Japan's Economy on the Road Back

Abstract

THE Japanese economy in the three years under Occupation has been characterized by two basic but divergent trends. A hare-andtortoise race seems to be in progress between a mounting inflation on the one hand and a slow revival of industrial activity on the other. The two are, of course, in effect tied together. The former tends to retard the latter, while the agonizing pace of the latter gives a clear field to the former. The heritage of war for any defeated country is usually a period of economic chaos and national misery. Many of the problems which have loomed large in Japan during the past three years have their roots deep in wartime dislocations. To cite but a few examples, coal output was bound to suffer severely, whether surrender came in I945 or in I947, because of the suicidal under-maintenance of the mines during the war.' The very fact of surrender caused a sharp drop in output as a result of the void in the mining labor force left by the departing Korean and Chinese miners who had been impressed into wartime labor service. The deliberate cannibalization of equipment in consumer goods industries made inevitable a grave lack of facilities and of supply in the immediate postwar period. The mounting note issue and the growing use made of central bank credit by the commercial banks, during the last year of the war, gave rise to a certain degree of inflation, attendant upon the loosening of controls with the collapse of government prestige and authority upon surrender. The probable postwar economic dislocations resultant from these and other factors were evident and foreseeable. They might have been contained and mitigated by a wise and effective exercise of basic economic controls over prices, wages, government expenditures, bank credit, supplies, etc. The very great and absolute centralization of