots and shoes -- all important items in Japan's trade with Australia. There has been agitation against Japanese textiles in Trinidad, Jamaica and British Guiana. The Federation of British Industries has presented demands to the Board of Trade for further protection against cheap Japanese goods, and Japanese competition was the subject of discussion in the closing hours of Parliament in July.

The Japanese industrialists have received news of these restrictions on their trade with the threat of a boycott not only against Indian cotton but against all Empire products, including wheat, Canadian lumber, Australian meat and wool, Indian pig iron and British machinery, and also with the threat to displace British goods in markets not under the British flag. Calmer heads, however, are opposing any such forms of retaliation and are warning that the continuation of too aggressive trade tactics may produce disastrous results. They are even urging the control of export prices, either through the government or through trade associations, to eliminate the charges of unfair competition now being made in foreign markets.

The obstacles that are appearing in the British markets will perhaps serve to redirect Japanese attention to the possibilities of China as an outlet for Japanese manufactures. The Chinese tariffs under the tariff autonomy attained in February 1929 have been moderate, but there has been an upward trend. Japan did not recognize tariff autonomy for China until the signing of the Sino-Japanese tariff treaty of May 1930. In that treaty, China agreed to limit tariffs on specified commodities, including cotton cloth, aquatic products, wheat flour and certain miscellaneous manufactures. In effect, the treaty gave important trade privileges to Japan quite out of reach of any most-favored-nation clause, since the items included are obtained by China mainly from Japan and constitute the major part of Japan's exports to China. On February 17, 1933, a spokesman of the Chinese Foreign Office announced that the Chinese Government did not intend to renew those portions of the treaty giving preference to Japan. The treaty expired on May 15 and a week later a new tariff schedule became effective increasing very substantially the duties on those items that had been favored in the treaty.

Obviously, in the face of expanding industrialization and mounting tariffs, it will become increasingly difficult for Japan to import raw materials from China or India, fabricate them in her factories, and then send back the finished goods to pay a tariff and compete with goods produced in local factories from local raw materials. Such trade cannot depend upon any advantages of cheap labor, for wages in China at normal exchange are from 40 to 50 percent and in India 75 percent of wages in Japan. Japanese competition must rest rather upon the greater efficiency of her labor, upon greater skill, and upon superiority in factory management and equipment. The economic outlook for Japan is by no means hopeless. She has a decided lead over the other countries of Asia in technical training and in the conduct of industry and finance on a modern scale, and she should be able to maintain that lead. As industrialization spreads, the earning power and the standard of living of the Chinese and the Indians should rise. Greater quantities of manufactured goods should be demanded and imports should increase. Japan, above all other countries, is in a position to supply those imports, providing her industries prove to be sufficiently sensitive to the changing requirements of regions where industrialization is under way and providing friendly relations with the countries of the continent can be established and maintained. It is upon that proviso that the economic future of Japan would seem to depend. There is little prospect of developing and maintaining prosperous trade between antagonistic peoples.

IV

A considerable body of opinion in Japan recognizes the vital importance of the Asia market. Economists and the more liberal industrial and political leaders have opposed policies that might antagonize the continental peoples. This conciliatory influence might have been much more effective in Sino-Japanese relations had Japan's interests in China been solely economic and had they not been complicated by political and strategic considerations. Japan has always feared lest a strong power should establish itself on the adjacent sections of the mainland. The limitations of the Japanese islands have also been cause for anxiety. These facts have frequently diverted attention from the effort to secure markets to the possibility of obtaining political control over additional territory and resources. During most of the modern period the political and strategic motives, rather than the purely economic, have dominated. They have shaped and guided an aggressive policy, but though this has achieved many of its immediate aims it has alienated and antagonized neighboring countries.

Japan's first great opportunity for economic leadership came with the defeat of Russia in 1905. The Japanese victory caught the imagination of all Asiatics. The invincibility of the west had been questioned for the first time. The moment was auspicious, for in the years immediately previous there had been not only the Russian advance in Manchuria, but Germany, Great Britain and France had also acquired control over Chinese territory. The complete partition of China seemed imminent. Japan in daring to challenge one of the imperialistic European Powers came to be regarded as the champion of Asia against the west. Enthusiasm for Japan was particularly keen in India, where an independence movement was taking form. Even in China great respect for Japan was evident despite the defeat which China had suffered at her hands a few years earlier. Chinese students in large numbers went to Japan to study in schools and factories.

