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Dante Scarano

Post-War Japan was in a state of devastation of the Second World War. After the

countless bombings of its most prized cities, it was unfathomable that this nation could

rebuild itself in a rapid fashion. The United States government suspected if Japan was not

rebuilt or protected it would quickly fall to the growing spread of communism in Asia.

America created harsh economic and industrial restrictions to control the amount of

power in Japan, so that they did not gain the amount of power that was had before the

WWII. America reconstructed Japan, for it could be seen as an economic boost for the

Japanese, but also a powerful trade partner in the east for the newly hegemonic United

States. This was not the reason though; the world was plunged into a Cold War and

America needed to take safeguards to ensure its victory over their Chinese enemies. The

American view of the Japanese economy in post-war era, went from reconstructing

economy and infrastructure to securing an economically strong geo-strategic position in

the East when China fell to communism in 1949.

Revisionists and post-revisionists have argued what America’s view of Japan

during the reconstruction phase after WWII was ultimately for. The revisionists’ take on

the matter of the Japanese economy and strictly debate that the economic state in Japan

was the leading role in the U.S involvement in Japan. As the Japanese nation and

infrastructure was destroyed in WWII, the US saw fit to rebuild a nation that could take

part in world trade to become powerful once again. In Forberg’s monograph America and

the Japanese Miracle, he argues, “The escalating Cold war played a larger role in

promoting Japanese economic welfare and in forging the pattern of post economic

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integration.”1 Economics played the largest role in post-war reconstruction of Japan. As

Forberg explains that Washington’s goal in Japan was to create a nation that would be

widely accepted into world trade, which in turn would bolster the economy of Japan. In

other articles such as The Spirit of Japanese Enterprise, Hirscmier argues that there was a

spur of economic nationalism, to disband the major conglomerates that ruled Japan and

create a more stable labor force.2 The key factors of in how economy had created a sense

of anti-communism as it is highly unlikely that for a nationalist nation to concede to

Soviet-style communism. If the American government were able to dissolve the large

companies in the economy, than this would promote growth between the medium and

small companies, creating capitalism. The revisionists’ argument is based solely around

the U.S perception of post-war Japanese economy as an economic force that needed to

rebuild in order to resume functioning once again.

The post-revisionist would argue that during this time period, there was a growing

fear of a possible Third World War against the communist forces. The boosting of the

economy in Japan was seen as a safe guard against communism, rather than an economic

endeavor. Sayuri Shimizu argues this point in Creating People of the Plenty, that

economic boost to Japan was seen as a way to promote capitalism, if an Eastern nation

was economically backed by the U.S, this would offer a powerful force in the East, thus

containing the communist spread. Stopping the immanent spread of communism was in

the best interest of America because the ideology had threatened the way of American

life. In Swenson-Wright’s scholarly monograph entitled Unequal Allies? They argue the

security relationship between both the U.S and the Japanese was seen as a safeguard of

1 Forsberg Arron, American and the Japanese Miracle. 2000 p. XI2 Hirschmeier Johannes, “The Japanese Spirit of Enterprise, 1897-1970”, Business History Review, 1970

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communism. Neither of the two nation’s governments wanted Japan to fall to

communism, this stressed the importance on the economy, however it explains the

amount of importance of the standpoint that Japan was. The newly formed Communist

Party in China began to send red flags to Washington that the American government

might not be able to the battle of ideologies in the Far East.

Throughout World War II, America saw the power of Japanese industry. Most of

the industry was destroyed with the continuous bombing of the mainland, but America

still saw the potential in Japanese industry. During the reconstruction U.S policymakers

looked towards the Japanese industries to help with the cause. To gain this support new

industry was created along with the restoration of pre-war industries with restrictions.3

United States government officials viewed that there needed to be limitations within the

Japanese businesses, or history would soon repeat itself. However, the U.S could greatly

benefit from the industry that would be rebuilt. Various restrictions were put on the

growth and control that many businesses had, but at the same time creating a more stable

economy. The United States policymakers created a long term investment in the Japanese

economy because they knew that the Japanese people would soon rebuild their own

industries, this time though it was in American favor and by their restrictions.

