how did japan become a superpower after ww2
Lawrence W Reed
2022-08-26
<div><div>
<p>For a century after his death in 1856, statues of the philosopher and economist <a href="https://en.wikipedia.org/wiki/Ninomiya_Sontoku">Kinjiro Ninomiya</a> adorned public places, especially schools, all over his native Japan. Most of them depicted him as a boy reading a book while walking with a load of firewood strapped on his back. Though he is credited with introducing the concept of compound interest to the peasantry, the statues pay tribute to a broader counsel he championed in Japanese culture: <em>read, study and work hard as if your life depended on it, because it often does.</em> He also urged his countrymen to “Save, waste not; otherwise, Heaven will punish you.” </p>
<p>Ninomiya’s sage and timeless advice surely helped Japan recover from the ravages of World War II. For a full explanation of the remarkable pace and magnitude of the recovery, however, we must identify other factors. How did a nation which had sunk so low undergo such a stupendous economic rebound?</p>
<p>From <a href="https://www.history.navy.mil/browse-by-topic/wars-conflicts-and-operations/world-war-ii/1942/halsey-doolittle-raid.html">the Doolittle Raid </a>on Tokyo in April 1942 to the atomic bombs dropped in August 1945, nearly four years of American bombing wiped out a huge swath of Japan’s industrial capacity. In his book, <em><a href="https://amzn.to/3woc7Ng">Ashes to Awesome: Japan’s 6,000-Day Economic Miracle</a></em>, Yoshikawa Hiroshi tells us that 93 percent of Japan’s steel production was obliterated. The country’s GNP in 1946 stood at just under half its peak before the war. Astronomical hyperinflation nearly destroyed the currency. Living conditions were “wretched” and the caloric intake of the average person was just two-thirds of its pre-war level.</p>
<figure>
<div><p></p><figcaption>Note from Bank of Japan in 1946, a year after the war ended and the country was gripped with hyperinflation.</figcaption>
</div>
</figure>
<p>Japan at war’s end was a nation defeated, demoralized, devastated, and, until 1952, occupied by almost a million American soldiers. Its major cities, including Tokyo (and of course, Hiroshima and Nagasaki), lay in ashes.</p>
<p>Thirty years later, the Japanese economy ranked second in the world, behind only the United States. From 1950 to 1973, it grew at twice the rate of Western Europe’s and more than <a href="https://www.statista.com/statistics/1234645/gdp-growth-us-japan-europe-1950-1987/">two and a half times faster</a> than that of the US. During the 1960s, it doubled in size in only seven years. In barely more than one generation, Japan transformed itself from a poor country to a rich one—a feat widely seen as “miraculous.” How does such a historically rare development occur?</p>
<p>Did Japan decide to adopt a socialist path to recovery? Silly question. Nobody outside of academia or who understands either economics or history would ever prescribe compulsory wealth redistribution, central planning, massive tax hikes or burdensome bureaucracy as a cure for anything, let alone a half-dead economy. That would simply kill the remaining half. The fact is that Japan’s post-war progress owes more to the ideas of Adam Smith and Milton Friedman than to those of John Kenneth Galbraith or Paul Krugman.</p>
<p>The Japanese Economic Miracle is explained by six major factors. Here they are:</p>
<h2>1. The Korean War</h2>
<p>From 1950 to 1953, the US and allied nations fought the North Koreans and Chinese to a standstill. America bought huge quantities of food and war materials from nearby Japan. This represented a sizable transfer of wealth from American taxpayers to the Japanese economy. This “procurement boom,” along with other American aid after 1945, helps explain some Japanese growth early in the country’s recovery, but those transfers mostly evaporated when the Korean War ended.</p>
<h2>2. Punishment to Growth</h2>
<p>US policy in the early months of the Occupation of Japan tended to be punitive, designed to keep the country down and out. But in 1947, as the Cold War with the Soviet Union and Red China worsened, the Truman administration decided that a stronger, freer Japan would help stave off communist advances in Asia and the Pacific.</p>
<p>Among the harsh measures imposed on Japan, based largely on advice from left-wing academics, were monstrously high personal income tax rates that ranged to a high of 86 percent. Alan Reynolds of the Cato Institute <a href="https://www.cato.org/speeches/toward-meaningful-tax-reform-japan">writes</a>,</p>
<blockquote>
<p><em>This was a central part of a severe austerity program, </em>not<em> a plan to promote economic growth. As Edwin Reischauer pointed out at the time, “Steeply graduated income taxes and inheritance taxes have been adopted to prevent in the future the accumulation of … concentrations of wealth.” But taxes designed to punish additions to </em>income <em>must also punish additions to </em>output<em>—economic growth.</em></p>
</blockquote>
<p>Sky-high taxes kicked in at relatively low-income levels and exemptions were few. Corporate income and “excess profits” were likewise confiscated at high rates. A vast expansion (and higher rates) of excise taxes and a hike in already-high inheritance taxes punished Japanese citizens at all income levels. “Brutal” describes the punitive tax regime imposed on Japan by Americans in the immediate aftermath of the war.</p>
<p>Before economic growth could take off, Japan had to stop punishing its wealth-creating entrepreneurs. As General Douglas MacArthur steered American Occupation toward leniency, that’s exactly what Japan did (as you’ll read in a moment).</p>
<p>Japan seemed destined to pay heavy reparations to the nations it damaged in the war until America in the late ‘40s pressed those other nations to back off. Unlike the massive payments the Versailles Treaty obligated Germany to fork over after World War I, and which contributed greatly to another war 20 years later, what Japan was required to pay proved minimal in the end.</p>
<p>By 1949, America was actively encouraging the integration of a depressed and insular Japanese economy into world commerce. Markets opened for the country’s exports, which in turn spurred its purchase of imports. In 1955, Japan became a member of the tariff-cutting General Agreement on Trade and Tariffs (GATT).</p>
<h2>3. Tax Cuts</h2>
<p>Fortunately, the heyday of the left-wing American academics in Japan was short-lived. The changing perspective in Washington from punishment to growth opened the door for tax cuts. To quote Reynolds again,</p>
<blockquote>
<p><em>In late 1950, following a similar policy coup in Germany, Japan’s highest individual income tax rate was slashed to 55% from 86%. From 1950 to 1974, Japan cut taxes </em>every year<em> (except 1960) often by greatly increasing the income thresholds at which the higher tax rates applied, or by enlarging deductions and exemptions. The taxable income needed to fall into a 60% tax bracket was raised to 3 million yen by 1953, for example, compared with only 300,000 in 1949. The Shoup Commission’s net worth tax was also abolished in 1953. The sting of high tax rates was further neutralized by exemptions for interest income and capital gains, deductions from corporate and individual taxes on dividends, a deduction for earnings, and various other holes in the tax base, legitimate and otherwise.</em></p>
<p><em>Some deductions were far from neutral, and therefore less desirable than lower tax rates would have been. Yet the continual tax reductions from 1950 to 1974 accomplished two things. First, they greatly reduced effective marginal tax rates. Second, they moved the system a long way toward what is sometimes called a “consumed income tax” or “expenditure tax”—that is, a system that taxes income only once, regardless of whether the income is saved or devoted to immediate consumption.</em></p>
</blockquote>
<p>Tax cuts accelerated after the end of American Occupation in 1952. Reductions in levies on savings and investment were especially stimulative. With the baleful influence of left-wing American academics gone, public policy focused on boosting production instead of leveling and equalizing incomes. Success in the marketplace became a virtue instead of a vice. To his credit, <a href="https://econ.columbia.edu/faculty/in-memoriam/carl-sumner-shoup-1902-2000/">Carl Shoup</a> of Columbia University helped immensely to simplify the tax code so that Japanese people could see it as fair and understandable.</p>
<p>Japan also steadily reduced its tariffs (taxes on the purchase of foreign goods). For example: By 1975, Reynolds notes, “the effective tariff on autos fell from 40% to 10%, and the tariff on televisions from 30% to 5%.”</p>
<h2>4. Economic Freedom</h2>
<p>Japan’s tax reductions were an important element of a broader liberalization of its economy. Even the World Bank, in a comprehensive 1993 study of the Japanese Economic Miracle, admitted that liberalization was an indispensable factor. It <a href="https://documents.worldbank.org/en/publication/documents-reports/documentdetail/975081468244550798/main-report">concluded</a> that “the rapid growth was primarily due to the application of a set of common, market-friendly economic policies, leading to both higher accumulation and better allocation of resources.”</p>
<p>In explaining the Japanese Economic Miracle, some people suggest that government “industrial policy” agencies such as the Ministry of International Trade and Industry (MITI) were its main architects. But that is belied by the fact that MITI’s interventions were neither huge nor effective. They produced more than a few failures. The World Bank’s 1993 report dismissed its “contributions” as one of many attempts around the world “to guide resource allocation with nonmarket mechanisms [that] have generally failed to improve economic performance.”</p>
<p>At a time when much of the Western world embraced Keynesian economics of higher taxes, spending, budget deficits and debt, Japan’s recovery was fueled by lower taxes, less spending, more saving, increasingly secure property rights and conservative fiscal policies. Education, always highly prized in Japan, was kept local with an emphasis on high-quality K-12. Even today, most Japanese people will tell you they studied harder in grade schools than in universities. The result was an explosion in both human and physical capital.</p>
