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Japan's wartime command economy

27 events 2 sources 1920s to 1945 to December 1945 created 21 Jul 2026, 06:21

The wartime machine that later survives into peace: bank consolidation, foreign-exchange controls, planning boards, mobilization laws, munitions ministries, savings drives, and main-bank discipline.

The wartime machine that later survives into peace: bank consolidation, foreign-exchange controls, planning boards, mobilization laws, munitions ministries, savings drives, and main-bank discipline.

Figures Richard Werner

Linked to

this parallel How the Second World War unfolded this parallel The military-industrial complex and Pax Americana this part of Princes of the Yen: Japan built, bubbled, and broken this part of Money and finance

27 newly added in the last 14 days

  1. new

    Wartime consolidation of Japanese banks

    also in Princes of the Yen: Japan built, bubbled, and broken, The Bank of Japan's window-guidance machine

    To simplify credit allocation, the number of Japanese banks was drastically reduced from about fourteen hundred at the end of the 1920s to sixty-four by the end of the Second World War, organized under the National Financial Control Association.

    • To simplify the credit allocation regime, the number of banks was drastically reduced, from about fourteen hundred by the end of the 1920s to a mere sixty-four by the end of the Second World War.
      Princes of the Yen
  2. new

    Manchuria placed under direct army rule

    also in Princes of the Yen: Japan built, bubbled, and broken

    Manchuria had been under direct Japanese army rule since 1931 and served as the testing ground where planners experimented with the prototype of the mobilized war economy before implementing it in Japan.

    • They had gained invaluable experience in implementing and running this system when they were experimenting with its prototype in Manchuria, which had been under direct army rule since 1931.
      Princes of the Yen
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    Full-scale war with China begins

    also in Princes of the Yen: Japan built, bubbled, and broken

    When hostilities with China turned into full-scale war in 1937, the Japanese military pushed through major changes under emergency war legislation, giving reform bureaucrats a mandate to build a mobilized economy.

    • When hostilities with China turned into full-scale war in 1937, the military pushed through major changes under the cover of emergency war legislation, which gave the reform bureaucrats the mandate to establish a mobilized economy with strong government intervention.
      Princes of the Yen
  6. new

    Konoe cabinet promulgates three wartime control laws

    also in Princes of the Yen: Japan built, bubbled, and broken

    In 1937 the promilitary Konoe cabinet promulgated three wartime control laws that directed critical materials and capital to the munitions industry and expanded bureaucratic control over the economy.

    • The 1937 promilitary cabinet of Konoe (the grandfather of 1993 prime minister Hosokawa) promulgated three wartime control laws. The Export-Import Commodities Emergency Measures Law ordered priority allocation of critical materials to the munitions industry.
      Princes of the Yen
  7. new

    Temporary Funds Adjustment Law

    also in Paper money, central banks, and credit creation, Princes of the Yen: Japan built, bubbled, and broken, The Bank of Japan's window-guidance machine

    With the reform bureaucrats in power after hostilities opened in China, the Temporary Funds Adjustment Law of 1937 brought banks' investment and loan decisions under strict control by the central bank and the Ministry of Finance.

    • This law brought banks and their investment and loan decisions under strict control by the central bank and the Ministry of Finance. Funding through the stock market was reduced to a trickle, and the banking system was relied upon for resource allocation.
      Princes of the Yen
  8. new

    Wartime transformation of the Japanese economy

    also in Princes of the Yen: Japan built, bubbled, and broken

    Between 1937 and 1945 the New Economic Order transformed Japanese firms from private profit-seeking undertakings into quasi-public ones focused on growth, replacing the prewar market mechanism with planning and government guidance.

    • The changes implemented between 1937 and 1945 reshaped the function of the firm. Under the slogan “Public interest above individual interest,” the New Economic Order successfully transformed firms from private profit-seeking undertakings to quasi-public ones focusing on growth, not profits.
      Princes of the Yen
  9. new

    Cabinet Planning Board established

    also in Princes of the Yen: Japan built, bubbled, and broken

    The Cabinet Planning Board, set up in October 1937, was designed as the economic general staff of the militarized economy, tasked with building a system for maximum growth and directing resources to priority industries.

    • Overall coordination lay in the hands of the Cabinet Planning Board, set up in October 1937. It was designed as the economic general staff of the militarized economy.
      Princes of the Yen
  10. new

    Industrial Patriotic Societies established

    also in Princes of the Yen: Japan built, bubbled, and broken

    In 1938 the doctrine of the firm as an organic organization was officially implemented through Industrial Patriotic Societies in all companies, while trade unions were abolished and union activity channeled to the company level.

    • The doctrine of the firm as an “organic organization” binding employers and employees together and serving for the public benefit was officially implemented in 1938, with the establishment of Industrial Patriotic Societies in all companies.
      Princes of the Yen
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    National General Mobilization Law

    also in Princes of the Yen: Japan built, bubbled, and broken

    In April 1938 the sweeping National General Mobilization Law was put to the Diet, allowing mobilization of all physical things in the country and the drafting of imperial subjects; Konoe pushed it through against vigorous resistance.

    • In April 1938, the sweeping National General Mobilization Law was put to the Diet. It allowed the mobilization of all physical things in the country, and it stated that “the Government may in time of war (including incidents that are to be treated as war) draft Imperial subjects and employ them in mobilization work as stipulated by Imperial Decree whenever necessary.”
      Princes of the Yen
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    Dividend increase permits required

    also in Princes of the Yen: Japan built, bubbled, and broken, The Bank of Japan's window-guidance machine

    Beginning in April 1939, firms with dividend rates of 10 percent or more needed a Ministry of Finance permit to raise their dividend rate, making stock investment less attractive.