The fishing economy had become a major debate among the Japanese

policymakers in the U.S; Japan’s major source of food and economy was their fishing

industry. The U.S had created restrictions on fishing because in pre-war Japan, Japan

fished in other coastal nation’s waters and disregard fishing conservation laws. The U.S

3 The United States Reparations Delegate in Japan (Hodge) to the secretary of State, Foreign Relation of the U.S articles 1947, p. 427

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did not want Japan to be starved either creating hostilities toward America.4 As fishing

was one of Japan’s major sources of food, they needed to fish, but with heavy

restrictions. Every restraint that America put on Japan was to stagnate the country,

however at the same time keep it economically stable. America did not want an

overgrowth in the economy in Japan because that is what caused them to go to war with

the U.S in the first instance. The United States would have rather stagnate Japan’s

economy, so that it could slowly rebuild its infrastructure, and industries. The limitations

that were put forth by the American government on the Japanese marine industry directly

mirror, what restrictions that the U.S were putting on the rest of the industries in Japan.

However the U.S policymakers thought that the reconstruction of Japan in the

early post-war era was to be done mainly by the U.S. The economic situation that was

occurring in Japan was America’s fault; a self-supporting Japan was a vision of the

American government as well as the Japanese. The U.S had invested $300,000,000 of

goods to Japan because they did not have any means of paying for its exports and

imports.5 As America became the new hegemonic power of the world, its duty was to

support even its past enemy’s. American taxpayers would not agree with this spending to

support a nation that the U.S was just at war with.

A goal that American policymakers held during the early reconstruction phase in

Japan was to have it become a self-sustaining nation. The Japanese economy would begin

to export various items that were needed in various countries.6 When Japan became a

4 Meorandum by the Acting Assstant Chief of the International Resource Diviision (Flory) to the Informal Interagency Committee on Japanese Fishing and Marine Industry, Foreign Relation of the U.S articles 1947, p. 1805 The Political advisor in Japan (Atcheson) to President Truman, Foreign Relation of the U.S articles,1947, p. 1596 Marshall, The Secretary of State to Diplomatic and Consular Officers, Foreign Relation of the U.S articles, 1947, p. 169

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self-sustaining nation the U.S would no longer have to export goods to it, which means

that the United States would have to pay less to support the Japanese. America known the

work ethic of the Japanese people and thought if they built Japan to its former glory, with

some restrictions, then Japan would become a powerful trade partner in the east. During

this point in Japanese reconstruction, American policymakers saw the rise in the Chinese

communist party; however they did not think that the revolution would accumulate into

such a large scale. At this point their focus America leaned more towards the regrowth of

Japan, so that it would not fall back into the fascist state it was in the pre-world war II

era. The idea of a self-supporting nation would not only create a rehabilitated nation, but

a peaceful non-dependent nation too.

The goal in Japan during the early post war was to rebuild a nation, as quickly and

efficiently as possible. The United States government had taken all the blame for the state

that the Japanese economy was during the post war. American government officials

believed that it would be beneficial for the Japanese people to invest efforts in rebuilding

their own economy. The Japanese government had to preserve through hard work to

recover economically.7 While the United States government was spending billions of the

taxpayers’ money to rebuild Japan, America began to loosen their grip over Japanese

economy; this started to show a shift towards policies towards Japan. The U.S

government intended to combine with a new American installed Japanese government, in

which both governments would be able to work hard rehabilitating the economy. This

ideal would provide for a fast recovery, which the American policymakers and taxpayer’s

had wanted. With the slight transfer of power between the two nations, the U.S could

7 Draft Paper for the National Security Council, Foreign Relation of the U.S articles articles, 1948, p.780

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reluctantly release its grasp over Japan, with hopes that the U.S would be benefitted in

the long run.

