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18 C H A P T E R 1 ANewMobilization The Redemption of the Planning Ideal I t was the initial policy of the Allied Occupation to leave the responsibility for economic rehabilitation to the Japanese government.1 The task that lay ahead for Japanese, however, was enormous. The economy was in a state of near collapse by the time of surrender, and the wartime privations of daily life had reached new extremes. Food rations had dwindled in the final winter of the war, and bad weather, along with shortages of fertilizer, equipment, and labor, resulted in a disastrous harvest in 1945. Agricultural output had plummeted so precipitously by August 1945 that mass starvation seemed imminent. Production of consumer goods such as clothing and household wares had long before come to a virtual halt. The ranks of the unemployed swelled as soldiers, administrators, and civilians returned from the former empire and as workers at home were idled by the shutdown of military production. The destruction of the war had laid waste to great swaths of the industrial capacity of the country, and production was at a “complete standstill.”2 Intensive wartime production had left decrepit what industrial facilities remained. Because foreign trade had all but ceased and internal infrastructure almost completely broken down, raw materials were hard to come by. Financial markets were in disarray, causing severe shortages in the capital that industry needed to rebuild and retool. Exacerbating all of this was galloping inflation: by December 1945, prices had risen nearly six times above their level at the time of surrender four months before. In the face of this desperate emergency, Japanese government policy was confused and adrift. The burden of the war effort in the final months of the conflict had strained resources to the breaking point, and in the desperate fight for survival, civilian and military bureaucrats had done little comprehensive planning for what the world might look like after the war.3 “We were dazed,” then president of the Bank of Japan, Shibusawa Keizö, A New Mobilization 19 later recalled, “truly numb.”4 Beyond the constraints imposed by dire circumstance , laying plans for postwar policy had presented official Japan with an ideological dilemma during the endgame period of the war, for it meant confronting what was becoming increasingly difficult to deny: Japan would be defeated. The final swiftness of the surrender, moreover, had caught key ministries such as Munitions and Finance and other official agencies unprepared for conversion to a postwar economy.5 Arisawa Hiromi, a leftleaning economist who participated broadly in postwar policy formulation, notes that there was no independent response by the government to the issue of reconstruction as the Occupation forces began arriving in Japan, while an early economic study panel on which Arisawa served declared that the government merely “idly looked on” as the wartime system collapsed.6 This policy vacuum was in part the product of the dramatic geopolitical changes brought about by defeat. The Japanese bid for economic autarky had failed, and with the end of empire, Japan lost over 50 percent of the area under its control. The dream of an integrated bloc economy—through which the architects of empire had hoped to secure a ready supply of raw materials and captive markets for manufactures—was foreclosed forever. The entire framework on which Japanese economic theorizing, planning, and policy making had rested for the better part of a decade and a half had collapsed. On top of all this, Occupation policy at the time of surrender was an unknown quantity. The Potsdam declaration of July 1945 had called for seemingly wide-ranging changes in the political and economic structures of Japan. Yet the exact nature of the reforms was still unclear by the end of the war. The months during which Occupation policies on reparations, the dissolution of the zaibatsu industrial combines, the purge of economic leaders , and deconcentration of capital holdings were hammered out further unsettled the climate for effective action by the Japanese government on economic recovery.7 Big business, for its part, did little better than government. Dazed by the far-reaching changes in corporate Japan that the Occupation seemed determined to enact and financially dependent on war contract outlays from the government, business leaders failed to fill the policy void with their own formulations of a recovery plan. Industrialists were, it was heard at the time, “marking time in vain.”8 Management in Japan had “lost its confidence,” argues Inaba Hidezö, a wartime researcher in...

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