From the article of 'Petrel'
No.713 / February 14, 1999

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The Yell of Acceptance of National Bond by the Bank of Japan Has Risen Finally.

It Is to Make Currency to Paper Money Virtually.
The Rule of Capital Headed Towards Inflation and National Dissolution


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A chorus has begun to accept the national bond by the Bank of Japan. Even though it first began in United States, a strong reaction was immediately produced in the Liberal Democratic Party and the Japanese bourgeoisie. They fear the recession that has deepened increasingly, and from which no exit can be found, and have run out of the ordinary means and are not able to choose means any longer. For the past fifty years the Japanese bourgeoisie has considered the acceptance of national bonds by the Bank of Japan as "taboo" or "prohibited tactics". This was due to the experience of the "malignant" inflation related to the Bank of Japan's national bond which had endangered their rule in the prewar, and wartime period. However, it now looks as though they are unable to maintain the stability of the power of capital without relying on this fearful drug.
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The Loss of public finance "moderation", and the conversion of Bank of Japan notes into paper money

Needless to say, the Bank of Japan's acceptance of the national bond is almost the same as the nation or government itself issuing paper money.

It is nonsense to say that the Bank of Japan notes are not paper money.

It has been said that the Bank of Japan notes are "theoretically" different from paper money because they are issued by a nation in accordance with its own necessity, freely arbitrarily, and moreover without any limit, whereas the latter, on the contrary, come out in accordance with the internal demand of distribution and economy.

However, the Bank of Japan notes have increasingly become paper money and have served the same function as paper money. For proof, it is sufficient to see the depreciation of money in the postwar days, that is, the history of price rises. The yearly depreciation of one, two or several percentage points shows us not that there was no inflation, but only that it gradually advanced;-Clearly now it is increasingly turned into currency.

If the government would draw up a tremendous financial deficit and issue a large amount of national bonds to promote business, and the Bank of Japan would accept this, it would lead to the increased issue of the Bank of Japan notes and the expansion of money by just that much. This is almost no different from the government throwing paper money directly into distribution.

Those who are advocating the need for the Bank of Japan to accept the national bonds insist that this is a temporary measure and an expedient means to revive business.

However, we can realize that such a policy is not temporary if we remember the experience since "the lifting of the ban" on the issuing of national bonds in the latter half of the 1960's.

The principle of "the sound balanced budget" solemnly pledged after the war was thrown away very easily and national bonds were first issued during the recession of 1965 under the Finance Minister Fukuda. As an excuse it was said, even at that time, that there was no need to worry about the issuing of national bonds (namely, even if the nation would borrow money) because this was only a temporary measure and would cease immediately with the business recovery, and that the way to aberrant public finance would not be opened and they would be able to redeem (repay) it instantly through the increased tax revenue from the business recovery.

However, we can easily confirm the outcome.

A "government construction bond" was issued at the time of the recession in 1965, but only 10 years later "government bonds for deficit financing" were accepted, and now government construction bonds or government bonds for deficit financing are issued without almost any restriction. The moderation of public finance is now already nowhere to be seen
The several attempts to decrease the national debt and come somewhat closer to the ideal of "healthy public finance" always collapsed (it was flattering unction at the time of the boom, and a mere pose!!) and has given way to the increasing expansion of deficit finance.

The debt policy of the nation once said to be a temporary expedient policy has become the "daily" policy, the indispensable policy for the rule of capital now, and has become so to such a degree that it is impossible to even think of stopping it. If they were to do such a thing the bourgeois nation would not last even a day.

The debt of the nation to be repaid has now quickly swollen to the tremendous amount of more than 300 trillion yen. This is a debt of 2.5 million yen per capita. The people must repay someday by some means, in other words, they must share debt. Moreover, the obligation of the whole nation including the local powers, exceeds 500 trillion yen in fact, and is increasing at an unbelievable rate.

We can say with confidence that the Bank of Japan's acceptance of the national bond will trace almost the same progress and fate as the lifting of the issue ban of national bond traced.

It is a precisely like a drug and can not be easily stopped once started, but will "go all the way" with the addiction growing increasingly larger.

