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International Economic Controls in Occupied Japan

Published online by Cambridge University Press:  23 March 2011

Leon Hollerman
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Abstract

The Supreme Command for the Allied Powers (SCAP) claimed credit for bringing democracy to Japan during the Occupation. With some exceptions, the predominant result of SCAP's activities in economic (as distinguished from political) affairs, was just the opposite. SCAP imposed comprehensive economic controls on Japan and suppressed the free market system. Its intervention was especially repressive on the international plane.

Prior to mobilization for the Pacific War, Japan had never had a planned or controlled economy. As the occupation drew to a close, SCAP authorized the Diet to pass legislation for international economic controls to be employed by successor peacetime governments. An extensive Japanese government bureaucracy with a vested interest in the perpetuation of economic controls took charge of their implementation. The economic control laws, and the bureaucracy to which they gave rise, constituted an important part of SCAP's legacy to postwar Japan. This legacy became a primary conditioning factor in Japan's subsequent resistance to economic liberalization—a source of continuing friction in relations between the United States and Japan.

Type
Articles
Information
The Journal of Asian Studies , Volume 38 , Issue 4 , August 1979 , pp. 707 - 719
Copyright
Copyright © The Association for Asian Studies, Inc. 1979

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References

1 Najita, Tetsuo, Japan (Englewood Cliffs, N.J.: Prentice-Hall, 1974), p. 2Google Scholar.

2 The dates of the Occupation are from 2 September 1945 to 28 April 1952. SCAP refers either to General MacArrhur personally as Supreme Commander for the Allied Powers, or collectively to his military headquarters.

3 Ohkawa, Kazushi and Rosovsky, Henry, “A Century of Japanese Economic Growth,” in Lockwood, William W., ed., The State and Economic Enterprise in Japan (Princeton: Princeton Univ. Press, 1965), p. 61Google Scholar.

4 Nakayama, Ichiro, “The Japanese Economy and the Role of the Government,” Hitotsubashi Journal of Economics, 1: 1 (October 1960), p. 11Google Scholar.

5 Fine, Sherwood M., “Japan's Postwar Industrial Recovery,” Contemporary Japan, 21: 4–6 (1952), 194Google Scholar.

6 Fine, p. 193. On 22 March 1947, General MacArthur wrote a letter to Prime Minister Yoshida emphasizing SCAP's belief that it was essential that “free enterprise” should be replaced by a directed economy. Ball, W. Macmahon, Japan: Enemy or Ally? (New York: The John Day Company, 1949), pp. 60–63Google Scholar.

7 JCS radiogram to SCAP, WX 82794, 15 November 1945, paragraph 2. Washington's instructions to MacArthur twenty-two months after the inception of the Occupation were as follows: “Eventual Japanese participation in world trade relations will be permitted,” U.S. Department of State Directive No. 82, “Basic Post-Surrender Policy for Japan,” forwarded to SCAP on 26 June 1947.

8 “Basic Initial Post-Surrender Directive to Supreme Commander for the Allied Powers for the Occupation and Control of Japan,” forwarded to SCAP in Tokyo, 8 November 1945.

9 Nakayama, p. 5.

10 Cohen, Jerome B., Japan's Economy in War and Reconstruction (Minneapolis: Univ. of Minnesota Press, 1949), p. 419Google Scholar. Elsewhere, Cohen remarks, “Since the mechanics and details were left [by SCAP] to the Japanese government, they were, in customary fashion, badly bungled.” Cohen, p. 455

11 In supervising facilities at Japanese ports, the U.S. military relegated Japanese customs officials to a supernumerary role. The latter—a notoriously starchy and self-important group—were demoralized because of their loss of authority, to say nothing of office space. They were also upset by the change imposed by the Occupation on the traditional order of rank of the various ports.

