ABSTRACT
THE first post-War decade was regarded by the majority of contemporary English business men as a period of chronic depression; it was only when the world slump occurred in 1929 that they began to realize that they had been in error and that what they had taken for a depression was actually a period of growth and activity. In much the same way, the Japanese business man now thinks of the years from 1920 to 1931 as a time of stagnation in trade. Yet, except in the last two years of that period, industrial output and foreign trade advanced substantially, as was shown in the last chapter. The reasons for this misconception are the same in both countries. In Japan as in England, the period was one in which maladjustments caused by the Great War were in process of correction, and in which first one part and then another part of industry was subjected to severe pressure on account of violent changes in prices and exchange rates. Japanese manufacturing industry, especially the heavy trades, had been stimulated by the War and her price level had risen very high. In the early post-War years, therefore, she was compelled to effect a redistribution of labour among different industries; her heavy industries had to contract; and high-cost producers were weeded out as the price-level fell. This process, however, was not continuous. It was checked for a time by the earthquake of 1923 which was followed by another period of rising prices and great activity in the constructional trades-a period which came to an end in the financial crisis of 1927. From then until the beginning of the world slump, the process of adjustment and industrial reorganization was resumed. There was a weeding out of inefficient firms that only could exist in times of boom; and although production grew, yet industrial development was uneven. Business men whose anxieties are intensified in periods of quickly changing conditions of demand and price naturally overlook the progress that may then occur. For this reason the post-War decade lingers in the memory of the Japanese as a time of stagnation, although figures of trade and output provide weighty evidence to the contrary.