The historical experience

The Bank of Japan's acceptance of the national bond by Finance Minister Takahashi in 1933 was also implemented, like the clutching at straws, under the impetus of a serious recession as the "only" (or "ultimate") remedy for it. They intended to fight against the recession by expanding public finance and raising "the purchasing power" (one may say "consumption" now) of the nation.

It is a fact that this policy showed some "effect" temporarily and superficially. However, it was a strictly temporary thing and the expedient and shallow essence of such a policy became clear right away.

As is often the case with a drug, to greater strengthen its efficacy, the budget deficit has be carried out more frequently and on a greater scale, but this only expands the ill-effects.

Takahashi, the ringleader who opened the "Pandora's box" of the Bank of Japan accepting the national bond, became strongly aware of impending crisis with the rapid advance of inflation, and began to maneuver in the opposite direction for "sound finances". However, the military authorities, having become aware how the "making-sound" finance policy would hinder the expansion in armaments, became hostil towards him, and he lost his life during the February 26th incident.

The public finance expansion (the deficit budget by the such means as the Bank of Japan's acceptance of national bonds) lost its "brake" and advanced rapidly with the development of Japanese militarism. It was an additional way to plunder the nation by force, and supported the development of militarism. Moreover, it became an important economic and "financial" means to enforce the imperialism war.

However, today is different from the case of the 1930's in that the enormous national debt balance has already accumulated at present and it has reached a sufficient scale to virtually ruin the nation, and the Bank of Japan's acceptance of the national bond began to be called for under such conditions.

The issue of national bonds (the debt) of the enormous amount of 30 trillion yen has already been included in the budget bill for this year. The issue of the national bond, including the conversion issue, is on a stunning scale of 71 trillion yen. This alone is a debt of over 500 thousand yen per capita.

Even if they say that this is the debt of the state and not the people it makes no difference because the state is a "national state," and the debts are the debts of the people, and the people must repay it in some form in the future.

The large amount of national debt in the prewar days and during the war was "repaid" and redeemed in the form of inflation (in other words, the rise of prices) by the people under unspeakable suffering after (needless to say, also during) the war.

The compulsory purchased national bonds, and savings which were pursuaded (for example, the postal deposits) became worthless in a moment. Real wages fell sharply with the sky-rocketing of prices.

Probably anyone over 60 years old can remember clearly what a difficult time it was, a period of starvation and "shortage of goods".

Inflation is just the remedy of capital and the nation.

The bourgeois nation that already has a debt of over 300 trillion yen, instead of seriously thinking of how to repay this debt, has failed to do so, and has begun to devise a plan to prolong its own life-in other words, the adoption of an open inflation policy.

Apparently the "State" is an abstract concept and it can go on without even bearing any proper responsibility, so that no matter how much it accumulates debts it need not think about repaying it.

The debts of a state will be settled if the people will repay it, that is, the people shall share it with the mediation such as price rises, and all will thus be settled and go well with it. Even if there would be a national debt of 500 trillion yen, supposing that value of money becomes 1/100, 1/1000 with inflation, it would reduce it by 500 billion yen or 5 trillion yen in a moment. Therefore, there is no need to worry about the repayment of debt in the future.

In fact, Bank of Japan's acceptance of the national bonds shows us that the system of capital, "liberalism," and the bourgeois nation are decadent and have collapsed.

Because the state got bogged down on account of the issue of an enormous national bond they say that the Bank of Japan acceptance of the national bond is necessary.

If the economy has become abnormal because the issue of the national bond has become too much, the only proper and normal counterplan is not to remove all restrictions to the issuing of bonds, but to restrict and decrease the issue of the national bond.

However, the present bourgeoisie will resort to anything if they are pressed by necessity, and are not ones to worry about such things or suffer from their self contradictions. They are completely shameless and not introspective.

In fact the only means left for the bourgeoisie is inflation. They understand this well and have already shrieked about "coordinated inflation". Needless to say, expressions such as "coordinated" adjusting" only guard appearances, and they actually expect quite intense inflation.

If inflation would come, the prices would go up and the profit rate would be leaping up instantly. The debt of the nation would decrease instantly and the burden of the nation would decrease radically. The nation could even be reincarnated and could assume a healthy body.

