No.8 1930s and War Economy

Economic Development of Japan

Pure

dictatorship

Full

democracyDemocratic

institution

(Form)

Political

competition

Constitution

Laws

Parliament

Election

Court

Reform vs conservatism, big vs small

government, other policy debates

EdoMeiji

Taisho

Fascism

Constitution

Parliament

Democracy

movement,

Party cabinet

Democratization

New constitution

Showa2

War1937

1945-51 LDP dominance

Lack of policy debate

Male suffrage

1960Now

US rule

Defeat

Showa1

1889

1925

1931Military rises

1937-45

(Content)Political fights

Two-party Politics 1924-1932PP.130-32

Minsei Party 民政党(Kenseikai until 1927)

Seiyukai 政友会(Estab. in 1900 by Hirobumi Ito)

Economy Small government, free market,

fiscal austerity & industrial

restructuring for return to gold

Big government, fiscal activism,

local public works for securing

votes

Foreign

policy

Oppose militarism, protect

Japan’s interest by diplomacy,

promote disarmament

To attack Minsei Party, support

military and fascism if necessary,

even deny democracy

Remark Peace orientation is laudable,

but stubborn deflation policy

caused fascism to gain force

Economic recovery policy was

welcomed, but its opportunism

severely undermined democracy

Seiyukai statements:“Prof. Minobe’s theory denies the supreme dignity of Emperor. Just banning his

books is not enough.”

“Go, go, Japan, the leader of Asia, the vast land of Manchuria and Mongolia is

waiting for you!!!” (election campaign song)”

Northeastern China today

Shidehara Diplomacy

His policy was more moderate than before or after him

• Maintain good relations with US and UK

• Respect Washington Naval Disarmament Treaty (1921-22)

• No military intervention in China; secure Japan’s economic interest through diplomacy and negotiation

• When China protests and resists, his diplomacy breaks down

• Domestically, criticized as Coward Diplomacy

• Fail to stop Manchurian Incident (1931) started by Kantogun(Japanese Army stationed in China)

PP.106-9

Kijuro Shidehara, 1872-1951

Foreign Minister, 1924-27, 1929-31

Prime Minister 1945-46

Tanaka Cabinet (Seiyukai), 1927-1929

• The Oriental Conference (Japan’s policy towardChina): defend Japan’s interests in Manchuria-Mongolia 満蒙, but welcome FDI from any country.

• Send Japanese troops to prevent Chiang Kai-shek 蒋介石’s army to unify China (1927 & 1928).

• Suppress communists and proletariat parties.

• Strengthen Security Maintenance Law 治安維持法(introduce death penalty).

• Kantogun 関東軍 (Japanese army in China) kills Chinese military leader 張作霖 by train bombing. PM Tanaka did not report the truth to Emperor. Emperor criticizes him and he resigns.

Giichi Tanaka

1864-1929

Hamaguchi Cabinet (Minsei Party), 1929-31

• Fiscal austerity and industrial restructuring for returning to

gold standard ($1=2 yen)

• Disarmament (supported by people, opposed by navy)

• Social policies for workers and farmers

Prime Minister

Osachi Hamaguchi

Finance Minister

Junnosuke Inoue

Foreign Minister

Kijuro Shidehara

Hamaguchi Cabinet is regarded as the crown of pre-WW2 democracy

achievement. However, its stubborn deflation policy encouraged

fascism and militarism, despite Minsei Party’s peace orientation.

Promoting Naval Disarmament

• London Naval Disarmament Treaty (1930) signed and ratified against opposition by Navy and Privy Council (cruisers & submarines, 69.75% vs 70% of US/UK tonnage)

• Navy attacks government for “violation of Emperor’s supreme command authority” 統帥権干犯

• Seiyukai supports Navy to undermine Minsei Party Government (=helping fascism)

• PM Hamaguchi shot at Tokyo Station (1930), dies next year

Note: Before WW2, many PMs were assassinated or almost killed: Ito, Okuma, Hara, Inukai, Hamaguchi, Takahashi, Saito, Suzuki

Showa Economic Crisis 昭和恐慌Causes

(1) Impact of global depression

(2) Austerity policy initiated and continued by FM Inoue

Consequences

(1) Severe price deflation

(2) Rural impoverishment, coupled with famine

(3) Cartelization and rationalization (“free market doesn’t work”)

(4) Rise of fascism (army, navy, right-wing groups)

--Rejection of party politics

--“Reform” movement

1/ Military readiness for total war

2/ Totalitarian state for the benefit

of farmers and workers

PP.126-130

0

5

10

15

20

1929 1930 1931 1932 1933 1934

Nominal GNP (bil yen)

Takahashi Budget and Recovery 1932-36

• Korekiyo Takahashi, FM in Inukai Seiyukai Cabinet and two

other cabinets (1932-36)--“Japanese Keynes”