12 SCAPIN 1741, 3 July 1947.

13 Hadley, Eleanor M., Antitrust in Japan (Princeton: Princeton Univ. Press, 1970), p. 147Google Scholar.

14 In 1930, 46.1 percent of all industrial workers were engaged in establishments employing not more than five workers. These dwarf enterprises produced sixty-five percent of the total volume of Japan's exports during 1931–33. Mitsubishi Economic Research Bureau, Japanese Trade and Industry (London: Macmillan, 1936), p. 63Google Scholar.

15 After successive revisions of the unequal treaties, it was not until the Taishō era that the number of foreign trade transactions performed by Japanese exceeded those performed by foreigners in Japan.

16 In industry, as well as in agriculture, production was probably higher than statistically accounted for by SCAP, given the incentive to avoid price controls by producing unreported output and diverting it to the black market.

17 As a nonmilicary industry and a prime candidate for export promotion, the textile industry was appropriately chosen for early rehabilitation. This decision was also convenient from the point of view of the U.S. Commodity Credit Corporation, which had accumulated unredeemed raw cotton under the crop loan program amounting in value to $200 million. The cotton was loaned to Japan for manufacture during 1946–47.

18 Thus, while providing a captive market for its agricultural producers, the United States protected its textile industry from import competition. As a result of difficulty in finding other dollar markets, however, the prohibition against sale of Japanese cotton textiles in the United States was dropped at the beginning of 1948.

19 Research and Statistics Division, Economicand Scientific Section (ESS), “Restricted” Memorandum, “Current Economic Conditions in Japan,” January 1947, p. 22Google Scholar.

20 General Headquarters, Tokyo, Mission and Accomplishments of the Supreme Commander in the Economic and Military Fields, 1950, p. 36, discusses the development of working fundsGoogle Scholar.

21 Memorandum of the Import-Export Division, ESS, 12 June 1946Google Scholar.

22 “Current Economic Conditions in Japan,”p. 23.

23 The agency was established in accordance with Imperial Ordinance No. 703 (14 December 1945) and SCAPIN 854 (3 April 1946).

24 Author's memorandum, 13 December 1948.

25 SCAPIN 1741, 14 June 1947, paragraph 3. Inaugural deals were to be consummated as of 1 September 1947.

26 “Floor prices” were abolished for all exports except raw silk and silk piece goods as of 26 October 1949; floor prices for silk were abolished as of 1 January 1950. Thereafter, “safeguards” were maintained against dumping or unfair competition.

27 See The Oriental Economist, 16: 320 (5 February 1949), p. 112Google Scholar.

28 Report to the President on Foreign Economic Policies (Gray Report), (Washington, D.C.: GPO, 10 November 1950), p. 119Google Scholar.

25 Author's memorandum, 13 December 1948.

30 Contracts were still subject to SCAP review, however. This consisted primarily of a check of the yen-dollar ratio to determine that the contract specified a dollar payment at the proper rate of exchange with respect to the yen purchase price paid by the Foreign Trade Fund to the Japanese manufacturer.

31 Large imports of salt into Japan, for example, were attributed for trade arrangement purposes tothe United Kingdom as country of origin because the shipments were financed through that country. Customs declarations, however, showed thecountry of physical origin to be other than the United Kingdom. Leon Hollerrhan, “Problems in the Development and Operation of Foreign Trade Controls in Occupied Japan,” 7 May 1951.

32 The ostensible purpose of floor prices, namely to prevent Japanese “dumping,” was inspired by fear of Japan's competitive power even in the midst of its postwar collapse.

33 The above information on check prices was provided by Theodore Cohen, former Chief, Labor Division, ESS, SCAP.

34 For this reason, check prices are not mentioned in any official publication of the Japanese government.

35 ESS, SCAP Information Memorandum to Private Trade Representatives, No. 21, 1 December 1949.

36 At one time, I was in charge of the catalogue operation.

37 For further details, see Hollerman, Leon, Japan's Dependence on the World Economy (Princeton: Princeton Univ. Press, 1967), pp. 229–30CrossRefGoogle Scholar.