<p>Toshio Murata, a long-time friend of the Foundation for Economic Education (FEE) in America, was a Japanese economist of the “Austrian School.” He translated <em>Human Action</em> by Ludwig von Mises into Japanese. In 2017, FEE <a href="https://fee.org/articles/the-light-that-blinks-in-the-far-east/">bestowed its “Blinking Lights Award”</a> upon him before his death in 2021 at the age of 97. In an article for FEE in 1994, he explained why the World Bank was correct in its assessment, noting that the favorable tax treatment of savings played a key role in generating a robust capital market for business start-ups and investment:</p>
<blockquote>
<p>The true explanation of Japan’s successful post-war economic development rests…on good old-fashioned virtues—saving, hard work, reduced government spending, and innovative entrepreneurship—combined with ingenious marketing techniques and relatively free world trade. On the basis of 1971-1991 figures, the average gross saving rate in Japan was twice that in the United States; the saving rate per household in Japan was 2.7 times that in the States.</p>
</blockquote>
<p>Industries that had been run or heavily regulated by the old imperial government or by American occupiers were set free. Many of the monopolies <em>(“zaibatsu”</em>) that held sway for generations in Japan, thanks usually to government-granted privileges, were broken up, sold off or deregulated to compete on a more level playing field.</p>
<p>Considerable credit for the advance of economic freedom in Japan goes to <a href="https://www.britannica.com/biography/Yoshida-Shigeru">Shigeru Yoshida</a>, who served as Prime Minister for most of the period from 1946 to 1954. He spearheaded economic liberalization and, at the same time, successfully resisted American pressure for Japan to spend heavily on the military. At the San Francisco Peace Conference in 1951, he pronounced the treaty formally ending the war as “fair and generous” and “not a treaty of vengeance but an instrument of reconciliation.” The following year, Japan once again became an independent nation.</p>
<p>During the four years of Prime Minister Hiyato Ikeda (1960-1964), economic growth and the entrepreneurs who generated it were embraced as keystones of a new and optimistic Japan. Even Ikeda’s modest welfare state measures couldn’t slow things down (that would happen later as the bills came due).</p>
<p>The spirit of liberalization continued into the 1980s. Under Prime Minister Yasuhiro Nakasone, Japan’s national government privatized telecommunications and railways and diminished the influence of MITI in the economy. When the country turned toward bigger government in the 1990s, the growth momentum stopped, as <a href="https://fee.org/articles/how-japan-s-government-looted-the-future-and-its-children-are-paying-the-price/">partially explained by economist Hiroshi Yoshida</a> in this recent article for FEE.</p>
<p>Japan never became the libertarian paradise that was Hong Kong (before recent subjugation by Beijing), but it did become far freer economically during the decades of economic liberalization than it perhaps had ever been before. Today, it still ranks <a href="https://www.heritage.org/index/pdf/2022/book/2022_IndexOfEconomicFreedom_FINAL.pdf">an impressive 35th</a> in economic freedom among the world’s nearly 200 nations, according to the Heritage Foundation’s Index of Economic Freedom</p>
<h2>5. Dodge and Deming</h2>
<p>While it was fashionable for many governments around the world in the 1940s and 1950s to seek advice from “whiz kids” and “planner” types in the ivory tower, Japan to its credit didn’t pay them much attention when it was free to look elsewhere. In fact, by taking advice from two notable men from the entrepreneurial private sector, Japan avoided the stagnation that left-wing academicians usually produced. Their names were Joseph Dodge and W. Edwards Deming.</p>
<p>President Harry Truman dispatched Joe Dodge to Japan from his perch as Chairman of Detroit Bank in 1949. He was to be financial advisor to the Supreme Commander, General Douglas MacArthur, and help the nation emerge from the economic doldrums.</p>
<p>What became known as “The Dodge Line” did the trick. By implementing a balanced national budget and shutting down the printing presses, it ended hyperinflation. It stabilized the exchange rate between the yen and the dollar. It drastically reduced government economic intervention across the board. Dodge’s intention was not to “plan” the Japanese economy but rather, to finally leave it alone. He killed every subsidy and price control he could get his hands on, and MacArthur cheered him as he did it. (Truman would later make Dodge his Director of the Budget and in barely a year, he cut the US federal deficit in half.)</p>
<p>W. Edwards Deming was another private sector genius with both feet planted firmly on solid ground. He was an engineer, statistician, and management consultant who introduced quality control techniques to Japanese manufacturing—techniques that achieved previously unheard-of levels of productivity. Toshio Murata <a href="https://fee.org/articles/how-japan-realized-her-impossible-dream/">writes</a>,</p>
<blockquote>
<p>Japanese exports in prewar days were regarded as “cheap, but of poor quality.” W. E. Deming, a U.S. professor, played a major role in improving the quality of Japanese goods. A prize established in his honor is awarded to individuals and companies making important contributions to quality control. Today, thanks no doubt to lessons learned from Professor Deming and from taking consumer wishes to heart, Japanese appliances and automobiles are rated among the best in the world.</p>
</blockquote>
<p>The Japanese owe these two men a great debt for their important contributions. If the country had followed the prevailing wisdom of left-leaning academics at the time, recovery would likely have been stalled or reversed.</p>
<p>(If my remarks strike you as uncharitable toward leftist academia, please allow me to cite two illuminating comments from economist Thomas Sowell, himself an academic: In 1997 he wrote, “The most fundamental fact about the ideas of the political left is that they do not work. Therefore, we should not be surprised to find the left concentrated in institutions where ideas do not have to work in order to survive.” In 2011, Sowell opined, “Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”)</p>
<h2>6. General MacArthur’s Constitution</h2>
<p>The sixth factor in Japan’s Economic Miracle was by no means the least important. Without the vision and personality of Douglas MacArthur, it’s difficult to imagine that either an economic recovery or Japanese-American relations would have emerged as robust.</p>
<p>MacArthur worked so amiably with Japanese leaders, including Emperor Hirohito, that most people in Japan mourned his departure in 1951 as American Occupation neared its end. He personally supervised the writing of a new Constitution that included provisions to ensure a limited, representative government, free and fair elections, private property, and individual liberties. It took effect in May 1947. For seven and a half decades, that Constitution has governed Japan, as one commentator put it, “without the change of a comma.”</p>
<p>In April 1951, the general who proved as indispensable to the new, peaceful Japan as he was to winning the war in the Pacific, was able to tell Congress, in person, this good news:</p>
<blockquote>
<p><em>The Japanese people since the war have undergone the greatest reformation recorded in modern history. With a commendable will, eagerness to learn, and marked capacity to understand, they have from the ashes left in war's wake erected in Japan an edifice dedicated to the supremacy of individual liberty and personal dignity, and in the ensuing process there has been created a truly representative government committed to the advance of political morality, freedom of economic enterprise, and social justice.</em></p>
</blockquote>
<p>In 1960, Japan honored General MacArthur with its highest honor, the Grand Cordon of the Order of the Rising Sun. You can see a short video of the official presentation <a href="https://www.youtube.com/watch?v=E-v2l_hG84E">here</a>.</p>
<p></p>
<p>Fortunately for Germany, a similar economic miracle took shape at the same time as Japan’s. There, as I’ve written before, it <a href="https://fee.org/articles/lemonade-from-lemons/">was largely due to</a> similar free market policies of economist and statesman Ludwig Erhard. Ironic, isn’t it, that two of the nations most responsible for World War II emerged from it as economic miracles because of freedom and free markets. Kinjiro Ninomiya would be most proud.</p>
<p>Freedom works. It's a lesson that needs to be told, re-told, and told again.</p>
<p><em>(Editor’s Note: <a href="https://elamerican.com/lessons-from-japans-post-war-economic-miracle/">A condensed version of this essay was published by </a></em><a href="https://elamerican.com/lessons-from-japans-post-war-economic-miracle/"><em><strong>El American.com</strong></em></a><em>).</em></p>
<h2>For Additional Information, See:</h2>
<p><em><strong><a href="https://documents1.worldbank.org/curated/en/975081468244550798/pdf/multi-page.pdf">The East Asian Miracle</a></strong></em> by the World Bank</p>
<p><em><strong><a href="https://fee.org/articles/how-japan-realized-her-impossible-dream/">How Japan Realized Her Impossible Dream</a></strong></em> by Toshio Murata</p>
<p><em><strong><a href="https://tinyurl.com/3p64mm3d">Ashes to Awesome: Japan’s 6,000-Day Economic Miracle</a></strong></em> by Yoshikawa Hiroshi</p>
<p><em><strong><a href="https://www.jstor.org/stable/41954913?read-now=1&amp;refreqid=excelsior%3A27155f3f4f9480e53a6de01fc09080ca&amp;seq=4#page_scan_tab_contents">The Japanese Post-War Tax Culture Shock Caused by the Extraordinary Tax Program</a></strong></em> by Birger Nerré</p>
<p><em><strong><a href="https://www.cato.org/speeches/toward-meaningful-tax-reform-japan">Toward Meaningful Tax Reform in Japan</a></strong></em> by Alan Reynolds</p>
<p><em><strong><a href="https://tinyurl.com/2mvxn7yc">America and the Japanese Miracle: The Cold-War Context of Japan’s Economic Revival</a></strong></em> by Aaron Forsberg</p>
<p><em><strong><a href="https://www.pbs.org/wgbh/americanexperience/features/macarthur-occupation-japan-and-constitution/">Occupation of Japan and the New Constitution</a></strong></em> (by PBS’s “American Experiment”)</p>
<p><em><strong><a href="https://www.youtube.com/watch?v=LK738CDh21g">Reinventing Japan</a></strong></em> (video)</p>
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 What Caused Japan’s Post-War Economic Miracle?