    • Beginning in April 1939, firms with dividend rates of 10 percent or more—about two-thirds of large firms at the time—required a permit from the Ministry of Finance to increase their dividend rate.
      Princes of the Yen
  15. new
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    Proclamation of the New Economic Order

    also in Princes of the Yen: Japan built, bubbled, and broken

    In 1940 the Konoe cabinet proclaimed the New Economic Order, composed of a New Financial System, a New Fiscal Policy, and a New Labor System, as Japan approached entry into World War II.

    • With such legal powers in their hands and with the approach of Japan’s entry into World War II, the Konoe cabinet in 1940 proclaimed the New Economic Order, composed of a New Financial System, a New Fiscal Policy, and a New Labor System.
      Princes of the Yen
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    Wartime switch to bank funding

    also in Princes of the Yen: Japan built, bubbled, and broken

    Between 1940 and 1950 Japanese firms radically switched their external funding from the stock market to bank borrowing, which averaged 60 percent of liabilities versus 40 percent equity; bank financing predominance persisted until the late 1980s.

    • In the period from 1940 to 1950, on average 60 percent of firms’ liabilities consisted of bank borrowing and only 40 percent consisted of equity financing.
      Princes of the Yen
  18. new

    Bank of Japan Law of 1942

    also in Princes of the Yen: Japan built, bubbled, and broken, Reichsbank: independence, hyperinflation, and Hitler, The Bank of Japan's window-guidance machine

    The Bank of Japan Law was introduced in 1942, largely as a translation of Hitler's Reichsbank Law of 1939. The Ministry of Finance later fought off attempts to change it while the BoJ kept sole charge of window guidance.

    • While the ministry won the first political battle and avoided a change in the Bank of Japan Law (which had been introduced in 1942, largely as a translation of Hitler’s Reichsbank Law of 1939), the Bank of Japan remained solely in charge of window guidance.
      Princes of the Yen
    • After his "parachute" study, which was published in 1942, Morrison's attention score and the research it generated seem not to be referred to again in the professional literature.
      Life in Classrooms
  19. new

    National Financial Control Association established

    also in Princes of the Yen: Japan built, bubbled, and broken, The Bank of Japan's window-guidance machine

    In 1942, as the mobilized war economy was fully implemented, the National Financial Control Association was established as the nerve center of wartime credit allocation, with Ichimada as its first secretary-general.

    • The time to make full use of his knowledge and experience came in 1942, when the system of a mobilized war economy was being fully implemented and the National Financial Control Association was established.
      Princes of the Yen
  20. new

    Munitions Corporation Law promulgated

    also in Princes of the Yen: Japan built, bubbled, and broken

    As part of the 1943 Measures to Strengthen the Domestic System, corporate law was changed and the Munitions Corporation Law was promulgated in October 1943, eliminating shareholders' influence on firm management.

    • Thus as part of the 1943 Measures to Strengthen the Domestic System, the corporate law was changed and a new Munitions Corporation Law was promulgated in October of that year. It eliminated shareholders’ influence on firm management.
      Princes of the Yen
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    Creation of the main bank system

    also in Princes of the Yen: Japan built, bubbled, and broken, The Bank of Japan's window-guidance machine

    In 1944 key military suppliers were designated munitions companies, and in 1945 over six hundred firms were assigned designated banks by the Ministry of Finance under a compulsory lending system; these main bank relationships lasted into the present.

    • In 1944, key producers of military supplies were designated as “munitions companies.” In 1945, over six hundred firms received necessary funds to fulfill their production quota via one or two banks that had been allocated to them by the Ministry of Finance.
      Princes of the Yen
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    Araki appointed BoJ deputy governor, then governor

    also in Occupation Japan keeps the controls, Princes of the Yen: Japan built, bubbled, and broken, The Bank of Japan's window-guidance machine

    Immediately after Japan's defeat in August 1945, Eikichi Araki, former wartime head of the Banking Department, was appointed deputy governor of the Bank of Japan, and two months later governor.

    • Immediately following Japan’s defeat in August 1945, he was appointed deputy governor of the Bank of Japan. Two months later, he was appointed governor.
      Princes of the Yen
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    Occupation Order No. 3 continues economic controls

    also in Occupation Japan keeps the controls, Princes of the Yen: Japan built, bubbled, and broken

    Order No. 3 of the occupation forces of September 1945 declared the continuation of Japan's wartime economic controls, and foreign currency rationing was reintroduced immediately.

    • Certain wartime legislation was officially reintroduced soon after the war, especially by MITI and MoF: the Order No. 3 of the occupation forces of September 1945 declared the continuation of economic controls.
      Princes of the Yen
  27. new

    Munitions Ministry and Home Ministry broken up

    also in Occupation Japan keeps the controls, Princes of the Yen: Japan built, bubbled, and broken

    In December 1945 the occupation broke up the Munitions Ministry, the heart of the war economy, along with the powerful Home Ministry and its police apparatus including the Thought Police.

    • The Munitions Ministry, at the heart of the war economy, was broken up in December 1945. So was the powerful Home Ministry, with its police apparatus, including the dreaded Thought Police.
      Princes of the Yen

Further reading

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