2 - Finance for war in Asia and its aftermath

Summary

Issues of war finance engaged Japan, republican or nationalist China and the Chinese Communists throughout all fourteen years, and for the Japanese also included Southeast Asia between 1941 and 1945. This chapter shows that long periods of war and occupation in Asia could be financed by printing money because the demand for it held up sufficiently well that hyperinflation was largely avoided and confidence in money was not entirely destroyed. Japan, although its mobilization for war was badly managed and often poorly executed, never had any difficulty in financing war, starting with the so-called Peking Incident in 1937 and continuing until the Pacific War ended in 1945. Finance for both the Sino-Japanese and the Pacific War was at the expense of much higher inflation than for other major combatants, drastic cuts in civilian consumption, and considerable repressed inflation. In China and Southeast Asia, the financial techniques Japan adopted to finance occupation avoided any real payment.