 In barely more than one generation, Japan transformed itself from a poor country to a rich one—a feat widely seen as “miraculous.”

 Friday, August 26, 2022

 Image Credit: Tak1701d, CC BY-SA 3.0

 Lawrence W. Reed

 History Japan World War II Economic Miracle Tax Cuts Laissez-Faire
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 For a century after his death in 1856, statues of the philosopher and economist Kinjiro Ninomiya adorned public places, especially schools, all over his native Japan. Most of them depicted him as a boy reading a book while walking with a load of firewood strapped on his back. Though he is credited with introducing the concept of compound interest to the peasantry, the statues pay tribute to a broader counsel he championed in Japanese culture: read, study and work hard as if your life depended on it, because it often does. He also urged his countrymen to “Save, waste not; otherwise, Heaven will punish you.”

 Ninomiya’s sage and timeless advice surely helped Japan recover from the ravages of World War II. For a full explanation of the remarkable pace and magnitude of the recovery, however, we must identify other factors. How did a nation which had sunk so low undergo such a stupendous economic rebound?

 From the Doolittle Raid on Tokyo in April 1942 to the atomic bombs dropped in August 1945, nearly four years of American bombing wiped out a huge swath of Japan’s industrial capacity. In his book, Ashes to Awesome: Japan’s 6,000-Day Economic Miracle, Yoshikawa Hiroshi tells us that 93 percent of Japan’s steel production was obliterated. The country’s GNP in 1946 stood at just under half its peak before the war. Astronomical hyperinflation nearly destroyed the currency. Living conditions were “wretched” and the caloric intake of the average person was just two-thirds of its pre-war level.

 Note from Bank of Japan in 1946, a year after the war ended and the country was gripped with hyperinflation.

 Japan at war’s end was a nation defeated, demoralized, devastated, and, until 1952, occupied by almost a million American soldiers. Its major cities, including Tokyo (and of course, Hiroshima and Nagasaki), lay in ashes.

 Thirty years later, the Japanese economy ranked second in the world, behind only the United States. From 1950 to 1973, it grew at twice the rate of Western Europe’s and more than two and a half times faster than that of the US. During the 1960s, it doubled in size in only seven years. In barely more than one generation, Japan transformed itself from a poor country to a rich one—a feat widely seen as “miraculous.” How does such a historically rare development occur?

 Did Japan decide to adopt a socialist path to recovery? Silly question. Nobody outside of academia or who understands either economics or history would ever prescribe compulsory wealth redistribution, central planning, massive tax hikes or burdensome bureaucracy as a cure for anything, let alone a half-dead economy. That would simply kill the remaining half. The fact is that Japan’s post-war progress owes more to the ideas of Adam Smith and Milton Friedman than to those of John Kenneth Galbraith or Paul Krugman.

 The Japanese Economic Miracle is explained by six major factors. Here they are:

 1. The Korean War

 From 1950 to 1953, the US and allied nations fought the North Koreans and Chinese to a standstill. America bought huge quantities of food and war materials from nearby Japan. This represented a sizable transfer of wealth from American taxpayers to the Japanese economy. This “procurement boom,” along with other American aid after 1945, helps explain some Japanese growth early in the country’s recovery, but those transfers mostly evaporated when the Korean War ended.

 2. Punishment to Growth

 US policy in the early months of the Occupation of Japan tended to be punitive, designed to keep the country down and out. But in 1947, as the Cold War with the Soviet Union and Red China worsened, the Truman administration decided that a stronger, freer Japan would help stave off communist advances in Asia and the Pacific.