All this popular acclaim provided a favorable basis for political leadership and might easily have been directed toward securing a preference for Japanese goods, especially as the countries of Asia were almost as conscious and resentful of their economic dependence upon the Occident as they were of European political penetration. As a matter of fact, both China and India, perhaps encouraged by the example of Japan's success, were defying the west openly at that very time, not through any resort to armed force, it is true, but by an attack upon trade. In China an economic boycott against American goods had been begun in May 1905 in protest against the application of the Chinese Exclusion Act; and in August of the same year the first boycott against the British was put into effect in India. There could scarcely have been a combination of circumstances more favorable for Japanese trade expansion.

There soon was reason to doubt, however, whether Japan had acted as the savior of China. By the Treaty of Portsmouth, signed on September 5, 1905, Russia was forced to surrender the greater part of her gains in Manchuria. But they were transferred not to China but to Japan. There was disappointment in Asia, and enthusiasm for the victor gave way quickly to suspicion. Japan came to be looked upon as merely another western nation equipped with the mechanical strength of the west and motivated by the same selfish imperialistic designs, but more dangerous because she was close at hand.

The World War presented to Japan a second major opportunity for attaining both economic and political leadership in Asia. Imports from Europe and America were restricted or cut off almost completely, and for the period of the war Japan enjoyed a virtual monopoly of the trade of Asia and the South Seas. But in the rush to fill orders her traders used methods that were short-sighted. Insufficient attention was given to quality and to the value of a reputation for business integrity. Japanese manufactures came to be regarded as inferior goods, a term that has been used since then in Chinese boycotts to designate specifically the products of Japan. At the close of the war, the consuming markets for the most part returned to the manufactures of Europe and America. Japan in 1918 had supplied 47 percent of China's imports; in 1921, her share had been reduced to 26 percent, approximately the percentage supplied in 1914.

Japan also alienated the confidence of the rest of Asia by the seizure of Shantung, by her political demands upon China beginning with the famous Twenty-one Demands in 1915 and followed by numerous secret treaties in 1917 and 1918, and by interference in China's internal politics. Finally, in September 1931, came the positive action by the Japanese military in Manchuria, followed a few months later by the attack on Shanghai.

China has been unable to resist the demands of Japan with force, but each act has been met with economic reprisals and an attack upon trade. Since 1915 there have been seven major boycotts against Japanese goods. There is considerable controversy regarding the significance of the boycott as a defensive weapon and it is difficult to measure its effects with any accuracy, since they are usually obscured by such circumstances as those which interrupted European trade -- a world depression, a rise or fall in the price of silver, or a depreciated currency. However, a careful analysis of the boycotts against Japan in the light of attendant conditions reveals that each has resulted in a substantial reduction in Japan's trade with China. Though Japanese exports have experienced a decided recovery in the months intervening between the boycotts, there can be little question that they would be at a higher level today if they had not been subject to repeated interruptions. Good will is recognized as a valuable asset both in domestic and foreign trade, and each of Japan's conflicts with China has left in its wake a bitterness that has been difficult to counteract. Not only have the boycotts brought a loss in trade to Japan, but they have acted as a stimulus to industrialization in China and have thus encouraged a permanent competition to Japanese manufactures. Many of the modern Chinese industries were established during periods when supplies from Japan were interrupted. The making of foreign-style umbrellas, matches, electrical supplies, enamel ware, rubber shoes, paper and knit goods, and the spinning and weaving of cotton textiles, were all either started in China or greatly expanded during periods of boycott. Some of the boycott organizations have actually collected funds to establish manufacturing industries to replace Japanese goods; and exhibitions of domestic manufactures are a part of the boycott propaganda.

Each succeeding boycott has shown an increasing effectiveness. The present boycott began in the summer of 1931 with the massacre of the Chinese in Korea, but it did not become a significant movement until after September 18. In the twenty-one months ending with May 1933, Japanese exports to China proper and Hongkong, despite the depreciation of the yen, declined by 213 million yen, or by 47 percent in comparison with previous months. In the same period, Japanese exports to the other countries of the world increased by 13 percent. In south China there has been an almost complete stoppage of trade with Japan. The burden of the boycott has fallen especially on Japanese business in China. Many retail shops have been forced to close their doors; mills have shut down; shipping has been crippled, with some vessels tied up and others operating almost empty of passengers or cargo. It was reported in the Japanese press that Mitsui Bussan Kaisha, the great Japanese trading concern, had determined to withdraw its representatives from China proper because of the interruption of trade. The enforcing of the boycott will be facilitated by a law which went into effect on August 1, 1933, requiring that the country of origin be stamped on all goods imported into China.

