I notice in the papers that many questions are arising as a result of the Japanese occupation. Some of them are the following: (1) Bank deposits during the Japanese regime; (2) Japanese military notes (“Mickey Mouse” money); (3) Real estate transactions during said regime.
All deposits during the Japanese regime have nullified. This is of course a necessary consequence of the fact that the Japanese military notes have been declared worthless. Such action for the present is entirely justified. If bank deposits during the Japanese regime are recognized, no bank will be able to open. They will have to be declared bankrupt unless the government assumes responsibility for such deposits, which is of course impossible. The military notes, of course, have to be declared worthless because there is no reason for them and they were issued by the enemy. The United States and Philippine governments cannot be made responsible for them. They have to be outlawed. These military notes are not really money or currency. They were really only a means of requisitioning Filipino materials. It was the equivalent of the Japanese confiscating the food and other materials belonging to the Filipinos without compensation. But at the same time, the Japanese, by order, declared them legal tender — refusal to accept was considered a hostile act punishable with a heavy penalty. We therefore, against our will, had to recognize them as legal currency. They were used in all transactions. In the meanwhile, the circulation of Philippine Commonwealth money was strictly prohibited. Anybody circulating them or even possessing them was arrested and punished. The Japanese had spies to detect those violating the prohibition.
I do not believe though that the so-called Mickey Mouse money problem is permanently dead. I think after the war, discussion of that subject would have to ensue. The Japanese have circulated here over a billion. Where are they? The rich, the influential, the intelligent do not have them. As they knew what would become of those notes, they disposed of all that they had. So where did they go? They must have gone somewhere since they were not destroyed. I suspect that they went to the masses — to the laborers, small merchants, producers and vendors especially the small ones like those who produced and sold “camote”, “casava”, vegetables, etc. They must possess quite a big amount. They worked hard for their money. When normalcy is resumed, they will demand that the notes be recognized or be given some value. I do not believe they will stop their demand until they get something. I believe they will get something. Even now in Congress, a resolution was introduced to register this kind of money and try to get payment from Japan. I am sure it will be taken up in the peace conference. I suggest that proceeds from the sale of Japanese properties and holdings be applied to the payment of these military notes. After the war, Japan will not be in a position to pay. So I believe that the United States Government or the Philippine Government will pay even a small portion. There is a precedent for this. Belgium was in the same situation as the Philippines after the First World War, although the German marks circulated in Belgium went down in value and afterwards became worthless. The Belgium government assumed responsibility and paid a portion of those marks at a rate which I do not remember just now.
However, in recognizing these military notes in whole or in part, the necessary economic measures must be taken to avoid inflation. The release of such a big amount necessarily will cause inflation. Furthermore, the government cannot afford to pay at one time and if it has to borrow money, it will need also a big amount for amortization and interest. What should be done is to make an accurate and scientific readjustment in the circulation. Nobody knows how much Japanese military notes have been circulated in the Philippines. Notwithstanding all my efforts, I could not ascertain it. I believe, however, it is not as much as I originally thought. The military notes circulated only in Manila and some provinces in Luzon. In the South, with the exception of Davao and inside the cities of Cebu, Iloilo and Bacolod, they did not circulate at all. A good portion of those notes had been destroyed. My estimate now is that there is only over a billion. The way to find out is to have them registered. Supposing it is one billion, I would pay immediately 5% or about ₱50,000,000. The rest or ₱950,000,000 I would divide into 40 parts each part to be paid in installments every year. Each installment would be ₱23,750,000. I believe that this amount can be absorbed by the natural increase in our production. This is just an example. The installments may be paid every five years if so desired. There should be three provisions: (1) That the periods may be shortened, if the finances of the government and the development of production — agriculture, industry and commerce — so warrant; (2) That the bonds are negotiable; and (3) That if the finances of the government so permit, the bonds may be redeemed sooner at a discount the amount of which shall depend upon the maturity of the bond. In other words, if for instance, a bond will mature in 30 years, after a period of five years the government may purchase them if offered by the holders at 25% or 50% of the face value of the bonds as may be decided upon.
But I say this must be considered after the complete termination of the war. While the war is still going on, it is natural that the Japanese money be declared worthless. One advantage of the postponement is that, if we get anything from Japan by way of an indemnity or by confiscation of their holdings in the Philippines, such amount will eliminate or at least lighten the burden that may be imposed the government.
Another point is, if we declare the Japanese notes worthless forever, it may relieve Japan from the obligation of providing for them as part of the indemnity.
It is reported that Pres. Osmeña sent a message to Congress recommending a solution to the problem of indebtedness incurred before the war paid during the Japanese occupation. The recommendation of his advisers, as I remember it, is the following: (1) Declare all payments invalid; (2) Declare all payments valid; (3) Revalue the payment made in accordance with the rate of exchange between the Philippine peso and the military note at the time of the payment. I do not understand why the government should meddle in a strictly private affair as this one. Furthermore, I doubt whether payments made could legally be declared illegal. It will be an epso facto law. As to the revaluation, this will involve many complications. Everything may as well be left for the courts to decide.