Japanese Economic History 1930's


Despite the great depression, the Japanese economy recovered during the 1930's. Japan did this partly throughout rearmament and through the exploitation of captive East Asian markets.

As the Japanese steel industry expanded it required larger amounts of iron and ores from China and Malaya.

Domestic supplies of coal and copper were also inadequate, but this was less critical than Japan's near total reliance on petroleum energy sources of all kinds for its industrial growth.

Japan's quest for "economic security" which was a self-evident good in the eyes of its nationalist rulers and militarists drove it forward into an expansionist foreign policy.

In order to do this the finance ministry under Takahashi was willing to borrow recklessly in the early 1930's in order to allocate more to the armed forces, whose share of government spending rose from 31% in 1931-32 to 47% in 1936-37.

When he saw the economic problems that such a military build caused on Japanese long-term financial stability and tried to stop the policy he was promptly assassinated by militarists.

In 1938 government spending on the military exceeded 70% and Japan was spending more than the far more wealthier democracies of the world.

While the two leading naval powers, Britain and the US economized during the 1920's and early 1930's the Japanese went up to and secretly beyond treaty limits.

All of the major Japanese warships were fast and very heavily armed, and by the late 1930's it was laying down the gigantic Yamato-class vessels, larger than anything else ever produced.

Even more important was Japan's powerful and efficient naval air service that included ten modern carriers, with 3,000 aircraft and 3500 pilots, as well as deadly efficient bomber and torpedo-carrying squadrons based on land. Japanese torpedos were of unequaled quality and power.

Finally, the navy possessed the 3rd largest merchant marine force in the world.

In 1939 Japan had an army of 51 active divisions and 133 air squadrons. By the eve of the war Japan had a well trained, well-armed modern army of over 1 million men, backed by 2 million trained reservists. Its army was well-trained in jungle warfare, but lacked a great number of tanks.

Government decision making throughout the 1930's was rendered erratic and, at times even incoherent by clashes between the various branches of the military.

The army anticipated and engaged in an invasion of the Asian continent while the navy and airforce anticipated a war with either Britain or the US.

Since the army was much more influential in Japanese politics its views and priorities usually prevailed.

By the end of 1938 there were 1.5 million Japanese troops in China and the "China incident" as Tokyo referred to the campaign was now costing Japan $5 million a day without any victory in sight.

Rationing was introduced into Japan in 1938 in order to support the China campaign and the national debt spiraled as the government borrowed more and more to sustain enormous defense expenditures.

What made this strategy even more difficult was Japan's shrinking stocks of foreign currency and raw materials, and it became increasingly dependent on imports from the unapproving Americans and British.

The situation was all the more intolerable as the Japanese saw that the KMT forces were being supplied from the south along the Burma road and French Indo-china.

Logically, the conviction grew that Japan would have to strike south, both to isolated China and to gain oil reserves, and other raw materials.

This led to the gravest problem of all for due to the armed strength that they had built up in the 1930's they could easily sweep all the Europeans out of Asia, but it was quite another thing for the Japanese to go to war against wither Russia or the US.

In the bloody border clashes with the Red Army around Nomonhan in 1939 the Japanese Imperial General Headquarters were alarmed by the clear superiority or Russian heavy artillery, aircraft and firepower or Soviet tanks.

If the northern war exposed Japan's limitations a southern war ran the risk of the provoking the U.S.

The US had twice the population of Japan, seventeen times the national income, produced five times as much steel, seven times as much coal, and made 80 times as many motor vehicles each year. Its industrial potential even during the depression was seven times that of Japan.

To sober strategist such as Admiral Yamamoto, an attack on a country such as the US bordered on the insane, especially when it remained clear that most of the Japanese army would remain in China. But not to take on the US would leave Japan exposed to economic blackmail, which was also an intolerable notion. Unable to go back by 1940, the Japanese military leaders plunged forward.