 Among the harsh measures imposed on Japan, based largely on advice from left-wing academics, were monstrously high personal income tax rates that ranged to a high of 86 percent. Alan Reynolds of the Cato Institute writes,

 This was a central part of a severe austerity program, not a plan to promote economic growth. As Edwin Reischauer pointed out at the time, “Steeply graduated income taxes and inheritance taxes have been adopted to prevent in the future the accumulation of … concentrations of wealth.” But taxes designed to punish additions to income must also punish additions to output—economic growth.

 Sky-high taxes kicked in at relatively low-income levels and exemptions were few. Corporate income and “excess profits” were likewise confiscated at high rates. A vast expansion (and higher rates) of excise taxes and a hike in already-high inheritance taxes punished Japanese citizens at all income levels. “Brutal” describes the punitive tax regime imposed on Japan by Americans in the immediate aftermath of the war.

 Before economic growth could take off, Japan had to stop punishing its wealth-creating entrepreneurs. As General Douglas MacArthur steered American Occupation toward leniency, that’s exactly what Japan did (as you’ll read in a moment).

 Japan seemed destined to pay heavy reparations to the nations it damaged in the war until America in the late ‘40s pressed those other nations to back off. Unlike the massive payments the Versailles Treaty obligated Germany to fork over after World War I, and which contributed greatly to another war 20 years later, what Japan was required to pay proved minimal in the end.

 By 1949, America was actively encouraging the integration of a depressed and insular Japanese economy into world commerce. Markets opened for the country’s exports, which in turn spurred its purchase of imports. In 1955, Japan became a member of the tariff-cutting General Agreement on Trade and Tariffs (GATT).

 3. Tax Cuts

 Fortunately, the heyday of the left-wing American academics in Japan was short-lived. The changing perspective in Washington from punishment to growth opened the door for tax cuts. To quote Reynolds again,

 In late 1950, following a similar policy coup in Germany, Japan’s highest individual income tax rate was slashed to 55% from 86%. From 1950 to 1974, Japan cut taxes every year (except 1960) often by greatly increasing the income thresholds at which the higher tax rates applied, or by enlarging deductions and exemptions. The taxable income needed to fall into a 60% tax bracket was raised to 3 million yen by 1953, for example, compared with only 300,000 in 1949. The Shoup Commission’s net worth tax was also abolished in 1953. The sting of high tax rates was further neutralized by exemptions for interest income and capital gains, deductions from corporate and individual taxes on dividends, a deduction for earnings, and various other holes in the tax base, legitimate and otherwise.

 Some deductions were far from neutral, and therefore less desirable than lower tax rates would have been. Yet the continual tax reductions from 1950 to 1974 accomplished two things. First, they greatly reduced effective marginal tax rates. Second, they moved the system a long way toward what is sometimes called a “consumed income tax” or “expenditure tax”—that is, a system that taxes income only once, regardless of whether the income is saved or devoted to immediate consumption.

 Tax cuts accelerated after the end of American Occupation in 1952. Reductions in levies on savings and investment were especially stimulative. With the baleful influence of left-wing American academics gone, public policy focused on boosting production instead of leveling and equalizing incomes. Success in the marketplace became a virtue instead of a vice. To his credit, Carl Shoup of Columbia University helped immensely to simplify the tax code so that Japanese people could see it as fair and understandable.

 Japan also steadily reduced its tariffs (taxes on the purchase of foreign goods). For example: By 1975, Reynolds notes, “the effective tariff on autos fell from 40% to 10%, and the tariff on televisions from 30% to 5%.”

 4. Economic Freedom

 Japan’s tax reductions were an important element of a broader liberalization of its economy. Even the World Bank, in a comprehensive 1993 study of the Japanese Economic Miracle, admitted that liberalization was an indispensable factor. It concluded that “the rapid growth was primarily due to the application of a set of common, market-friendly economic policies, leading to both higher accumulation and better allocation of resources.”

 In explaining the Japanese Economic Miracle, some people suggest that government “industrial policy” agencies such as the Ministry of International Trade and Industry (MITI) were its main architects. But that is belied by the fact that MITI’s interventions were neither huge nor effective. They produced more than a few failures. The World Bank’s 1993 report dismissed its “contributions” as one of many attempts around the world “to guide resource allocation with nonmarket mechanisms [that] have generally failed to improve economic performance.”

 At a time when much of the Western world embraced Keynesian economics of higher taxes, spending, budget deficits and debt, Japan’s recovery was fueled by lower taxes, less spending, more saving, increasingly secure property rights and conservative fiscal policies. Education, always highly prized in Japan, was kept local with an emphasis on high-quality K-12. Even today, most Japanese people will tell you they studied harder in grade schools than in universities. The result was an explosion in both human and physical capital.

 Toshio Murata, a long-time friend of the Foundation for Economic Education (FEE) in America, was a Japanese economist of the “Austrian School.” He translated Human Action by Ludwig von Mises into Japanese. In 2017, FEE bestowed its “Blinking Lights Award” upon him before his death in 2021 at the age of 97. In an article for FEE in 1994, he explained why the World Bank was correct in its assessment, noting that the favorable tax treatment of savings played a key role in generating a robust capital market for business start-ups and investment:

 The true explanation of Japan’s successful post-war economic development rests…on good old-fashioned virtues—saving, hard work, reduced government spending, and innovative entrepreneurship—combined with ingenious marketing techniques and relatively free world trade. On the basis of 1971-1991 figures, the average gross saving rate in Japan was twice that in the United States; the saving rate per household in Japan was 2.7 times that in the States.

 Industries that had been run or heavily regulated by the old imperial government or by American occupiers were set free. Many of the monopolies (“zaibatsu” ) that held sway for generations in Japan, thanks usually to government-granted privileges, were broken up, sold off or deregulated to compete on a more level playing field.

 Considerable credit for the advance of economic freedom in Japan goes to Shigeru Yoshida, who served as Prime Minister for most of the period from 1946 to 1954. He spearheaded economic liberalization and, at the same time, successfully resisted American pressure for Japan to spend heavily on the military. At the San Francisco Peace Conference in 1951, he pronounced the treaty formally ending the war as “fair and generous” and “not a treaty of vengeance but an instrument of reconciliation.” The following year, Japan once again became an independent nation.

 During the four years of Prime Minister Hiyato Ikeda (1960-1964), economic growth and the entrepreneurs who generated it were embraced as keystones of a new and optimistic Japan. Even Ikeda’s modest welfare state measures couldn’t slow things down (that would happen later as the bills came due).

 The spirit of liberalization continued into the 1980s. Under Prime Minister Yasuhiro Nakasone, Japan’s national government privatized telecommunications and railways and diminished the influence of MITI in the economy. When the country turned toward bigger government in the 1990s, the growth momentum stopped, as partially explained by economist Hiroshi Yoshida in this recent article for FEE.

 Japan never became the libertarian paradise that was Hong Kong (before recent subjugation by Beijing), but it did become far freer economically during the decades of economic liberalization than it perhaps had ever been before. Today, it still ranks an impressive 35th in economic freedom among the world’s nearly 200 nations, according to the Heritage Foundation’s Index of Economic Freedom

 5. Dodge and Deming

 While it was fashionable for many governments around the world in the 1940s and 1950s to seek advice from “whiz kids” and “planner” types in the ivory tower, Japan to its credit didn’t pay them much attention when it was free to look elsewhere. In fact, by taking advice from two notable men from the entrepreneurial private sector, Japan avoided the stagnation that left-wing academicians usually produced. Their names were Joseph Dodge and W. Edwards Deming.

