Economic Development of Japan

Economic Development of Japan No.8 1930s and War Economy Two-party Politics 1924-1932 Minsei Party 民政党 (Kenseikai until 1927) PP.130-32 Seiyukai 政友会 (Estab. in 1900 by Hirobumi Ito) Economy Foreign policy Remark Small government, free market, fiscal austerity & industrial restructuring for return to gold Big government, fiscal activism, local public works for securing votes Oppose militarism, protect Japan’s interest by diplomacy, promote disarmament Peace-orientation is laudable, but stubborn deflation policy encouraged fascism To attack Minsei Party, support military and fascism if necessary, even deny democracy 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)” Shidehara Diplomacy Kijuro Shidehara, 1872-1951 Foreign Minister, 1924-27, 1929-31 (Minsei Party) Prime Minister 1945-46 PP.106-9 His policy was more moderate than before or after • Respect Washington Naval Disarmament Treaty (1921-22) • Maintain good relations with US and UK • No military intervention in China; secure Japan’s interests in China through diplomacy • 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) Japan-US Relationship • Largest trading partner: US share in Japan’s trade— export 44%, import 26% (in 1925) • In China--Japan asserts its “special interests” in China, US wants open door policy (esp. for bank loans) • Immigration Problem 1890s Japanese economic immigrants to US West Coast; Anti-Japanese movement begins 1907 Gentlemen’s Agreement to curb Japanese immigration 1913 Anti-Japanese legislations in California 1924 Ban on Japanese immigration 1942 Japanese Americans are sent to concentration camps Manzanar Camp, California Tanaka Cabinet (Seiyukai), 1927-1929 • The Oriental Conference (Japan’s policy toward China): defend Japan’s interests in Manchuria- Giichi Tanaka 1864-1929 Mongolia 満蒙, but welcome FDI from any country. • Sends Japanese troops to prevent Chiang Kai-shek 蒋 介石’s army to unify China (1927 & 1928). • Suppresses communists and proletariat parties. • Revises Security Maintenance Law (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. Northeastern China today Hamaguchi Cabinet (Minsei Party), 1929-31 Finance Minister Junnosuke Inoue Prime Minister Osachi Hamaguchi Foreign Minister Kijuro Shidehara • 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 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 command authority” 統帥権干犯 • Seiyukai supports Navy to undermine Minsei 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 Nominal GNP (bil yen) 20 --“Reform” movement 1/ Military readiness for total war 2/ Totalitarian state for the benefit of farmers and workers 15 10 5 0 1929 1930 1931 1932 1933 1934 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 Manchurian Incident (1931) (Sep. 18 Incident) PP.133-35 • 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) • 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) Political parties in parliament 無産政党 民政党 政友会 Army factions 陸軍統制派 陸軍皇道派 Proletariat parties Gain seats under broad voter base, demands social policies Minsei Party Opposes fascism, promotes social policies Seiyukai Party Supports fascism to undermine Minsei Party Discipline Faction Social reform through parliament Imperial Faction Social reform thru coup & terrorism Navy Attempt to cooperate to fight fascism fails Rivalry among fascio groups R Wing Political terrorism Dissatisfied with two major parties, sympathetic to “social reform” by fascio groups Lose election Feb. 1936 Failed coup Feb. 26 Incident, 1936 Anti-military criticism in parliament DEMOCRACY X Dominant & suppressive X 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 War Economy 1937-45 PP.136-39 • 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 (1937=100) 2500 Weapons & ammunition Consumer Product Supply (1933=100) 160 140 120 100 80 Total Food Clothing 2000 Planes (army) Planes (navy) Battleships 1500 1000 60 40 20 500 0 0 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 Million tons 25 20 15 10 Other Oil from SEA Nonferrous metals Iron ore Coal Maritime Transport during Pacific War 1941-1945 5 0 1942:H1 1942:H2 1943:H1 1943:H2 1944:H1 1944:H2 1945:H1 1953 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 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.