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Occupation Japan keeps the controls

31 events 2 sources 1945 to 1952 to September 1955 published 23 Jul 2026, 01:01

The US occupation breaks Japan politically but preserves much of the economic-control machine: BoJ continuity, zaibatsu reform, reverse course, priority finance, Dodge austerity, and fixed exchange rates.

The US occupation breaks Japan politically but preserves much of the economic-control machine: BoJ continuity, zaibatsu reform, reverse course, priority finance, Dodge austerity, and fixed exchange rates.

Figures Richard Werner

Linked to

this parallel The Cold War this parallel The passing of the torch: how the American century replaced the British one this part of Princes of the Yen: Japan built, bubbled, and broken this part of Money and finance

31 newly added in the last 14 days

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    U.S. occupation of Japan

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

    The U.S. occupation, officially in charge until 1952, implemented reeducation and democratization, providing Japan with a new constitution, political parties, free elections including for women, and a market-oriented capitalist system.

    • The U.S. occupation, officially in charge until 1952—longer than in Germany—implemented the U.S. program of reeducation and democratization of the Japanese people.
      Princes of the Yen
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    Araki appointed BoJ deputy governor, then governor

    also in Japan's wartime command economy, 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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    MacArthur arrives at Atsugi; BoJ money accepted

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

    General MacArthur arrived at Atsugi naval airdrome on August 30, 1945, where Bank of Japan officials reportedly met him with banknotes; MacArthur accepted BoJ money rather than issuing military currency.

    • Legend has it that Haruo Maekawa was one of the monetary officials who met General MacArthur with a suitcase full of banknotes upon his arrival in Atsugi naval airdrome on Tokyo’s outskirts on 30 August 1945.
      Princes of the Yen
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    Occupation Order No. 3 continues economic controls

    also in Japan's wartime command economy, 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
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    Munitions Ministry and Home Ministry broken up

    also in Japan's wartime command economy, 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
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    Ichimada appointed Bank of Japan governor

    also in Paper money, central banks, and credit creation, Princes of the Yen: Japan built, bubbled, and broken, Reichsbank: independence, hyperinflation, and Hitler

    In 1946, with the approval of the U.S. occupation, Hisato Ichimada, a Bank of Japan official trained in credit creation who had studied Schacht's Reichsbank in Berlin, was appointed BoJ governor.

    • In 1946, with the approval of the U.S. occupation, a young Bank of Japan official named Hisato Ichimada was appointed BoJ governor.
      Princes of the Yen
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    Bank of Japan freezes loan balances

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

    The Bank of Japan's Banking Department instructed that banks could not in principle increase their outstanding loan balances beyond the level of 20 March 1946 without a permit from the Bank of Japan and the government, blocking low-priority claims on scarce resources.

    • The Bank of Japan’s control had already been asserted a year earlier, when the director of the Banking Department had issued instructions that “in principle” banks were not allowed to increase their outstanding loan balance beyond the balance of 20 March 1946 without a permit from the Bank of Japan, as well as the government.
      Princes of the Yen
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    Ichimada rules the BoJ for eight and a half years

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

    Hisato Ichimada, known as 'the Pope,' controlled the economy as Bank of Japan governor from June 1946 to December 1954 through his decrees on who would receive money.

    • His “infallible” decrees about who would or would not receive money ruthlessly controlled the economy for eight and a half years, from June 1946 to December 1954, while his mentor Araki oiled the communications pipeline from Washington.
      Princes of the Yen
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    Economic Stabilization Board established

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

    The wartime Cabinet Planning Board was revived as the powerful but short-lived Economic Stabilization Board, established in August 1946 and lasting until 1952, to direct postwar funding of the economy.

    • The Cabinet Planning Board was revived in the form of the powerful but short-lived (1946–52) Economic Stabilization Board (ESB or Keizai Antei Honbu), established in August 1946.
      Princes of the Yen
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    Priority lending regulations of 1947

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

    With the 1947 Regulations on the Provision of Funds by Financial Institutions, announced by the Ministry of Finance, the government reestablished the wartime priority production system, ranking 460 types of business into lending categories.

    • Second, the government planners took the initiative to reestablish the priority production system from the wartime era with the 1947 Regulations on the Provision of Funds by Financial Institutions (Kinyū Kikan Shikin Yūzū Junsoku), announced by the Ministry of Finance.
      Princes of the Yen
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    Temporary Interest Rates Adjustment Law reintroduced

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

    In 1947 the occupation reintroduced the wartime interest-fixing law as the Temporary Interest Money Rates Adjustment Law, enabling the BoJ and Ministry of Finance to set interest rate ceilings; it remained 'temporary' until the 1980s.