 President Harry Truman dispatched Joe Dodge to Japan from his perch as Chairman of Detroit Bank in 1949. He was to be financial advisor to the Supreme Commander, General Douglas MacArthur, and help the nation emerge from the economic doldrums.

 What became known as “The Dodge Line” did the trick. By implementing a balanced national budget and shutting down the printing presses, it ended hyperinflation. It stabilized the exchange rate between the yen and the dollar. It drastically reduced government economic intervention across the board. Dodge’s intention was not to “plan” the Japanese economy but rather, to finally leave it alone. He killed every subsidy and price control he could get his hands on, and MacArthur cheered him as he did it. (Truman would later make Dodge his Director of the Budget and in barely a year, he cut the US federal deficit in half.)

 W. Edwards Deming was another private sector genius with both feet planted firmly on solid ground. He was an engineer, statistician, and management consultant who introduced quality control techniques to Japanese manufacturing—techniques that achieved previously unheard-of levels of productivity. Toshio Murata writes,

 Japanese exports in prewar days were regarded as “cheap, but of poor quality.” W. E. Deming, a U.S. professor, played a major role in improving the quality of Japanese goods. A prize established in his honor is awarded to individuals and companies making important contributions to quality control. Today, thanks no doubt to lessons learned from Professor Deming and from taking consumer wishes to heart, Japanese appliances and automobiles are rated among the best in the world.

 The Japanese owe these two men a great debt for their important contributions. If the country had followed the prevailing wisdom of left-leaning academics at the time, recovery would likely have been stalled or reversed.

 (If my remarks strike you as uncharitable toward leftist academia, please allow me to cite two illuminating comments from economist Thomas Sowell, himself an academic: In 1997 he wrote, “The most fundamental fact about the ideas of the political left is that they do not work. Therefore, we should not be surprised to find the left concentrated in institutions where ideas do not have to work in order to survive.” In 2011, Sowell opined, “Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”)

 6. General MacArthur’s Constitution

 The sixth factor in Japan’s Economic Miracle was by no means the least important. Without the vision and personality of Douglas MacArthur, it’s difficult to imagine that either an economic recovery or Japanese-American relations would have emerged as robust.

 MacArthur worked so amiably with Japanese leaders, including Emperor Hirohito, that most people in Japan mourned his departure in 1951 as American Occupation neared its end. He personally supervised the writing of a new Constitution that included provisions to ensure a limited, representative government, free and fair elections, private property, and individual liberties. It took effect in May 1947. For seven and a half decades, that Constitution has governed Japan, as one commentator put it, “without the change of a comma.”

 In April 1951, the general who proved as indispensable to the new, peaceful Japan as he was to winning the war in the Pacific, was able to tell Congress, in person, this good news:

 The Japanese people since the war have undergone the greatest reformation recorded in modern history. With a commendable will, eagerness to learn, and marked capacity to understand, they have from the ashes left in war's wake erected in Japan an edifice dedicated to the supremacy of individual liberty and personal dignity, and in the ensuing process there has been created a truly representative government committed to the advance of political morality, freedom of economic enterprise, and social justice.

 In 1960, Japan honored General MacArthur with its highest honor, the Grand Cordon of the Order of the Rising Sun. You can see a short video of the official presentation here.

 Fortunately for Germany, a similar economic miracle took shape at the same time as Japan’s. There, as I’ve written before, it was largely due to similar free market policies of economist and statesman Ludwig Erhard. Ironic, isn’t it, that two of the nations most responsible for World War II emerged from it as economic miracles because of freedom and free markets. Kinjiro Ninomiya would be most proud.

 Freedom works. It's a lesson that needs to be told, re-told, and told again.

 (Editor’s Note: A condensed version of this essay was published by El American.com).

 For Additional Information, See:

 The East Asian Miracle by the World Bank

 How Japan Realized Her Impossible Dream by Toshio Murata

 Ashes to Awesome: Japan’s 6,000-Day Economic Miracle by Yoshikawa Hiroshi

 The Japanese Post-War Tax Culture Shock Caused by the Extraordinary Tax Program by Birger Nerré

 Toward Meaningful Tax Reform in Japan by Alan Reynolds

 America and the Japanese Miracle: The Cold-War Context of Japan’s Economic Revival by Aaron Forsberg

 Occupation of Japan and the New Constitution (by PBS’s “American Experiment”)

 Reinventing Japan (video)

 Lawrence W. Reed

 Lawrence W. Reed is FEE's President Emeritus, Humphreys Family Senior Fellow, and Ron Manners Global Ambassador for Liberty, having served for nearly 11 years as FEE’s president (2008-2019). He is author of the 2020 book, Was Jesus a Socialist? as well as Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of Progressivism . Follow on LinkedIn and Like his public figure page on Facebook . His website is www.lawrencewreed.com .

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Edit
What Caused Japan’s Post-War Economic Miracle? | Lawrence W. Reed
https://fee.org/articles/what-caused-japan-s-post-war-economic-miracle
Asia for Educators, Columbia University
None
<div><div>
                  
