23 - Financing heavy industries, 1927–1937

Summary

The depression, amalgamation and securities investments, 1927–1937

The 1927 bank crash in Japan was followed by several depressions exacerbated and prolonged by the Black Thursday collapse on the Wall Street securities market at New York on 24 October 1929. The wholesale price index (1934–6 = 1) fell from 1.075 in 1927 to 0.748 in 1931; thereafter a slow recovery started, with the price rising to 1.036 in 1936 and further to 1.258 in 1937. Industrial production was severely hit, but the recovery, stimulated by demands for war materials, accelerated during the mid-1930s to 1937 when industrial production reached 190 per cent of the 1931 level.

During the decade up to 1937, there was a steady fall in the total number of banks, including special banks, from 1,425 to 462, with a reduction of paid-in capital from ¥1,886 to ¥1,455 million. Advances fell continuously from ¥11,145 million in 1927 to ¥9,969 million in 1934 but then recovered to ¥12,328 million in 1937. Deposits and debentures showed more flexibility, being between ¥11,000 and ¥16,400 million and between ¥1,740 and ¥2,300 million during the decade respectively. The situation of the banking system was a reflection of general economic depression following the 1927 banking crisis and the commencement of world depression. It was also a reflection of a particular factor in the system, that is, the bank amalgamation movement. The two elements formed the basis of banking performances in the decade from 1927.

The progress of the movement to absorb the prefectural Agri-Industrial Banks continued apace.