    • The Temporary Money Rates Adjustment Law, which fixed interest rates, was reintroduced in 1947 by the occupation as the Temporary Interest Money Rates Adjustment Law. It enabled the BoJ and MoF to set maximum ceilings on interest rates.
      Princes of the Yen
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    U.S. reverse course on occupation policy

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

    By 1947, with the advent of the Cold War, MacArthur's democratization policies had been seriously undermined and a major unannounced U-turn in the U.S. stance toward Japan had taken place, with GHQ now advancing the continuation of the wartime mobilization system.

    • Already by 1947, General MacArthur’s democratization policies had been seriously undermined. Although there was no official announcement, a major U-turn of the U.S. stance vis-à-vis Japan had taken place.
      Princes of the Yen
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    Nine-Point Economic Stabilization Program

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

    In December 1948 Washington instructed SCAP to issue a Nine-Point Economic Stabilization Program recommending tighter monetary and fiscal policies for Japan.

    • Ichimada’s views were heard in Washington, which first instructed SCAP (the Supreme Commander for the Allied Powers) to issue a Nine-Point Economic Stabilization Program in December 1948 that recommended tighter monetary and fiscal policies.
      Princes of the Yen
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    Bank of Japan Policy Board introduced

    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

    A nominal Policy Board was introduced at the Bank of Japan in 1949, but Ichimada ensured it was placed inside the central bank and under its control, creating a sleeping board that made no important decisions.

    • Apart from the marginal change that resulted from the introduction of the nominal Policy Board in 1949, the law was still the same one that had been introduced in 1942, when the control bureaucrats were in charge.
      Princes of the Yen
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    Dodge mission and the Dodge plan

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

    Joseph Dodge, president of Detroit Bank, was sent to Japan from February to April 1949 as adviser to SCAP; his plan, passed unaltered by parliament, prescribed an overbalanced budget, ended deficit spending, and decreed the end of the Reconstruction Finance Bank.

    • Washington next sent Joseph Dodge, president of Detroit Bank, to Japan with the rank of minister from February to April 1949 as adviser to SCAP.
      Princes of the Yen
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    Yen fixed at 360 per dollar

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

    On the recommendation of Detroit bank president Joseph Dodge, a single fixed exchange rate of 360 yen to the dollar was set in April 1949, weaker than an earlier U.S. mission had recommended and a lasting boost to Japanese exporters.

    • What is known is that Detroit bank president Joseph Dodge recommended the establishment of a single fixed exchange rate, which was set at ¥360/$ in April 1949.
      Princes of the Yen
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    Japan rebuilt as the Pacific anchor

    also in The Free World's clients: the West's unfree allies

    The US occupation and the 1951 security treaty made Japan the cornerstone of American power in the Pacific. Washington backed the long-ruling, pro-Western Liberal Democratic Party, kept major bases, and helped drive Japan's economic rise as a bulwark against communism in Asia. Like West Germany, Japan became a democratic anchor rather than an authoritarian client.

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    Anti-Monopoly Law watered down

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

    By 1953, a year after the U.S. occupation left, the Anti-Monopoly Law had been drastically watered down: restrictions on stock retention, interlocking directorships, and mergers were relaxed, and depression and rationalization cartels allowed.

    • By 1953, just a year after the departure of the U.S. occupation, the Anti-Monopoly Law had already been drastically watered down. Restrictions on stock retention, interlocking directorships, and mergers were relaxed, depression and rationalization cartels allowed.
      Princes of the Yen
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    Ichimada serves as finance minister

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

    Former BoJ governor Ichimada was appointed finance minister in the first Hatoyama cabinet on December 10, 1954, was reappointed twice, and later served in the first Kishi cabinet until resigning on June 12, 1958.

    • Ichimada was appointed as finance minister to the first Hatoyama cabinet on December 10, 1954. He was reappointed to the second Hatoyama cabinet (on March 19, 1955) and to the third (on November 22, 1955). He resigned with the entire cabinet on December 20, 1956.
      Princes of the Yen
  29. new

    Formation of the Liberal Democratic Party

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

    The unification of several parties created the Liberal Democratic Party in 1955, establishing a one-party reign resembling the wartime Imperial Rule Assistance Association system; all governments were solely LDP until 1993.

    • It remains to say that the unification of several parties to create the so-called Liberal Democratic Party in 1955 established the one-party reign (if not rule) that provided the democratic fig leaf for the control bureaucrats who were actually running the country.
      Princes of the Yen
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