It has been noticed that during the three years 1896, 1897 and 1898 the Japanese imports have been immensely in excess of their exports. This is probably due to the necessity of obtaining plant in great quantities for the immediate increase of the many new industries that have sprung up all over the country in so short a time. This financially has undoubtedly resulted in a distinct loss to the nation. The Chinese War indemnity brought a good deal of gold into the country, but the greater part of it has been expended in augmenting the navy and in the purchase of war materials. Fortunately, trade throughout Japan in 1899 was distinctly flourishing, thanks mainly to the abundance of the crops in the preceding year, and also to a curb having been put on exaggerated industrial activity, whereby, as already intimated, the imports were in excess of the exports, and the danger of a crisis in this direction was averted. This extraordinary commercial development in so remarkably short a period reflects the greatest credit upon the Japanese people, but we must not expect that it will continue progressing without encountering occasional checks, and there are not a few thoughtful people who foresee that the Japanese factories will soon have to compete very seriously with those which have been recently erected in the free ports of China. In this respect it may be remarked that salaries have risen at Shanghai, as well as at Osaka and Tokio. The acquisition of the island of Formosa will probably before long enable the Japanese to cultivate cotton and other tropical produce on their own territory, which will, of course, be a great gain to them. CHAPTER VII THE FINANCES OF JAPAN Flourishing condition of Japanese finance on the eve of the war with China—Present Japanese financial problem the result of the important military, naval, and public works undertaken by the Government at the close of the war—Enormous expense of this programme, demanding a loan of £24,000,000—Gradual method of paying off this debt in nine instalments—Impossibility of floating the loan on the home market, all Japanese capital being locked up in the various newly-created industries—Debts incurred in connection with the programme of expansion, whereby the ordinary Budget was doubled—Progressive scale of taxation from the present date until 1905—Absolute necessity of augmenting certain taxes—Projected imposition of increased taxation, especially upon land and on beers, wines, and spirits—Taxation as compared with the population of Japan and other countries—Prospects of Japanese finance.