As the relocation of power to the Japanese began the U.S government grew wary

that Japan would not continue the economic recovery that America had set forward. The

main priority that U.S government officials had put forth was to give power to the

Japanese which in turn they would carry out the deconstruction process.8 This process

would help diminish and dissolve large conglomerates and monopolies within Japan

(Zaibatsu). This could ultimately benefit the American economy, without monopolies

throughout Japan, new businesses would be created, businesses that had American ideals

instilled within them. This would work to the advantage of the United States economy

because these newly former companies would begin to trade with America rather than,

various nations amongst the East. The government officials in Washington at this time

perceived the economy of Japan as economic booster for their own economy; they had

known the workmanship of the Japanese and began to exploit it for their own profit. The

U.S was not close in trading with Japan in the prewar period, but as the policymakers in

the United States began to shape the Japanese economy it produced a dependable trade

partner. Soon Japan would be able to stand economically on its own again; it would be

created as a vanguard of capitalism to push back the growing threat of the U.S.S.R.

During the early post-war period in Japan the American government was solely

focused on rebuilding Japan from the devastation that they had brought during the

Second World War. Many of the letters in the state department focused on the Japanese

economy for rebuilding of the nation and to correct trade industry. The communist threat

8 Memorandum by Mr. Paul H. Nitze, Deputy to the Assistant Secretary of State for economic Affairs (Thorp), to the Assistant Secretary of State for Occupied Areas (Saltzman), Foreign Relation of the U.S articles, 1948, p.1025

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from the U.S.S.R was also a problem, but through the perception of the government

officials it had not been as major of an issue as the complete destruction and re-

establishment of the Japanese economy. On October 1, 1949 there was a shift in power in

the Far East; Mao Tse Tung’s communist party had become victorious in China.9 The

shift in the foreign relations documents on Japan show the amount of importance that this

held to the U.S government. The newly formed communist state in China struck fear into

the policymakers in Washington, this meant that the communist forces were winning in

Asia and the next nation to fall to communism would be Japan. It was in the utmost

importance that the U.S government would have to protect Japan from communism.

With a newly formed communist state in China, it was in the American

government’s best interest to take action to contest this shift. One instance that the United

States government took action to combat the Chinese Communist Party (CCP) was to

blockade it from trade. Not only was China blockaded from American trade, they were

able to stop Japan from trading with China as well.10 Japan was viewed to become a geo-

strategic standpoint for the U.S forces against CCP. This would create devastation for

China, as there long standing trade-relations with their partners to the West had now been

broken. In some ways however, this blockade of China from the Japanese could be seen

as a burden for the United States. This would mean that the American government would

have to increase trade with Japan to even larger heights. Japan may not have relied on

China for economical goods, but it did depend greatly on China’s food source.11 This

explains the importance that the government officials in Washington felt towards Japan.

9 Bronfenbrenner, Martin, The American Occupation of Japan: A Retrospective View, pp. 13-4 , 196810 Cohen B. Jerome, Japan’s Foreign Trade Problems, 1952, pp. 167-911 The Assistant Secretary of State Far Eastern Affairs (Butterworth) to the Acting Poltical Adviser in Japan (Sebald), Foreign Relation of the U.S articles, 1949, p. 895

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As the United States government would have to reconsider their ideas of a self-sustaining

Japan. America needed to invest more money in the Japanese economy once again to

hold a geo-strategic standpoint against the CCP. At this moment the Japanese economy

was seen as an even greater burden because there needed to be more investments in Japan

to keep it economically strong against communists.

What U.S policymakers later began to realize was that since the war had ended

Japan received most of its goods from the United States. As the amount of money that the

U.S government would have to spend on keeping Japan strong was overstated in the

previous years. Japan was in an ideal position to blockade the Chinese, the importance of

trade between the two nations was over exaggerated, and Japan received much of its

imports from America and islands surrounding Japan since the ending of the war.12 The

United States government saw this importance to the Chinese and chose to exploit it

against them. As there was a general blockade on all communist nations from the allies,

this would make it difficult for Chinese to get the imports that they had needed. This

would create the perception of the Japanese economy of how much of a geo-strategic

position it had in the Far East. If the Japanese kept trade with the Chinese than it would

have kept flourishing into a powerful nation, instead of Japanese trade stifling the CCP’s

economy. However, many of the government officials did not agree with the restrictions

that were put forth. Yoshida Shigeru who was the premier, began to disregard the

blockade of trade to China that Washington had commanded. Yoshida also made

attempts to seek out peace treaties with the Chinese communist government.13 This

explains that the relations with Japan had to be held carefully as the wrong move would