                  <h2>Japan's Quest for Power and World War II in Asia</h2>
<ul>
              <li><a href="#war">The World at War: 1931-1945</a></li>
              <li><a href="#discuss1">The World at War: Discussion Questions</a></li>
              <li><a href="#pearl">Japan and the United States at War: Pearl
              Harbor, December 1941</a></li>
              <li><a href="#discuss2">Pearl Harbor: Discussion Questions</a></li>
            </ul>
        <h2><a></a>The
          World at War: 1931-1945</h2>      
          <p><b>Economic Background          </b>          
          </p><p>While the United States was still struggling to
            emerge from the Great Depression at the end of the 1930s, and would do
            so partly because of the war, Japan had emerged from its own period of
            depression, which had begun in 1926, by the mid-1930s. Many of the young
            soldiers mobilized into the Japanese army by the early 1930s came from
            the rural areas, where the effects of the depression were devastating
            and poverty was widespread. Their commitment to the military effort to
            expand Japanese territory to achieve economic security can be understood
            partly in these terms. The depression ended in the mid-1930s in Japan
            partly because of government deficits used to expand greatly both heavy
            industry and the military.
          </p><p>Internationally, this was a time when "free trade" was in
            disrepute. The great powers not only jealously protected their special
            economic rights within their colonies and spheres of influence, but sought
            to bolster their sagging economies through high tariffs, dumping of goods,
            and other trade manipulation. The Japanese, with few natural resources,
            sought to copy this pattern. They used cutthroat trade practices to sell
            textiles and other light industrial goods in the East Asian and U.S.
            markets, severely undercutting British and European manufacturers. They
            also developed sources of raw materials and heavy industry in the colonies
            they established in Korea, Taiwan and Manchuria. Japan used high tariffs
            to limit imports of American and European industrial products.</p>
          <p>The Japanese military faced a particular tactical problem in that certain
            critical raw materials — especially oil and rubber — were
            not available within the Japanese sphere of influence. Instead, Japan
            received most of its oil from the United States and rubber from British
            Malaya, the very two Western nations trying to restrict Japan's expansion.
            U.S. President Franklin D. Roosevelt's embargo of oil exports to Japan
            pressured the Japanese navy, which had stocks for only about six months
            of operations.</p>
          <p>The Japanese army, for its part, was originally concerned with fighting
            the Soviet Union, because of the army's preoccupation with Manchuria
            and China. The Japanese army governed Manchuria indirectly through the "puppet" state
            of Manchukuo and developed heavy industry there under its favorite agencies,
            disliking and distrusting the zaibatsu (large Japanese corporations).
            But the Soviet army's resistance to Japanese attacks was sufficient to
            discourage northern expansion.</p>
          <p>Meanwhile in 1937, the intensification of Chinese resistance to the
            pressure of the Japanese military drew Japan into a draining war in the
            vast reaches of China proper, and in 1940 into operations in French Indochina,
            far to the south. Thus, when the navy pressed for a "southern" strategy
            of attacking Dutch Indonesia to get its oil and British Malaya to control
            its rubber, the army agreed.</p>
          <p>While it seems that economic factors were important in Japanese expansion
            in East Asia, it would be too much to say that colonialism, trade protection,
            and the American embargo compelled Japan to take this course. Domestic
            politics, ideology and racism also played a role.</p>
          <p><b>Domestic Politics</b></p>
          <p>The political structure of Japan at this time was
            inherited from the Meiji era and was increasingly dominated by the military.
            During the Meiji period, the government was controlled by a small ruling
            group of elder statesmen who had overthrown the shogun and established
            the new centralized Japanese state. These men used their position to
            coordinate the bureaucracy, the military, the parliament, the Imperial
            Household, and other branches of government. Following their deaths in
            the early 1920s, no single governmental institution was able to establish
            full control, until the 1931 Manchurian Incident, when Japan took control
            of Manchuria. This began a process in which the military behaved autonomously
            on the Asian mainland and with increasing authority in politics at home.</p>
          <p>From 1937 on, Japan was at war with China. By the time General Hideki
            Tōjō became prime minister and the war against the United
            States began in 1941, the nation was in a state of "total war" and
            the military and their supporters were able to force their policies on
            the government and the people. The wartime regime used existing government
            controls on public opinion, including schools and textbooks, the media,
            and the police, but Japan continued to have more of an authoritarian
            government than a totalitarian one like Hitler's Germany. In particular,
            the government was never able to gain real control of the economy and
            the great zaibatsu, which were more interested in the economic opportunities
            provided by the military's policies than in submitting loyally to a patriotic
            mission.</p>
          <p>The emperor has been criticized for not taking a more forceful action
            to restrain his government, especially in light of his own known preference
            for peace, but Japanese emperors after the Meiji Restoration had "reigned
            but not ruled." One wonders if a more forceful emperor in fact could
            have controlled the army and navy at this late date. The doubts are strengthened
            in light of the difficulty the emperor had in forcing the military to
            accept surrender after the atomic bombings. The emperor's decision at
            that point to bring agreement among his advisers was an extraordinary
            event in Japanese history.</p>
          <p><b>Ideology</b></p>
          <p>The emperor-based ideology of Japan during World War II was
            a relatively new creation, dating from the efforts of Meiji oligarchs
            to unite the nation in response to the Western challenge. Before the
            Meiji Restoration, the emperor wielded no political power and was viewed
            simply as a symbol of the Japanese culture. He was the head of the Shintō religion,
            Japan's native religion, which holds, among other beliefs, that the emperor
            is descended from gods who created Japan and is therefore semidivine.
            Westerners of that time knew him only as a shadowy figure somewhat like
            a pope.</p>
          <p>The Meiji oligarchs brought the emperor and Shintō to national
            prominence, replacing Buddhism as the national religion, for political
            and ideological reasons — since Buddhism had originated in India
            and come to Japan via China. The people were not allowed to look at the
            emperor, or even to speak his name; patriotism had been raised to the
            unassailable level of sacredness.</p>
          <p>It is sometimes difficult to comprehend the extreme sacrifices the Japanese
            made in the name of the emperor. This can perhaps best be viewed, however,
            as extreme patriotism — Japanese were taught to give their lives,
            if necessary, for their emperor. But this was not entirely different
            from the Americans who gave their lives in the same war for their country
            and the "American" way.
            The kamikaze pilots, who were named for the "divine wind" (kami
            kaze) that destroyed the Mongol fleet in the thirteenth century and saved
            Japan from invasion, might be compared to the young Iranian soldiers
            fighting in suicide squadrons in the Iran-Iraq war of the 1980s, or even
            to fanatical Shiites responsible for the truck bombing of the U.S. Lebanese
            embassy in 1983.</p>
          <p><b>Racism</b></p>
          <p>The Japanese were proud of their many accomplishments and resented
            racial slurs they met with in some Western nations. Their attempt to
            establish a statement of racial equality in the Covenant of the League
            of Nations was vetoed by the United States (because of opposition in
            California) and Great Britain (Australian resistance). The Japanese greatly
            resented this.</p>
          <p>The Japanese military was convinced of the willingness of its people
            to go to any sacrifice for their nation, and it was contemptuous of the "softness" of
            the U.S. and European democracies, where loyalty and patriotism were
            tempered by the rights and well-being of the individual. The military's
            overconfidence in its own abilities and underestimation of the will of
            these other nations were thus rooted in its own misleading ethnic and
            racial stereotypes. While Asians, the Japanese saw themselves as less
            representatives of Asia than Asia's champion. They sought to liberate
            Asian colonies from the Westerners, whom they disdained. But although
            the Japanese were initially welcomed in some Asian colonies by the indigenous
            populations whom they "liberated" from European domination,
            the arrogance and racial prejudice displayed by the Japanese military
            governments in these nations created great resentment. This resentment
          is still evident in some Southeast Asian nations.</p>
          <h2><a></a>The
              World at War: Discussion Questions</h2>          <ol>
                <li>What was the economic situation
                  in Japan around 1930? Why was this? </li>
                <li>Who dominated the government in Japan at this time? What was
                  their ambition? </li>
                <li>Describe the international economic situation that fueled
                  military conflict among nations. How did Japan fit into this situation? </li>
                <li>Who was General Hideki Tojo? </li>
                <li>Explain what an "ideology" is? What ideology was
                  propagated by the Japanese leaders to unite the country behind
                  the war? Explain what role belief in the emperor's special status
                  played in the ideology. What role did racism play — the belief
                  in the special qualities of Japanese and other Asian peoples? </li>
                <li>Give an example of a situation where the Japanese felt insulted
                  by what they perceived as the racism of Western countries. </li>
              </ol>
             <h2><a></a>Japan
              and the United States at War: Pearl Harbor, December 1941<i></i></h2>          
        <p>Today Japan and the United States are close allies. But between 1941 and
          1945, they fought a bitter and bloody war, which many people remember well
          today. Why did they fight this war?</p>
        <p>The answer on the American side is simple: the Japanese bombing of Pearl
          Harbor. The Americans were angry at the Japanese for their invasions of
          first Manchuria (1931), then China (1937), and later French Indochina (1940).
          After the Japanese moved into Indochina, President Roosevelt ordered a
          trade embargo on American scrap steel and oil, on which the Japanese military
          depended. But the American people felt that Asia was far away, and a large
          majority of voters did not want to go to war to stop Japan. The surprise
          attack on the Pacific fleet at Pearl Harbor on December 7, 1941 changed
          this, outraging the whole U.S. nation and convincing it that it must stop
          the Japanese army and navy.</p>
        <p>Why did Japan attack the United States? This is a more complicated question.
          Japan knew the United States was economically and military powerful, but
          it was not afraid of any American attack on its islands. Japan did worry
          however, that the Americans might help the Chinese resist the Japanese
          invasion of their country. When President Roosevelt stopped U.S. shipments
          of steel and oil the Japan, he was doing exactly this: the Japanese are
          dependent on other countries for raw materials, for they have almost none
          on their own islands. Without imports of steel and oil, the Japanese military
          could not fight for long. Without oil, the navy would not be able to move
          after it had exhausted its six-month reserve. Roosevelt hoped that this
          economic pressure would force Japan to end its military expansion in East
          Asia.</p>
        <p>The Japanese military saw another solution to the problem: if it could
          quickly conquer the British and Dutch colonies in Southeast Asia and gain
          complete control of the oil, rubber, and other raw materials it needed,
          then it could defend its interests in China and Indochina against those
          Europeans who were now busy fighting a major war in Europe against the
          Germans and Italians. The only force that could stop the Japanese was the
          American Pacific fleet — which was conveniently gathered close to
          Japan at Pearl Harbor, in Hawaii. Knowing that many Americans did not want
          to fight a war against Japan, the military thought that if it suddenly
          destroyed the U.S. fleet, America would simply give up and allow Japan
          to consolidate its grasp on East Asia.</p>
        <p>Japan was not militarily or economically powerful enough to fight a long
          war against the United States, and the Japanese military knew this. Its
          attack on Pearl Harbor was a tremendous gamble — and though the short-run
          gamble was successful, the long-run gamble was lost because the Japanese
          were wrong about the American reaction.</p>
        <p>But behind this mistake was another, earlier miscalculation. Ever since
          Commodore Perry's fleet opened Japan in 1853, in an era of great colonial
          expansion, the Japanese had watched the European powers dominate East Asia
          and establish colonies and trading privileges. China, Japan's neighbor,
          was carved up like a melon as Western powers established their spheres
          of influence on Chinese territory. After an amazingly short time, Japan
          was able to develop the economic and military strength to join this competition
          for dominance of the Asian mainland. Japan defeated China in 1895 and Russia
          in 1905, in battles over who should dominate Korea. Japan joined the allies
          against Germany in 1914-18 in a struggle to control a portion of China
          and then conquered Manchuria in 1931 in an effort to secure a land area
          rich in raw materials. The Japanese nation and its military, which controlled
          the government by the 1930s, felt that it then could, and should, control
          all of East Asia by military force.</p>
        <p>Japan's military invasions of other Asian countries, however, brought
          resistance from not only the European colonial powers, but also the Asian
          people themselves, and finally, the United States. The Japanese military
          tried to convince the Japanese people that complete loyalty and obedience
          would make Japan invincible. Japan's early victories seemed to prove this,
          but the U.S. victory at Midway Island in June 1942 led to the steady encirclement
          of the Japanese islands, cutting them off from needed supplies of raw materials.
          The Japanese navy was destroyed. When this was followed by massive bombardment
          from the air and the final blow of the atomic bombs dropped on Hiroshima
          and Nagasaki, Japanese invincibility was proven to be a myth. At the end
          of the war, the Japanese nation was not only starving and devastated by
          the bombing, but bewildered and shocked by the defeat.</p>
        <h2><a></a>Pearl
              Harbor: Discussion Questions</h2>
          <ol>
            <li>Was Japan the first country to try to dominate other countries
              in Asia? Explain. </li>
            <li> Why did it seem logical to the Japanese that they, rather than
              the European powers, should be dominant in Asia? </li>
            <li> Explain the economic reasons for establishing colonies. What in
              particular did Japan hope to gain from its colonies? </li>
            <li> Locate Pearl Harbor on a map. </li>
            <li> Why did Japan attack the United States at Pearl Harbor? </li>
            <li> In what ways was the Japanese attack a tactical miscalculation? </li>
            <li> In what sense could you say that Japan actually defeated itself?
              Explain. </li>
          </ol>
                 