• “If someone saves 30,000 yen out of his income of 50,000 yen,

his savings will increase, which is fine for him. But from the

viewpoint of national economy, his saving will surely reduce

demand elsewhere, which lowers national output. For the

nation, it is actually better that this person spend all his income

of 50,000 yen.” (Takahashi speech on austerity and returning

to gold standard, 1929)

• Reversing Inoue’s austerity policy

--Terminate gold standard, let yen fall

--BOJ monetization of fiscal deficit

--“Spending Policy” on public works

PP.131-32

Takahashi was assassinated by

rebellion army in 1936

Manchurian Incident (1931)(Sep. 18 Incident)

• Kantogun (関東軍 Japanese army stationed in China) initiates

well-planned invasion of Manchuria without informing Tokyo

• Tokyo Government and Army HQ try to stop it but fails

Kantogun is now uncontrollable

Violating “open door, equal opportunity” principle

• US Secretary of State Stimson’s press statement undermines

FM Shidehara (regarding Jinzhou bombing)

• Seiyukai (Inukai) Government declares the “independence” of

Manchuria (1932).

• The League of Nations determines that Manchuria is not an

independent state and Japan’s action is not self-defense

Japan withdraws from the League of Nations (1933)

PP.133-35

Democracy Fascism/militarism

Pro-

Zaibatsu,

Pro-Capit-

alism

Workers’

&

Farmers’

Rights

Multiplicity of Political Players and Policy Debates(1930s until the outbreak of Japan-China War (July 1937)

Seiyukai Party

Minsei

Party

“Proletariat” partiesMilitary

Ugaki

Proletariat

parties

Minsei

Party

Seiyukai

Party

Discipline

Faction

Imperial

Faction

Navy

R Wing

Political parties in parliament Army factions

Social reform

through

parliament

Social reform thru

coup & terrorism

Political terrorism

1931‐36

Failed coup

Feb. 26 Incident, 1936

XDominant &

suppressive

Rivalry among

fascio groups

Supports fascism

to undermine

Minsei Party

Lose election

Feb. 1936

Opposes fascism,

promotes social

policies

Gain seats under

broad voter base,

demands social

policies

FASCIODEMOCRACY

Attempt to

cooperate to fight

fascism fails

Anti-military criticism

in parliament

XJapan-China War, 1937

Dissatisfied with

two major parties,

sympathetic to

“social reform” by

fascio groups

無産政党 民政党 政友会 陸軍統制派 陸軍皇道派

Why People & Media Supported Military?(Not all of them, but some)

• The Sense of “Crisis in Manchuria-Mongolia” 満蒙の危機—need to protect Japan’s interests against the emergence of anti-Japanese movement in China; Shidehara Diplomacy is regarded as too soft

• Showa Economic Crisis—workers and farmers suffer severely while big businesses make money

• Disgust with political parties—both Seiyukai and Minsei Party are regarded as corrupt and unfriendly to workers’ welfare

• However, some journalists criticized militarism consistently--Tanzan Ishibashi 石橋湛山, Kiyoshi Kiyosawa 清沢冽

War Economy 1937-45• Political debate and democracy completely suppressed.

• Economic planning to mobilize people and resources

under private ownership (no nationalization).

1937-39 Planning Board, National Mobilization Law; State

Power Management Law

1939-41 Control over civil life becomes pervasive

1941-44 Total war with US--Ministry of Military Demand;

Military Needs Company Act

1944-45 Economic collapse due to lack of inputs

War with China prolongs Resource shortage within

Yen Bloc Invade SEA for more resources Total

war with US and rest of the world

PP.136-39

0

5

10

15

20

25

1942:H1 1942:H2 1943:H1 1943:H2 1944:H1 1944:H2 1945:H1

Other

Oil from SEA

Nonferrous metals

Iron ore

Coal

Million tons

(1937=100)

0

500

1000

1500

2000

2500

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

Weapons & ammunition

Planes (army)

Planes (navy)

Battleships

0

20

40

60

80

100

120

140

160

1933

1935

1937

1939

1941

1943

1945

1947

1949

1951

1953

Total

Food

Clothing

(1933=100)

Military Production Consumer Product Supply

Maritime Transport

during Pacific War

1941-1945

Origin of the Post-WW2 Japan System

• Featuring long-term commitments and official intervention

Government-led industrial drive, administrative guidance,

subcontracting, lifetime employment, keiretsu, mainbanks,

friendly trade unions, BOJ window guidance, etc.

• Negative view—this system was installed artificially after

1937 to execute war. It continued to work reasonably well in

the 1950s-60s, but it is now obsolete.

• Positive view—advanced industrialization requires such

features. Free markets do not generate high-tech or heavy

industries. Japan needed such a system to develop.

This means laissez-faire policy supports light industries and

simple processing only; to go further, developing countries

need above features even today.

PP.140-41