FOREIGN TRADE: Paying with Silk

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From April, 1933, until last week, the Japanese yen was nailed to the prestigious British pound at the rate of one shilling twopence per yen though Japan's purchases from Britain were small potatoes and the U. S. far & away her best provider. When Europe's war sent the pound hopping around between $4.68 and $3.72½, the yen hopped alongside, between 275/16¢ and 22⅞¢ U. S. money. Last week the Japanese Cabinet decided that it would be simpler to clear on New York; that the pound-pegged yen, which happened to be at 23½¢, would henceforth be pegged to the U. S. dollar at 237/16¢.

Meanwhile Britain's blockade of Germany cut off the goods which for the last year and a half have reached Japan under a very favorable arrangement by which Japan, without spending any of her mite-sized gold supply, got machinery, chemicals, etc. in return for some goods but mostly for bothering Britain in the East. These will now have to be bought mostly in the U. S., thereby enlarging Japan's already big import balance and the problem of paying for the war goods she needs.

> Ever since Japan took on the Chinese war, she has been buying twice as much as she has sold to the U. S. Her import balance in U. S. trade for the first seven months of 1939 was 258,000,000 yen. To replace German imports, to get deliveries before the Allies buy the output of U. S. factories, and before the U. S.-Japan trade treaty expires next January, the Japanese have boosted their U. S. purchases by approximately one-third. That put Japan on the spot.

The clever Japanese calculated that about 57% of their exports to the U. S. are raw silk, and that 52% of the silk is knitted into full-fashioned women's hosiery. The Japanese have observed that, at least in cities, U. S. women cannot do without silk stockings, and silk stockings wear out continually so that even a temporary buyers' strike is next to impossible. So by last week raw silk cost U. S. hosiers as much as $3.55½ a nine-year peak price, up nearly $1 since August, up $1.75 since December. U. S. silkmen were full of confusion, distress, suspicion. Many a silkman was caught in short positions by a sudden, savage shortage. Some types of silk were not to be had at any price.

This squeeze may be a sign rather that the Japanese are desperate than that they are smart. They might lose their silk market forever. Last week in Wilmington, Del., Du Font's sheeny, much-publicized nylon hosiery went on sale at $1.15, $1.25, $1.35 (for different gauges), sold quickly when salesgirls claimed that one pair of them would outwear four of silk, that they would dry in ten minutes when washed. As material for full-fashioned hose a previous silk substitute, rayon, was a lame competitor to silk but nylon and its brother synthetics now in prospect may be another story. For silk's best defense against nylon & company is that decent silk stockings can be sold for 79¢ when the price of raw silk is below $2 (1935-38 average, $1.85). With silk at $3.50 most branded stockings were up from 79¢ last spring, to 85¢ in late summer, to $1 now.