12Cohen B. Jerome, Japan’s Foreign Trade Problems, 1952, pp. 167-913 Unsigned Memorandum of Conversation, with Yoshida Shigeru, Foreign Relation of the U.S articles, 1951, p 1326

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have made them become communist. The government in Japan was not stable as they

were just rebuilding. The policymakers in Washington saw Japan as important position in

the East, but were also volatile.The Chinese and the Japanese were trade partners since

the establishment of each country. To put an end to these trade relations explains how

serious that the American politics were towards the communist threat in the Far East.

Washington ultimately did not want Japan to trade with China because it would

show that a capitalist nation could not survive without the help from a communist nation.

Showing that communism had become the far superior ideology, as it was not able to

support a failed capitalist state as well. This dependence on the Chinese would lead to the

down fall of capitalism in the East because if China controlled the raw minerals to and fro

Japan it would lead to a chaotic system, and the collapse of the Japanese economic

system.14 The question of dependence was soon a growing concern with how the U.S

policymakers viewed the Japanese economy. They could not keep spending money on a

nation that may not be able to recover. This explains why the issue of trade was so

delicate, if trade began again in China, America would lose all control in the East and if

America continued on spending money on Japan it may affect their economy. The

solution to this problem was to have a large amount of Japanese trade be more with

Pacific island nations.15 This would not only continue to spread capitalism, supporting

America’s cause, but also create a strong economy for Japan that did not have to rely on

the communist party in China.

A major issue that U.S policymakers began to face was the threat of an internal

communist revolution beginning to gain power. If Japan was to fall to either external or

14 Memorandum of Discussion at the 139th Meeting of the National Security Council, Foreign Relation of the U.S articles, 1952-1954 p. 140815 139th Meeting of the Nation Security Council, p. 1407

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internal communism, for the American government this would mean the end of

capitalism and ultimately U.S power in the East. Washington needed to take economic

precautions to prevent a further uprising within Japan. The American policymakers left

no room for these internal communists to gain power as Sebald, (Acting Political adviser

in Japan) claimed, “Communists work upon in this large and powerful rural area of

Japanese society comprising of exactly one half of the population. Other areas, save that

of industrial labor, are similarly fortified against communist invasion.”16 There was a

constant threat that Japan was going to fall to internal communist within the newly found

government of Japan as well the United States government. Reforms to various industries

and farmlands would have to be put in place because this is where the seed of

communism would begin to spread. The dangers of a communist controlled labor revolt

would have been instantaneous.17 This ideal struck fear in to government officials in

Washington because this immediate revolution to communism had already happened

once before in China. The ethics of the Japanese people are based around communal

ideas and widely accepted conformity. Communism seems right into place with the

Japanese style of life, this is why American policymakers began to create a large amount

of capitalist ideas within the Japanese society. If the economy was not built up and these

ideas of capitalism were not created Japan would soon fall to the Soviets and the Chinese,

which was creating propaganda against the U.S.

Japan became a truly coveted nation to be had after 1949 not only by the allies

and America, but communists too. Moscow had seen the great importance on creating a

Japan that was communist. Communist spokespeople would meet and gather together

16 The Acting Political Adviser in Japan (Seabald) to the Acting Secretary of State, Foreign Relation of the U.S articles, 1949, p. 60117 Political Adviser in Japan to the Secretary of State, p. 601

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Japanese government officials and begin to create propaganda to incite them to join the

communist revolution. “Russians have been industriously wooing the Japanese with

propaganda … [America] according to Russian spokesmen and Japanese Communists,

seeks to reduce Japan to the status of an American colony exploiting her economy for

American profit.”18 While the American government had focused their efforts on the

Japanese economy the U.S was not going to turn them into a colony. This article could

highlight the feeling of many Japanese at the time as they may have begun to loath the

United States government. This would produce a negative presumption of the American

government by the Japanese people. Washington needed to combat the propaganda by

proving that Japan was being economically restored, which it had done. The U.S

government needed to continue the economic incline in Japan because both the world

was watching what was going to happen to Japan.

