Columbia Studies in the Social Sciences Volume 98, No. 2 (Paperback)

This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1922 Excerpt: ...tendency on the part of an importer to favor the use of his own currency in connection with the financing of the goods which he imports. That is to say, he prefers to make an arrangement with his local bank to open the credit, and have this credit in terms of his own currency. This will be the case except when the currency of the importer's country is at a heavy discount in the exporter's country, in which case, either the exporter's currency or the currency of some other country may be employed. There will thus be a tendency toward the use of yen bills for Japanese imports from the United States and for the use of dollar bills for Japanese exports to the United States. The reasons for this method of financing are obvious. By purchasing foreign goods in foreign currencies the element of the risk of exchange would be added, and this would involve the necessity of adding to the margin of profit another item which would cover this risk. The more uncertain the foreign exchanges, the larger must be the i1. Sano and T. Takazaki, Banking, Tokyo, 1916, p. 298. insurance premium. Again, the importer must pay an extra commission to the foreign bankers, all of which adds4 to the cost of the goods. Finally, after the bill had been accepted by the credit-issuing bank, if the import bill of exchange was stated in a foreign currency it could not'be sold in the domestic open discount market as readily as if stated in the home currency. The factor which hinders the use of yen and dollar bills of exchange in the financing of American-Japanese trade in the past is; primarily the inadequate financial organization in both the United States and Japan and the deficient banking relationships between them and with other countries. There is even at the present time no well develope...