V

It is true that losses in the trade of Japan with China proper have been offset to some extent by gains in Manchuria. Japanese political control has been greatly strengthened and expanded, and Russia, so it would appear, has been eliminated as a threatening political force in eastern Asia for the time being at least. Japan has gained control over the agricultural and mineral resources of Manchuria and in the event of war will be able to draw upon them either by way of the South Manchuria and Korean Railways or by way of the newly constructed Kirin-Tunhua-Rashin Railway. This control does not necessarily solve Japan's economic problems in time of peace. There is little prospect that Japan's crowding population will find relief through migration to Manchuria. Under the new régime Japanese will go to the cities to participate, as they have in the past, in administration, trade and manufacture, but no one in Japan outside of the military group seems to place much hope in colonization on the land. The climate is too rigorous for the Japanese and there is the competition of the 32 or 33 million Chinese farmers in Manchuria with their lower standard of living.

Manchuria will supply grain, beans and meat to Japan, but Japan has never in the modern period faced an actual shortage of food. The problem has been and will continue to be the provision of export credits in sufficient volume to pay for the necessary imports of food, whether they come from Korea, Formosa, Manchuria, Indo-China or Siam. Markets remain Japan's primary economic requirement.

The coal reserves of Manchuria, as far as they are known at present, are somewhat less than the reserves of Japan proper, but they will be an important supplement to the Japanese supply even though they include little coal of coking quality. The coal is mined cheaply, so cheaply that it can undersell Japanese coal in the Tokyo market. Even before September 1931 the Japanese mine owners, unable to meet the competition, had forced a curtailment of imports from Manchuria.

The tonnage of Manchurian iron ore is large, but the quality is so low that much of the estimated reserve would not be considered as ore in the United States. Costs of production at the Anshan furnaces are high and the pig iron is not satisfactory for the manufacture of quality steel. Stocks have been accumulating at a time when iron was being imported from India and sold in Tokyo despite the long haul. An attempt is being made to bring pressure upon importers and to persuade them not to handle the Indian pig iron, thus eliminating it from the Japanese market. The Manchurian ore may serve to make Japan self-sufficient in the event of war, but in time of peace it may easily become a burden upon Japanese industry because, unless costs of production can be lowered appreciably and quality improved, it will be more economical for Japanese consumers to continue to depend upon the pig iron of India.

Considerable thought has been given by the Japanese to the economic development of Manchukuo. It was at first proposed that there should be a development of manufacturing industries and that an economic bloc should be established between Japan and Manchukuo, without tariff barriers; but immediately the objection was raised in Japan that Manchurian products, both raw materials and manufactures, would offer competition which Japan's established industries could not meet, and that Japanese farmers, workers and capitalists would be the losers. For the time being, the economic bloc has been abandoned and attention is being given to a plan to develop in Manchukuo only such industries as will not compete with Japanese industries, a policy that obviously will hamper economic growth in the new state.

It has been argued that the control of the Manchurian market will compensate Japan for the loss of trade to China proper. It is probable that if peaceful conditions can be established and maintained in Manchuria, the trade with that region will increase; but unless she makes her control complete by repudiating the Open Door, Japan has no assurance of holding that market; and even if she had a monopoly there it would seem that China with its area of two million square miles and a population of 400 million presents richer possibilities for trade expansion than Manchuria with 440,000 square miles and 34 million people.

With events occurring so rapidly, it is extremely hazardous to venture any opinion regarding the likely trends in Sino-Japanese relations. But three possible courses suggest themselves. (1) The present situation may continue, with Japan in control in Manchuria either through a nominally independent Manchukuo or through open annexation. As China is unlikely to accept this loss of territory, resistance may be expected through every means at her disposal -- the boycott, the inciting of disturbances in Manchuria, and raids upon the borders of the areas under Japanese control. A heavy military burden will be carried by Japan; and there can be little hope of any revival of Japanese trade in the remainder of China. (2) In an effort to terminate so unstable a situation, Japan may revert to military activities beyond the borders of Manchukuo, either with the intention of forcing China to acquiesce in the present status of Manchuria or for the purpose of adding territory to the new state or of creating buffer states. This course might easily lead to the conquest of a large part of China. Such a development would be opposed by the other Powers -- perhaps effectively and perhaps not. Certainly the difficulties encountered by Japan would be great, the expense would be enormous, and the economic dilemma which Japan now faces in Manchuria would be duplicated on a larger scale: for an industrialized China would offer serious competition to Japan, while a disrupted and impoverished China would bring no profit and most likely would be an expense. (3) Finally, Japan may decide that the political and strategic gains of her present Asiatic policy are illusory and are being purchased at too great a price. Imperialism may retreat. There are no visible indications of such a reversal of Japanese policy at the present time. But conceivably it may be forced upon Japan by the pressure of world opinion, by continued losses in foreign trade both in China and in other markets, by a financial collapse under the present heavy expenses, or by a domestic political upheaval.

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  • JOHN E. ORCHARD, Associate Professor of Economic Geography, Columbia University; author of "Japan's Economic Position"
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