The fear of the growing influence of the Soviets had created an entanglement with

the United States government officials and Japan. To push back the Soviet advances

throughout the world was the main goal of the allied powers, and major goal of the U.S.

Towards the end of the Yalta conference the U.S.S.R were seen to have powerful control

over the Far East.19 With the civil war in China and most of the other Eastern countries

torn apart by war, communism had begun to look ideal for the countries left in the wake

of the Japanese war path. Japan would not share the same fate as its neighboring

countries though, as American policy maker’s instilled anti-communist and capitalist

ideals to the Japanese people. These ideals came with the growth of the economy in

Japan, when the U.S government began to hand off power to Japan, General Douglas

18 Farley S. Miriam, Japan and U.S Post-Treaty Problems, 1952, p. 3719 Memorandum of Conversation, by Mr.Marshall Green of the Division of Noertheast Asian Affairs, 1948, p. 789

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MacArthur the Supreme Commander of Allied Powers (SCAP) had created his seven

assumptions regarding Japan,

“Economic conditions in the Far East will permit the necessary expansion of trade … Japan will be increasingly free to conduct its own foreign commerce and engage in merchant shipping … there will be no international trade discrimination against Japan.”20

These assumptions would create free trade within Japan to further boost the economy. All

of these ideas that were created were also promoting capitalism amongst the Japanese

economy. The U.S government gave Japan no restrictions to which they traded with and

made it possible Japan would be able to trade with anyone, once again encouraging the

growth of economy. Whereas only a few years before Japan were barely allowed to

create fishing industry with the amount of restrictions put forth by the U.S government.

This explains the threat that the U.S government officials had now felt towards the

amassing power in the East that had become Soviet Russia. To the U.S government Japan

had begun to be the last holdout of capitalism and economic growth in the Far East.

However, a grueling question of payment still remained, during the time of the

occupation; American government officials questioned how the United States

government was going to continuously supply the nation of Japan with imports. When

Japan was conquered a clause of what was to be apprehended by the conquers, among

this was the vast wealth of Japanese gold. The U.S and SCAP had chosen that it would

not be affective towards any nation if America had used as reparations for occupation

costs.21 The gold had ultimately been given back to the Japanese people to use in their

economy. This deferment of funds was important because it explains how American

20 The Acting Secretary of the Army (Draper) to the Acting Secretary of State, Foreign Relation of the U.S articles, 1948, p 106221The Secretary of the State to the Political Advisor in Japan (Atcheson) Foreign Relation of the U.S articles, 1947, p. 425

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politicians viewed the future of Japan. They wanted to create a friendly trade partner and

ally. If America had taken the gold from Japan, it would have harmed international

relations because the Japanese government would have viewed this as American

attempting to profit on their misfortune. It would be seen as an imperialistic and

capitalistic movement by the nation of Japan. In turn this could have created an anti-

capitalist movement among the Japanese people, making it all the easier to fall to the

clutches of Soviet communism. The United States government was constantly pushing

back communist advances in the east throughout the duration of the Cold War.

During the pre World War period the Zaibatsu were large conglomerates and

banks that had a strangle hold over the nation of Japan. These companies were one of the

factors that had commenced the Sino-Japanese war as well as the war against America in

WWII. Before China had fallen to the communists it was the plan of the occupying

American force to dissolve the Zaibatsu companies in Japan and had eventually wanted

the Japanese government to continue the disintegration of these conglomerates. After the

fall of China to the CCP the Japanese government became more lenient on the Zaibatsu

program, even releasing certain conglomerates from being designated in front of the

Deconcentration review board.22 While the Japanese review board may have been less

harsh on the Zaibatsu, the American government did nothing to continue on and restrict

these companies from growing. The problem was that these conglomerates were

generating a sense of capitalism amongst the Japanese economy. However, the Zaibatsu

were ultimately dissolved and the newly created a ‘new’ Zaibatsu began to rise. These

were considered to be the ‘new’ Zaibatsu, some even bearing the same name as Zaibatsu,

22 The Acting Political Adviser in Japan (Sebald) to the Secretary of State, Foreign Relation of the U.S articles, 1949, p. 842

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such as Mitsubishi. The ‘new’ Zaibatsu was a way to navigate around the policies that the

U.S government had put forth against the large conglomerates, but the restrictions were

had not been strictly enforced.23 If U.S policymakers had continued to dissolve the

Zaibatsu this may have meant less economic growth soon leading to a spread of

communism. This was around the time as the Second Red Scare where Washington’s

government officials were in fear of objecting any idea that had promoted capitalism.

