Economic Development of Japan

Economic Development of Japan No.8 1930s and War Economy

Full democracy Democratic institution(Form) Showa2 US rule 1960 Now LDP dominanceLack of policy debate 1945-51 ConstitutionLawsParliamentElectionCourt DemocratizationNew constitution Military rises 1931 Democracy movement, Party cabinet 1937 Defeat War Male suffrage 1925 Showa1 Taisho ConstitutionParliament 1889 Fascism 1937-45 Meiji Edo (Content) Political fights Pure dictatorship Reform vs conservatism, big vs small government, other policy debates Political competition

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

PP.106-9 Shidehara Diplomacy Kijuro Shidehara, 1872-1951Foreign Minister, 1924-27, 1929-31 Prime Minister 1945-46 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)

Tanaka Cabinet (Seiyukai), 1927-1929 Giichi Tanaka 1864-1929 • The Oriental Conference (Japan’s policy towardChina):defend Japan’s interests in Manchuria-Mongolia満蒙, but welcomeFDI 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.

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 Finance MinisterJunnosuke Inoue Foreign MinisterKijuro Shidehara Prime MinisterOsachi Hamaguchi 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

PP.126-130 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” movement1/Military readiness for total war 2/ Totalitarian state for the benefit of farmers and workers Nominal GNP (bil yen)

PP.131-32 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 Takahashi was assassinated by rebellion army in 1936

PP.133-35 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)

Multiplicity of Political Players and Policy Debates(1930s until the outbreak of Japan-China War (July 1937) Seiyukai Party Minsei Party Ugaki Military “Proletariat” parties

Political parties in parliament Army factions 無産政党民政党政友会陸軍統制派陸軍皇道派 Proletariat parties Minsei Party SeiyukaiParty Discipline Faction Imperial Faction Gain seats under broad voter base, demands social policies Opposes fascism, promotes social policies Supports fascism to undermine Minsei Party Social reform through parliament Social reform thru coup & terrorism Navy Rivalry among fascio groups Attempt to cooperate to fight fascism fails R Wing Political terrorism1931‐36 Dissatisfied with two major parties, sympathetic to “social reform” by fascio groups Lose electionFeb. 1936 Failed coupFeb. 26 Incident, 1936 X Dominant & suppressive Anti-military criticism in parliament X DEMOCRACY FASCIO Japan-China War, 1937

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

PP.136-39 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

Military Production Consumer Product Supply Maritime Transport during Pacific War 1941-1945

PP.140-41 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.

Economic Development of Japan