                </div></div>||||I||||      GO
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            Japan's Quest for Power and World War II in Asia

              * The World at War: 1931-1945
              * The World at War: Discussion Questions
              * Japan and the United States at War: Pearl Harbor, December 1941
              * Pearl Harbor: Discussion Questions

            The World at War: 1931-1945

            Economic Background

            While the United States was still struggling to emerge from the Great Depression at the end of the 1930s, and would do so partly because of the war, Japan had emerged from its own period of depression, which had begun in 1926, by the mid-1930s. Many of the young soldiers mobilized into the Japanese army by the early 1930s came from the rural areas, where the effects of the depression were devastating and poverty was widespread. Their commitment to the military effort to expand Japanese territory to achieve economic security can be understood partly in these terms. The depression ended in the mid-1930s in Japan partly because of government deficits used to expand greatly both heavy industry and the military.

            Internationally, this was a time when "free trade" was in disrepute. The great powers not only jealously protected their special economic rights within their colonies and spheres of influence, but sought to bolster their sagging economies through high tariffs, dumping of goods, and other trade manipulation. The Japanese, with few natural resources, sought to copy this pattern. They used cutthroat trade practices to sell textiles and other light industrial goods in the East Asian and U.S. markets, severely undercutting British and European manufacturers. They also developed sources of raw materials and heavy industry in the colonies they established in Korea, Taiwan and Manchuria. Japan used high tariffs to limit imports of American and European industrial products.

            The Japanese military faced a particular tactical problem in that certain critical raw materials — especially oil and rubber — were not available within the Japanese sphere of influence. Instead, Japan received most of its oil from the United States and rubber from British Malaya, the very two Western nations trying to restrict Japan's expansion. U.S. President Franklin D. Roosevelt's embargo of oil exports to Japan pressured the Japanese navy, which had stocks for only about six months of operations.

            The Japanese army, for its part, was originally concerned with fighting the Soviet Union, because of the army's preoccupation with Manchuria and China. The Japanese army governed Manchuria indirectly through the "puppet" state of Manchukuo and developed heavy industry there under its favorite agencies, disliking and distrusting the zaibatsu (large Japanese corporations). But the Soviet army's resistance to Japanese attacks was sufficient to discourage northern expansion.

            Meanwhile in 1937, the intensification of Chinese resistance to the pressure of the Japanese military drew Japan into a draining war in the vast reaches of China proper, and in 1940 into operations in French Indochina, far to the south. Thus, when the navy pressed for a "southern" strategy of attacking Dutch Indonesia to get its oil and British Malaya to control its rubber, the army agreed.

            While it seems that economic factors were important in Japanese expansion in East Asia, it would be too much to say that colonialism, trade protection, and the American embargo compelled Japan to take this course. Domestic politics, ideology and racism also played a role.

            Domestic Politics

            The political structure of Japan at this time was inherited from the Meiji era and was increasingly dominated by the military. During the Meiji period, the government was controlled by a small ruling group of elder statesmen who had overthrown the shogun and established the new centralized Japanese state. These men used their position to coordinate the bureaucracy, the military, the parliament, the Imperial Household, and other branches of government. Following their deaths in the early 1920s, no single governmental institution was able to establish full control, until the 1931 Manchurian Incident, when Japan took control of Manchuria. This began a process in which the military behaved autonomously on the Asian mainland and with increasing authority in politics at home.

            From 1937 on, Japan was at war with China. By the time General Hideki Tōjō became prime minister and the war against the United States began in 1941, the nation was in a state of "total war" and the military and their supporters were able to force their policies on the government and the people. The wartime regime used existing government controls on public opinion, including schools and textbooks, the media, and the police, but Japan continued to have more of an authoritarian government than a totalitarian one like Hitler's Germany. In particular, the government was never able to gain real control of the economy and the great zaibatsu, which were more interested in the economic opportunities provided by the military's policies than in submitting loyally to a patriotic mission.

            The emperor has been criticized for not taking a more forceful action to restrain his government, especially in light of his own known preference for peace, but Japanese emperors after the Meiji Restoration had "reigned but not ruled." One wonders if a more forceful emperor in fact could have controlled the army and navy at this late date. The doubts are strengthened in light of the difficulty the emperor had in forcing the military to accept surrender after the atomic bombings. The emperor's decision at that point to bring agreement among his advisers was an extraordinary event in Japanese history.