The nation does not give a damn whether the people would suffer from a price rise and the savings and the pension would be decreased by several 100 trillion yen. Thus, although the people would be faced with intense additional plundering through the decrease of credit and the price rise, this national plundering is the only way for the bourgeoisie to survive and for the nation to revive.

A short conclusion

Our conclusion could be stated as follows.

It may be just the style of solution of the present bourgeois indeed that if the price of the national bond would collapse (the interest rates would go up) by its enormous issue, the counterplan would be to open the way to an even greater issue of national bond through the state organ purchasing them.

This perfectly suits the approach of the present bourgeoisie, who are obsessed with the superficial policy of the immediate future against the overproduction, while they make a fuss about the necessity of the expanding the national demand, the consumption expansion they leave the foundation for overproduction, i.e. the fundamental contradiction, in place.

Needless to say, the Bank of Japan has already bought an enormous amount of national bonds every year. They are throwing about 4 trillion yen every month, nearly 50 trillion yen a year, into distribution in exchange for the national bond and are asserting that they are supplying the "necessary quantity of money." This is substantially the same case as the Bank of Japan's acceptance of the national bond.

It may be a contradictory deed itself that the Bank of Japan buys the bonds of the state. The Bank of Japan is the state organ from the beginning and is "the state" virtually. If the state is to attempt to make the capitalist economy sound and not become entangled in the relations of money and credit, the purchase of bonds by state organs should be prohibited.

Regardless of this, it comes back to the point that the Bank of Japan's acceptance of national bonds should require a reform that would enable a new increased issue of the national bond, however, there the national debt balance at present is already 300 trillion yen.

In other words, they have already accumulated deficit finance as such, and have tried to revive business by expanding the national demand.

However, they are saying now that these national demand expansion policies have produce no effect after all. If "there was no effect" even by the nation having expended 300 trillion yen exceeding the revenue, how much shall they expend to produce the effect?

They do not answer, and can not answer it. They yell that they should thoroughly and unrestrictedly eliminate all the breaks of public finance because they have not been able to obtain any results by the scale and the halfway measures up to now, and that they should legalize the Bank of Japan's acceptance of the national bond to enable it to issue the national bond, that is, the national debts will be boundlessly enabled if they make the nation to buy the national bond because the money capital market cannot absorb it any longer.

Fortunately, the present nation can expand the "debts" and can increase "money" issue boundlessly. (They have to only print in white paper at the Treasury Printing Bureau). The Bank of Japan note is already no longer a convertible note, and also has been increasingly transformed into paper currency virtually.

The bourgeois nation is about to treat even the whole credit relations and?normal" economic relations as nothing to worry about now. The era when properness becomes abnormal and abnormality becomes proper is about to come once again.

In fact, there is no distinction essentially between a state organ buying the national bond and that the state increasing the Bank of Japan notes, that is, the money directly.

Inflation will become inevitable if such a thing goes on. And, once inflation begins to go on, it will not stop until a certain point.

This may draw a clear line in the era of the rule of capital that the bourgeoisie began to call for the Bank of Japan's acceptance of the national bond.

This signifies that the rule of capital has declined thoroughly and is collapsing, and that overcoming this rule is now a realistic task. This state is becoming increasingly reactionary, turning into an existence that brings about only misfortune for the working class.

The Bank of Japan playing the role of "the watchman of money" is turning down the demand of the Liberal Democratic Party for the Bank of Japan to accept the national bond and says that this is not acceptable because it causes "the loss of moderation of public finance."

Though we will watch from now on whether the Bank of Japan can stick to such a position, what is there to do about "the moderation of public finance" now?

In reality, such a thing has already been lost completely and enormous deficit finance has been carried out every year.

It may be clear that the Bank of Japan's acceptance of the national bond is not the beginning of the loss of "the moderation of public finance" but the completion, the end, and the last word.

The collapse of the rule of capital, namely the bourgeois nation is inevitable. This nation must be crushed and replaced by the rule of the workers; If not, even the ruin of mankind is possible.

(Translated by Yoshi & Roy)