When the Korean war begun the Japanese industries and their economy became a

main focus of Washington. The United States government once again needed an

economically powerful ally in the East to support it with armament and supplies.

However the American government did not want to over exert Japanese economies in

fear that they may fail, “The present and potential capabilities of Japanese industries, the

alternate uses of those industrial resources, the present and the future impact on the

Japanese economy.”24 The U.S had needed aide from the Japanese government, but they

were mindful of how much of various industries and supplies that they were going to use.

If they asked too much from the Japanese industries they would have doomed them to

ultimately fail. Though the success of the American forces in Korea had depended on the

involvement of Japanese industries. The American government’s view towards Japan’s

economy had now grown from Japan being a burden of the previous war, to an economy

that the U.S policymakers had depended on to win in another war. Industries in the

Japanese economy were a main point of focus when the Korean War broke out. The

United States government once again needed an economically powerful ally in the East to

23 Bronfenbrenner, Martin, The American Occupation of Japan pp. 19-2124 The Acting Assistant Secretary of State for Far Eastern Affairs (Allison) to the Assistant to the Secretary of Defense for International Security Affairs (Nash), Foreign Relation of the U.S articles, 1949, p. 601 p. 1140

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support it with armament and supplies. However the American government did not want

to over exert Japanese economies in fear that they may fail, “The present and potential

capabilities of Japanese industries, the alternate uses of those industrial resources, the

present and the future impact on the Japanese economy.25 The U.S needed aide from the

Japanese government, but they were mindful of how much of industries and supplies that

they were going to consume. If too much was asked from the Japanese industries they

would have doomed them to ultimately fail. Through the success of the American forces

in Korea depended on Japanese industries. The American government’s view towards

Japan’s economy grew from Japan being a burden of the previous war, to an economy

that U.S policymakers depended on.

The American view of the Japanese economy changed drastically when China fell

to the communist forces in 1949. The change became less of an economic and

reconstruction based occupation, to the creation of a geo-strategically standpoint for the

American government in the Far East. If the American’s were not so entangled within the

Japanese economy, it could be possibly that the Japanese government may have built

itself back to the fascist state it once was. Japan could have fallen into the clutches of

communism as well, which would mean the spread of communism was unstoppable.

Each outcome would have endangered the hegemonic rule that the American government

intended to impose across the globe.

25 The Acting Assistant Secretary of State for Far Eastern Affairs (Alliso) to the Assistant to the Secretary of Defense for International Security Affairs (Nash), Foreign Relations of the U.S articles, 1949, p. 1140

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Bibliography

Arron Forsber. America the Japanese Miracle. London: University of North

Carolina, 2000.

Jerome B. Choen. “Japan’s Foreign Trade Problems.” Far Eastern Survey, Vol.

21, No. 16. 1952

Martin Bronfenbrenner. “The American Occupation of Japan: A Retrospective

View.” New York: Center for East Asian Studies the University of Kansas.1968.

17

Miriam S. Farley. “Japan and US Post-Treaty Problems.” Far Eastern Survey,

Vol. 21, No. 4. 1952

United States Department of State Foreign relations of the United States, 1947.

The Far East. Washington D.C. 1947

United States Department of State Foreign relations of the United States, 1948.

The Far East and Australia. Washington D.C. 1948

United States Department of State Foreign relations of the United States, 1949.

The Far East and Australasia (in two parts). Washington D.C. 1947

United States Department of State Foreign relations of the United States, 1952-

1954, China and Japan (in two parts). Washington D.C. 1947