            Ideology

            The emperor-based ideology of Japan during World War II was a relatively new creation, dating from the efforts of Meiji oligarchs to unite the nation in response to the Western challenge. Before the Meiji Restoration, the emperor wielded no political power and was viewed simply as a symbol of the Japanese culture. He was the head of the Shintō religion, Japan's native religion, which holds, among other beliefs, that the emperor is descended from gods who created Japan and is therefore semidivine. Westerners of that time knew him only as a shadowy figure somewhat like a pope.

            The Meiji oligarchs brought the emperor and Shintō to national prominence, replacing Buddhism as the national religion, for political and ideological reasons — since Buddhism had originated in India and come to Japan via China. The people were not allowed to look at the emperor, or even to speak his name; patriotism had been raised to the unassailable level of sacredness.

            It is sometimes difficult to comprehend the extreme sacrifices the Japanese made in the name of the emperor. This can perhaps best be viewed, however, as extreme patriotism — Japanese were taught to give their lives, if necessary, for their emperor. But this was not entirely different from the Americans who gave their lives in the same war for their country and the "American" way. The kamikaze pilots, who were named for the "divine wind" (kami kaze) that destroyed the Mongol fleet in the thirteenth century and saved Japan from invasion, might be compared to the young Iranian soldiers fighting in suicide squadrons in the Iran-Iraq war of the 1980s, or even to fanatical Shiites responsible for the truck bombing of the U.S. Lebanese embassy in 1983.

            Racism

            The Japanese were proud of their many accomplishments and resented racial slurs they met with in some Western nations. Their attempt to establish a statement of racial equality in the Covenant of the League of Nations was vetoed by the United States (because of opposition in California) and Great Britain (Australian resistance). The Japanese greatly resented this.

            The Japanese military was convinced of the willingness of its people to go to any sacrifice for their nation, and it was contemptuous of the "softness" of the U.S. and European democracies, where loyalty and patriotism were tempered by the rights and well-being of the individual. The military's overconfidence in its own abilities and underestimation of the will of these other nations were thus rooted in its own misleading ethnic and racial stereotypes. While Asians, the Japanese saw themselves as less representatives of Asia than Asia's champion. They sought to liberate Asian colonies from the Westerners, whom they disdained. But although the Japanese were initially welcomed in some Asian colonies by the indigenous populations whom they "liberated" from European domination, the arrogance and racial prejudice displayed by the Japanese military governments in these nations created great resentment. This resentment is still evident in some Southeast Asian nations.

            The World at War: Discussion Questions

             1. What was the economic situation in Japan around 1930? Why was this?
             2. Who dominated the government in Japan at this time? What was their ambition?
             3. Describe the international economic situation that fueled military conflict among nations. How did Japan fit into this situation?
             4. Who was General Hideki Tojo?
             5. Explain what an "ideology" is? What ideology was propagated by the Japanese leaders to unite the country behind the war? Explain what role belief in the emperor's special status played in the ideology. What role did racism play — the belief in the special qualities of Japanese and other Asian peoples?
             6. Give an example of a situation where the Japanese felt insulted by what they perceived as the racism of Western countries.

            Japan and the United States at War: Pearl Harbor, December 1941

            Today Japan and the United States are close allies. But between 1941 and 1945, they fought a bitter and bloody war, which many people remember well today. Why did they fight this war?

            The answer on the American side is simple: the Japanese bombing of Pearl Harbor. The Americans were angry at the Japanese for their invasions of first Manchuria (1931), then China (1937), and later French Indochina (1940). After the Japanese moved into Indochina, President Roosevelt ordered a trade embargo on American scrap steel and oil, on which the Japanese military depended. But the American people felt that Asia was far away, and a large majority of voters did not want to go to war to stop Japan. The surprise attack on the Pacific fleet at Pearl Harbor on December 7, 1941 changed this, outraging the whole U.S. nation and convincing it that it must stop the Japanese army and navy.

            Why did Japan attack the United States? This is a more complicated question. Japan knew the United States was economically and military powerful, but it was not afraid of any American attack on its islands. Japan did worry however, that the Americans might help the Chinese resist the Japanese invasion of their country. When President Roosevelt stopped U.S. shipments of steel and oil the Japan, he was doing exactly this: the Japanese are dependent on other countries for raw materials, for they have almost none on their own islands. Without imports of steel and oil, the Japanese military could not fight for long. Without oil, the navy would not be able to move after it had exhausted its six-month reserve. Roosevelt hoped that this economic pressure would force Japan to end its military expansion in East Asia.

            The Japanese military saw another solution to the problem: if it could quickly conquer the British and Dutch colonies in Southeast Asia and gain complete control of the oil, rubber, and other raw materials it needed, then it could defend its interests in China and Indochina against those Europeans who were now busy fighting a major war in Europe against the Germans and Italians. The only force that could stop the Japanese was the American Pacific fleet — which was conveniently gathered close to Japan at Pearl Harbor, in Hawaii. Knowing that many Americans did not want to fight a war against Japan, the military thought that if it suddenly destroyed the U.S. fleet, America would simply give up and allow Japan to consolidate its grasp on East Asia.

            Japan was not militarily or economically powerful enough to fight a long war against the United States, and the Japanese military knew this. Its attack on Pearl Harbor was a tremendous gamble — and though the short-run gamble was successful, the long-run gamble was lost because the Japanese were wrong about the American reaction.

            But behind this mistake was another, earlier miscalculation. Ever since Commodore Perry's fleet opened Japan in 1853, in an era of great colonial expansion, the Japanese had watched the European powers dominate East Asia and establish colonies and trading privileges. China, Japan's neighbor, was carved up like a melon as Western powers established their spheres of influence on Chinese territory. After an amazingly short time, Japan was able to develop the economic and military strength to join this competition for dominance of the Asian mainland. Japan defeated China in 1895 and Russia in 1905, in battles over who should dominate Korea. Japan joined the allies against Germany in 1914-18 in a struggle to control a portion of China and then conquered Manchuria in 1931 in an effort to secure a land area rich in raw materials. The Japanese nation and its military, which controlled the government by the 1930s, felt that it then could, and should, control all of East Asia by military force.

            Japan's military invasions of other Asian countries, however, brought resistance from not only the European colonial powers, but also the Asian people themselves, and finally, the United States. The Japanese military tried to convince the Japanese people that complete loyalty and obedience would make Japan invincible. Japan's early victories seemed to prove this, but the U.S. victory at Midway Island in June 1942 led to the steady encirclement of the Japanese islands, cutting them off from needed supplies of raw materials. The Japanese navy was destroyed. When this was followed by massive bombardment from the air and the final blow of the atomic bombs dropped on Hiroshima and Nagasaki, Japanese invincibility was proven to be a myth. At the end of the war, the Japanese nation was not only starving and devastated by the bombing, but bewildered and shocked by the defeat.

            Pearl Harbor: Discussion Questions

             1. Was Japan the first country to try to dominate other countries in Asia? Explain.
             2. Why did it seem logical to the Japanese that they, rather than the European powers, should be dominant in Asia?
             3. Explain the economic reasons for establishing colonies. What in particular did Japan hope to gain from its colonies?
             4. Locate Pearl Harbor on a map.
             5. Why did Japan attack the United States at Pearl Harbor?
             6. In what ways was the Japanese attack a tactical miscalculation?
             7. In what sense could you say that Japan actually defeated itself? Explain.
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