JAPAN: Inflation

In Japan, the boom tide was receding and the nation's economy was touching its keel in the shallow waters of inflation. For three years, the war in Korea had made work for millions of Japanese, spelling the difference between profit and bankruptcy for hundreds of Japanese firms. U.S. military purchases, and spending by U.N. soldiers on leave from Korea or stationed in Japan, more than made up for the annual deficit in Japan's foreign trade. In the big cities, fishtail Cadillacs, gaudy nightclubs, air-conditioned office buildings and huge geisha parties reflected the boom.

Even three years ago, Japan's prices were high on the world market, partly because it could not buy cheap raw materials from China. Today, inflation has boosted Japan's internal prices 59%, and raised its export prices accordingly. As a result, exports are down; imports, mainly consumer goods paid for in U.S. procurement dollars, are up. And last week Japanese businessmen learned that in 1953, for the first time since 1949, U.S. spending had failed to cover the big export-import deficit.

Japan's Premier Shigeru Yoshida is well aware that U.S. spending will drop even more this year. To meet the situation he has ordered government departments to trim their budgets. But Japan's growing defense forces will make heavy demands on the treasury. So will the severe rice shortage resulting from Japan's recent floods (TIME, Oct. 12). Yoshida's 1954 budget, announced last week, totals 994.3 billion yen ($2.76 billion), which is 32 billion yen less than actual expenditures last year. But—significantly—the new figure is 33.8 billion yen higher than the original 1953 budget estimates. Despite the urgent need to halt inflation, Japan will probably spend more money this year than last.